BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                              Senator Wieckowski, Chair
                                2015 - 2016  Regular 
           
          Bill No:            AB 1205
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          |Author:    |Gomez                                                |
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          |-----------+-----------------------+-------------+----------------|
          |Version:   |5/5/2015               |Hearing      |7/1/2015        |
          |           |                       |Date:        |                |
          |-----------+-----------------------+-------------+----------------|
          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Rebecca Newhouse                                     |
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          SUBJECT:  The California River Revitalization and Greenway  
          Development Act of 2015


            ANALYSIS:
          
          Existing law:  
          
          1) Under the California Global Warming Solutions Act of 2006 (AB  
             32), requires the California Air Resources Board (ARB) to  
             adopt a statewide greenhouse gas (GHG) emissions limit  
             equivalent to 1990 levels by 2020 and to adopt rules and  
             regulations to achieve maximum technologically feasible and  
             cost-effective GHG emission reductions.  (Health and Safety  
             Code (HSC) §38500 et seq.)

          2) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the  
             State Treasury, requires all moneys, except for fines and  
             penalties, collected pursuant to a market-based mechanism be  
             deposited in the fund and requires the Department of Finance,  
             in consultation with ARB and any other relevant state agency,  
             to develop, as specified, a three-year investment plan for  
             the moneys deposited in the GGRF.  (Government Code §16428.8)

          3) Prohibits the state from approving allocations for a measure  
             or program using GGRF moneys except after determining that  
             the use of those moneys furthers the regulatory purposes of  
             AB 32, and requires moneys from the GGRF be used to  
             facilitate the achievement of reductions of GHG emissions in  
             California.  (HSC §39712) 







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          4) Authorizes expenditures from the GGRF for investments that  
             reduce GHG emissions associated with water use and supply,  
             land and natural resource conservation and management,  
             forestry, and sustainable agriculture.  (HSC §39712)

          5) Requires the Department of Finance, in the GGRF investment  
             plan, to allocate at least 25% of available moneys in the  
             GGRF to projects that provide benefits to disadvantaged  
             communities, and at least 10% to projects located within  
             disadvantaged communities.  (HSC §39713 )

          6) Under the California River Parkways Act of 2004, requires the  
             California Natural Resources Agency (CNRA) to provide grants  
             for river parkway projects that acquire land for river  
             parkways or for the restoration, protection, and development  
             of river parkways.  (Public Resources Code §5750 et seq.)

          7) Authorizes the Department of Water Resources to establish a  
             program of flood damage reduction and urban creek restoration  
             known as the Urban Streams Restoration Program.  (Water Code  
             Section §7048)

          8) Creates the Active Transportation Program in the California  
             Department of Transportation for the purpose of encouraging  
             increased use of active modes of transportation, such as  
             biking and walking.  (Streets and Highways Code §2380)

          This bill:  

          1) Makes various findings regarding the GHG emission reduction  
             benefits and environmental cobenefits of river systems.

          2) Declares it is the intent of the Legislature to protect,  
             restore, and enhance a network of river systems and riparian  
             corridors.

          3) Requires CNRA to establish a grant program for eligible  
             applicants to develop projects that assist with implementing  
             AB 32 and requires CNRA to prioritize funding for projects  
             that provide the greatest level of the following cobenefits:

             a)    Recreational access and improved human interactions,  
                especially in urban corridors and park-starved  








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                communities.

             b)    Transportation mobility, especially pedestrian,  
                bicycle, and public transit.

             c)    Economic viability by promoting appropriate  
                development, especially in an urban setting.

             d)    Development of visitor-serving and interpretive  
                facilities.

             e)    Access and development of pocket parks, community  
                gardens, demonstration gardens, and other urban greening.

             f)    Species protections and the protection of habitat  
                strongholds, including improved wildlife corridors.

             g)    Improved resiliency in the face of unavoidable impacts  
                from climate change.

             h)    Improved water supply and water quality.

             i)    Job training and workforce development, especially  
                projects that involve disadvantaged youth and veterans.

             j)    Improved stormwater retention.

             aa)   Improvements along impaired water bodies.

