BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 763 (Fuller) - State Water Resources Control Board:
underground storage tanks.
Amended: April 23, 2013 Policy Vote: EQ 9-0
Urgency: No Mandate: No
Hearing Date: May 13, 2013 Consultant: Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 763 deletes the sunset date of the Replacing,
Removing, or Upgrading Underground Storage Tanks Program (RUST
Program) and revises loan eligibility and grant award
requirements. This bill would also consolidate two accounts that
fund the RUST Program and would make an $8 million appropriation
from the Underground Storage Tank Cleanup Fund (USTCF) to the
RUST Program for grants and loans.
Fiscal Impact:
One-time appropriation of $8 million from the USTCF
(special) to fund the RUST Program.
Increased revenues of approximately $1.1 million over five
years to the Petroleum Underground Storage Tank Financing
Account (RUST Account) (special) from increased investment
interest and increased loan rates.
One-time increase of $2.7 million into the RUST Account
from the Petroleum Underground Storage Tank Financing
Account (PUSTFA).
On-going increased annual expenditures of approximately
$400,000 from the RUST Account for administrative costs that
are currently funded by the PUSTFA.
Background: The Barry Keen Underground Storage Tank Cleanup
Trust Fund Act of 1989 requires every owner of an underground
storage tank to pay a storage fee for each gallon of petroleum
placed in the tank. The fees are deposited in the Underground
Storage Tank Cleanup Fund (USTCF), which may be used to pay for
abatement and oversight costs of unauthorized releases of
hazardous substances from underground storage tanks. The USTCF
may also be used to make transfers to the RUST Account.
The RUST Program is a program designed to assist small,
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independent gas retailers, who cannot otherwise afford the
expense associated with required tank and related equipment
upgrades and/or removal, to remain in business. Under the RUST
Program, the State Water Resources Control Board (SWRCB) awards
grants or loans from the RUST Account to replace, remove, or
upgrade underground storage tanks. No more than 33% of the funds
allocated may be for grants. The interest rate for loans is
equal to the rate earned by the Surplus Money Investment Fund
(SMIF) at the time of the loan commitment. The RUST Program
sunsets on January 1, 2016.
Existing law requires principal payments on loans to be
deposited back into the RUST Account but interest payments on
loans and investment interest are deposited into a subaccount,
the Petroleum Underground Storage Tank Financing Account
(PUSTFA) which may be expended for SWRCB's administration of the
RUST program.
Proposed Law: This bill would eliminate the sunset date on the
RUST program would revise loan eligibility and grant award
requirements.
The bill would also make several changes regarding the financing
of the program. Specifically, this bill would:
Cap the percentage of financial assistance given as
grants to 15% of the RUST Account;
Require that the interest rate for the loans be equal to
half the most recent general obligation rate at the time of
commitment;
Delete the PFCA and transfer its expenditures and
revenues to the RUST Account; and
Appropriates $8 million from the USTCF to the RUST
account.
Staff Comments: The RUST Program helps protect California's
drinking water from contaminants and ensures that necessary fuel
supplies, particularly in rural areas, are maintained. To the
extent that the RUST program helps prevent contamination from
underground storage tanks, it reduces future cost pressures on
the USTCF. There is a greater than a dollar-for-dollar savings
as preventing contamination is substantially less expensive than
remediation.
Currently there is a significant structural imbalance in the
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RUST Account. This bill would improve the sustainability of the
fund by:
Increasing the focus on loans over grants;
Increasing the loan interest rate (Currently the SMIF
rate is just below 1%, whereas half the general obligation
rate is 1.9%);
Transferring $8 million from the USTCF to the RUST
Account which increases both the principal in the account
and the investment interest on the principal.
According to the SWRCB, over the next five years, these changes
are estimated to bring an additional $1.1 million into the RUST
Account. Staff notes that the PFCA has a fund balance of $2.7
million, so that combining the PFCA and the RUST Account will
bring additional principal and investment interest revenues into
the program. Staff notes that even with this bill's provisions,
an imbalance will likely still remain in the RUST Account. As
this bill also removes the sunset provisions on the RUST
Program, additional actions will be needed to solve the
structural imbalance.
This bill would appropriate $8 million of the USTCF, which is
currently oversubscribed. USTCF funds are allocated based on a
priority basis. As this bill slightly decreases the available
funds in the USTCF for one year, this bill will increase the
amount of time that low priority projects must wait for funding.
However, given that $8 million is a relatively small portion of
the USTCF and that the RUST Program reduces future cost
pressures on the USTCF, staff believes that the appropriation is
a reasonable investment.