BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                  AB 1292
                                                                  Page  1

          Date of Hearing:   May 18, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                AB 1292 (Roger Hernandez) - As Amended:  May 4, 2011 

          Policy Committee:                              Environmental 
          Safety and Toxic Materials                    Vote: 8-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              No

           SUMMARY  

          This bill authorizes the issuance of revenue bonds to provide 
          funding to satisfy matching requirements under the Safe Drinking 
          Water Act.  Specifically, this bill:

          1)Authorizes the California Infrastructure and Economic 
            Development Bank (I-Bank) to contract with the Department of 
            Public Health (DPH) to issue tax-exempt revenue bonds, with 
            the proceeds to be placed in the Safe Drinking Water Revolving 
            Fund (SDWRF).

          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.

          3)Provides that tax-exempt revenue bonds be repaid from SDWSRF 
            as security for revenue bonds and authorizes the use of 
            interest earned from water system loans from the fund to pay 
            principal and interest to bond holders.

           FISCAL EFFECT  

          1)Potential issuance of revenue bonds, possibly in the 
            millions of dollars, to provide the state match for Safe 
            Drinking Water Act federal money.

          2)Annual costs to DPH in the range of $100,000 to $150,000 
            for contract services to provide financial advice 
            regarding the implementation of a revenue bond program. 
            (SDWSRF.)









                                                                  AB 1292
                                                                  Page  2

           COMMENTS  

           1)Rationale  .  DPH (sponsor) asserts that it needs the authority 
            to issue bonds, through the I-Bank, and to use the interest 
            from water system loans to repay bond holders so that DPH can 
            satisfy the 20% state match for federal drinking water funds 
            and receive the maximum possible amount of those federal 
            funds.  DPR notes that, under existing law, it is not 
            authorized to use interest earned from water system loans to 
            pay bond holders.

           1)Background  .  The DPH administers a safe drinking water 
            regulatory program for all publicly and privately owned water 
            systems of 15 or more service connections.  The department 
            administers the Safe Drinking Water Revolving Fund, which 
            provides loans and grants to local agencies for safe drinking 
            water system upgrades. The fund receives federal monies, for 
            which the state must provide a 20% match.  In recent years, 
            the state has met this match requirement using proceeds from 
            bonds issued pursuant to Proposition 50 (the Water Security, 
            Clean Drinking Water, Coastal and Beach Protection Act of 
            2002).  

            DPH reports that the federal drinking water allocation will be 
            approximately $90 million for each of the next several years, 
            which will require the state to provide an annual match of $18 
            million. DPH indicates that current state match sources are 
            insufficient to provide the full match, so the state risks 
            forfeiting federal drinking water money.

           2)Support  .  The bill is supported by its sponsor, the Department 
            of Public Health.

           3)There is no formal opposition registered to this bill.  

           Analysis Prepared by  :    Jay Dickenson / APPR. / (916) 319-2081