BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                            Senator Bob Wieckowski, Chair
                                2015 - 2016  Regular 

          Bill No:           SB 208           Hearing Date:    4/15/2015
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          |Author:   |Lara                                                  |
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          |Version:  |2/11/2015                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Rachel Machi Wagoner                                  |
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          Subject:  Integrated regional water management plans:  grants:   
          advanced payment


            ANALYSIS:                                                     
          
          Existing law:

             1.   Under the Regional Water Management Planning Act, 

                  A.        Authorizes a regional water management group,  
                    as defined, to prepare and adopt a regional plan, in  
                    accordance with certain procedures, that addresses  
                    programs, projects, reports, or studies relating to  
                    water supply, water quality, flood protection, or  
                    related matters, over which any local public agency,  
                    as defined, that is a participant in that group has  
                    authority to undertake. 




                  B.        Establishes the Integrated Regional Water  
                    Management Program (IRWMP), which encourages the  
                    development of integrated regional strategies for  
                    management of water resources by providing funding,  
                    through competitive grants.











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                  C.        Requires that not less than 10% of IRWMP funds  
                    be allocated to address the critical water supply  
                    needs of disadvantaged communities and to facilitate  
                    the participation of those communities in integrated  
                    regional water management planning.

             2.   The Water Quality, Supply, and Infrastructure  
               Improvement Act of 2014 (Proposition 1) authorizes $7.12  
               billion in general obligation bonds for state water supply  
               infrastructure projects, such as public water system  
               improvements, surface and groundwater storage, drinking  
               water protection, water recycling and advanced water  
               treatment technology, water supply management and  
               conveyance, wastewater treatment, drought relief, emergency  
               water supplies, and ecosystem and watershed protection and  
               restoration. 

          This bill:  Establishes a process whereby the state agency  
          administering an IRWMP grant could provide advance funding of  
          IRWMP grants where the project proponent is a nonprofit  
          organization or a disadvantaged community, or the project  
          benefits a disadvantaged community.  The process would be as  
          follows:

             1.   Within 90 days of receiving notice that it has been  
               awarded an IRWMP grant, the regional water management group  
               would be required to provide the administering agency with  
               a list of projects to be funded by the grant funds where  
               the project proponent is a nonprofit organization or a  
               disadvantaged community, or the project benefits a  
               disadvantaged community. The list shall specify how the  
               projects are consistent with the adopted integrated  
               regional water management plan and shall include specific  
               information about each project.

             2.   Within 60 days of receiving the project information from  
               the regional water management group, the administering  
               agency would provide advanced payment of 50 percent of the  
               grant award for those projects that satisfy both of the  
               following criteria:
                           The project proponent is a nonprofit  
                    organization or a disadvantaged community, or the  
                    project benefits a disadvantaged community.
                           The grant award for the project is less than  








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                    one million dollars.

             1.   The recipients would be required to place the funds in a  
               noninterest-bearing account until expended.
                           The funds would be required to be spent within  
                    six months of the date of receipt, unless the  
                    administering agency waives this requirement.
                           The recipient shall periodically, but not more  
                    frequently than quarterly, provide an accountability  
                    report to the administering agency regarding the  
                    expenditure and use of any advanced grant funds in a  
                    format as determined by that state entity.
                           If funds are not expended, the unused portion  
                    of the grant shall be returned to the administering  
                    agency within 60 days after project completion or the  
                    end of the grant performance period, whichever is  
                    earlier.

          The provisions of this bill sunset on January 1, 2025.

          Background

          Numerous water bonds, including most recently Proposition 1,  
          provide funding for projects and programs through the Integrated  
          Regional Water Management Program (IRWMP).  The Legislature has  
          appropriated bond funds to the Department of Water Resources  
          (DWR) to be distributed by DWR or DWR and the State Water  
          Resources Control Board for a competitive grant solicitation.   
          DWR then issues guidelines for a round of IRWMP funding, and  
          regional water management groups submit their list of local  
          projects.  DWR ranks the projects and makes the awards within  
          each IRWMP funding region.  

          In many cases, regional water management groups contract with  
          their local entities to carry out the projects.  The typical  
          reimbursement process is that the local entity submits invoices  
          to its regional water management group, who then submits the  
          invoices to DWR.  Upon review of the invoices, DWR then  
          reimburses the management group who then reimburses the local  
          entity.  Depending on the specific details of the funding  
          agreement and the administrative processes of the management  
          group, a number of months may pass between the time the local  
          entity incurs the expense and the time they receive  
          reimbursement from the management group. 








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            Comments
          
          1. Purpose of the bill.

             According to the author, the current IRWM funding mechanism  
             created through past water bond measures reflects a  
             pay-as-you-go system where groups with approved plans provide  
             funding for water projects up front and are reimbursed later.  
             This mechanism is intended to save state general funds, but  
             instead threatens the success of regional programs and  
             continued participation of interested stakeholders. Smaller  
             communities and non-profit organizations are  
             disproportionately impacted by the pay-as-you-go system as  
             pre-financing water projects requires a larger budget than  
             these stakeholders are often able to fund.

             The author further states that delays in reimbursement  
             payments burdens and threatens the successful participation  
             of smaller non-profits and disadvantaged communities.  
             Whenever the processing of an IRWM project invoice  
             reimbursement is untimely, as is sometimes the case, the  
             delay disenfranchises the groups that can least afford it.  
             These challenges further impact the credibility of the IRWM  
             process as smaller non-profit organizations and disadvantaged  
             communities who have viable project plans become less willing  
             and able to apply for funding for projects, creating an  
             inequity in the funding process.

