California Legislature—2013–14 Regular Session

Assembly Bill No. 118

Introduced by Committee on Environmental Safety and Toxic Materials (Alejo (Chair), Bloom, Lowenthal, Stone, and Ting)

(Coauthors: Assembly Members Perea and Wieckowski)

January 14, 2013

An act to amend Sections 116760.43, 116760.50, 116761.20, 116761.21, 116761.23, 116761.50, 116761.65, and 116761.70 of the Health and Safety Code, relating to drinking water.

LEGISLATIVE COUNSEL’S DIGEST

AB 118, as introduced, Committee on Environmental Safety and Toxic Materials. Safe Drinking Water State Revolving Fund.

Existing law, the California Safe Drinking Water Act, requires the State Department of Public Health to administer provisions relating to the regulation of drinking water to protect public health. The department’s duties include, but are not limited to, conducting research, studies, and demonstration programs relating to the provision of a dependable, safe supply of drinking water, enforcing the federal Safe Drinking Water Act, adopting and enforcing regulations, and conducting studies and investigations to assess the quality of water in domestic water supplies.

Existing law establishes the Safe Drinking Water State Revolving Fund, which is continuously appropriated to the department 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. Existing law authorizes the department to establish specified separate accounts or subaccounts within the fund.

Existing law requires applicants for loans or grants to provide specified information to the department. Existing law authorizes the department to enter into contracts with applicants for grants or loans, and requires and authorizes these contracts to contain specified information.

This bill would authorize the department to adopt interim regulations for purposes of implementing provisions relating to the Safe Drinking Water State Revolving Fund. The bill would require an applicant for funding to demonstrate that it has the technical, managerial, and financial capacity to operate and maintain its water system for at least 20 years, as specified. The bill would authorize an applicant, subject to specified conditions, to receive up to the full cost of a project in the form of a loan. The bill would require that contracts entered into between the department and an applicant include certain additional information, including the time for the completion of the project, and authorize the contracts to include certain additional information, including an agreement by the supplier to complete, as part of the project, a rate study.

This bill would make other related changes.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 116760.43 of the Health and Safety Code
is amended to read:

116760.43.  

(a) The department may adopt emergency
regulations pursuant to Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code
necessary or convenient to implement this chapter and to meet
requirements pursuant to the federal act.

(b) The adoption of any emergency regulations that are filed
with the Office of Administrative Law within 18 months of the
effective date of this act shall be deemed to be an emergency and
necessary for the immediate preservation of the public peace, health
and safety, or general welfare.

begin insert

(c) In addition to the authority granted pursuant to subdivision
(a), the department may adopt interim regulations to implement
this chapter and to meet the requirements of the federal act and
its implementing regulations or guidelines. The interim regulations
shall not be subject to the rulemaking provisions of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code, and:

end insert begin insert

(1) Shall be subject to a public review and comment period of
not less than 30 days.

end insert begin insert

(2) Shall take effect when filed with the Secretary of State, and
shall be published in the California Code of Regulations.

end insert begin insert

(3) Shall remain in effect for three years, unless sooner repealed
or amended by additional regulations adopted pursuant to this
subdivision.

end insert begin insert

(4) May amend or repeal emergency regulations adopted
pursuant to subdivision (a).

end insert begin insert

(5) Shall supersede any conflicting emergency regulations
adopted pursuant to subdivision (a).

end insert begin insert

(d) Applicable regulations in effect at the time a complete
application for funding a project pursuant to this chapter is
received by the department shall apply to the project funding,
unless the department determines a regulation adopted later, but
prior to the date a funding agreement is issued for a project, would
be more beneficial to the project applicant, in which case the later
adopted regulation may be applied.

end insert

SEC. 2.  

Section 116760.50 of the Health and Safety Code is
amended to read:

116760.50.  

The department shall establish criteria that shall
be met for projects to be eligible for consideration for funding
under this chapter. The criteria shall include all of the following:

(a)  begin delete All end delete begin insert Except as provided in subdivision (d), all end insert preliminary
design work for a defined project that will enable the applicant to
supply water that meets safe drinking water standards, including
a cost estimate for the project, shall be completed.

(b) A legal entity shall exist that has the authority to enter into
contracts and incur debt on behalf of the community to be served
and owns the public water system or has the right to operate the
public water system under a lease with a term of at least 20 years,
unless otherwise authorized by the department. If the proposed
project is funded by a loan under this chapter, the department may
require the applicant to secure a lease for the full term of the loan
if the loan exceeds 20 years.

(c) The applicant shall hold all necessary water rights.

