BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 763
                                                                  Page  1

          Date of Hearing:   August 14, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                   SB 763 (Fuller) - As Amended:  August 19, 2013 

          Policy Committee:                             Environmental  
          Safety and Toxic Materials                    Vote: 6-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill extends the January 1, 2016 sunset of the Replacing,  
          Removing, or Upgrading Underground Storage Tanks Program (RUST  
          Program) until January 1, 2022, revises loan eligibility and  
          grant award requirements and transfers funds.  Specifically,  
          this bill: 

          1)Transfers $8 million from the Underground Storage Tank  
            Clean-Up Fund (USTCF) to the Petroleum Underground Storage  
            Tank Financing Account (RUST Account).

          2)Changes the interest rate for RUST loans from the Surplus  
            Money Investment Fund (SMIF) rate to one-half of the General  
            Obligation Bond rate.  The SMIF rate is currently 0.247  
            percent; half of the current G.O. Bond rate is 1.90 percent.

          3)Reduces the cap on RUST funds that may be used for grants from  
            33% to 25%.

          4)Deletes the Petroleum Financing Collection Account (PUSTFA)  
            and the administrative subaccount and transfers expenditures  
            and revenues to the RUST Account.

          5)Expands eligibility by removing the requirement to only fund  
            applicants who cannot obtain a loan from a private  
            institution, the California Pollution Control Financing  
            Authority, or any other government board.

          6)Deletes the provision that allows SWRCB to prioritize RUST  
            grants based on demonstrated financial hardship if grant  
            requests exceed available funding.








                                                                  SB 763
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           FISCAL EFFECT  

          1)One-time transfer of $8 million from the USTCF to finance RUST  
            loans and grants.

          2)Increased revenues of approximately $1 million over five years  
            to the RUST Account from increased investment interest and  
            increased loan rates.

          3)One-time transfer of approximately $3 million in unexpended  
            funds into the RUST Account from PUSTFA and the administrative  
            subaccount.

           


          COMMENTS  

           1)Purpose.  According to SWRCB, this bill will improve the  
            efficiency and sustainability of the RUST program.  Without  
            this bill, SWRCB estimates the RUST program will only be able  
            to fund about $3 million annually in grants and loans over the  
            next three years.  By extending the sunset date and  
            transferring money into the program, the bill will improve the  
            long-term viability of the program.

            SWRCB has identified a number of problems with current program  
            requirements that this bill addresses.

           2)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.  Funds  
            may also be transferred from the USTCF the RUST Account.

            By transferring $8 million from the USTCF to the RUST account,  
            this bill may increase the amount of time that low priority  
            projects must wait for funding.  However, the RUST program is  
            preventative and will reduce future underground storage tank  
            leaks.  









                                                                  SB 763
                                                                  Page  3

           3)Rust Program.   Under the RUST Program, the SWRCB provides  
            low-interest loans and grants to small businesses (such as gas  
            stations) to assist in upgrading, removing, or replacing  USTs  
            to meet applicable local, state, or federal standards.  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 administer the program.  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.  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. 

            Although the demand for RUST grants annually exceeds the  
            amount of available funding, the SWRCB has never exercised the  
            authority to develop a priority ranking system based on  
            demonstrated financial need and instead, the SWRCB runs the  
            program on a first-come, first-served basis.  

            According to the SWRCB, all eligible applicants are able to  
            demonstrate economic hardship.  SWRCB currently runs the  
            program on a first-come, first-served basis.


           Analysis Prepared by  :    Jennifer Galehouse / APPR. / (916)  
          319-2081