             The author believes that current policy disadvantages certain  
             integrated water management groups from providing the water  
             security voters intended to establish through Proposition 1.  
             SB 208, the Water Equity and Access bill, will improve equity  
             by advancing grant funds to non-profit organizations and  
             disadvantaged communities under limited circumstances. The  
             author believes that as California is heading into its fourth  
             drought year and in need of 11 trillion gallons of water, the  
             state must support smart water initiatives that can improve  
             our current drought situation as well as water quality.

          2. Addresses a real problem.  

             As noted by the Senate Committee on Natural Resources and  
             Water, the reimbursement process has been a real problem for  








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             some nonprofit organizations.  While water agencies can  
             usually carry the invoice billing as a receivable for a few  
             months, many nonprofit organizations, which often have meager  
             reserves, cannot.

             The IRWMP process is notoriously difficult and costly for  
             non-profit organizations and disadvantaged communities.   
             Despite statutory requirements that not less than 10% IRWMP  
             funds be granted for the benefit of disadvantaged  
             communities, the program  application process and approval  
             process is not designed to accommodate those communities or  
             organizations that do not hire a costly consultant to apply  
             for funding and negotiate the process for them.   
             Additionally, challenges like that identified by this bill of  
             not receiving funds to pay contractors for many months have  
             added to the difficulty of pursuing projects even if the  
             community or organization successfully navigates the IRWMP  
             application process.

             In hearings on Proposition 1 legislation, it was discussed as  
             to whether the IRWMP was the appropriate program for  
             distribution of bond grants to disadvantaged communities  
             because of the historic difficulties for these communities  
             and the organizations that represent them to access funds  
             through this program.  In the end, it was decided to continue  
             to fund projects through this program.

          3. What about accountability?  

             The Senate Committee on Natural Resources and Water analysis  
             notes that one advantage of the current reimbursement process  
             is that the state can ensure that it does not pay for any  
             non-eligible expenses.  Providing funding in advance reduces  
             the state's ability to ensure bond funds are only expended on  
             eligible expenses.

             The Senate Committee on Natural Resources and Water analysis  
             stated that should this bill move forward, the committee may  
             wish to encourage the author to work with the DWR to ensure  
             DWR has effective remedies in the event of improper expenses.

          4. Could the process be streamlined?  

             The bill provides the regional water management group 90 days  








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             to provide a list of projects to be funded by the grant funds  
             where the project proponent is a nonprofit organization or a  
             disadvantaged community, or the project benefits a  
             disadvantaged community.  DWR would then have an additional  
             60 days to approve and provide the advanced funding.  This  
             means the funds may not be available until 150 days (or  
             nearly 5 months) after the grant was awarded.

             The Senate Committee on Natural Resources and Water analysis  
             stated that should this bill move forward, the committee may  
             wish to encourage the author to work the DWR to determine if  
             a more expedient process might be possible.

            Related/Prior Legislation

          The Safe Drinking Water, Water Quality and Supply, Flood  
          Control, River and Coastal Protection Act of 2006 (PROPOSITION  
          84) included funding for the IRWM Grant Program administered by  
          DWR.


          The Water Security, Clean Drinking Water, Coastal and Beach  
          Protection Act of 2002 (PROPOSITION 50), passed by California  
          voters in November 2002. Implementation of Proposition 50  
          Chapter 8 included IRWMP funding, jointly administered by the  
          Department of Water Resources (DWR) and the State Water  
          Resources Control Board (State Water Board).  

           SOURCE:                    San Diego County Water Agency  

           SUPPORT:               
          Association of California Water Agencies
          California Association of Resource Conservation Districts
          California Municipal Utilities Association
          Clean Water Action
          Coachella Valley Regional Water Management Group
          Coachella Valley Water District
          Community Water Center
          Environmental Justice Coalition for Water
          Lakeside Water District
          Leadership Counsel for Justice and Accountability
          Pueblo Unido Community Development Corporation
          Rural County Representatives of California
          San Diego County Water Authority








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          San Jerado Cooperative, Inc.
          Sierra Club California
          The Nature Conservancy
          Valley Ag Water Coalition
           
           OPPOSITION:    None on file  

           ARGUMENTS IN SUPPORT:    
          According to the San Diego County Water Agency, "Administration  
          of the state's Integrated Regional Water Management program  
          (IRWMP), which is funded through state general obligation bond  
          proceeds, has created challenges for implementation at the  
          regional level that threaten the success of regional programs  
          and continued participation of all interested stakeholders,  
          including smaller nonprofit organizations, watershed groups, and  
          disadvantaged communities.  Specifically, issues and concerns  
          related to the IRWMP relate to delayed or untimely processing if  
          IRWMP project invoice reimbursements, resulting in significantly  
          delayed reimbursement payment to those smaller nonprofit  
          organizations and disadvantaged communities that can least  
          afford it.  On occasion, it has taken anywhere from 60 to 330  
          days to process regional invoices for payment.  This invoice  
          payment delay disenfranchises smaller nonprofit organizations  
          and disadvantaged communities, which could become less willing  
          to meaningfully participate in the IRWMP process due to  
          reimbursement delays."

          "SB 208 would focus on removing these administrative challenges  
          and allow for the continued meaningful participation of  all   
          regional interests in the IRWMP process. For these reasons, we  
          strongly support SB 208."
          
          ARGUMENTS IN OPPOSITION:    None received.
           
           
                                          
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