BILL ANALYSIS Ó AB 440 SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Jerry Hill, Chair 2013-2014 Regular Session BILL NO: AB 440 AUTHOR: Gatto AMENDED: May 24, 2013 FISCAL: Yes HEARING DATE: July 3, 2013 URGENCY: No CONSULTANT: Rachel Machi Wagoner SUBJECT : HAZARDOUS SUBSTANCES: RELEASES: LOCAL AGENCY CLEANUP OR REMEDY SUMMARY : Existing law : 1) Dissolved redevelopment agencies (RDAs) and community development agencies (CDAs), as of February 1, 2012, and provides for the designation of a successor agency, as defined, to resolve the final matters of the agencies and to dispose of assets and properties in accordance with certain procedures. 2) Under the Polanco Redevelopment Act (the Polanco Act) which was part of the Community Redevelopment Law (CRL), assisted redevelopment agencies in responding to brownfield properties in their redevelopment areas. It prescribed processes for redevelopment agencies to follow when remediating a hazardous substance release in a redevelopment project area. It also provided specified immunity from liability for sites cleaned up under a cleanup plan approved by the Department of Toxic Substances Control (DTSC) or a Regional Water Quality Control Board (RWQCB). It provided limited liability protections for RDAs and future purchasers of properties remediated under the Polanco Act. This bill : Authorizes local government agencies to remedy or remove a release of hazardous substances within the boundaries of the local agency. Specifically this bill: AB 440 Page 2 1)Allows counties, cities, or housing authorities to undertake cleanup of a contaminated property if there is no responsible party for the property, the responsible party fails to agree within 60 days of request to clean up the property, or, having agreed, fails to follow through in an appropriate and timely manner. 2)Requires that hazardous waste cleanups carried out by local agencies must be conducted under guidelines or remedial action plans approved by DTSC, the regional water quality control board, or designated local agencies; 3)Provides that, if a local agency completes the cleanup of a property in accordance with an approved remedial action plan, the agency is immune from further liability for the hazardous substance release that was the subject of the cleanup. 4)Provides that the immunity from further liability also extends to any person who enters into an agreement with the local agency to develop the property, to persons who subsequently acquire the property, and to persons who financed the redevelopment activities. 5)Authorizes local agencies to recover cleanup costs from the responsible party or parties for the property. 6)Provides for a public participation process when local governments are developing a clean-up plan. The public participation process shall include: a) An opportunity for the public and other government agencies to participate in the decision making process for the removal or remedial action and the consideration of those comments before submitting a clean-up plan for approval; b) A public notice 30 days before submitting a clean-up plan to state or local agencies for approval; c) A public meeting, if requested; and AB 440 Page 3 d) The local agency shall consider the issue of environmental justice for communities impacted by a proposed removal or remedial action. 7)Provides that local agencies shall reimburse the RWQCB or DTSC for the cost incurred in reviewing or approving a cleanup plan submitted by a local agency. 8)States that the Legislature declares that this chapter is the policy successor to the Polanco Redevelopment Act. COMMENTS : 1)Purpose of Bill . According to the author, "There is no clear statutory authority for redevelopment successor agencies to compel brownfield clean up. Redevelopment Agencies used to exercise Polanco Act powers to clean up and redevelop brownfields. Despite the Legislature's effort to pass some blanket bills which transferred all development powers of RDAs to local government or local housing authorities, it is the opinion of Legislative Counsel, CalEPA, and private developers that this does not obviously extend to Polanco Act powers. Additionally, even if local authorities somehow did retain the right to utilize Polanco Act powers, under the law as written they would only be able to exercise those powers within redevelopment areas, which will be phased out of existence with the end of RDA's. The Polanco Act powers need to be saved, and the areas where they may be used must be redefined." 