BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2722| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2722 Author: Burke (D) Amended: 8/16/16 in Senate Vote: 21 SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-2, 6/29/16 AYES: Wieckowski, Hill, Jackson, Leno, Pavley NOES: Gaines, Bates SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/11/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NOES: Bates, Nielsen ASSEMBLY FLOOR: 51-26, 6/2/16 - See last page for vote SUBJECT: Transformative Climate Communities Program SOURCE: California Environmental Justice Alliance Greenlining Institute DIGEST: This bill creates the Transformative Climate Communities Program, administered by the Strategic Growth Council (SGC), to award competitive grants for the development of transformative climate community plans, and projects that implement plans, which contribute to greenhouse gas emissions reductions and demonstrate other benefits, as specified, in disadvantaged communities. ANALYSIS: Existing law: 1) Requires, under the California Global Warming Solutions Act of 2006 (also known as AB 32), the California Air Resources Board AB 2722 Page 2 (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) Appropriates, continuously, 60% of GGRF moneys to transit, affordable housing and sustainable communities, including 20% continuously appropriated to the 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 AB 2722 Page 3 Environmental Protection Agency (CalEPA), to award competitive grants to eligible entities, including nonprofit organizations, community-based organizations, faith-based organizations, coalitions or associations of nonprofit organizations, community development finance institutions, community development corporations, local agencies, and joint powers authorities. 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) Specifies that, in order to be eligible for funding under the program, a plan, and a project that implements a plan, must demonstrate that it will achieve a reduction in GHG emissions. 7) Requires SGC, in awarding grants, to prioritize plans, and projects that implement plans that maximize, to the extent feasible, climate, public health, environmental, workforce, and economic benefits. 8) 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. 9) Requires SGC to "endeavor to identify" additional public and private sources of funding to sustain and expand the Program and a network of technical assistance providers to assist in plan development, implementation, and project financing. 10)Requires SGC to conduct at least three public workshops, consider any feedback, and post draft guidelines on their website before adopting the guidelines and selection criteria. 11)Specifies that the bill will only become operative if AB 1613 AB 2722 Page 4 (Committee on Budget) is enacted and becomes effective on or before January 1, 2017, and AB 1613 appropriates $205 million from the GGRF, as specified. 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. AB 2722 Page 5 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 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 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 for fiscal year 2016-17 include a $400 million and $100 million appropriation from the GGRF for "local climate programs." AB 2722 Page 6 Comments 1) Purpose of Bill. According to the author, "Assembly Bill 2722 establishes the Transformative Climate Communities Program 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 investments 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 includes 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 AB 2722 Page 7 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. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee: Unknown ongoing costs, between the high hundreds of thousands to low millions (GGRF) for the SGC to develop, administer, and oversee the financial assistance programs. Approximately $715,000 annually in years one and two for ARB, and approximately $550,000 ongoing (GGRF). Unknown, potentially significant, costs (GGRF) to CalEPA for consultation. SUPPORT: (Verified8/15/16) California Environmental Justice Alliance (co-source) Greenling Institute (co-source) 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 AB 2722 Page 8 National Audubon Society PAN North America Sierra Club California TransForm Union of Concerned Scientists Valley Clean Air Now OPPOSITION: (Verified8/15/16) 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. ASSEMBLY FLOOR: 51-26, 6/2/16 AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Grove, Harper, Jones, Kim, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk NO VOTE RECORDED: Daly, Gordon, Hadley Prepared by:Rebecca Newhouse / E.Q. / (916) 651-4108 8/16/16 17:50:30 AB 2722 Page 9 **** END ****