BILL ANALYSIS                                                                                                                                                                                                    

                             SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:       AB 21
          AUTHOR:        Alejo and Perez
          AMENDED:       February 14, 2013
          HEARING DATE:  June 26, 2013
          CONSULTANT:    Valderrama

           SUBJECT  :  Safe Drinking Water Small Community Emergency Grant  
          SUMMARY  :   Authorizes the Department of Public Health 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 loans. Creates the Safe Drinking Water  
          Small Community Emergency Grant Fund in the State Treasury and  
          requires moneys collected to be deposited into the fund.

          Existing law:
          1.Authorizes, pursuant to the federal Safe Drinking Water Act,  
            the United States Environmental protection agency (US EPA) to  
            make funds available to drinking water systems to finance  
            infrastructure improvements.

          2.Establishes the Safe Drinking Water State Revolving Fund  
            (SDWSRF), which is continuously appropriated to the Department  
            of Public Health (DPH) for the provision of grants and  
            revolving fund loans to provide for the design and  
            construction of projects for public water systems that will  
            enable suppliers to meet safe drinking water standards. 

          3.Requires DPH to establish criteria to be met for projects to  
            be eligible for consideration for this funding.
          This bill:
          1.Authorizes DPH to assess an annual charge to be in lieu of  
            interest that would otherwise be charged on SDWSRF loans.

          2.Creates the Safe Drinking Water Small Community Emergency  
            Grant Fund (Fund) in the State Treasury and requires the  
            moneys collected pursuant to 1) above to be deposited in this  

          3.Permits the charge to be applied at any time during the term  
            of the financing and, once applied, is required to remain  


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          4.Prohibits the charge from increasing the financing repayment  
            amount, as specified.

          5.Permits moneys in the Fund to be expended on grants for  
            projects that meet specified requirements and that serve  
            disadvantaged and severely disadvantaged communities.

          6.Requires DPH, for purpose of approving grants, to give  
            priority to projects that serve severely disadvantaged  

          7.Requires funds expended pursuant to this bill to be expended  
            in a manner consistent with the federal EPA grant regulations,  
            as specified.

           FISCAL EFFECT  :  According to Assembly Appropriations Committee  
          potential fund shift from the SDWSRF to the Safe Drinking Water  
          Small Community Emergency Grant Fund in the millions of dollars  
          and absorbable ongoing costs to DPH to administer the grant  

           PRIOR VOTES  :  
          Assembly Environmental Safety and Toxic Materials:  6- 0
          Assembly Appropriations:                17- 0
          Assembly Floor:                         77- 0
          Senate Environmental Quality:         9-0
          COMMENTS  :  
           1.Author's statement. 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 has SDWSRF funds to address drinking water issues,  
            these communities often lack the technical and financial  
            resources to access the funding.  Some water systems have been  
            in the waiting list for funding from 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. This bill makes use of a funding tool, an in-lieu  
            charge assessed in place of interest on SDWSRF loans, to  
            provide a renewable funding source addressing drinking water  
            emergencies, and targets the funds raised at disadvantaged  
            communities. Also, by removing these funds from the corpus of  


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            the SDWSRF, applicants will not have to comply with the same  
            level of requirements that make the SDWSRF so difficult to  
            access.  The solution in this bill was proposed by the  
            Governor's Drinking Water Stakeholder Group, a diverse group  
            of agricultural, water agency and environmental justice  

          2.Prevalence of ground water contamination in disadvantaged  
            communities.  AB 2222 (Caballero), Chapter 670, Statues of  
            2008, required State Water Resources Control Board (SWRCB) to  
            submit a report to the Legislature to identify the following:  
            communities that rely on contaminated groundwater as a primary  
            source of drinking water, the principal contaminants in  
            groundwater, and potential solutions and funding sources to  
            clean up groundwater.

          The SWRCB report "Communities that Rely on Contaminated  
            Groundwater" identified 2,584 community Public Water Systems  
            (PWS) in California that rely on groundwater as their primary  
            source of drinking water. Out of those, 682 were reported to  
            rely on contaminated groundwater as a primary source of  
            drinking water. The SWRCB report also compared the list of 682  
            community PWS with a list of PWS that had received a drinking  
            water quality violation within the most recent compliance  
            cycle (2002-2010). This comparison revealed that a total of  
            265 community PWS that rely on contaminated groundwater and  
            serve a little over two million people had received at least  
            one drinking water quality violation within the last CDPH  
            compliance cycle. 

            According to this report, most of the community PWS with  
            violations of drinking water standards are located in the  
            Southern California Inland Empire, the east side of San  
            Joaquin Valley, the Salinas Valley and the Santa Maria Valley.  
            The findings from this report and the UC Davis study suggest  
            that drinking water contamination in California  
            disproportionally affects small, rural and low-income  
            communities that depend mostly on groundwater as their  
            drinking water source.

          3.Efforts to mitigate 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  


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            environmental justice community, academia, and other water  
            related entities, submitted its "Final Report to the  
            Governor's Office," on August 20, 2012. 

          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."   
            According to the author, 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.   
          4.Fee in lieu of collecting interest.  Charging a fee in lieu of  
            interest is an alternative means of capitalizing on revolving  
            fund loans.  The annual charge is in lieu of interest that  
            would otherwise be charged in association with a SDWSRF loan.  
            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.
          5.Double referral.  This bill was heard in the Senate Committee  
            on Environmental Quality on June 12, 2013 and passed with a  
            9-0 vote.
          6.Prior legislation.  AB 2356 (Arambula), Chapter 609, Statues  
            of 2008, created the Clean Water State Revolving Fund (CWSRF)  
            Small Community Grant (SCG) Fund, which authorized the SWRCB  
            to asses an annual charge on existing CWSRF financing  
            agreements for deposit into the SCG fund.    

          7.Support.  Supporters of this bill argue that the application  
            to apply for funding from the SDWSRF is arduous and expensive,  
            and the difficulty of this process creates such a barrier that  
            many communities with the greatest needs cannot apply.   


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            Supports believe this bill will improve the ability of  
            disadvantaged communities to access the funding necessary to  
            undertake critical capital projects that will enhance the  
            water quality of their residents.  

          Support:  Audubon California
                    California Environmental Justice Alliance
                    California Rural Legal Assistance Foundation
                    California State Grange
                    City of Salinas
                    California Latino Water Coalition
                    California Rural Legal Assistance Foundation
                    California Water Association
                    Clean Water Action
                    Community Water Center
                    Environmental Justice Coalition for Water
                    Environmental Working Group
                    Leadership Council for Justice and Accountability
                    Monterey County Board of Supervisors
                    Pesticide Action Network
                    Planning and Conservation League
                    Sierra Club California
                    Unitarian Universalist Service Committee
                    Winnemem Wintu Tribe
                    Western Growers Association

          Oppose:   None received. 

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