          4) Requires projects receiving grants to be consistent with AB  
             32, the California Water Action Plan, The Safeguarding  
             California Plan, and requirements for GGRF investments in  
             disadvantaged communities.

          5) Requires CNRA to prioritize funding for projects with the  
             following characteristics:

             a)    Are consistent with a parkway, greenway, or urban  
                greening plan.

             b)    Leverage moneys from the Water Quality, Supply, and  
                Infrastructure Improvement Act of 2014 (Proposition 1).

             c)    Provide recreational access to a major metropolitan  








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                area of the state.

          6) Creates the CalRIVER fund to receive appropriations from the  
             Legislature from bond proceeds and special funds, including,  
             but not limited to, GGRF.  

            Background
          
             AB 1205 creates the CalRIVER program, with funding for the  
             program authorized from the GGRF.  Whereas the use of GGRF  
             moneys is the jurisdiction of this committee, provisions  
             relating specifically to the need for, and details of, the  
             river revitalization program created in the bill, are within  
             the jurisdiction of the Senate Natural Resources Committee,  
             and are not considered in this analysis. 

          1) Cap-and-trade auction revenue. ARB has conducted 11  
             cap-and-trade auctions. The first 10 have generated almost  
             $1.6 billion in proceeds to the state. 

             Several bills in 2012, and one in 2014, provided legislative  
             direction for the expenditure of auction proceeds including: 

             SB 535 (de Leon, Chapter 830, Statutes of 2012) requires that  
             25% of auction revenue be used to benefit disadvantaged  
             communities and requires that 10% of auction revenue be  
             invested in disadvantaged communities. 

                       AB 1532 (J. Perez, Chapter 807, Statutes of 2012)  
                  directs the Department of Finance to develop and  
                  periodically update a three-year investment plan that  
                  identifies feasible and cost-effective GHG emission  
                  reduction investments to be funded with cap-and-trade  
                  auction revenues. AB 1532 specifies that reduction of  
                  greenhouse gas emissions through water use and supply,  
                  land and natural resource conservation and management,  
                  forestry, and sustainable agriculture, are eligible  
                  investments of GGRF. 

                       SB 1018 (Budget and Fiscal Review Committee,  
                  Chapter 39, Statutes of 2012) created the GGRF, into  
                  which all auction revenue is to be deposited. The  
                  legislation requires that before departments can spend  
                  moneys from the GGRF, they must prepare a record  








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                  specifying: (1) how the expenditures will be used, (2)  
                  how the expenditures will further the purposes of AB 32  
                  (Nunez and Pavley, Chapter 488, Statutes of 2006), (3)  
                  how the expenditures will achieve GHG emission  
                  reductions, (4) how the department considered other  
                  non-GHG-related objectives, and (5) how the department  
                  will document the results of the expenditures. 

                       SB 862 (Budget and Fiscal Review Committee,  
                  Chapter 36, Statutes of 2014) requires the ARB to  
                  develop guidelines on maximizing benefits for agencies  
                  administering GGRF funds and guidance for administering  
                  agencies on GHG emission reduction reporting and  
                  quantification methods. 

             Legal consideration of cap-and-trade auction revenues. The  
             2012-13 budget analysis of cap-and-trade auction revenue by  
             the Legislative Analyst's Office noted that, based on an  
             opinion from the Office of Legislative Counsel, the auction  
             revenues should be considered mitigation fee revenues, and  
             their use requires that a clear nexus exist between an  
             activity for which a mitigation fee is used and the adverse  
             effects related to the activity on which that fee is levied.  
             Therefore, in order for their use to be valid as mitigation  
             fees, revenues from the cap-and-trade auction must be used to  
             mitigate GHG emissions or the harms caused by GHG emissions. 

             In 2012, the California Chamber of Commerce filed a lawsuit  
             against the ARB claiming that cap-and-trade auction revenues  
             constitute illegal tax revenue.  In November 2013, the  
             superior court ruling declined to hold the auction a tax,  
             concluding that it's more akin to a regulatory fee.  The  
             plaintiffs filed an appeal with the 3rd District Court of  
             Appeal in Sacramento in February of last year.

