BILL ANALYSIS Ó
SB 763
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Date of Hearing: July 2, 2013
ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS
Luis Alejo, Chair
SB 763 (Fuller) - As Amended: April 23, 2013
SENATE VOTE : 39-0
SUBJECT : Underground storage tanks
SUMMARY : Eliminates the sunset date on the loans and grants
program known as the Replacing, Removing, and Upgrading Tanks
(RUST) Program, changes the interest rate on the loans, reduces
the share of funds that may be used for grants, and transfers $8
million from the Underground Storage Tank Cleanup Fund to the
Petroleum Underground Storage Tank Financing Account.
Specifically, this bill :
1)Repeals the sunset date on the RUST Program which authorizes
the State Water Resources Control Board (State Water Board) to
make loans and grants to small businesses to replace, remove,
and upgrade underground storage tanks.
2)Removes the restriction on the State Water Board from making a
RUST loan only to those applicants who cannot obtain a loan
from a private institution, the California Pollution Control
Financing Authority, or any other governmental board.
3)Sets the interest rate for RUST loans at one-half of the most
recent General Obligation Bond rate obtained by the Office of
the State Treasurer at the time of the loan commitment.
4)Requires the loan fee for a RUST loan to be deposited in the
Petroleum Underground Storage Tank Financing Account. This
financing account exists to receive governmental funds and
repayments of loans and interest and late fees on those
accounts. The funds in this account are subject to
appropriation by the Legislature and can be used by the State
Water Board only to make loans and grants to applicants.
5)Removes the authority of the State Water Board, when the total
amount of grant requests exceed the amount in the Petroleum
Underground Storage Tank Financing Account, to adopt a
priority ranking list to award grants based upon the level of
demonstrated financial hardship of the eligible grant
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applicant or the relative impact upon the local community.
6)Reduces from 33 percent to 15 percent the maximum share of
RUST grants that can be awarded from the Petroleum Underground
Storage Tank Financing Account.
7)Transfers $8 million from the fees collected in the
Underground Storage Tank Cleanup Fund to the Petroleum
Underground Storage Tank Financing Account, and appropriates
this sum for RUST loans and grants.
8)Repeals the Petroleum Financing Collection Account in the
California Economic Development and Grant and Loan Fund.
9)Makes a series of corrections to obsolete or erroneous code
references in the laws governing RUST loans and grants.
EXISTING LAW :
1)Restricts the State Water Board to making RUST loans only to
applicants who cannot obtain a loan, with reasonable terms,
from a private financial institution, the California Pollution
Control Financing Authority, or any other governmental board.
2)Sets the interest rate for loans to replace, remove, or
upgrade underground storage tanks at the rate earned by the
Surplus Money Investment Fund.
3)Requires the loan fee charged applicants to replace, remove or
upgrade an underground storage tank be deposited in the
Petroleum Financing Collection Account. This collection
account is created for the purpose of receiving charges, fees,
and income including the costs of loan fees to applicants.
These funds are continuously appropriated to the State Water
Board for the costs necessary to protect the state's position
as a lender-creditor.
4)Authorizes the State Water Board, when the total amount of
grant requests exceed the amount in the Petroleum Underground
Storage Tank Financing Account, to adopt a priority ranking
list to award grants based upon the level of demonstrated
financial hardship of the eligible grant applicant or the
relative impact upon the local community where the project
tank is located if the claim is denied.
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5)Creates the Petroleum Underground Storage Tank Financing
Account in the State Treasury to receive governmental funds
and to receive repayments of loans and interest and late fees
on those accounts, and to make RUST loans and grants.
6)Specifies, that upon appropriation by the Legislature, the
funds in the Petroleum Underground Storage Tank Financing
Account are used by the State Board to make RUST loans and
grants.
7)Requires the State Water Board to annually make available no
more than 33 percent of available funds from the Petroleum
Underground Storage Tank Financing Account for RUST grants.
8)Establishes the Petroleum Financing Collection Account in the
California Economic Development and Grant and Loan Fund solely
for the purpose of receiving charges, fees, and income
including the costs to administer the loan program (i.e., to
impose reasonable charges on applications, impose a loan fee,
recover collection costs, and earn income on assets recovered
pursuant to a loan default) and for costs necessary to protect
the state's position as a lender-creditor.
9)Authorizes the State Water Board, upon appropriation by the
Legislature in the Budget Act, to expend funds in the
subaccount in the Petroleum Underground Storage Tank Financing
Account for administrative expenses of making RUST loans and
grants.
10)Sunsets the RUST Program on January 1, 2016.
FISCAL EFFECT :
The State Water Board reports the following fiscal effects:
1)One-time transfer of $8 million from the Underground Storage
Tank Cleanup Fund to finance loans and grants to replace,
remove, and upgrade underground storage tanks.
2)Increased revenues of approximately $1.1 million over five
years to the Petroleum Underground Storage Tank Financing
Account (RUST Account) from increased investment interest and
increased loan rates.
COMMENTS :
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1)Source and Purpose of Bill. The source of this bill is the
State Water Board. According to the author and the State
Water Board, the purposes of this bill are to improve the
efficiency and sustainability of the RUST Program. Extending
the program and increasing its efficiency would enable the
State Water Board to help more small businesses remove,
replace, or upgrade their underground storage tanks to meet
regulatory requirements, thereby helping to protect public
health and the environment.
2)Background. Underground storage tanks (UST) and their
components have the potential of leaking gasoline, diesel
fuels, and fuel additives and other hazardous substances into
the soil and groundwater, presenting a risk to public health
and the environment. The cost of replacing, removing, or
upgrading these tanks can be significant.
