Amended in Senate June 17, 2013

California Legislature—2013–14 Regular Session

Assembly BillNo. 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 Sectionsbegin delete 116760.43, 116760.50,end delete 116761.20begin delete, 116761.21,end deletebegin insert andend insert 116761.23begin delete, 116761.50, 116761.65, and 116761.70end delete of the Health and Safety Code, relating to drinking water.

LEGISLATIVE COUNSEL’S DIGEST

AB 118, as amended, 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 forbegin delete the provision ofend delete grants and revolving fund loansbegin delete to provideend delete for the design and construction of projects for public water systems that will enable suppliers to meet safe drinking water standards.begin delete Existing law authorizes the department to establish specified separate accounts or subaccounts within the fund.end deletebegin insert Under existing law, a grant is authorized 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.end insert

begin insert

This bill would limit loans and grants from the fund for planning and preliminary engineering studies, project design, and construction costs to those incurred by community and not-for-profit noncommunity public water systems and would specify that 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 is serving a severely disadvantaged community, is deemed to have no ability to repay a loan.

end insert
begin delete

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.

end delete
begin insert

Under existing law, the maximum amount of a construction grant award to a public water system for a single project is $3 million or, for a public water system that serves a disadvantaged community, $10 million, as specified.

end insert

This bill wouldbegin delete 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 wouldend delete authorize an applicant, subject to specified conditions, to receive up to the full cost of a project in the form of a loan.begin delete 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.end delete

begin delete

This bill would make other related changes.

end delete

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

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

begin delete
P3    1

SECTION 1.  

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

3

116760.43.  

(a) The department may adopt emergency
4regulations pursuant to Chapter 3.5 (commencing with Section
511340) of Part 1 of Division 3 of Title 2 of the Government Code
6necessary or convenient to implement this chapter and to meet
7requirements pursuant to the federal act.

8(b) The adoption of any emergency regulations that are filed
9with the Office of Administrative Law within 18 months of the
10effective date of this act shall be deemed to be an emergency and
11necessary for the immediate preservation of the public peace, health
12and safety, or general welfare.

13(c) In addition to the authority granted pursuant to subdivision
14(a), the department may adopt interim regulations to implement
15this chapter and to meet the requirements of the federal act and its
16implementing regulations or guidelines. The interim regulations
17shall not be subject to the rulemaking provisions of Chapter 3.5
18(commencing with Section 11340) of Part 1 of Division 3 of Title
192 of the Government Code, and:

20(1) Shall be subject to a public review and comment period of
21not less than 30 days.

22(2) Shall take effect when filed with the Secretary of State, and
23shall be published in the California Code of Regulations.

24(3) Shall remain in effect for three years, unless sooner repealed
25or amended by additional regulations adopted pursuant to this
26 subdivision.

27(4) May amend or repeal emergency regulations adopted
28pursuant to subdivision (a).

29(5) Shall supersede any conflicting emergency regulations
30adopted pursuant to subdivision (a).

31(d) Applicable regulations in effect at the time a complete
32application for funding a project pursuant to this chapter is received
33by the department shall apply to the project funding, unless the
34department determines a regulation adopted later, but prior to the
35date a funding agreement is issued for a project, would be more
36beneficial to the project applicant, in which case the later adopted
37regulation may be applied.

38

SEC. 2.  

Section 116760.50 of the Health and Safety Code is
39amended to read:

P4    1

116760.50.  

The department shall establish criteria that shall
2be met for projects to be eligible for consideration for funding
3under this chapter. The criteria shall include all of the following:

4(a) Except as provided in subdivision (d), all preliminary design
5work for a defined project that will enable the applicant to supply
6water that meets safe drinking water standards, including a cost
7estimate for the project, shall be completed.

8(b) A legal entity shall exist that has the authority to enter into
9contracts and incur debt on behalf of the community to be served
10and owns the public water system or has the right to operate the
11public water system under a lease with a term of at least 20 years,
12unless otherwise authorized by the department. If the proposed
13project is funded by a loan under this chapter, the department may
14require the applicant to secure a lease for the full term of the loan
15if the loan exceeds 20 years.

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

17(d) (1) The applicant shall have completed, prior to receiving
18a funding agreement, environmental review and documentation
19of the defined project, including, but not limited to, any review
20required pursuant to the California Environmental Quality Act
21(Division 13 (commencing with Section 21000) of the Public
22Resources Code) and the guidelines adopted pursuant thereto. Any
23measures required for compliance with applicable environmental
24laws and regulations shall be included in the final plans for the
25defined project.