(d)  begin insert (1) end insert begin insert   end insert The applicant shall have completed begin insert , prior to receiving end insert
begin insert a funding agreement, environmental review and documentation end insert
begin insert of the defined project, including, but not limited to, end insert any review
required pursuant to the California Environmental Quality Act
(Division 13 (commencing with Section 21000) of the Public
Resources Code) and the guidelines adopted pursuant begin delete thereto, and end delete
begin delete have included plans end delete begin insert thereto. Any measures required end insert for compliance
with begin delete that act in its preliminary end delete begin insert applicable environmental laws and end insert
begin insert regulations shall be included in the final end insert plans for the begin insert defined end insert
project.

begin insert

(2) Notwithstanding paragraph (1), a defined project may be
subject to further or supplemental review consistent with the
requirements of any applicable environmental laws or regulations.

end insert

(e) The applicant has assembled sufficient financial data to
establish its ability to complete the proposed project and to
establish the amount of debt financing it can undertake.

begin insert

(f) The applicant shall demonstrate that it has the technical,
managerial, and financial capacity to operate and maintain its
water system, including the project, in accordance with the federal
act, state law, and applicable regulations for at least 20 years, or
shall submit an acceptable plan for achieving this capacity by the
time the project is scheduled to be completed.

end insert

SEC. 3.  

Section 116761.20 of the Health and Safety Code is
amended to read:

116761.20.  

(a) Planning and preliminary engineering studies,
project design, and construction costs begin insert incurred by community and end insert
begin insert not-for-profit noncommunity public water systems end insert may be funded
under this chapter by loans, begin delete or, in the case of end delete begin insert and, if these systems end insert
begin insert are owned by end insert public agencies or private not-for-profit water
companies, by grants or a combination of grants and loans.

(b)  begin insert (1) end insert begin insert   end insert The department shall determine what portion of the full
costs the public agency or private not-for-profit water company is
capable of repaying and authorize funding in the form of a loan
for that amount. The department shall authorize a grant only to the
extent the department finds the public agency or not-for-profit
water company is unable to repay the full costs of a loan.

begin insert

(2) Notwithstanding any other provision of this chapter, a small
community water system or nontransient noncommunity water
system that is owned by a public agency or a private not-for-profit
water company and serving a severely disadvantaged community,
is deemed to have no ability to repay a loan.

end insert

(c) At the request of the department, the Public Utilities
Commission shall submit comments concerning the ability of
suppliers, subject to its jurisdiction, to finance the project from
other sources and to repay the loan.

SEC. 4.  

Section 116761.21 of the Health and Safety Code is
amended to read:

116761.21.  

Not more than 30 percent and not less than 15
percent, provided that there are projects eligible for funding as
prescribed in Section 116760.70, of the total amount begin delete deposited in end delete
begin delete the fund end delete begin insert of the capitalization grant end insert may be expended for grants.
This amount shall be limited to disadvantaged communities
specified in Section 1452(d) of the federal act (42 begin delete U.S.C.A. end delete begin insert U.S.C. end insert
Sec. 300j-12).

SEC. 5.  

Section 116761.23 of the Health and Safety Code is
amended to read:

116761.23.  

(a) The maximum amount of a planning grant
permitted under this chapter for each participating public water
system’s share of the costs of the planning, engineering studies,
environmental documentation, and design of a single project shall
be no more than five hundred thousand dollars ($500,000).

(b) Unless the department approves an increase pursuant to this
subdivision, the maximum amount of a construction grant award
authorized under this chapter to each participating public water
system for its share of the cost of the construction of a single
project shall be no more than three million dollars ($3,000,000).
The department may approve an increase in the maximum amount
for a construction grant award authorized under this chapter so
that the maximum amount of the construction grant award does
not exceed ten million dollars ($10,000,000) only if the department
makes all of the following findings:

(1) A public water system that serves a disadvantaged
community has a defined project need that exceeds the maximum
grant amount of three million dollars ($3,000,000).

(2) The defined project has been bypassed in at least one funding
cycle due to a lack of funds.

(3) The defined project is eligible for funding pursuant to the
program regulations.

(4) The defined project represents the highest public health risk
among unfunded projects, as determined by the department
according to its standard criteria.

(c) Total funding under this article for planning, engineering
studies, environmental documentation, project design, and
construction costs of a single project, whether in the form of a loan
or a grant, or both, shall be determined by an assessment of
affordability using criteria established by the department.

(d) Subject to all other limitations of this chapter, a small
community water system or nontransient noncommunity water
system, owned by a public agency or private not-for-profit water
company, serving severely disadvantaged communities shall be
eligible to receive up to 100 percent of eligible project costs in the
form of a grant, to the extent the system cannot afford a loan as
determined by the department pursuant to Section 116761.20.

begin insert

(e) Subject to the availability of funds and the applicant’s ability
to repay, an applicant may receive up to the full cost of the project
in the form of a loan bearing interest at the rate established
pursuant to subdivision (a) of Section 116761.65.

end insert

SEC. 6.  

