BILL ANALYSIS Ó
AB 21
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Date of Hearing: February 12, 2013
ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS
Luis A. Alejo, Chair
AB 21 (Alejo and V. M. Perez) - As Amended: February 5, 2012
SUBJECT : Safe Drinking Water Small Community Emergency Grant
Fund.
SUMMARY : Creates the Safe Drinking Water Small Community
Emergency Grant Fund and authorizes the Department of Public
Health (DPH) to assess an annual charge to be deposited in this
fund in lieu of interest that would otherwise be charged on Safe
Drinking Water State Revolving Fund (SDWSRF) loans.
Specifically, this bill :
1)Creates the Safe Drinking Water Small Community Emergency
Grant Fund.
2)Provides that the following monies shall be deposited in the
grant fund:
a) Monies transferred to the grant fund pursuant to the
below charge in lieu of interest provisions; and,
b) Any interest earned upon the monies deposited in the
grant fund.
3)Authorizes, for any loans made for projects meeting the
eligibility criteria of SDWSRF Law, DPH to assess an annual
charge to be deposited in the grant fund in lieu of interest
that would otherwise be charged.
4)Authorizes the charge to be applied at any time during the
term of the financing, requires that the charge, once applied,
remain unchanged, and prohibits the charge from increasing the
financing repayment amount.
5)Authorizes the monies in the grant fund to be for grants for
emergency drinking water projects that meet the requirements
stated in Emergency Clean Water Grant Fund (ECWG) provisions
(see next page) and that serve disadvantaged and severely
disadvantaged communities.
6)Requires, for the purpose of approving grants, DPH to give
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equal priority to projects that serve severely disadvantaged
communities.
7)Requires that charge in lieu of interest funds be expended in
a manner consistent with federal Environmental Protection
Agency (US EPA) Drinking Water State Revolving Fund (DWSRF)
grant regulations.
EXISTING FEDERAL LAW :
1)Pursuant to the federal Safe Drinking Water Act (SDWA),
authorizes the US EPA to set standards for drinking water
quality and to oversee the states, localities, and water
suppliers who implement those standards. As amended in 1996,
establishes the DWSRF to make funds available to drinking
water systems to finance infrastructure improvements.
EXISTING STATE LAW :
1)Pursuant to the California SDWA, requires DPH to regulate
drinking water and to enforce the federal SDWA and other
regulations (Health and Safety Code (HSC) § 116270 et seq.).
2)Pursuant to Safe Drinking Water State Revolving Fund Law,
requires DPH to implement the SDWSRF, which provides funding
to correct public water system deficiencies (HSC § 116760 et
seq.).
3)Establishes the Emergency Clean Water Grant Fund (ECWG), which
is continuously appropriated to the Department of Public
Health (DPH) to provide financial assistance to public water
systems and to fund emergency actions by DPH to ensure that
safe drinking water supplies are available to all Californians
who are served by public water systems (HSC §116475).
a) Authorizes DPH to expend funds in the ECWG for specified
purposes, including, but not limited to, the following
actions:
i) The provision of alternative water supplies and
bottled water;
ii) Improvements of the existing water supply system;
iii) Hookups with adjacent water systems; and,
iv) Design, purchase, installation, and operation and
maintenance of water treatment technologies.
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b) Requires DPH to develop and revise guidelines, which are
exempted from the Administrative Procedure Act, for the
allocation and administration of monies in the ECWG.
4)Under the Safe Drinking Water, Water Quality and Supply, Flood
Control, River and Coastal Protection Bond Act of 2006
(Proposition 84), as passed by the voters, allocates $10
million to DPH for grants and direct expenditures to fund
emergency and urgent actions to ensure that safe drinking
water supplies are available to all Californians. Lists
eligible project criteria. (Public Resources Code (PRC) §
75021).
FISCAL EFFECT : Unknown.
COMMENTS :
Need for the bill : According to supporters, communities with a
single drinking water source are the most vulnerable to
interruption of their water supply. When that community is very
small and low-income, that vulnerability is increased, as they
lack the economies of scale and financial resources to address
their problem. While the state does provide technical
assistance and grants for capital projects, it is very difficult
for these communities to access the funding. Some water systems
have been in the waiting list for the SDWSRF since its inception
in 1998; each year they pass up the opportunity for funding
because of the onerous requirements attached to the funding.