2) Background . In 1945, the California Legislature enacted the Community Redevelopment Act to assist local governments in eliminating blight through development, reconstruction, and rehabilitation of residential, commercial, industrial, and retail districts. The Act gave cities and counties the authority to establish RDAs. In 1951, the Legislature superseded the Community AB 440 Page 4 Redevelopment Act with the California Redevelopment Law (CRL), Chapter 710, Statutes of 1951, which codified in California Constitution, Article XVI, Section 16, and the Health and Safety Code, beginning with Section 33000, CRL provided funding from local property taxes to promote the redevelopment of blighted areas. CRL enabled local government entities to create redevelopment agencies to develop a plan and provide the initial funding to launch revitalization of identified areas in order to encourage and attract private sector investment that otherwise wouldn't occur. The CRL also established the authority for tax increment financing (TIF), which is a public financing method to subsidize redevelopment, infrastructure, and other community-improvement projects. TIF used future increases in property taxes to subsidize current improvements, which are projected to create the conditions for the increases. In 1976, the California Legislature required that at least 20% of the tax increment revenue from redevelopment project areas be used to increase, improve, and preserve the supply of housing for very low, low, and moderate income households. AB 3193 (Polanco), Chapter 1113, Statutes of 1990, as part of the Community Redevelopment Act, was enacted to assist redevelopment agencies in responding to brownfield properties in their redevelopment areas. It prescribes processes for redevelopment agencies to follow when cleaning up a hazardous substance release in a redevelopment project area. It also provides specified immunity from liability for sites cleaned up under a AB 440 Page 5 cleanup plan approved by DTSC or a RWQCB. AB 1290 (Isenberg), Chapter 942, Statutes of 1993, known as the "Community Redevelopment Law Reform Act of 1993," revised the CRL to address alleged abuses, and added restrictions on redevelopment activities, including limiting them predominately to urban areas. Citing a significant State General Fund deficit, Governor Brown's 2011-12 budget proposed eliminating RDAs and returning billions of dollars of property tax revenues to schools, cities, and counties to fund core services. On June 28, 2011, the Governor approved two bills, AB1X 26 (Blumenfield), Chapter 5, Statutes of 2011, and AB1X 27(Blumenfield), Chapter 5, Statutes of 2011, which amended the CRL. AB1X 26 was the "dissolution" bill, which set November 1, 2012 as the date to dissolve all RDAs. The companion legislation AB1X 27, the "reinstatement" bill, allowed cities to keep their agencies in place by committing to substantial "community remittances" to be paid to the State. In July 2011, a lawsuit was filed challenging the constitutionality of both AB1X 26 and AB1X 27. The California Supreme Court accepted the case and issued a stay under which agencies remained in place but in the suspended state pending a decision by the Court. On December 29, 2011, the California Supreme Court issued its decision: it upheld AB1X 26, which eliminates redevelopment agencies, but struck down AB1X 27, which would have allowed cities to agree to community remittance payments to keep their agencies in place. As a result, under the schedule set by the California Supreme Court, AB1X 26 provides that cities may create AB 440 Page 6 successor agencies and could continue to implement "enforceable obligations" which were in place prior to the suspension-existing contracts, bonds, leases, etc.-and take title to all of the former redevelopment agencies' housing and other assets. On June 27, 2012, the Governor approved AB 1484 (Assembly Committee on Budget) Chapter 26, Statutes of 2012, making some significant clarifications and procedural changes in AB1X 26, the redevelopment dissolution law. 3) Purpose of the Polanco Act . In 1990 the California Legislature recognized the benefit to cleaning up brownfield properties located within redevelopment areas in California where it was a struggle to address economic and social deterioration and blight caused by properties where contamination was present. The private sector was reluctant to invest because the costs associated with cleaning up brownfields outweighed the potential gain. RDAs served as the catalyst for remediating these sites. The Polanco Act was enacted in the CRL to provide RDAs with tools to compel remediation of sites within designated redevelopment areas and provided the RDA limited immunity from liability as a responsible party from future remediation of contamination found. 4) Expansive authority and liability protection to local governments . AB 440 replicates the authority and protections provided under the Polanco Act, however with several key differences: AB 440 Page 7 a) Applies those authorities and protections to all cities and counties rather than within the limitations of an RDA and does so for any property within the jurisdiction of a city or county. b) Allows local agencies to designate another local agency to do oversight of cleanups within their own jurisdictions. c) Requires state oversight agencies to provide general guidelines for remediation. d) Creates a new chapter pertaining to liability relief outside of the CRL. e) The Polanco Act requires that the plan and schedule have been found by the overseeing agency to be consistent, to the maximum extent possible, with the priorities, guidelines, criteria, and regulations contained in the National Contingency Plan. This bill only requires that the plan and schedule are consistent with the intended use of the property . 