BILL ANALYSIS Ó AB 1292 Page 1 ASSEMBLY THIRD READING AB 1292 (Roger Hernández) As Amended May 4, 2011 Majority vote ENVIRONMENTAL SAFETY 8-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |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 AB 1292 Page 2 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 AB 1292 Page 3 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