BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: AB 274
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|Author: |Committee on Environmental Safety and Toxic |
| |Materials |
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|Version: |5/27/2015 |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: Oversight costs: uncollectible accounts.
ANALYSIS:
Existing law:
1)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.
2)Requires any costs incurred by the Department of Toxic
Substances Control (DTSC) or a regional board to be
recoverable from the liable person or persons, and requires
the amount of any response action costs that may be recovered
to include interest on any amount paid.
3)Requires DTSC to review all current outstanding receivables
and make an appropriate adjustment for estimated uncollectible
amounts, consistent with current accounting practices and
recognizing the present value of future collection, and
authorizes DTSC to write off or write down those receivable
amounts.
4)Authorizes DTSC to consider whether to enter into a contract
with a private collection agency to collect substantially
past-due accounts, and for longer term receivables consider
whether credit arrangements should be made with banks or other
institutions willing to assist in financing a potentially
AB 274 (Committee on Environmental Safety and Toxic Materials)
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responsible party's obligation for remediation.
This bill:
Allows DTSC to not pursue and write off an uncollectible
account, as defined. Specifically, this bill defines an
uncollectible account as an oversight cost that meets the
following conditions:
1) The cost was incurred by DTSC on or after July 1, 1987
and prior to December 31, 2013, while overseeing an action.
2) The amount of the uncollectible cost is not more than
$5,000.
3) The estimated cost for DTSC to pursue the oversight cost
exceeds the cost itself.
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 long-standing shortcomings resulting in millions of
dollars in unbilled and uncollected cleanup costs dating back
to 1987.
According to DTSC, efforts to address the backlog have led to
a reduction in the number of sites without payment from 2,700
to fewer than 1,600 (40% reduction), and a reduction in the
amount of outstanding costs by more than $24 million, which
includes settlements paid, cash collected, and data cleanup.
Of the remaining outstanding costs, there are 865 projects, or
about $1 million worth of projects valued at less than $5,000
each. Of that, 235 projects have bills less than $500, and 61
projects billed at less than $25.
AB 274 (Committee on Environmental Safety and Toxic Materials)
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2)One-time Fix. This bill provides a one-time fix and
specifically only applies to uncollectible bills for costs
accrued between July 1, 1987, and December 31, 2013. The
authorization in this bill will not apply to any oversight
costs accrued after January 1, 2014.
Comments
1) Purpose of Bill. According to the author, authorizing DTSC
to cut its losses on low-dollar uncollected projects valued
at less than $5,000 will assist with the backlog of
outstanding costs and free-up resources to address larger,
higher priority cleanup cost recoveries.
According to DTSC, the initial cost to send a collection
letter is roughly $72.70. The cost to conduct a responsible
party search costs, on average, is $7,800. Therefore, DTSC's
costs to identify a responsible party for some projects often
far exceed the recoverable costs, resulting in a financial
loss to DTSC, and therefore to taxpayers.
2) One-time fix- amendment. As noted above, this legislation
applies to outstanding bills for costs accrued prior to
December 31, 2013. DTSC has stated that pursuant to the
audit, new accounting systems are in place that will allow
better tracking and oversight of billing activities. As DTSC
has said that there is a prospective solution in place to
prevent this type of backlog in the future, an amendment
should be taken to sunset this statute after DTSC has had an
opportunity to resolve these cases.
Related/Prior 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 273 (ESTM) modifies provisions relating to DTSC's
authority to require corrective actions under hazardous
waste control laws.
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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.
SOURCE: Committee on Environmental Safety and Toxic Materials
SUPPORT:
California League of Conservation Voters
Environment California
Environmental Working Group
Natural Resources Defense Council
OPPOSITION:
None received
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