BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                  AB 1292
                                                                  Page 1


          ASSEMBLY THIRD READING
          AB 1292 (Roger HernŠndez)
          As Amended  May 4, 2011
          Majority vote 

           ENVIRONMENTAL SAFETY          8-0                   
          APPROPRIATIONS      17-0                            
           
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          |Ayes:|Wieckowski, Miller,       |Ayes:|Fuentes, Harkey,          |
          |     |Campos, Davis, Feuer,     |     |Blumenfield, Bradford,    |
          |     |Bonnie Lowenthal,         |     |Charles Calderon, Campos, |
          |     |Morrell, Valadao          |     |Davis, Donnelly, Gatto,   |
          |     |                          |     |Hall, Hill, Lara,         |
          |     |                          |     |Mitchell, Nielsen, Norby, |
          |     |                          |     |Solorio, Wagner           |
           ----------------------------------------------------------------- 
           -------------------------------------- 
          |     |                          |     |
           -------------------------------------- 
           SUMMARY  :   Authorizes the California Department of Public Health 
          (CDPH) 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 








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            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.

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

           FISCAL EFFECT  :  According to the Assembly Appropriations 
          Committee, this bill would result in the potential issuance of 
          revenue bonds, possibly in the millions of dollars, to provide 
          the state match for Safe Drinking Water Act federal money.  The 
          annual cost to CDPH is estimated to be 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.)

           


          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 (US 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% 
          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 








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          funding.

           Repayment of bonds from the SDWSRF revenue.   The US EPA 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 (e.g., California has done this with 
          Proposition 13, Proposition 50, and Proposition 84).  As an 
          alternative to these options, US 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; this 
          bill would provide such authority.
           
          Prior Legislation:
           
          AB 1571 (Costa) Chapter 1078, Statutes of 2000, authorizes 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.


           Analysis Prepared by  :    Bob Fredenburg / E.S. & T.M. / (916) 
          319-3965 

                                                                FN: 0000983