BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: AB 274 ----------------------------------------------------------------- |Author: |Committee on Environmental Safety and Toxic | | |Materials | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |5/27/2015 |Hearing | 6/17/2015 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Rachel Machi Wagoner | | | | ----------------------------------------------------------------- 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) Page 2 of ? 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) Page 3 of ? 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. AB 274 (Committee on Environmental Safety and Toxic Materials) Page 4 of ? 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 -- END --