BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        AB 273|
          |Office of Senate Floor Analyses   |                              |
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                                    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).








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          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  








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            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).  








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           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  








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          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









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          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


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