BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Bob Wieckowski, Chair 2015 - 2016 Regular Bill No: SB 208 Hearing Date: 4/15/2015 ----------------------------------------------------------------- |Author: |Lara | |----------+------------------------------------------------------| |Version: |2/11/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Rachel Machi Wagoner | |: | | ----------------------------------------------------------------- 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. SB 208 (Lara) Page 2 of ? 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 SB 208 (Lara) Page 3 of ? 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. SB 208 (Lara) Page 4 of ? 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 SB 208 (Lara) Page 5 of ? 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 SB 208 (Lara) Page 6 of ? 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 SB 208 (Lara) Page 7 of ? 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. -- END --