5) Out of context . Within the context of the CRL and the Polanco Act, the liability protections and authorities to require a property to be remediated were inherently limited to properties that were within a defined RDA and were subject to the many limitations that applied to that RDA's activities under the CRL and the Polanco Act (i.e., the sites were "blighted" pursuant to Article XVI of the California Constitution and the obstacles to addressing the blight prevented the private sector from investing without the assistance of the RDA, including financial assistance). The limitations of the CRL together with the Polanco Act limitations were put in place to protect the public interest and protect against potential misuse by a local government. By removing the controlling limitations of the CRL and the Polanco Act and applying it more broadly, AB 440 gives local officials far greater authority than they had before RDAs' dissolution. The narrow rules that made sense in the AB 440 Page 8 context of RDA law are not appropriate in all cases for all city or county remediation projects. Additionally, AB 440 removes the context of the CRL entirely by creating a new chapter rather than amending the Polanco Act. So while there is a section within the bill that states: The Legislature finds and declares that this chapter is the policy successor to the Polanco Redevelopment Act (Article 12.5 (commencing with Section 33459) of Part 1 of Chapter 4 of Division 24) and shall be interpreted and implemented consistent with that act. It is further the intent of the Legislature that any judicial construction or interpretation of the Polanco Redevelopment Act also apply to this chapter. by creating a new chapter, the bill loses the context the CRL and the limitations that applied from that act and the Polanco Act together. 6) How clean is clean? What are the risks after a cleanup is complete ? The intended land use defines how a cleanup will be done and what will be contained within a cleanup or remedial action plan is determined by that land use, regulatory standards, types of contamination and anticipated exposure, cleanup costs, State Lands statutes and residential acceptance. There is not a set standard for every contaminant for every situation. If the proposed use is residential, the cleanup or remedial action plan will be more stringent than if it is a parking lot. However, it is unlikely that the remedial action plan will require the full removal of every possible contaminant because cleanups are complicated and expensive. Remedial action plans mitigate risk, but they do not necessarily completely remove it. The hazard to public health is not completely gone when a site is remediated. For instance, on many sites a cement cap is put over contamination because that adequately protects from the exposure pathway of the contaminant for the intended land use. The caps have to be maintained and monitored into the future to prevent exposure. Transfer of risk . The Polanco Act has led to many successful cleanups of blighted sites across the state, AB 440 Page 9 however, with or without the liability protections provided under the Polanco Act, there are also sites that have been remediated that, even with all best efforts and compliance with a cleanup or remedial action plan, lingering contamination has led to harm to residents or environmental hazards that need to be addressed. If a city or county or future developer is not a responsible party (as would be provided under this bill), the residents will be left to address the contamination themselves. This bill may remove liability, but it does not remove potential risk - it transfers it. By providing liability protections to any property within the local agencies' jurisdiction this bill provides that current and future owners of one of these properties would not be responsible for further remediation, even if the property was found to be making inhabitants or future purchasers of the property sick, as long as they complied with the cleanup or remedial action plan. If there is no longer a previous responsible party available for the property, then there is no way to compel the developer or local government to conduct future remediation of the contamination. While it is laudable to create incentives for cleaning up contaminated property, liability immunity applied this broadly creates serious potential health risks for future inhabitants or users of the property. This type of liability relief should be very limited to minimize this risk. 7) Questions related to local government qualifications and authority . DTSC, SWRCB, and the RWQCBs are responsible for overseeing the management, containment and remediation of contamination and pollution for the State. They have on staff toxicologists and other scientists who specialize in these activities on a day-to-day basis. What local agency can meet