Supporters continue that the ECWGF was created within DPH to
provide immediate relief to water systems with a disruption in
their potable water supply, including exemptions from
contracting and procurement requirements as needed. While DPH
received $10 million in funding from Proposition 84 in 2006 to
fund its emergency drinking water program, this resource is not
renewable, and DPH has only expended or allocated about half of
the funds.
Supporters argue that this bill makes use of a funding tool -
and in lieu fee assessed in place of interest on SDWSRF loans -
to provide a renewable funding source for emergency drinking
water projects, and targets the funds raised at disadvantaged
and severely disadvantaged communities. Because this funding
comes from the SDWSRF, it can only be used for capital projects;
however, by assessing a fee instead of using interest payment
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funds, DPH is able to disburse funds without requiring
applicants to comply with the same level of requirements that
make the SDWSRF so difficult to access.
Nitrate contamination in California : While many contaminants
are present in California's groundwater and drinking water,
nitrate contamination has been the focus of recent study.
Senate Bill SB X2 1 (Perata, Chapter 1, Statutes of 2008 Second
Extraordinary Session) required the SWRCB, in consultation with
other agencies, to prepare a report to the Legislature focusing
on nitrate groundwater contamination in the state and potential
remediation solutions. In response, the SWRCB contracted with
the University of California at Davis (UCD) to gather
information for the report, which was released in January 2012.
The study showed that nitrate loading to groundwater in the
four-county Tulare Lake Basin and the Monterey County portion of
the Salinas Valley is widespread and chronic, and is
overwhelmingly the result of crop and animal agricultural
activities. Due to long transit times, the impact of nitrates
on groundwater resources will likely worsen in scope and
concentration for several decades.
According to the UCD study, infants who drink water containing
nitrate in excess of the maximum contaminant level (MCL) for
drinking water may quickly become seriously ill and, if
untreated, may die because high nitrate levels can decrease the
capacity of an infant's blood to carry oxygen
(methemoglobinemia, or "blue baby syndrome"). High nitrate
levels may also affect pregnant women and susceptible adults.
In addition, nitrate and nitrite ingestion in humans has been
linked to goitrogenic (anti-thyroid) actions on the thyroid
gland, fatigue, reduced cognitive functioning, maternal
reproductive complications including spontaneous abortion, and a
variety of carcinogenic outcomes.
Challenges in addressing groundwater and drinking water
contamination : The slow response of groundwater quality to
source reduction efforts implies that the most immediate path
toward attaining safe drinking water in nitrate contaminated
areas is in the form of safe drinking water actions. However,
the costs to provide safe drinking water to affected communities
in this region are high, due to the large number of
groundwater-contaminating nitrate sources, the dispersed
population, and the high incidence of elevated nitrate levels in
drinking water.
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The fact that many of the affected communities are small and
impoverished adds to the challenges of providing safe drinking
water to these areas. Many of the community public water
systems are small water systems, which often already face
chronic financial problems. They have difficulty in applying
for and meeting the eligibility requirements for receiving
existing State funds because they lack economies of scale and
often have inadequate technical, managerial, and financial
capacity. Even when funding is provided, these systems often
lack the capacity to manage operation and maintenance costs or
make loan repayments.
Actions for addressing groundwater and drinking water
contamination: The UCD study proposed a range of actions that
could be taken to address groundwater and drinking water
contamination, including policy and regulatory changes and
funding options. To examine these proposed actions and to
"identify specific, creative, viable solutions," in June 2012,
Governor Jerry Brown convened a Drinking Water Stakeholder
Group.
The Drinking Water Stakeholder Group, comprised of
representatives from, among others, California State and local
agencies, the agricultural community, the environmental justice
community, academia, and other water related entities, submitted
its "Final Report to the Governor's Office," on August 20, 2012.
Among the recommendations in the report was to "Increase access
to existing funding sources for disadvantaged communities in
unincorporated areas for both long-term and interim safe
drinking water solutions."
