BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: AB 2722 ----------------------------------------------------------------- |Author: |Burke | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |5/31/2016 |Hearing |6/29/2016 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Rebecca Newhouse | | | | ----------------------------------------------------------------- SUBJECT: Transformative Climate Communities Program. ANALYSIS: Existing law: 1) Under the California Global Warming Solutions Act of 2006 (also known as AB 32), requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with these regulations. (Health and Safety Code §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. (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) 4) Continuously appropriates 60% of GGRF moneys to transit, affordable housing and sustainable communities, including 20% AB 2722 (Burke) Page 2 of ? continuously appropriated to the Strategic Growth Council (SGC) for the Affordable Housing and Sustainable Communities Program. (HSC §39719) This bill: 1) Establishes the Transformational Climate Communities Program (Program) to fund the development and implementation of neighborhood-level transformative climate community plans that include multiple, GHG emissions reduction projects that provide local economic, environmental, and health benefits that are directly connected to communities most impacted by pollution and vulnerable to climate change. 2) States the intent of the Legislature that private resources can "more effectively be catalyzed to support innovative community and climate transformation in disadvantaged communities." 3) Requires the SGC, in coordination with the Assistant Secretary for Environmental Justice and Tribal Affairs at California Environmental Protection Agency (CalEPA), to award competitive grants to eligible entities, as specified. 4) Directs SGC to award grants for plans and projects that implement plans that contribute to the reduction of GHG emissions and demonstrate potential climate, economic, workforce, health, and environmental benefits located in communities that have a demonstrated need for climate, economic, workforce, health, and environmental benefits. 5) Authorizes SGC to award a grant over multiple years. 6) Requires SGC to weigh economic, environmental, and health benefits equally with climate benefits. 7) Defines "economic benefits" as high-quality, well-paid employment opportunities for residents, benefits for small businesses, and benefits for minority-, LGBT-, woman-, or disabled veteran-owned small businesses in the plan's region. Defines "LGBT" as lesbian, gay, bisexual, or transgender. 8) Requires SGC to "endeavor to identify" additional public and private sources of funding to sustain and expand the Program AB 2722 (Burke) Page 3 of ? and a network of technical assistance providers to assist in plan development, implementation, and project financing. Background 1) Cap-and-trade auction revenue. Since November 2012, ARB has conducted 15 cap-and-trade auctions, generating over $4 billion in proceeds to the state. State law specifies that the auction revenues must be used to facilitate the achievement of GHG emissions reductions and outlines various categories of allowable expenditures. Statute further requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop a three-year investment plan for the auction proceeds, which are deposited in the GGRF. SB 535 (de León, Chapter 830, Statutes of 2012) requires the Department of Finance, in the 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. Additionally, SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014) requires ARB to develop guidelines on maximizing benefits for disadvantaged communities by agencies administering GGRF funds, and guidance for administering agencies on GHG emissions 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 AB 2722 (Burke) Page 4 of ? constitute illegal tax revenue. In November 2013, the superior court ruling declined to hold the auction a tax, concluding that it is more akin to a regulatory fee. The plaintiffs filed an appeal with the 3rd District Court of Appeal in early 2014, and that case is pending. Budget allocations. SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014), a 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. The Governor's 2016-17 proposed budget appropriates over $3 billion to a variety of programs and projects in the transportation, energy, natural resources, and waste diversion sectors. 2) Governor's Transformative Climate Communities budget proposal. The Governor's 2016-17 budget proposal requests $100 million to establish the Transformational Climate Communities Program, administered by the SGC, to support local climate action implementation in the top five percent disadvantaged communities in California. According to the proposal, "Funding would support projects that integrate multiple, cross-cutting approaches to reduce GHGs, and that the program combines climate investments within a local area for catalytic impact-including investments in energy, transportation, active transportation, housing, urban, greening, land use, water and waste efficiency, and other areas-while also increasing job training, economic, health and environmental benefits." The Senate and Assembly budget plans included a $400 million and $100 million appropriation from the GGRF for "local climate programs." Comments 1) Purpose of Bill. According to the author, "Assembly Bill 2722 establishes the Transformative Climate Communities Program AB 2722 (Burke) Page 5 of ? administered by the Strategic Growth Council to ensure that California is making investments that reduce greenhouse gases and also demonstrate co-benefits for the economy, workforce, and the health of California's most vulnerable communities. AB 2722 creates a one stop shop for cities, counties, and community-based organizations to fund multiple projects that reduce greenhouse gas emissions. Our state has been a strong leader in the fight against climate change and reducing pollution, and AB 2722 is a step to ensure that we leave no community behind." 