the qualifications of the State's oversight agencies? Additionally, can one local agency provide objective oversight of another local agency's cleanup activities within the same jurisdiction? AB 440 Page 10 Without specific state oversight, how does the State prevent abuse of this authority on the local level? This bill very broadly allows local governments the authority to compel owners of sites within their jurisdiction to either cleanup their property or conduct the remediation themselves and then charge the owner and responsible parties for the local government's activities for ANY site within its jurisdiction. Is it appropriate to give local government such broad authority to force property owners to take action when the contamination on the property may not be causing harm and the owner may not have the financial ability to fund a cleanup? 8) Unintended consequences . Will this bill result in stunting private investment in brownfields? If a developer can receive the benefits of liability protection simply by developing or purchasing any property in the State in which the local government conducted or caused to be conducted a cleanup under the provisions of this bill, then why would any developer ever purchase and develop a property that was not cleaned up by a local government and does not afford the same liability protection? 9) Solution to the loss of CRL and Polanco Act tools . With the loss of the RDAs in California, the Polanco Act tool and protections were lost with RDAs. As the author notes, the Polanco Act was a valuable tool that led to the successful remediation of many sites within California and there is value in preserving this tool to encourage brownfield cleanups. However, this bill broadly extends the authority and protections of the Polanco Act without preserving the context in which the Polanco Act worked. The Senate Environmental Quality Committee considered legislation early this year, SB 470 (Wright), which would preserve the Polanco Act while also preserving the AB 440 Page 11 context of the CRL. This more narrowly crafted legislation will result in local governments being able to cleanup brownfields within the jurisdictions of the former RDAs without broadening the authority so extensively as to potentially increase the risk to public health and environmental safety. SB 470 provides a more focused solution to this issue. 10)New economic drivers for addressing blight . The dissolution of RDAs has left open the question about how the state can help local governments moving forward encourage and address those areas within communities that would benefit from government interventions and incentives in order to economically reinvigorate communities. Any solution should provide specifically crafted tools for the needs of those communities without creating the potential for misuses of overly broad allowances within statute. To that end, the Legislature has introduced several bills aimed at providing those tools. For example, SB 1 (Steinberg) allows a local government to establish a Sustainable Communities Investment Authority (Authority) and direct tax increment revenues to that Authority in order to address blight by supporting development in transit priority project areas, small walkable communities, and clean energy manufacturing sites. Liability protections should be considered in the context of any new investment tools provided. 11)Related legislation . SB 470 (Wright) allows cities and counties to use some of the Community Redevelopment Law's financing, property sale, and brownfield cleanup powers to promote economic development, is awaiting hearing in the Assembly Committee on Housing and Community Development. SB 1335 (Pavley), of 2012, would have authorized successor agencies with approval of their oversight board, to retain properties that are considered brownfields for the purpose of remediating the AB 440 Page 12 contamination in order to maximize their value. The successor agencies would use available financing, funds obtained from a responsible party, existing state or federal grants or any other funds at the disposal of the successor agency. This measure failed in the Senate Appropriations Committee. AB 1235 (Hernandez), of 2011, would have applied all authority, rights, powers, duties, obligations, and protections afforded to a redevelopment agency under the Polanco Redevelopment Act to a successor agency, as defined, for any property that was within a redevelopment project of a redevelopment agency that has been dissolved by an act of the Legislature. The measure was amended on the Senate Floor to pertain to another subject. SOURCE: Author SUPPORT : California Building Industry Association California Conference of Carpenters California State Council of Laborers City of Burbank City of Chula Vista City of El Centro City of Huntington Beach City of Lakewood City of Sacramento City of Vista Harbor Association of Industry & Commerce League of California Cities League of California Cities - Los Angeles County Division Natural Resources Defense Council OPPOSITION : None on file