Federal and state laws require owners of a petroleum UST to
maintain financial responsibility to pay for the damages
arising from their tank operations. The UST Cleanup Fund Act
was enacted by the Legislature to help petroleum UST owners to
meet the government requirements and pay for the cleanup of
contaminated soil and groundwater when a leak is discovered.
This fund is administered by the State Water Board. In
addition, the State Water Board offers direct loans and grants
through the RUST Program to assist small gas station owners
and operators to comply with UST regulatory requirements.
3)RUST Program. Under the RUST Program, the State Water Board
provides low-interest loans and grants to small businesses
(such as gas stations) to assist them in upgrading, removing,
or replacing their USTs to meet applicable local, state, or
federal standards and to conduct corrective actions. The RUST
Program is intended to be financed as a revolving fund where
revenues generated from principal and interest payments on
existing loans, along with user fees, are used to fund new
loans and grants and to administer the program.
This program is available for tank removals and upgrades, not
for costs associated with remediation after a leak. The
intent of the RUST Program is to prevent contamination.
RUST loans are available to companies with fewer than 500
employees and may range from $10,000 to $750,000. These loans
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may be used to finance up to 100% of the costs necessary to
remove, replace, or upgrade USTs, including corrective actions
to meet applicable government standards including design,
construction, monitoring, operation, or certain maintenance
requirements. Typical eligible costs are replacing USTs,
installing containment sumps, double-walled piping,
dispensers, under dispenser containment boxes/pans, electronic
monitoring systems, enhanced vapor recovery systems, and to
conduct enhanced leak detection tests. During Fiscal Year
2011-12, the RUST Program approved 10 loans, awarding a total
of $2.1 million (for an average loan amount of $210,023).
These 10 loans made it possible to replace or upgrade 26
project tanks. In contrast, during Fiscal Year 2008-09, the
RUST Program approved 29 loans, awarding a total of $4.7
million, which made it possible to replace or upgrade 87
project tanks.
RUST grants are given to small businesses that are independently
owned and operated with less than 20 employees. The grants
range from $3,000 to $50,000 and these funds may be used to
finance up to 100% of the costs necessary to upgrade USTs by
installing containment sumps, double-walled piping,
dispensers, under-dispenser containment boxes/pans, electronic
monitoring systems, enhanced vapor recovery systems, and to
conduct enhanced leak detection tests. During Fiscal Year
2011-12, the RUST Program approved 31 grants (averaging
$46,000 per grant), awarding a total of $1.4 million in
grants, which made it possible to remove or upgrade 69 project
tanks. In contrast, during Fiscal Year 2009-10, the RUST
Program approved 179 grants, awarding $7.3 million in grants,
which made it possible to replace, remove, or upgrade 466
project tanks.
4)Existing problems. The State Water Board has identified a
number of problems with current program requirements that lead
to program inefficiencies and reduce the effectiveness of the
program. Specifically, the State Water Board has identified
the following problems:
a) Current law requires the State Water Board to charge an
extremely low interest rate on RUST loans (currently:
0.27% or approximately of 1 percent) and provides that
not more than one-third of the RUST funds may be used for
grants. As a result, expenditures in grant and loan moneys
from the RUST fund historically have outpaced revenues from
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loan repayments and interest earnings, impacting the
overall sustainability of the program.
b) Current law establishes separate subaccounts for funding
administrative costs and for the collection of various loan
fees and interest charges. These separate subaccounts
reduce the State Water Board's ability to efficiently and
effectively manage the program, often unnecessarily tying
up funds that could be used to make additional loans and
grants. For example, the State Water Board's annual
administrative costs usually are much lower than the
revenues that are annually deposited into the
administrative subaccount, but the State Water Board is
unable to use the excess funds to provide additional grants
and loans.
c) Current law establishes various administrative
requirements on loan applicants and the State Water Board
that have proven to be unnecessary.
5)How bill addresses the problems. According to the author and
the State Water Board, the bill addresses the problems, noted
above, as follows:
a) Provides a one-time transfer of $8 million from the
Underground Storage Tank Cleanup Fund (USTCF) to
reinvigorate the RUST Program;
b) Eliminates two underused subaccounts and transfer the
unexpended moneys to the main program account;
c) Changes the interest rate for RUST loans from the
Surplus Money Investment Fund (currently 0.275 of 1
percent) to one-half of the General Obligation Bond rate
(would be 1.9 percent) for a more reliable interest rate to
ensure a revolving fund. This new rate would be the same
as the rate charged by the State Clean Water Revolving
Fund; that is used to finance waste water treatment
projects.
d) Reduces the percentage of available funds that may be
used for grants from 33 percent to 15 percent;
e) Deletes unnecessary RUST loan eligibility requirements
and grant provisions; and
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f) Eliminates the sunset date on the RUST Program to better
ensure long-time viability and the ability to make
necessary loans and grants to small businesses.
6)What is the optimum split of the funds for grants and loans?
Current law sets the maximum percentage of RUST funds that may
be used for grants at 33 percent. In fact, during the most
recent year for which data is available, Fiscal Year 2011-12,
the percent of funds awarded for grants was approximately 33
percent. This bill proposes to reduce the maximum percentage
available for grants to 15 percent. Since grant funds are
reserved for the smallest businesses in the state, which may
have the hardest time meeting payroll and remaining in
business, should the percentage of funds be reduced for this,
arguably, more at-risk set of businesses?
Current law already provides administrative flexibility to
decide what percentage of funds shall be awarded in grants.
If more statutory guidance is sought, perhaps a smaller
reduction from the 33 percent should be considered.
REGISTERED SUPPORT / OPPOSITION :
Support
State Water Resources Control Board (Source/Sponsor)
California Independent Oil Marketers Association
California Service Station and Auto Repair Association
CORE Environmental Reform, Inc.
Opposition
None received.
Analysis Prepared by : Manny Hernandez / E.S. & T.M. / (916)
319-3965