             AB 32 auction revenue investment plan. The first three-year  
             investment plan for cap-and-trade auction proceeds, submitted  
             by Department of Finance, in consultation with ARB and other  
             state agencies in May of 2013, identified sustainable  
             communities and clean transportation, energy efficiency and  
             clean energy, and natural resources and waste diversion as  
             the three sectors that provide the best opportunities, in  
             that order, for achieving the legislative goals and  
             supporting the purposes of AB 32.  For natural resources  








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             investments, the plan recommends funding ecosystem management  
             projects for their ability to sequester carbon, as well as  
             their co-benefits to human health and the environment.

             Budget allocations. The 2014-15 Budget allocates $832 million  
             in GGRF revenues to a variety of transportation, energy, and  
             resources programs aimed at reducing GHG emissions.  Various  
             agencies are in the process of implementing this funding.  SB  
             862 (Budget and Fiscal Review Committee), the 2014 budget  
             trailer bill, established a long-term cap-and-trade  
             expenditure plan by continuously appropriating portions of  
             the funds for designated programs or purposes.  The  
             legislation appropriates 25% for the state's high-speed rail  
             project, 20% for affordable housing and sustainable  
             communities grants, 10% to the Transit and Intercity Rail  
             Capital Program, and 5% for low-carbon transit operations.   
             The remaining 40% is available for annual appropriation by  
             the Legislature. 

             Of that 40%, the Governor's 2015-16 budget proposal  
             appropriates $40 million towards wetland and watershed  
             restoration to be administered by the Department of Fish and  
             Wildlife. 

             The 2015-16 Budget bill passed both houses on June 15 of this  
             year, but excluded any appropriation of cap-and-trade auction  
             revenue. 

          1) River and Stream Restoration. California has two grant  
             programs in statute that restore rivers and streams: 1) the  
             Urban Streams Restoration Program and 2) the California River  
             Parkways Program. Both programs are primarily funded through  
             the Safe Drinking Water, Water Quality and Supply, Food  
             Control, River and Coastal Protection Bond Act of 2006  
             (Proposition 84).  

             The California River Parkways Program was created pursuant to  
             the California Rivers Parkways Act of 2004.  The Natural  
             Resources Agency is currently soliciting for a one-time  
             funding round of approximately $7.6 million dollars for the  
             acquisition, restoration, protection and development of river  
             parkways, with a cap for an individual project at $500  
             thousand. This funding cycle will award the last of  
             Proposition 84 moneys for the program.  Projects are required  








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             to meet at least two of the following objectives: 1)  
             providing compatible recreation opportunities, 2) protecting  
             or restoring riverine or riparian habitat, 3) providing flood  
             management benefits, 4) conversion of developed riverfront  
             land to river parkways, and 5) providing facilities to  
             support river conservation.  Over 60 projects have been  
             funded through the program.

             Through the Urban Streams Restoration Program, the Department  
             of Water Resources provides grants to local communities for  
             projects to reduce flooding and erosion and associated  
             property damage, restore, enhance or protect the natural  
             ecological values of streams, and promote community  
             involvement, education and stewardship.  Since 1985, the  
             program has provided more than 270 grants ranging from $1,000  
             to $1 million to communities throughout California.  The  
             projects have included stream cleanups, bank stabilization  
             projects, revegetation efforts, recontouring of channels to  
             improve floodplain function and occasional acquisition of  
             strategic floodplain properties or easements. The last  
             funding cycle for the program was in 2014, where over $8  
             million was awarded to 13 project proposals. 

             Proposition 1.  The Water Quality, Supply, and Infrastructure  
             Improvement Act of 2014 (Proposition 1) authorizes $7.545  
             billion in general obligation bonds to fund ecosystems and  
             watershed protection and restoration, water supply  
             infrastructure projects, including surface and groundwater  
             storage, and drinking water protection.  Specifically, $1.495  
             billion is designated for competitive grants for multibenefit  
             ecosystem and watershed restoration projects. 

