BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 118 (Committee on Environmental Safety and Toxic Materials) -
Safe Drinking Water Sate Revolving Fund.
Amended: June 17, 2013 Policy Vote: EQ 9-0, Health 9-0
Urgency: No Mandate: No
Hearing Date: August 12, 2013 Consultant:
Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 118 would declare certain water systems serving
a severely disadvantaged community as eligible for a grant
instead of a loan from the State Drinking Water State Revolving
Fund (SDWSRF) and would allow loans from the SDWSRF to cover the
full cost of a project, subject to availability of funds and the
applicant's ability to repay.
Fiscal Impact:
Unknown increased cost pressures on the SDWSRF (special)
for assistance issued as grants instead of loans.
Increased exposure to potential loan defaults in the
millions of dollars to the SDWSRF by allowing loans to be
issued for the full cost of the project.
Background: The Department of Public Health (DPH), under the
California Safe Drinking Water Act, administers grants and loans
from the SDWSRF to provide for the design and construction of
public water systems projects that will enable suppliers to meet
safe drinking water standards. Existing law requires DPH to
establish eligibility criteria within specified parameters and
to establish a priority list of proposed projects. Specifically,
between 15 and 30% of the SDWSRF may be expended for grants to
serve disadvantaged communities (HSC §116761.21). Existing law
also sets specific maximums for planning grants and construction
grants.
Proposed Law: This bill would declare that all small community
water systems or nontransient noncommunity water systems owned
by a public agency or a private not-for-profit water company
that serve a severely disadvantaged community to have no ability
to repay a loan, thereby allowing such systems to receive a
AB 118 (Comm. on Env. Safety and Toxic Materials)
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grant instead of a loan from the SDWSRF.
This bill would also allow an applicant to receive up to the
full cost of a project in the form of a loan bearing interest
subject to the availability of funds and the applicant's ability
to repay.
Related Legislation: This bill has similar provisions to the
August 6, 2012 version of AB 2529 (Wieckowski, 2012). AB 2529
was subsequently amended to address an unrelated matter.
Staff Comments: This bill makes it easier for DPH to issue
grants instead of loans by automatically declaring that water
systems serving a severely disadvantaged community as having no
ability to repay a loan. While the amount of the SDWSRF that may
be given out as a loan is capped by federal and state law, this
provision would increase the likelihood that that cap is
reached, creating a cost pressure. Since a small water system
serving a severely disadvantaged community is likely to qualify
for a grant instead of a loan without this bill, this additional
cost pressure caused by this bill may be minimal. Staff notes
that since the SDWSRF largely operates as a revolving fund, any
financial assistance in the form of grants instead of loans
results in foregone future revenue to the SDWSRF.
This bill would allow DPH to issue loans much greater than the
$20 million limit under existing law, if funds are available.
While DPH reviews the applicant's ability to repay the loan, by
increasing the loan size, the state is exposed to more a more
costly potential default. Staff notes that there are only a few
projects that could utilize substantially more than $20 million
and that DPH has never experienced a default.