BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                  AB 21
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          AB 21 (Alejo and V. Manuel Pérez)
          As Amended  February 14, 2013
          Majority vote
          |ASSEMBLY:  |77-0 |(May 28, 2013)  |SENATE: |38-0 |(September 9,  |
          |           |     |                |        |     |2013)          |
           Original Committee Reference:    E.S. & T. M.  

           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.  Authorizes  
          the monies in the grant fund to be for grants for emergency  
          drinking water projects that meet the requirements stated in the  
          Emergency Clean Water Grant Fund (ECWGF) provisions that serve  
          disadvantaged and severely disadvantaged communities.

           The Senate amendments  limit the amount of funds that may be  
          placed in the ECWGF to no more that $50 million.

           EXISTING  LAW  :

          1)Authorizes, pursuant to the federal Safe Drinking Water Act  
            (SDWA), the US Environmental Protection Agency to make funds  
            available to drinking water systems to finance infrastructure  

          2)Requires, pursuant to the Safe Drinking Water State Revolving  
            Fund Law, DPH to implement the SDWSRF, which provides funding  
            to correct public water system deficiencies.

           FISCAL EFFECT  :  According to the Senate Appropriations  

          1)Unknown on-going costs, possibly in hundreds of thousands to  
            millions of dollars, in the form of reduced revenues to the  
            Safe Drinking Water State Revolving Fund (SDWSRF) (special)  
            due to forgone interest payments.

          2)One-time costs of approximately $100,000 from the SDWSRF for  


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            the development of regulations guiding the allocation of the  

          3)Unknown, but likely minimal, increases administrative costs to  
            SDWSRF for the administration of the fund. 

           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 state 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.    

           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.  

          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, "Consider establishing a  
          fee in lieu of interest assessed on a portion of the repayment  
          stream to provide continuous funding for eligible (capital)  


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          projects in the emergency fund."   

          This bill is intended to expedite SDWSRF funding disbursal for  
          drinking water solutions for disadvantaged communities, and is  
          based on the recommendations of the Drinking Water Stakeholder  
          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 often onerous disbursement and grantee qualification  
          requirements of the revolving funds.  Revolving fund monies  
          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.  

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