BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair AB 2636 (Gatto) - CalConserve Water Use Efficiency Revolving Fund. Amended: June 30, 2014 Policy Vote: EQ 6-0, NR&W 8-0 Urgency: No Mandate: No Hearing Date: August 14, 2014 Consultant: Marie Liu SUSPENSE. AS AMENDED. Bill Summary (as approved on August 14, 2014): AB 2636 would establish the CalConserve Water Use Efficiency Revolving Fund which would be administered by the Department of Water Resources (DWR) for the purpose of providing financial assistance for projects that reduce urban per capita water use, reduce agricultural water use, increase the use or availability of recycled water supply, or reduce greenhouse gas (GHG) emissions and water and energy use. Fiscal Impact (as approved on August 14, 2014): Cost pressures, likely in the millions of dollars, to the General Fund to fund the CalConserve Fund. Cost pressures in the hundreds of thousands of dollars to the General Fund/CalConserve Fund to DWR to administer the program. Background: Existing law requires the state to achieve a 20% reduction in urban per capita water use by December 31, 2020. Existing law also requires agricultural water suppliers to adopt a volumetric water pricing system and to implement locally cost effective and technical feasible water use efficiency measures, as specified. (SBx7 7 (Steinberg) Chapter 4, Statutes of 2009. Proposition 13, which was approved by the voters in 2000, made available $35 million to DFW to make loans to local agencies to aid in the acquisition and construction of agricultural water conservation projects and grants for feasibility studies. Proposed Law: This bill would create the CalConserve Water Use Efficiency Revolving Fund which would be available to DWR, upon appropriation by the Legislature, to fund projects that have at AB 2636 (Gatto) Page 1 least one of the following benefits: Measurably reduce urban per capita potable water use. Measurably reduce agricultural water use. Increase the use or availability of recycled water supply Reduce greenhouse gas emission and water and energy use. DWR would be authorized to adopt rules and guidelines to administer the program. This bill would transfer Proposition 13 funds that were marked for agricultural water conservation projects to the CalConserve Fund and allows the Legislature to appropriate monies from the Greenhouse Gas Reduction Fund (GGRF) to the CalConserve Fund. DWR could not encumber any funds from the GGRF in this program until the ARB publishes findings and reports on how all operational aspects of the projects result in greenhouse gas emission reductions. Related Legislation: AB 2011 (Gatto, 2012) and AB 1349 (Gatto, 2013) both would have also created CalConserve. Both bills were held in submission on the Assembly Appropriation's suspense file. Staff Comments: This bill would establish a new financial assistance loan program to be administered by DWR. It is unclear how much the administrative cost will be as it will depend on the size and design of the program. However, staff anticipates that minimum level of staffing will probably be in the hundreds of thousands of dollars to develop the program with potentially lower ongoing costs. Staff notes that the administration of a revolving loan program has unique administrative costs compared to a grant program. According to the Senate Natural Resources Committee, DWR has not administered a revolving loan account in several decades. Therefore the development of the program will likely necessitate some assistance from Department of Finance and other agencies that could manage revolving loan accounts. This bill would direct proceeds from Proposition 13 that were for the purpose of agricultural water conservation (§79157) to be transferred to the CalConserve Fund. However, all remaining Proposition 13 funds were appropriated in budget actions this year. This bill would also allow the GGRF to be used to the AB 2636 (Gatto) Page 2 CalConserve Fund, which would place cost pressures on the GGRF for this program. Furthermore, should the GGRF be used to support this program, the ARB would be required to publish findings and reports on how the projects result in GHG emission reductions, which would require additional workload. In the approved 2014-15 Budget, the ARB was allocated $1 million for various responsibilities associated with the spending of the GHG Reduction Fund, including the development of reduction metrics. Some of this work is likely to overlap the required actions under this bill. As such, staff believes ARB costs will likely be no more than $500,000 from the GGRF. Committee Amendments: Delete ability to use GGHF moneys for the CalConserve program and associated requirements (all of §81023).