BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 273|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 273
Author: Committee on Environmental Safety and Toxic Materials
AmendedAmended:7/8/15 in Senate
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 6-0, 6/17/15
AYES: Wieckowski, Gaines, Hill, Jackson, Leno, Pavley
NO VOTE RECORDED: Bates
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 64-9, 4/20/15 - See last page for vote
SUBJECT: Hazardous waste and substances: corrective action:
liability
SOURCE: Author
DIGEST: This bill increases the interest rate accrued on
monetary obligations owed to the California Department of Toxic
Substances Control (DTSC).
ANALYSIS: Existing federal law, under the federal Resource
Conservation and Recovery Act (RCRA) of 1976, governs the
disposal of hazardous waste:
1)Through regulation, sets standards for the treatment, storage,
transport, tracking and disposal of hazardous waste in the
United States.
2)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).
AB 273
Page 2
Existing state law, under the California Hazardous Waste Control
Act (HWCA) of 1972:
1)Establishes the Hazardous Waste Control program.
2)Regulates the appropriate handling, processing and disposal of
hazardous and extremely hazardous waste to protect the public,
livestock and wildlife from hazards to health and safety.
3)Authorizes the 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.
4)Authorizes, under the Carpenter-Presley-Tanner Hazardous
Substance Account Act, the DTSC to take or oversee removal and
remedial actions related to the release of hazardous
substances.
5)Authorizes the Attorney General to recover from the liable
person, as defined, the costs incurred by the DTSC or a
California regional water quality control board in carrying
out HWCA and subjects any monetary obligation owed to the DTSC
pursuant to HWCA or the hazardous waste control laws to a
specified rate of interest earned in the Surplus Money
Investment Fund (SMIF).
6)Authorizes the DTSC to waive the interest if the obligation is
satisfied within 60 days of the date of the invoice.
This bill:
1)Increases the interest rate accrued on monetary obligations
owed to the DTSC.
2)Makes explicit the requirement that a responsible party pay
for DTSC's oversight of any corrective action with respect to
AB 273
Page 3
hazardous waste.
3)Makes explicit that the cost of response or corrective action
are recoverable.
4)Deletes the interest rate on monetary obligations owed to the
DTSC as being the same rate earned on investments in the SMIF,
and establishes the interest rate as 7% per annum until June
30, 2021 and 10% per annum after June 30, 2021, and 7% per
annum for local governments.
5)Requires the DTSC to waive the interest if the obligation is
paid within 60 days of receipt of the invoice.
6)Requires the DTSC to waive the interest from accruing until
dispute is resolved if the liable person in receipt of the
invoice notifies DTSC of a good faith dispute over all or a
portion of the invoice within 45 days.
Background
State Audit Report. On August 7, 2014, the Bureau of State
Audits (BSA) released a report on the DTSC's cost recovery. The
BSA found that long-standing shortcomings with the 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 the 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 SMIF.
For the quarter ending June 30, 2013, the SMIF interest rate was
0.246%. 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).
AB 273
Page 4
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."
The BSA report specifically recommended that in order to improve
the 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.
Special treatment for local governments. State law establishes
different interest rates for local governments. Government Code
Section 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
Purpose of bill. According to the author, AB 273 is part of a
package of reform measures to improve the DTSC's cost recovery
efforts aimed at amending exiting cost recovery statutes and
AB 273
Page 5
strengthening or expanding the DTSC's authority to improve its
timeliness of collecting costs related to hazardous waste
cleanup.
Related/Prior Legislation
In addition to this bill, the Assembly Committee on
Environmental Safety and Toxic Materials (ESTM) has introduced
the following bills to address the shortcomings found in the BSA
report:
AB 274 (ESTM) allows the DTSC to not expend resources to
pursue an uncollectible account, as defined.
AB 275 (ESTM) revises the DTSC's statute of limitation for
cost recovery.
AB 276 (ESTM) allows the 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 the 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. The bill was vetoed by Governor Brown on September 29,
2014.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified7/7/15)
California League of Conservation Voters
Environment California
Environmental Working Group
Natural Resources Defense Council
Sierra Club
AB 273
Page 6
OPPOSITION: (Verified7/7/15)
The Civil Justice Association of California
ARGUMENTS IN
SUPPORT: The supporters believe that by "increasing the
interest rate charged on billed but unpaid invoices owed the
DTSC may improve the timeliness of collections from responsible
parties. The current interest rate is so low that the State
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% (per the previous version
of the bill) 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."
ASSEMBLY FLOOR: 64-9, 4/20/15
AYES: Achadjian, Alejo, Bloom, Bonilla, Bonta, Brown, Burke,
Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh,
AB 273
Page 7
Dahle, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo
Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley,
Roger Hernández, Holden, Jones, Jones-Sawyer, Kim, Lackey,
Levine, Linder, Lopez, Low, Maienschein, Mathis, McCarty,
Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell,
Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,
Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk,
Williams, Wood, Atkins
NOES: Baker, Brough, Chávez, Beth Gaines, Grove, Irwin, Mayes,
Olsen, Wagner
NO VOTE RECORDED: Travis Allen, Bigelow, Chang, Gallagher,
Harper, Patterson, Steinorth
Prepared by:Rachel Machi Wagoner / E.Q. / (916) 651-4108
7/8/15 15:51:50
**** END ****