BILL ANALYSIS                                                                                                                                                                                                    

                                                                 AB 21

                              Senator Jerry Hill, Chair
                              2013-2014 Regular Session
           BILL NO:    AB 21
           AUTHOR:     Alejo
           AMENDED:    February 14, 2013
           FISCAL:     Yes               HEARING DATE:     June 12, 2013
           URGENCY:    No                CONSULTANT:        Rachel Machi 
                          GRANT FUND

            SUMMARY  :    
            Existing law,  

           1)Authorizes, pursuant to the federal Safe Drinking Water Act  
             (SDWA), the US EPA to make funds available to drinking water  
             systems to finance infrastructure improvements.

           2)Requires, pursuant to Safe Drinking Water State Revolving  
             Fund (SDWSRF) Law, DPH to implement SDWSRF, which provides  
             funding to correct public water system deficiencies (Health  
             and Safety Code (HSC) Section 116760 et seq.).  

            This bill  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 SDWSRF loans.  Specifically,  this bill  :  

           1)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.

           2)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 (ECWGF)  
             provisions and that serve disadvantaged and severely  
             disadvantaged communities.


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           3)Requires, for the purpose of approving grants, DPH to give  
             equal priority to projects that serve severely disadvantaged  

           4)Requires that charge in lieu of interest funds be expended  
             in a manner consistent with US EPA Drinking Water State  
             Revolving Fund (DWSRF) grant regulations.
             COMMENTS  :
             1)Purpose of 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 on the  
             waiting list for 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 contend that 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.    

            2) Actions for addressing groundwater and drinking water  
              contamination  :  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.  


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              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  

              This bill 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.
           3) Fee in lieu provisions  :  Charging a fee in lieu of  
              collecting interest on loans disbursed from the revolving  
              funds is 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 SWRCB to assess an  
              annual charge on existing CWSRF financing agreements for  
              deposit into 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 moneys 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.  

               This bill 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:


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                     a)          Improvements of the existing water  
                       supply system;

                     b)          Hookups with adjacent water systems;  

                     c)          Design, purchase and installation of  
                       water treatment technologies.

            4) Double Referral to Senate Health Committee  .  If this measure  
             is approved by this committee, the do pass motion must include  
             the action to re-refer the bill to the Senate Health Committee.

            SOURCE  :        Author
           SUPPORT  :  California Latino Water Coalition
                          California Rural Legal Assistance Foundation
                          California State Grange
                          California Water Association
                          City of Salinas
                          Clean Water Action
                          Community Water Center
                          Environmental Justice Coalition for Water
                          Environmental Working Group
                          Monterey County Board of Supervisors
                          Pesticide Action Network
                          Sierra Club California
                          Winnemem Wintu Tribe

            OPPOSITION:     None on file