On November 9, 2012, the Stakeholder Group submitted
"Recommendations for Amendments to the 2013 SDWSRF Intended Use
Plan (IUP)," which are intended to ensure that DPH's SDWSRF IUP
will most effectively implement the goals of the Stakeholder
Group. Among the recommendations was to, "Consider establishing
a fee in lieu of interest assessed on a portion of the repayment
stream to provide continuous funding for eligible (capital)
projects in the emergency fund."
AB 21 is intended to expedite SDWSRF funding disbursal for
drinking water solutions for disadvantaged communities, and is
based on the above recommendations of the Drinking Water
Stakeholder Group.
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Safe Drinking Water State Revolving Fund (SDWSRF ): The federal
DWSRF authorizes the US EPA to award capitalization grants to
States (with a 20% State match), which in turn are authorized to
provide low-cost loans and other types of assistance to public
water systems (PWS) to finance the costs of infrastructure
projects needed to achieve or maintain compliance with SDWA
requirements.
DPH reports that the California SDWSRF program goals reflect
both federal and State legislative intent to provide funding to
correct PWS deficiencies based upon a prioritized funding
system. The funding system utilizes a comprehensive multi-year
Project Priority List, whereby certain projects receive higher
funding priority than other eligible PWS projects.
Proponents of AB 21 argue that the application process for
SDWSRF is onerous and lengthy, especially for disadvantaged
communities lacking resources and technical expertise. In
addition, a recent analysis of the SDWSRF by the Legislative
Analyst's Office provided to the author of the bill show that
the SDWSRF's fund utilization rate is below the national average
and that California's SDWSRF had the highest amount and rate of
unliquidated obligations in the nation, suggesting that DPH is
slow to disburse SDWSRF money.
Funding for drinking water emergencies : Proposition 84, as
passed by the voters in November 2006, included an allocation of
$10 million to DPH for emergency grants for projects meeting
specified criteria and an exemption for disbursements from
contracting and procurement requirements (PRC § 75021).
In April 2007, DPH adopted grant criteria to implement PRC §
75021. According to DPH, these criteria followed criteria
established in the 1980s for the ECWG, which was created under
Chapter 1428, Statutes of 1985 and amended under Chapter 885,
Statutes of 1987 (HSC § 116475). While the original ECWG fund
is essentially defunct, the ECWG criteria for awarding and
approving grants for emergencies is still being used as the
basis for awarding Proposition 84 emergency funds.
On December 21, 2012, DPH revised the emergency grant criteria
for PRC § 75021 to expand the definition of "public health
emergency," and thus the allowable uses of the funding, to
include specified public water systems that serve severely
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disadvantaged communities that cannot deliver water that meets
primary safe drinking water standards. Historically, this
funding source had been used mainly to address sudden
unanticipated events that disrupt water supply, such as fires,
earthquakes, and landslides. DPH's emergency grant criteria
also provide for expedited disbursal of funds, including an
option for an oral contract.
At the end of 2012, DPH allocated $2 million of the
approximately $7 million remaining of the Proposition 84
emergency grant funding for grants to provide interim
replacement drinking water for economically disadvantaged
communities eligible under the revised criteria. In October of
2012, the SWRCB also allocated $2 million from their Cleanup and
Abatement Account (CAA) to supplement DPH's interim drinking
water program.
While approximately $5 million remains of the original $10
million in Proposition 84 emergency grant funds, supporters of
AB 21 argue that this funding source is fixed, non-renewable and
is being drawn down. AB 21 is intended to provide a long-term
and more readily available source of funding for disadvantaged
communities with immediate drinking water needs.
Fee in lieu provisions : Charging a fee in lieu of collecting
interest on loans disbursed from the revolving funds in not a
new concept in California. AB 2356 (Arambula) Chapter 609,
Statutes of 2008, created the Clean Water State Revolving Fund
(CWSRF) Small Community Grant (SCG) Fund, which authorized the
SWRCB to assess an annual charge on existing CWSRF financing
agreements for deposit into the SCG Fund. The annual charge is
in lieu of interest that would otherwise be charged in
association with a CWSRF financing agreement.
