BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: AB 273
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|Author: |Committee on Environmental Safety and Toxic |
| |Materials |
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|Version: |6/2/2015 |Hearing |6/17/2015 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rachel Machi Wagoner |
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SUBJECT: Hazardous waste and substances: corrective action:
liability
ANALYSIS:
Existing law :
1) Under the federal Resource Conservation and Recovery Act
(RCRA) of 1976, governs the disposal of hazardous waste:
a) Through regulation, sets standards for the
treatment, storage, transport, tracking and disposal
of hazardous waste in the United States.
b) Authorizes states to carry out many of the
functions of the federal law through their own
hazardous waste laws if such programs have been
approved by the United States Environmental Protection
Agency (US EPA).
2) Under the California Hazardous Waste Control Act (HWCA)
of 1972:
a) Establishes the Hazardous Waste Control
program;
b) Regulates the appropriate handling, processing
and disposal of hazardous and extremely hazardous
waste to protect the public, livestock and wildlife
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from hazards to health and safety.
c) Authorizes the Department of Toxic Substances
Control (DTSC) to issue an order under the hazardous
waste control laws requiring that a violation be
corrected and imposing a civil penalty to specified
persons, including a person who has violated various
provisions regulating hazardous waste or provisions
concerning removal and remedial actions for hazardous
substance releases. A person who is issued that order
is required to pay for oversight of the removal or
remedial action.
3) Under the Carpenter-Presley-Tanner Hazardous Substance
Account Act, authorizes DTSC to take or oversee removal and
remedial actions related to the release of hazardous
substances.
4) Authorizes the Attorney General to recover from the
liable person, as defined, the costs incurred by DTSC or a
California regional water quality control board in carrying
out the act and subjects any monetary obligation owed to
the department pursuant to the act or the hazardous waste
control laws to a specified rate of interest earned in the
Surplus Money Investment Fund.
5) Authorizes DTSC to waive the interest if the obligation
is satisfied within 60 days of the date of the invoice.
This bill: Increases the interest rate accrued on monetary
obligations owed to the California Department of Toxic
Substances Control (DTSC). Specifically:
1) Makes explicit the requirement that a responsible party
pay for DTSC's oversight of any corrective action with
respect to hazardous waste;
2) Makes explicit that the cost of response or corrective
action are recoverable;
3) Deletes the interest rate on monetary obligations owed
to DTSC as being the same rate earned on investments in the
Surplus Money Investment Fund, and establishes the interest
rate as 10% per annum, and 7% per annum for local
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governments;
4) Requires 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 until
dispute is resolved if the liable person in receipt of the
invoice notifies DTSC of dispute over all or a portion of
the invoice within 45 days.
Background
1) State Audit Report : On August 7, 2014, the Bureau of State
Audits (BSA) released a report on DTSC's cost recovery. The
BSA found that long-standing shortcomings with DTSC's
recovery of costs have resulted in millions of dollars in
unbilled and billed but 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.
According to the report, "increasing the interest rate
charged on billed but delinquent unpaid amounts may improve
the timeliness of collections from responsible parties.
State law requires the department 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). However, the SMIF interest rate is
substantially lower than the interest rate charged for late
payments by other state entities, such as the California
State Board of Equalization (BOE). For example, for the
quarter ending June 30, 2013, the SMIF interest rate was
0.246 percent, while the BOE interest rate was 6 percent for
the same period. As long as the SMIF interest rate remains
low, there is less incentive for responsible parties to make
payments on time."
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The BSA report specifically 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.
2) Special treatment for local governments : State law
establishes different interest rates for local governments.
Government Code §970.1 sets an interest rate for local
governments only for interest on tax or fee judgments.
Article XV of the California Constitution provides that
"[t]he 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
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 interest rate imposed on local governments (aside from
judgments involving taxes or fees) is unspecified and is the
7% specified in the Constitution.
Comments
1) Purpose of Bill. According to the author, AB 273 is part of
a package of reform measures to improve DTSC's cost recovery
efforts aimed at amending exiting cost recovery statutes and
strengthening or expanding DTSC's authority to improve its
timeliness of collecting costs related to hazardous waste
cleanup.
Related/Prior Legislation
1)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
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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.
SB 812 (de León 2014), among other provisions, proposed to
require any monetary obligation owed to DTSC to accrue interest
at the same rate as the modified adjusted rate per annum imposed
for underpayments of sales and use taxes to the state. That
bill was vetoed by Governor Brown on September 29, 2014.
SOURCE: Committee on Environmental Safety and Toxic
Materials
SUPPORT:
California League of Conservation Voters
Environment California
Environmental Working Group
Natural Resources Defense Council
Sierra Club
OPPOSITION:
The Civil Justice Association of California
ARGUMENTS IN
SUPPORT: The support believes that by "increasing the
interest rate charged on billed but unpaid invoices owed DTSC
may improve the timeliness of collections from responsible
parties. The current interest rate is so low that the State
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Auditor believes there is little incentive for responsible
parties to make payments on time."
ARGUMENTS IN
OPPOSITION: The opposition argues that "federal law provides
a floating interest rate on judgments, which is less than 1%
(equal to the weekly average 1-year constant maturity Treasury
yield, as published by the Board of Governors of the Federal
Reserve System). Many other states have variable interest rates
on judgment awards. Over 16 states have enacted reforms to
reduce interest rates on judgments to reflect current market
realities."
The opposition believes that "by increasing the judgment
interest in these claims from the rate of investment in the
Surplus Money Investment Fund to 10% against private parties AB
273 would increase the rate by approximately 40 times and
against local governments by 28 times."
The opposition argues that, "at a time when California's legal
climate is already ranked as one of the worst in the nation - a
factor considered by businesses when making decisions about
where to grow or relocate, AB 273 goes the wrong direction."
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