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 Amended: 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: (Verified7/15/15) None received 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." ASSEMBLY FLOOR: 64-9, 4/20/15 AYES: Achadjian, Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, 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 7/15/15 17:03:28 **** END **** AB 273 Page 7