BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1588 (Mathis) - Water and Wastewater Loan and Grant Program
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|Version: June 15, 2016 |Policy Vote: E.Q. 7 - 0 |
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|Urgency: Yes |Mandate: No |
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|Hearing Date: August 1, 2016 |Consultant: Narisha Bonakdar |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 1588 establishes a program to provide funding for
local agencies to offer low-interest loans and grants to
eligible applicants for drinking water or wastewater treatment
projects. The bill also appropriates $10 million from the
General Fund for this purpose.
Fiscal
Impact:
One-time appropriation of $10 million (General Fund) for the
financial assistance program.
Ongoing costs of $500,000 annually for five years (General
Fund) to the State Water Resources Control Board (SWRCB) to
administer the grant program.
Background:
The federal Clean Water Act. The federal Clean Water Act
establishes federal guidelines for surface water quality
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protection, authorizes water quality programs; require quality
standards and permits for discharge; provides enforcement
mechanisms; and establishes the Clean Water State Revolving Fund
(CWSRF) to offer financial assistance for water quality
projects.
The federal Safe Drinking Water Act. The federal Safe Drinking
Water Act (SDWA) establishes federal standards for contaminants
in drinking water, and authorizes states to enter into primacy
agreements with the federal United States Environmental
Protection Agency (US EPA) to enforce SDWA if the state
establishes drinking water standards that are at least as
stringent as those developed by US EPA, as required by SDWA.
The Porter-Cologne Water Quality Control Act. The Porter-Cologne
Water Quality Control Act establishes the State Water Resources
Control Board (SWRCB) and Regional Water Quality Control Boards
to regulate and protect water quality in California. It also
establishes the State Water Pollution Control Revolving Fund to,
among other things, implement the federal CWSRF program. In
2014, the state transferred the Drinking Water Program and the
Safe Drinking Water State Revolving Fund (SDWSRF) from the
Department of Public Health to SWRCB.
The California Safe Drinking Water Act. The California Safe
Drinking Water Act requires SWRCB to protect the public from
contaminants in drinking water. It also establishes the state
SDWSRF which is partially capitalized by federal contributions
from the federal Safe Drinking Water Act, and specifies that the
SDWSRF provide funding for public water systems to correct
deficiencies and problems that pose public health risks and to
meet safe drinking water standards.
Proposition 1: The Water Quality, Supply, and Infrastructure
Improvement Act of 2014. Proposition 1 included $260 million,
upon appropriation by the Legislature to the SWRCB to be placed
in the CWSRF and used for grants for wastewater treatment
projects. It also included another $260 million, upon
appropriation by the Legislature, (recipient agency not
specified) for public water system infrastructure improvements
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and related actions to meet safe drinking water standards,
ensure affordable drinking water, or both.
The Household and Small Water System Drought Assistance Program.
The low-interest loans and other financing mechanisms available
through the above-mentioned programs do not fund water
infrastructure on private property such as wells, sewer
laterals, or septic systems. However, the 2016-17 Budget
allocated $15 million to the SWRCB from the Clean-up and
Abatement Account for Drought-related Interim Emergency Drinking
Water. The Governor directed the SWRCB to $5 million for the
Household and Small Water System Drought Assistance Program.
The Household and Small Water System Drought Assistance program
offers loan/grant funding to assist individual households and
small water systems (that serve less than 15 connections) to
address their drought-related drinking water emergencies. The
funds will be administered by three non-profit organizations:
Self-Help Enterprises, Rural Community Assistance Corporation,
and California Rural Water Association. These monies will fund
the following activities: new well construction, design of cost
of necessary infrastructure, permit and connection fees, well
rehabilitation/repair (including extending deep wells to deeper
aquifers, distribution/conveyance pipelines (up to point of
entry of household), limited consolidation efforts (i.e.
laterals, above-ground interties), and all necessary
appurtenances/equipment. Individual households may receive up
to $45,000 and small water systems may receive $100,000 in
maximum funding.
Proposed Law:
This bill:
1)Requires SWRCB to establish a program to provide funding for
local agencies to offer low-interest loans and grants to
eligible applicants for drinking water or wastewater treatment
projects.
2)Transfers $10 million from the General Fund to the
newly-created Water and Wastewater Loan and Grant Fund (LGF).
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3)Allows SWRCB to adopt guidelines for administering the program
exempt from the Administrative Procedures Act (APA).
4)Requires SWRCB to develop guidelines to apportion funds among
the counties.
5)Allows a county to apply to SWRCB for funds to award grants
and/or loans to residents within its jurisdiction.
6)Requires counties receiving LGF to annually provide specified
information to the SWRCB regarding projects and funding
recipients.
7)Limits loan eligibility to households with incomes below the
statewide median, who have an ownership interest in the house,
are unable to obtain financial assistance with reasonable
terms from private lenders, and who are able to repay the
loan.
8)Limits the loan interest rate to 1%, requires loans to be
secured by a mortgage on the residence and repaid within 20
years, and requires loan recipients to maintain homeowners
insurance during the life of the loan.
9)Allows counties to enter into contracts with private financial
institutions to provide loans as specified.
10)States that the bill is an urgency statute.
Related
Legislation:1) AB 954 (Mathis, 2015), similar to AB 1588, would have
established a program to provide funding for local agencies to
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offer low-interest loans and grants to eligible applicants for
projects that provide access to drinking water or wastewater
treatment. The bill was held in the Senate Appropriations
Committee.
Staff
Comments:
Staff notes that this bill establishes a local financial
assistance program. That is, the state will be giving funds to
locals who will then distribute assistance to individual
homeowners. The SWRCB estimates that it would need approximately
$500,000 for 3.5 positions to administer a $10 million grant
program. These costs are assuming that the local agencies
administering the program will be doing all of their own program
development including establishing loan and grant repayment
terms and vetting of homeowner applicants.
Staff notes that the bill does not establish any parameters
regarding how the SWRCB will determine how much each local
agency applicant can receive from the program, how the SWRCB is
to prioritize local agency requests for funds assuming that the
program will be oversubscribed, whether the SWRCB issues a grant
or a loan to the local agencies, and whether the local agencies
can use part of the financial assistance for their own
administrative costs. The SWRCB costs assume that they would
only issue grants to locals and grants would be issued to local
agencies based on their "readiness to proceed" and the severity
of the deficiencies the water systems Administrative costs may
change if the author requires the SWRCB to run the program
differently.
Staff notes that this bill is silent on whether the state or the
local agency bears the risk if a homeowner defaults on a loan
and the costs cannot be recovered from the mortgage. However,
this is only an issue that needs to be resolved if the author
intends for the SWRCB to issue loans instead of or in addition
to grants to local agencies.
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