            Comments
          
          1) Purpose of Bill.  According to the author, "Given the vast  
             potential for using our river systems to reduce and sequester  
             greenhouse gas emissions, and no existing integrated,  
             statewide grant program to deliver these benefits, this bill  
             would establish CalRIVER.  The program would be especially  
             useful in incentivizing projects that integrate stormwater,  
             natural resource improvements, as well as reductions in  
             vehicle miles traveled.  Without CalRIVER, the state would  
             continue to miss opportunities to harness the climate values  
             of our riparian corridors for greenhouse gas reductions, as  








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             well as the many other co-benefits associated with these  
             projects."

          2) GHG emission reduction priorities.  As noted in the  
             background, the GGRF investment identified sustainable  
             communities and clean transportation, energy efficiency and  
             clean energy, and natural resources and waste diversion as  
             the three sectors that provide the best opportunities, in  
             that order, for achieving the legislative goals and  
             supporting the purposes of AB 32.  The natural resources  
             sector (in addition to waste diversion) is third on the  
             priority list.

             The investment plan, in reference to the natural resources  
             and waste diversion sectors, states, "while this combined  
             category represents less than ten percent of GHG emissions,  
             there is potential for achieving greater reductions and  
             realizing significant co-benefits to human health and the  
             environment."

             So while natural resources is recommended for funding from  
             GGRF,  it is recommended for a smaller appropriation of GGRF  
             moneys than other sectors, since, although significant  
             opportunities for cobenefits exist, the GHG emissions  
             reduction potential of projects in the natural resources  
             sector is significantly lower than for clean transportation  
             and energy investments.

             The 2014-15 Budget appropriated $25 million to the Department  
             of Fish and Wildlife for wetlands and watershed restoration.  
             The Governor's 2015-16 budget proposal increases this  
             appropriation to $40 million.

          3) Other sources of funding available.  AB 1205 creates the  
             CalRIVER fund and authorizes the transfer of bond fund  
             moneys, and special funds, including, but not limited to,  
             river parkway and urban creek programs, and the GGRF.  As  
             noted in the background, the California River Parkways  
             Program and the Urban Streams Restoration Program have  
             completed, or are in the process of completing, their last  
             funding cycles. However, the newly enacted Proposition 1  
             assigns over $1.45 billion toward the protection of rivers,  
             lakes, streams, coastal waters and watersheds. Proposition 1  
             calls out the protection and restoration of rural and urban  








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             watersheds to improve storage capacity, stormwater resource  
             management and greenhouse gas reduction, the restoration of  
             river parkways, the implementation of watershed adaptation  
             project to reduce climate impacts, the restoration of  
             ecosystems, the reduction of pollution, and other goals, as  
             purposes of the $1.45 billion of Proposition 1 funding.  
             Additionally, $100 million is designated for project to  
             protect and enhance urban creeks. Proposition 1 also requires  
             $20 million go toward a competitive program to fund  
             multibenefit watershed and urban rivers enhancement projects.  
             Many of the goals specified in Proposition 1 are also  
             prioritized as cobenefits in AB 1205. It is likely that a  
             significant portion of the river restoration activities to  
             date have had some level of GHG reduction of sequestration  
             benefit due to restoration of riparian habitats and  
             opportunities for active transport in urban settings,  
             however, AB 1205 differs from other river restoration  
             efforts, in that the stated goal of the CalRIVER program is  
             the reduction or sequestration of GHGs. 

             Although projects to protect, restore, and enhance river  
             systems and riparian corridors are critically important,  
             authorizing GGRF moneys for this program, when money is  
             already available for similar efforts, potentially takes away  
             funding for other measures to reduce GHGs that do not have  
             multiple other sources of funding.

             Is it appropriate to authorize GGRF funds for this program,  
             when other dedicated funding streams are available for river  
             restoration and protection?

          4) GHG emissions.  AB 1205 requires CNRA to establish a grant  
             program and authorizes the use of GGRF moneys for the  
             program, which are funds that are required to be used to  
             achieve GHG emission reductions.  And although the bill  
             specifies project prioritization based on a list of  
             cobenefits, there is no requirement in the bill for the  
             prioritization of projects based on GHG emission reductions  
             or GHG sequestration potential. 

