BILL ANALYSIS Ó AB 525 Page 1 Date of Hearing: May 4, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 525 (Gordon) - As Amended: April 25, 2011 Policy Committee: Natural ResourcesVote:8-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill requires the Department of Recycling and Resource Recovery (Calrecycle) to dedicate at least 16% of its annual appropriation from the Tire Recycling Management Fund for market development and new technology (MD/NT) activities to local government public work projects that use waste tires and to related outreach efforts. The bill's provisions sunset as of June 30, 2010. FISCAL EFFECT This bill may result in Calrecycle redirecting an unknown amount, potentially in the millions of dollars, to local public works projects from other MD/NT activities eligible to receive funding from the department's Tire Program. The actual amount of funding that is redirected as a result of this bill in a given fiscal year is unknown but will depend upon (1) the amount the Tire Management Fund MD/NT appropriation included in the budget act for a given year and (2) the non-public works Tire Program projects that would have been funded, absent this bill. Calrecycle indicates that its most-recent five-year tire recycling plan calls for funding MD/NT activities in amounts that vary from $21.4 million to $12.5 million per fiscal year. Assuming those MD/NT funding amounts hold true, this bill would result in funding for local public works project that varies from $3.4 million to $2 million per fiscal year. COMMENTS 1)Rationale . The author contends the set aside for local public AB 525 Page 2 works projects that use waste tires, which had been authorized by statute that has since expired, needs to be continued. Public works projects, specifically roadway projects, the author notes, divert waste tires from landfill. And, the author claims, roadways made with waste tire products are superior to other road surface materials in several ways and, therefore, are the more cost-effective option for local governments. The author contends, however, that local governments, most of who are financially strapped, frequently base their capital decisions on up-front expense, not long-term cost-effectiveness. The author argues for continuing guaranteed funding for such local public works projects so their superiority may be demonstrated to local governments and others who will be making decisions about capital projects in what, hopefully, will be times of greater fiscal health. 2)Background. Each year, California produces approximately 40 million waste tires. In the recent past, illegal tire piles have produced significant hazards to human and environmental health, including chronic fires and breeding ground for pests. Consistent with statute, Calrecycle Tire Program grants are designed to encourage activities that reduce the number of waste tires going to landfills for disposal and eliminating the stockpiling of waste tires. Activities that receive funding include tire pile cleanup and enforcement, market development, and demonstration projects. Revenue for the grants is generated from a fee on each new tire sold in California. Until last July, the department's funding activities included the RAC (rubberized asphalt concrete) grant program. Established by SB 1346 (Chapter 671, Statutes of 2002, Kuehl), the RAC grant program provided funding to local governments to promote markets for recycled-content surfacing products derived from waste tires generated in California. The program was extended by SB 369 (Chapter 300, Statutes of 2006, Simitian) and expired on June 30, 2010. 3)The Power of Momentum. This bill was amended in policy committee to specify that 16% of Tire Program MD/NT activity funding will go to local public works projects and related outreach. That percentage was chosen because, as the policy AB 525 Page 3 committee analysis notes, the now-expired statute that governed Tire Program grants similarly required 16% go toward such public works projects. According to the admittedly fuzzy memory of staff working at the Integrated Waste Management Board--Calrecycle's predecessor--when the RAC grant program was instituted, the 16% figure was chosen based upon the workload needs of the board at that time. The decision to include the 16% figure in this bill, therefore, was the result of the persistence of past practice, not analytical reasoning. It may be worthwhile to ask Calrecycle to suggest a percentage for the public works set aside that makes sense, given current conditions. 4)Support . This bill is supported by California Association of Counties and the Regional Council of Rural Counties, whose members oftentimes are the recipients of Tire Program grants, and others who advocate against waste. 5)Opposition. The bill is opposed by the Rubber Manufacturers Association, which argues that price supports, such as Tire Program grants, artificially prop up uneconomic uses of tire-derived products that will fail once the price supports are removed. Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081