BILL ANALYSIS Ó
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2013-2014 Regular Session |
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BILL NO: AB 2636 HEARING DATE: June 24, 2014
AUTHOR: Gatto URGENCY: No
VERSION: June 19, 2014 CONSULTANT: Dennis O'Connor
DUAL REFERRAL: No FISCAL: Yes
SUBJECT: CalConserve Water Use Efficiency Revolving Fund.
BACKGROUND AND EXISTING LAW
One of the bills in the 2009 water package was SBX7 7
(Steinberg). That bill, sometimes known as the 20x2020 bill,
requires the state to achieve 20% reduction in urban per capita
water use by December 31, 2020. The bill provided specific
methods for urban water suppliers to meet the 20% reduction
goal.
SBX7 7 (Steinberg) also required agricultural water suppliers to
adopt a volumetric water pricing system and to implement locally
cost effective and technically feasible water use efficiency
measures, as specified.
PROPOSED LAW
This bill would establish the CalConserve Water Use Efficiency
Revolving Fund (Fund) as follows:
The purpose of the Fund is to provide monies to make at or
below market loans for water use efficiency projects.
The Department of Water Resources (DWR) would administer the
fund.
DWR would provide loans to water agencies, which would then
make loans to their customers.
The Fund would be endowed as follows:
Any remaining Proposition 13 agricultural water use efficiency
funds would be transferred to the Fund.
The Legislature would be authorized to appropriate moneys in
the Greenhouse Gas Reduction Fund for water-use efficiency
projects under the CalConserve Water Use Efficiency Revolving
Loan Program that reduce greenhouse gas emissions.
DWR would be authorized to enter into an agreement with the
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federal government for federal contributions to the Fund if
both of the following conditions are met:
(1) The state identifies any required matching funds.
(2) The department is prepared to commit to the expenditure
of any minimum amount in the Fund in the manner required by
the federal government.
Moneys in the Fund would be used for the following purposes:
Loans that meet all of the following requirements:
(1) Are made at or below market interest rates.
(2) Require annual payments of principal and any interest,
with repayment commencing not later than one year after
loan funding and full amortization not later than 20 years
after loan funding. Full amortization for loans to
disadvantaged communities shall not be later than 25 years
after loan funding.
(3) Require the loan recipient to establish an acceptable
dedicated source of revenue for repayment of a loan.
To guarantee, or purchase insurance for, local obligations if
that action would improve credit market access or reduce
interest rates.
As a source of revenue or security for the payment of
principal and interest on revenue or general obligation bonds
issued by the state, if the proceeds of the sale of those
bonds will be deposited in the Fund.
To earn interest.
Technical assistance.
For payment of the reasonable costs of administering the Fund,
not to exceed 4 percent of the fund.
Grants, principal forgiveness, negative interest rates, and
any other type of, or variation on, the types of assistance
described in this section that is authorized by a federal
capitalization grant deposited in the Fund to the extent
authorized and funded by that federal capitalization grant.
ARGUMENTS IN SUPPORT
According to the Author, "Water scarcity has long been a concern
for Californians, particularly for those from the Southern and
Inland regions of the state. The state is committed to reducing
urban per capita water use 20% by 2020 (Water Code §10608.20).
With the state in a deep drought this year, cities and counties
across the state are working even harder to develop innovative
water solutions to compensate for shrinking snow packs and
long-term declines in precipitation."
"The State Water Resources Control Board and the Department of
Public Health both administer state revolving loan programs that
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are used for specified water treatment projects and to address
water system deficiencies to ensure access to safe water. There
is no similar loan program to facilitate water-use efficiency on
commercial, industrial, or residential properties."
"AB 2636 authorizes the Department of Water Resources to
administer a state revolving fund program that will (1) be a
self-renewing source of funding for water-use efficiency,
available to the public between water bonds, (2) be a means of
leveraging local investment in water-use efficiency, including
investments by private entities, and (3) provide state financial
support to help cities, counties, urban and agricultural water
providers, and recycled water providers improving water
efficiency throughout the state and meet California's water-use
reduction goals."
ARGUMENTS IN OPPOSITION: None
COMMENTS
Third Time's Charmed? This bill is similar to AB 2011 (Gatto)
and AB 1349 (Gatto) both of which would also have created
CalConserve. However, AB 2011 differed in that it allocated an
anticipatory $50 million from the Safe, Clean, and Reliable
Drinking Water Supply Act of 2012 (Water Bond), if that act were
to pass. It did not. The Water Bond was moved to the 2014
ballot. Both AB 2011 and AB 1349 were held in the Assembly
Appropriations Committee pending firmer identification of
potential funding sources.
New Frontier For DWR . It has been decades since DWR has
administered a revolving loan account. DWR would likely seek
assistance from the Department of Finance and other agencies
that manage revolving loan accounts. Setting up the appropriate
financing mechanisms could take some time and money.
Accounting May Be Challenging. The bill proposes to endow the
Fund with bond funds, Cap-and-trade funds, and federal funds.
Each of those funding sources has limits on how those monies may
be used. DWR may need to establish separate subaccounts or use
some other accounting mechanism to ensure each of those funds
are used consistent with their underlying requirements.
Accounting requirements for local agencies receiving loans from
the Fund may similarly be complicated.
Actions in Previous Committees. This bill was heard in the
Senate Environmental Quality Committee on June 18, 2014.
Concerns were raised regarding whether the bill provided for a
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strong and clear nexus to greenhouse gas emission reductions, in
order to justify the use of monies from the Greenhouse Gas
Reduction Fund. The Committee members requested an amendment be
taken to address this issue by requiring ARB, in consultation
with DWR, to submit findings and report those findings to the
Legislature, on how all operational aspects of the program
result in greenhouse gas emission reductions. The bill passed
out with a motion to pass the bill, as amended, and re-refer to
the Senate Natural Resources and Water Committee on a vote of
6-0.
Other Funding. As noted above, the bill proposes to endow the
Fund, in part, by transferring the Proposition 13 agricultural
water use efficiency funds. According to the DWR, a $14.9
million reappropriation through a Spring Finance Letter and a
$17.3 million appropriation through May Revise depleted the fund
entirely.
Technical Amendments Needed. Staff have identified a number of
technical amendments for this bill which are described below:
SUGGESTED AMENDMENTS
(1)Add a definition of "on-bill financing."
(2)In §81030 (a), make clear, that the loans are to local
agencies.
(3)In §81030 (f), make clear that it is DWR's administrative
costs that are limited to 4 percent.
(4)In §81033, make clear that the prohibition on a local agency
using the funds for administrative costs apply to the local
agency's administrative costs.
SUPPORT
Association of California Water Agencies
California Landscape Contractors Association
California Municipal Utilities Association
City of Burbank
East Bay Municipal Utility District
Metropolitan Water District of Southern California
Nexus eWater
San Diego County Water Agency
Sierra Club California
Sonoma County Water Agency
OPPOSITION
None Received
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