Section 116761.50 of the Health and Safety Code is
amended to read:

116761.50.  

(a) The department may enter into contracts with
applicants for grants or loans for the purposes set forth in this
chapter. Any contract entered into pursuant to this section shall
include only terms and conditions consistent with this chapter and
the regulations established under this chapter.

(b) The contract shall include all of the following terms and
conditions that are applicable:

(1) An estimate of the reasonable cost of the project or study.

(2) An agreement by the department to loan or grant, or loan
and grant, the applicant an amount that equals the portion of the
costs found by the department to be eligible for a state loan or
grant. The agreement may provide for disbursement of funds during
the progress of the study or construction, or following completion
of the study or construction, as agreed by the parties.

(3) An agreement by the applicant to proceed expeditiously with
the project or study.

(4) An agreement by the applicant to commence operations of
the project upon completion of the project, and to properly operate
and maintain the project in accordance with the applicable
provisions of law.

(5) In the case of a loan, an agreement by the applicant to repay
the state, over a period not to exceed the useful life of the project
or 20 years, whichever is shorter, except as provided in the federal
act, or in the case of a study, over a period not to exceed five years,
begin insert that includes end insert all of the following:

(A) The amount of the loan.

(B) The administrative fee specified in subdivision (a) of Section
116761.70.

(C) Interest on the principal, which is the amount of the loan
begin delete plus the end delete begin insert including, if applicable, an end insert administrative fee.

(6)  In the case of a grant, an agreement by the public agency
or private not-for-profit water company to operate and maintain
the water system for a period of 20 years, unless otherwise
authorized by the department.

begin insert

(7) The time for the completion of the project. Subject to any
requirements of the federal act and its implementing regulations
and guidelines, in the case of a project for planning and a
preliminary design, pursuant to Section 116760.80, the department
may determine on a case-by-case basis an appropriate amount of
time for completion of the project, not to exceed 36 months.

end insert

(c) The contract may include any of the following terms and
conditions:

(1) An agreement by the supplier to adopt a fee structure that
provides for the proper maintenance and operations of the project
and includes a sinking fund for repair and replacement of the
facilities in cases where appropriate. The fee structure shall also
provide an acceptable dedicated source of revenue for the
repayment of the amount of the loan, and the payment of
administrative fees and interest.

(2) If the entire project is not funded pursuant to this chapter,
the department may include a provision requiring the applicant to
share the cost of the project or obtain funding from other sources.

begin insert

(3) An agreement by the supplier to complete, as part of the
project, a rate study pursuant to guidelines established by the
department.

end insert begin insert

(4) An agreement by the supplier to implement, not later than
the conclusion of the project, the approved plan for achieving
technical, managerial, and financial capacity as specified in
subdivision (f) of Section 116760.50.

end insert begin insert

(5) If the supplier is a small community water system or
nontransient noncommunity water system, owned by a public
agency or private not-for-profit water company, receiving grant
funding, an agreement by the supplier to comply with guidelines
adopted by the department for any procurement of engineering,
environmental compliance, or architectural services.

end insert

(d) The department may require applicants to provide security
for loan contracts.

SEC. 7.  

Section 116761.65 of the Health and Safety Code is
amended to read:

116761.65.  

(a) The department shall annually establish the
interest rate for loans made pursuant to this chapter at 50 percent
of the average interest rate, computed by the true interest cost
method, paid by the state on general obligation bonds issued in
the prior calendar year. All loans made pursuant to this chapter
shall carry the interest rate established for the calendar year in
which the funds are committed to the loan, as of the date of the
begin delete letter end delete begin insert issuance end insert of begin insert the funding end insert commitment. The interest rate set
for each loan shall be applied throughout the repayment period of
the loan. Interest on the loan shall not be deferred.

(b) Notwithstanding subdivision (a), if the loan applicant is a
public water system that is a disadvantaged community or provides
matching funds, the interest rate on the loan shall be zero percent.

SEC. 8.  

Section 116761.70 of the Health and Safety Code is
amended to read:

116761.70.  

(a) Not more than 4 percent of the capitalization
grant may be used by the department for administering this chapter.
The department may establish a reasonable schedule of
administrative fees for loans, which shall be paid by the begin delete applicant end delete
begin insert funding recipient end insert to reimburse the state for the costs of the state
administration of this chapter. begin insert The department annually shall end insert
begin insert establish in the Intended Use Plan the amount of any administrative end insert
begin insert fee. end insert

(b) Charges incurred by the Attorney General in protection of
the state’s interest in the use of repayment of grant and loan funds
under this chapter shall be paid. These charges shall not be paid
from funds allocated for administrative purposes, but shall be
treated as a program expense not to exceed one-half of 1 percent
of the total amount deposited in the fund.