26(2) Notwithstanding paragraph (1), a defined project may be
27subject to further or supplemental review consistent with the
28requirements of any applicable environmental laws or regulations.

29(e) The applicant has assembled sufficient financial data to
30establish its ability to complete the proposed project and to
31establish the amount of debt financing it can undertake.

32(f) The applicant shall demonstrate that it has the technical,
33managerial, and financial capacity to operate and maintain its water
34system, including the project, in accordance with the federal act,
35state law, and applicable regulations for at least 20 years, or shall
36submit an acceptable plan for achieving this capacity by the time
37the project is scheduled to be completed.

end delete
38

begin deleteSEC. 3.end delete
39begin insertSECTION 1.end insert  

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

P5    1

116761.20.  

(a) Planning and preliminary engineering studies,
2project design, and construction costs incurred by community and
3not-for-profit noncommunity public water systems may be funded
4under this chapter by loans, and, if these systems are owned by
5public agencies or private not-for-profit water companies, by grants
6or a combination of grants and loans.

7(b) (1) The department shall determine what portion of the full
8costs the public agency or private not-for-profit water company is
9capable of repaying and authorize funding in the form of a loan
10for that amount. The department shall authorize a grant only to the
11extent the department finds the public agency or not-for-profit
12water company is unable to repay the full costs of a loan.

13(2) Notwithstanding any other provision of this chapter, a small
14community water system or nontransient noncommunity water
15system that is owned by a public agency or a private not-for-profit
16water company and serving a severely disadvantaged community,
17is deemed to have no ability to repay a loan.

18(c) At the request of the department, the Public Utilities
19Commission shall submit comments concerning the ability of
20suppliers, subject to its jurisdiction, to finance the project from
21other sources and to repay the loan.

begin delete22

SEC. 4.  

Section 116761.21 of the Health and Safety Code is
23amended to read:

24

116761.21.  

Not more than 30 percent and not less than 15
25percent, provided that there are projects eligible for funding as
26prescribed in Section 116760.70, of the total amount of the
27capitalization grant may be expended for grants. This amount shall
28be limited to disadvantaged communities specified in Section
291452(d) of the federal act (42 U.S.C. Sec. 300j-12).

end delete
30

begin deleteSEC. 5.end delete
31begin insertSEC. 2.end insert  

Section 116761.23 of the Health and Safety Code is
32amended to read:

33

116761.23.  

(a) The maximum amount of a planning grant
34permitted under this chapter for each participating public water
35system’s share of the costs of the planning, engineering studies,
36environmental documentation, and design of a single project shall
37be no more than five hundred thousand dollars ($500,000).

38(b) Unless the department approves an increase pursuant to this
39subdivision, the maximum amount of a construction grant award
40authorized under this chapter to each participating public water
P6    1system for its share of the cost of the construction of a single
2project shall be no more than three million dollars ($3,000,000).
3The department may approve an increase in the maximum amount
4for a construction grant award authorized under this chapter so
5that the maximum amount of the construction grant award does
6not exceed ten million dollars ($10,000,000) only if the department
7makes all of the following findings:

8(1) A public water system that serves a disadvantaged
9community has a defined project need that exceeds the maximum
10grant amount of three million dollars ($3,000,000).

11(2) The defined project has been bypassed in at least one funding
12cycle due to a lack of funds.

13(3) The defined project is eligible for funding pursuant to the
14program regulations.

15(4) The defined project represents the highest public health risk
16among unfunded projects, as determined by the department
17according to its standard criteria.

18(c) Total funding under this article for planning, engineering
19studies, environmental documentation, project design, and
20construction costs of a single project, whether in the form of a loan
21or a grant, or both, shall be determined by an assessment of
22affordability using criteria established by the department.

23(d) Subject to all other limitations of this chapter, a small
24community water system or nontransient noncommunity water
25system, owned by a public agency or private not-for-profit water
26company, serving severely disadvantaged communities shall be
27eligible to receive up to 100 percent of eligible project costs in the
28form of a grant, to the extent the system cannot afford a loan as
29determined by the department pursuant to Section 116761.20.

30(e) Subject to the availability of funds and the applicant’s ability
31to repay, an applicant may receive up to the full cost of the project
32in the form of a loan bearing interest at the rate established pursuant
33to subdivision (a) of Section 116761.65.

begin delete
34

SEC. 6.  

Section 116761.50 of the Health and Safety Code is
35amended to read:

36

116761.50.  

(a) The department may enter into contracts with
37applicants for grants or loans for the purposes set forth in this
38chapter. Any contract entered into pursuant to this section shall
39include only terms and conditions consistent with this chapter and
40the regulations established under this chapter.