Charging a fee in lieu of interest is an alternative means of
capitalizing on revolving fund loans. This funding mechanism,
since it falls outside of the requirements associated with the
collection of interest, may enable fund disbursement to bypass
some of the oft onerous disbursement and grantee qualification
requirements of the revolving funds. Revolving fund funds
collected from loan recipients, whether in the form of interest
or a fee, likely do, however, have to follow the general funding
criteria of each fund.
Fee in lieu, the SDWSRF and the ECWG : AB 21 authorizes a fee in
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lieu of interest payments on SDWSRF loans, and to use those
fees, following ECWG criteria, for emergency grants for
disadvantaged communities lacking safe drinking water. The
rationale for this authorization is that the fees will provide a
continuous funding source for addressing drinking water
emergencies and may enable disadvantaged communities in need of
immediate action for their drinking water deficiencies to bypass
some of the onerous and lengthy requirements of the SDWSRF
disbursal process.
AB 21 intends to fund those projects that meet both the State's
drinking water emergency fund criteria and DWSRF funding
requirements. Allowable expenditures under the emergency fund
criteria that would also likely be allowable under federal DWSRF
requirements include:
1) Improvements of the existing water supply system;
2) Hookups with adjacent water systems; and,
3) Design, purchase and installation of water treatment
technologies.
Amendment : The Committee may wish to amend the bill to strike,
on page 2 line 31, the word "equal."
Related recent legislation : AB 2238 (Perea), as amended August
24, 2012, would have defined "public health emergency;"
authorized DPH to expend the monies from the ECWG; and listed
the provision of interim water treatment as one of the listed
specified actions for which the DPH may provide payment. AB
2238 passed out of the Senate Environmental Quality Committee on
a 5 - 1 vote, but was not taken up by the Senate Appropriations
Committee and subsequently died on file.
Related current legislation :
1)AB 1 (Alejo). Appropriates $2 million to SWRCB for use by the
Greater Monterey County Regional Water Management Group to
develop an integrated plan to address the drinking water and
wastewater needs of disadvantaged communities suffering from
wastewater discharges into the region's groundwater in the
Salinas Valley. This bill is scheduled for hearing in the
Assembly ESTM Committee on February 12, 2013.
2)AB 30 (Perea): Eliminates the sunset on the charge in lieu of
interest provision for the State Water Pollution Control
Revolving Fund.
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3)AB 69 (Perea). Establishes the Nitrate at Risk Area Fund, to
be administered by the SWRCB, for developing and implementing
sustainable and affordable solutions for disadvantaged
communities. This bill has not yet been referred to
Committee.
4)AB 115 (Perea). Authorizes funding, through the SDWSRF, of
projects to benefit a disadvantaged community that is not the
applying agency, extending applicant eligibility to larger
agencies with the expertise to assist disadvantaged
communities that suffer from contamination of their drinking
water sources. This bill has been referred to the Assembly
ESTM Committee.
5)AB 118 (ESTM). Authorizes DPH to adopt interim regulations for
purposes of implementing provisions relating to the SDWSRF,
and amends other statutory provisions relating to the drinking
water program. This bill has been referred to the Assembly
ESTM Committee.
6)AB 145 (Perea - Rendon). Transfers the State drinking water
program under the California Safe Drinking Water Act,
including the SDWSRF, from DPH to the SWRCB. Makes findings
regarding the need for consolidation of programs for safe
drinking water and clean water. This bill has been double
referred to the Assembly Committees on Water, Parks and
Wildlife Committee and on ESTM.
7)SB 117 (Rubio). Transfers the various duties and
responsibilities imposed on DPH by the California Safe
Drinking Water Act to the SWRCB, and makes conforming changes.
This bill has been double referred to Senate Committees on
Health and on Environmental Quality.
REGISTERED SUPPORT / OPPOSITION :
Support
California Latino Water Coalition
California Rural Legal Assistance Foundation
California Water Association
Clean Water Action
Community Water Center
Environmental Justice Coalition for Water
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Environmental Working Group
Monterey County Board of Supervisors
Pesticide Action Network
PolicyLink
Sierra Club California
Winnemem Wintu Tribe
Opposition
None received.
Analysis Prepared by : Shannon McKinney / E.S. & T.M. / (916)
319-3965