BILL ANALYSIS                                                                                                                                                                                                    ”

                                                                  AB 1292
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          Date of Hearing:   April 26, 2011

                                Bob Wieckowski, Chair
                AB 1292 (Roger Hernandez) - As Amended:  April 7, 2011
          SUBJECT  :   Safe Drinking Water State Revolving Fund

           SUMMARY  :   Authorizes the California Department of Public Health 
          (DPH) to sell revenue bonds to assist drinking water systems in 
          meeting their federal Safe Drinking Water State Revolving Fund 
          (SDWSRF) matching fund requirements.   Specifically,  this bill:

           1)Authorizes the California Infrastructure and Economic 
            Development Bank (I-Bank) to contract with the CDPH to issue 
            tax exempt revenue bonds with the proceeds to be provided to 
            the SDWSRF.

          2)Authorize the issuance of revenue bonds by the I-Bank to be 
            used to meet the federal matching requirements of the Safe 
            Drinking Water Act (SDWA).

          3)Provides that tax exempt revenue bonds would be repaid from 
            the funds in the SDWSRF as security for revenue bonds, and to 
            use the interest earned from water system loans to pay 
            principal and interest to bond holders.

           EXISTING LAW  :

          1)Creates the I-Bank within the Business, Transportation and 
            Housing Agency, to promote economic revitalization, enable 
            future development, and encourage a health climate for jobs in 
            California.  Authorize the I-Bank to issue tax-exempt and 
            taxable revenue bonds to underwrite the costs of 
            infrastructure development that meets certain public purposes.

          1)Establishes the California Safe Drinking Water Act (Health and 
            Safety Code Section 116275 et seq.), and requires DPH to 
            regulate drinking water, including conducting research, 
            studies, and demonstration programs for a dependable, safe 
            supply of drinking water and to enforce the federal Safe 
            Drinking Water Act and other regulations.

          2)Establishes the Safe Drinking Water State Revolving Fund and 
            continuously appropriates the funds to DPH to provide grants 


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            or revolving fund loans for the design and construction of 
            projects for the public water systems that will enable 
            suppliers to meet safe drinking water standards.


          1)Under 1996 Safe Drinking Water Act (SDWA) establishes the 
            Drinking Water State Revolving Fund (DWSRF) to provide states 
            with a financing mechanism to ensure safe drinking water to 
            the public.

          2)Under the American Recovery and Reinvestment Act of 2009 
            (ARRA), provides approximately $160 million to the State 
            Revolving Fund for infrastructure development for California's 
            drinking water systems.

           FISCAL EFFECT  :   Not Known.

           COMMENTS  :

           Need for the bill  .  According the CDPH, the sponsors of this 
          bill, the legislation is necessary to assure that California is 
          able to receive the maximum amount of federal funds available in 
          2011, and in subsequent years, to address drinking water system 
          infrastructure needs.  California receives annual funding from 
          the U.S. Environmental Protection Agency (EPA) for the Safe 
          Drinking Water State Revolving Fund (SDWSRF) program.  The 
          annual funding amount has ranged from $66 million to $126 
          million, and is expected to continue at approximately $90 
          million per year for 2011 and the next several years based on 
          recent federal budget actions.  In order for the state to 
          receive these federal dollars, the state must provide a 20 
          percent match of state funds.

          With an allocation of approximately $90 million per year, the 
          required state match is projected to be $18 million annually; 
          current state match sources are not enough to provide the full 
          match for the 2011 federal grant or in subsequent years.  This 
          increased allocation of federal funds requires the state to put 
          forth a larger match in order to draw down this critical 

           Repayment of bonds from the SDWSR revenue.   The US Environmental 


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          Protection Agency provides each state with an annual federal 
          capitalization grant that "seeds" the State Revolving Fund 
          program.  In order to get these funds, the state has to provide 
          a 20% match of state funds. The match can come from a variety of 
          sources, but it cannot come from repayments or interest on loans 
          that are made to water systems.  
          The state match can come from General Fund allocations or from 
          state bond measures (such as California has done with Prop 13, 
          Prop 50, and Prop 84).  As an alternative to these options, EPA 
          allows states to sell revenue bonds to provide the state match.  
          States are allowed to use the moneys in the SDWSRF as security 
          for revenue bonds, and to use the interest earned from water 
          system loans to pay principal and interest to bond holders.  
          CDPH does not currently have statutory authority to issue or 
          sell revenue bonds; AB 1292 would provide such authority.
          Prior Legislation:
          AB 1571 (Costa) Chapter 1078, statutes of 2000, this bill 
          authorized the California Infrastructure and Development Bank to 
          issue bonds and deposit the proceeds of those bonds into the 
          State Water Pollution Control Revolving Fund Program for 
          purposes of implementing Clean Water Act projects undertaken at 
          the local level.

           Technical Amendment  :

          Correction of reference to The Federal Safe Drinking Water Act. 

          Page 5, Line 35, Strike "300j-13(a) (2)" and insert:  300j-12(A) 

          (Thanks to Mr. Kennedy)


          California Department of Public Health (Sponsor)

          None on file.


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          Analysis Prepared by  :    Bob Fredenburg / E.S. & T.M. / (916)