2) What types of projects will be supported through the program? AB 2722 does not prescribe the types of projects that are eligible for funding, or provide categorical guidance for plans and projects that may be funded under the Program. Instead, the bill specifies that the Program will fund "neighborhood-level transformative" plans that include "multiple, coordinated greenhouse gas emissions reduction projects." The bill also requires that plans and projects awarded grants by SGC demonstrate an "integrated, innovative, crosscutting" approach and "provide multiple benefits to the community and demonstrate community engagement and leadership in all phases." The Governor's proposal included investments in energy, transportation, active transportation, housing, urban, greening, land use, water and waste efficiency, and other areas, as possible projects that could be funded through the Program. The sponsors of the bill have provided examples of the types of projects that might be funded through the Program. These include community-led planning in National City to develop a land use plan to build a vibrant, healthy community with affordable housing, equitable transit, safe pedestrian walkways, and increased clean energy. Other examples from the sponsors include an urban greening project in the San Fernando Valley to increase green infrastructure and active transportation, and an affordable housing development in South Los Angeles that includes community gardens, open space, and a community room and commercial space that serves the local community. 3) Plans and projects. AB 2722 requires SGC award grants for AB 2722 (Burke) Page 6 of ? transformative climate community plans, and projects that implement those plans. The bill authorizes SGC to make grant awards for plan development contingent on implementation of one or more projects identified in the plan. Although plans are critical for successful projects that reduce GHGs, plans without corresponding projects do not result in GHG emissions reductions. As achieving GHG emissions reductions is required for investments from the GGRF (which is not specified in the bill, but is the most likely source of funding for the Program), an amendment is needed to require SGC make grant awards for plan development contingent on implementation of one or more projects identified by the plan. 4) Weighing benefits equally. This bill includes a requirement that SGC weigh economic, environmental, and health benefits equally with climate benefits resulting from GHG emissions reductions. It is not clear how this provision will be implemented. Will any level of public health or economic benefits (e.g., bike lanes for active transportation or some threshold of job creation) be weighted equivalently with GHG emissions reduction, no matter how significant those reductions? Instead of requiring SGC give equal weight to benefits that are disparate and difficult to compare across the board, amendments are needed to 1) require projects demonstrate GHG emissions reductions to be eligible for funding under the program, and 2) require SGC, in awarding grants, prioritize projects that maximize, to the extent feasible, climate, public health, environmental, workforce, and economic benefits. 5) Guidelines. Although AB 2722 sets up the basic framework and goals for the Transformative Climate Communities Program, there are a variety of program specifications that SGC will need to establish. Amendments are needed to require SGC to develop guidelines, consistent with the statutory requirements for adopting guidelines for the Affordable Housing and Sustainable Communities Program (implemented by SGC and funded through GGRF), through a transparent and public process that includes AB 2722 (Burke) Page 7 of ? outreach to affected communities and consideration of input from stakeholders. 6) Author amendment. The author would like to amend the bill to include joint powers authorities as an eligible entity under the Program. SOURCE: California Environmental Justice Alliance Greenlining Institute SUPPORT: Audubon California California Association of Local Conservation Corps California Equity Leaders Network California League of Conservation Voters California Pan Ethnic Health Network Coalition for Clean Air Fresno Economic Opportunities Commission Health Officers Association of California Los Angeles Neighborhood Land Trust Lutheran Office of Public Policy - California National Audubon Society PAN North America Sierra Club California The Greenling Institute TransForm Union of Concerned Scientists Valley Clean Air Now OPPOSITION: None received ARGUMENTS IN SUPPORT: Supporters state that the Program will foster an integrative collaborative approach to comprehensively address the burdens of disproportionately impacted communities that have suffered from decades of environmental pollution and neglect. They also state that the Program moves out of the project-specific silos that has characterized most GGRF spending thus far and instead, the bill promotes multi-stakeholder collaborations and leverages a range of funding sources, including private sector, to achieve large-scale impact in a holistic manner. AB 2722 (Burke) Page 8 of ? -- END --