P7    1(b) The contract shall include all of the following terms and
2conditions that are applicable:

3(1) An estimate of the reasonable cost of the project or study.

4(2) An agreement by the department to loan or grant, or loan
5and grant, the applicant an amount that equals the portion of the
6costs found by the department to be eligible for a state loan or
7grant. The agreement may provide for disbursement of funds during
8the progress of the study or construction, or following completion
9of the study or construction, as agreed by the parties.

10(3) An agreement by the applicant to proceed expeditiously with
11the project or study.

12(4) An agreement by the applicant to commence operations of
13the project upon completion of the project, and to properly operate
14and maintain the project in accordance with the applicable
15provisions of law.

16(5) In the case of a loan, an agreement by the applicant to repay
17the state, over a period not to exceed the useful life of the project
18or 20 years, whichever is shorter, except as provided in the federal
19act, or in the case of a study, over a period not to exceed five years,
20 that includes all of the following:

21(A) The amount of the loan.

22(B) The administrative fee specified in subdivision (a) of Section
23116761.70.

24(C) Interest on the principal, which is the amount of the loan
25including, if applicable, an administrative fee.

26(6)  In the case of a grant, an agreement by the public agency
27or private not-for-profit water company to operate and maintain
28the water system for a period of 20 years, unless otherwise
29authorized by the department.

30(7) The time for the completion of the project. Subject to any
31requirements of the federal act and its implementing regulations
32and guidelines, in the case of a project for planning and a
33preliminary design, pursuant to Section 116760.80, the department
34may determine on a case-by-case basis an appropriate amount of
35time for completion of the project, not to exceed 36 months.

36(c) The contract may include any of the following terms and
37conditions:

38(1) An agreement by the supplier to adopt a fee structure that
39provides for the proper maintenance and operations of the project
40and includes a sinking fund for repair and replacement of the
P8    1facilities in cases where appropriate. The fee structure shall also
2provide an acceptable dedicated source of revenue for the
3repayment of the amount of the loan, and the payment of
4administrative fees and interest.

5(2) If the entire project is not funded pursuant to this chapter,
6the department may include a provision requiring the applicant to
7share the cost of the project or obtain funding from other sources.

8(3) An agreement by the supplier to complete, as part of the
9project, a rate study pursuant to guidelines established by the
10department.

11(4) An agreement by the supplier to implement, not later than
12the conclusion of the project, the approved plan for achieving
13technical, managerial, and financial capacity as specified in
14subdivision (f) of Section 116760.50.

15(5) If the supplier is a small community water system or
16nontransient noncommunity water system, owned by a public
17agency or private not-for-profit water company, receiving grant
18funding, an agreement by the supplier to comply with guidelines
19adopted by the department for any procurement of engineering,
20environmental compliance, or architectural services.

21(d) The department may require applicants to provide security
22for loan contracts.

23

SEC. 7.  

Section 116761.65 of the Health and Safety Code is
24amended to read:

25

116761.65.  

(a) The department shall annually establish the
26interest rate for loans made pursuant to this chapter at 50 percent
27of the average interest rate, computed by the true interest cost
28method, paid by the state on general obligation bonds issued in
29the prior calendar year. All loans made pursuant to this chapter
30shall carry the interest rate established for the calendar year in
31which the funds are committed to the loan, as of the date of the
32issuance of the funding commitment. The interest rate set for each
33loan shall be applied throughout the repayment period of the loan.
34Interest on the loan shall not be deferred.

35(b) Notwithstanding subdivision (a), if the loan applicant is a
36public water system that is a disadvantaged community or provides
37matching funds, the interest rate on the loan shall be zero percent.

38

SEC. 8.  

Section 116761.70 of the Health and Safety Code is
39amended to read:

P9    1

116761.70.  

(a) Not more than 4 percent of the capitalization
2grant may be used by the department for administering this chapter.
3The department may establish a reasonable schedule of
4administrative fees for loans, which shall be paid by the funding
5recipient to reimburse the state for the costs of the state
6 administration of this chapter. The department annually shall
7establish in the Intended Use Plan the amount of any administrative
8fee.

9(b) Charges incurred by the Attorney General in protection of
10the state’s interest in the use of repayment of grant and loan funds
11under this chapter shall be paid. These charges shall not be paid
12from funds allocated for administrative purposes, but shall be
13treated as a program expense not to exceed one-half of 1 percent
14of the total amount deposited in the fund.

end delete


O

    98