BILL ANALYSIS Ó AB 273 Page 1 Date of Hearing: April 15, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 273 (Committee on Environmental Safety) - As Introduced February 11, 2015 ----------------------------------------------------------------- |Policy |Environmental Safety and Toxic |Vote:|5 - 0 | |Committee: |Materials | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: SUMMARY: This bill modifies provisions relating to the Department of Toxic Substance Control's (DTSC) authority to require corrective actions under hazardous waste control laws. Specifically, this AB 273 Page 2 bill: 1)Requires a person to pay for the oversight of any corrective action required under hazardous waste laws. 2)Authorizes the Attorney General to recover costs incurred with regard to carrying out or overseeing a removal action, remedial action or a coercive action. 3)Changes the interest rate on monetary obligations owed to DTSC from the earned investment rate established in the Surplus Money Investment Fund to a 10 percent per annum rate or 7 percent per annum for local governments. 4)Requires rather than allows DTSC to waive the interest if the obligation is paid within 60 days of receipt of the invoice. 5)Requires DTSC to waive the interest from accruing for up to 180 days upon notification from the liable person disputing all or a portion of the invoice. FISCAL EFFECT: 1)Potential increased revenues to the Toxic Substance Control Account (TSCA) of up to $3 million. This figure assumes the 10 percent interest is applied and received from all outstanding invoices as well as increased cost recovery. 2)Minor and absorbable costs to DTSC for updating billing documents and procedures (TSCA). AB 273 Page 3 3)No significant costs for the Attorney General to implement cost recovery procedures. COMMENTS: 1)Rational. On August 7, 2014, the Bureau of State Audits (BSA) released a report on DTSC's cost recovery. The BSA found long-standing shortcomings resulting in millions of dollars in unbilled and uncollected cleanup costs dating back to 1987. Existing law requires DTSC to charge interest for invoices not paid within 60 days at a rate equal to the rate of return earned on investments in the State's Surplus Money Investment Fund (SMIF). For the quarter ending June 30, 2013, the SMIF interest rate was 0.246 percent. This low interest rate provides less incentive for responsible parties to make payments on time. The BSA recommended that in order to improve DTSC's efforts to promptly recover its costs, the legislature should revise state law to allow DTSC to use a higher interest rate assessed on late payments. This bill is consistent with that recommendation. 2)Lower rates for Local Government. Existing law establishes different interest rates for local governments and sets an interest rate for local governments only for interest on tax or fee judgments. Article XV of the California Constitution provides that the rate of interest upon a judgment rendered in any court of this State shall be set by the Legislature at not more than 10 percent per annum. Such rate may be variable and based upon interest rates charged by federal agencies, or AB 273 Page 4 economic indicators, or both. In the absence of setting of such rate by the Legislature, the rate of interest on any judgment rendered in any court of the State shall be 7 percent per annum. The California Supreme Court determined in California Federal Savings and Loan Association v. City of Los Angeles (1995) 11 Cal.4th 342 that in the absence of the Legislature establishing a different rate, the "applicable rate of post-judgment interest to be paid by local public entities is 7 percent." The local government interest rate established in this bill is consistent with this determination. 3)Related Legislation. In addition to this bill, the Committee on Environmental Safety and Toxic Materials has introduced the following bills to address the shortcomings found in the BSA report: a) AB 274 (ESTM) allows DTSC to not expend resources to pursue an uncollectible account, as defined. b) AB 275 (ESTM) revises DTSC's statute of limitation for cost recovery. c) AB 276 (ESTM) allows DTSC to request financial information from specified entities who claim inability to pay. AB 273 Page 5 All four bills will be heard in this Committee on April 15, 2015 Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081