          5) Implementing AB 32?  AB 1205 specifies that the CalRIVER  
             program assist the development of projects that assist the  
             state in implementing AB 32.  This language is unclear, as  
             the implementation of AB 32 entails various actions such as  








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             mandatory GHG emissions reporting, regulations that achieve  
             the maximum technologically feasible and cost-effective  
             reduction of GHG emissions, imposition of fees for  
             administrative implementation costs, as well as the  
             preparation of a scoping plan.  It may be more appropriate to  
             require the program to, instead, further the regulatory  
             purposes of AB 32, as required by any use of GGRF moneys, and  
             meet the requirements of the Greenhouse Gas Reduction Fund  
             Investment Plan and Communities Revitalization Act. 

          6) Vague language.  SB 1205 requires the prioritization of  
             certain projects based on a list of cobenefits, including  
             "recreational access and improved human interactions,"  
             "economic viability by promoting appropriate development,"  
             and "improvements along impaired water bodies."  It is not  
             clear what is meant by, or what projects would qualify as  
             having, improved human interactions, appropriate development,  
             or "improvements" along impaired water bodies. 

          7) Piece by piece. GGRF investments must facilitate the  
             achievement of GHG emissions reductions.  However, after that  
             requirement is fulfilled, there are number of other policy  
             goals that should be considered, including benefits to  
             environmental quality, resource protection, public health and  
             the economy, as well as benefits to disadvantaged  
             communities.  And although the fund is growing, it is still a  
             limited source of revenue.  In order to create an optimized  
             investment strategy from GGRF moneys, proposals should not be  
             considered in isolation, but be assessed in aggregate to  
             determine what suite of measures best meets the requirements  
             of the fund, uses resources most efficiently, and maximizes  
             policy objectives. 

             As budget discussions on a cap-and-trade investment strategy  
             have been pushed to later this session, an opportunity exists  
             to have a comprehensive discussion on the universe of GGRF  
             proposals currently in the Legislature, during budget  
                  negotiations this summer.  If the Legislature feels that the  
             CalRIVER program established through AB 1205 is an  
             appropriate expenditure of GGRF moneys, then this measure  
             should also be considered through the budget process for  
             cap-and-trade expenditures, along with all other measures  
             proposing to expend, or authorize for expenditure, GGRF  
             moneys.








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            SOURCE:                    Author  

           SUPPORT:               

          Audubon California
          California Trout
          LA River Revitalization Corporation
          Los Angeles County Board of Supervisors
           
           OPPOSITION:    

          CalTax  

           ARGUMENTS IN  
          SUPPORT:    California Trout states that while AB 1205 will 
          focus on providing support to rivers and the lands adjacent to  
          them, its benefits 
          will be much broader and far-reaching.  They note that investing  
          in river systems is 
          a valuable effort that allows for multiple economic, social, and  
          environmental 
          benefits.  The Los Angeles Board of Supervisors states that AB  
                         1205 would 
          provide an important funding mechanism for projects that are on  
                         or adjacent to 
          riparian corridors that integrate stormwater, and natural  
                         resource improvements,
          and would also help to reduce vehicle miles travelled. 
           
           

          ARGUMENTS IN  
          OPPOSITION:    CalTax is opposed to the bill because they
          state it distorts the nature of a regulatory fee and that a true  
                         regulatory fee must 
          comply with the principles of having a nexus to the payer, not  
                         being imposed for
          the purpose of generating revenue, and that they must be  
                         reasonable.  CalTax also 
          states that pending litigation will determine if the auction  
                         component of the cap-
          and-trade program constitutes an illegal tax, and by directing  








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          funds beyond the clear regulatory purposes, AB 1205 opens up the  
          cap-and-trade program to litigation risk. 
           
           DOUBLE REFERRAL:    

          If this measure is approved by the Senate Environmental Quality  
          Committee, the do pass motion must include the action to  
          re-refer the bill to the Senate Natural Resources and Water  
          Committee.  


           
                                          
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