BILL ANALYSIS Ó SB 208 Page 1 Date of Hearing: June 30, 2015 ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE Marc Levine, Chair SB 208 (Lara) - As Amended June 1, 2015 SENATE VOTE: 30-5 SUBJECT: Integrated regional water management plans: grants: advanced payment. SUMMARY: Allows the Department of Water Resources (DWR), under specified conditions, to provide advance funding of Integrated Regional Water Management Plan (IRWMP) grants where the project proponent is a nonprofit organization or a disadvantaged community, or the project benefits a disadvantaged community. Specifically, this bill: 1)Requires a regional water management group (RWMG), within 90 days of receiving notice that it is awarded an IRWMP grant, to provide DWR 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. Requires the list to provide specific information for each project, including how the project is consistent with the adopted IRWMP. SB 208 Page 2 2)Requires DWR, within 60 days of receiving the project information from the RWMG, to provide advanced payment of 50 percent of the grant award for those projects that satisfy both of the following criteria: a) The project proponent is a nonprofit organization or a disadvantaged community, or the project benefits a disadvantaged community. b) The grant award for the project is less than $1 million. 3)Requires that the recipient of the advanced payment place the funds in a noninterest-bearing account until expended. 4)Mandates that the funds be expended within six months of the date of receipt, unless DWR waives this requirement. 5)Requires the advanced funding recipient to provide, on a quarterly basis, an accountability report to DWR regarding the expenditure and use of any advanced grant funds that provides, at a minimum, the following: a) An itemization of how the advanced payment funds were expended. b) A project itemization as to how any remaining advanced payment funds will be expended over time. SB 208 Page 3 c) Whether the funds are placed in a noninterest-bearing account, and if so, the date that occurred and the dates of withdrawals of funds from that account. 6)Specifies that if funds are not expended, the unused portion of the grant shall be returned to DWR within 60 days after project completion or the end of the grant performance period, whichever is earlier. 7)Allows DWR to adopt additional requirements for the recipient regarding the use of advanced payment to ensure that the funds are used properly. 8)Sunsets on January 1, 2025. EXISTING LAW: 1)Provides $810 million in Chapter 7 of Proposition 1, the Water Quality, Supply, and Infrastructure Improvement Act of 2014 (Prop. 1), for projects that are included in and implemented in an adopted IRWM plan. 2)Requires that not less than 10% of Proposition 1 IRWM funds are allocated to projects that directly benefit disadvantaged communities. 3)Allocates $510 million of Prop. 1 IRWM funds by hydrologic region. FISCAL EFFECT: According to the Senate Appropriations Committee: SB 208 Page 4 1)Unknown potential losses, potentially in the hundreds of thousands of dollars, of bond/General Fund (GF) monies for advanced funds that are spent on ineligible uses and are unrecoverable. 2)Unknown costs, but potentially in the tens of thousands of dollars, from the GF for increased administrative costs to DWR for the administration and oversight of advanced funds. COMMENTS: This bill would establish a process whereby DWR 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, under specified circumstances. 1)Author's statement: The author states that this bill is needed as, currently, IRWM funding represents a pay-as-you-go system where groups with approved plans provide funding for water projects up front and are reimbursed later. The author adds that while this mechanism is intended to save state general funds it instead threatens the success of regional programs and the continued participation of stakeholders because smaller communities and nonprofit organizations are disproportionately impacted when pre-financing a water project requires a lager budget than these stakeholders are often able to fund. The author concludes that this bill will improve equity by advancing grant funds to nonprofit organizations and disadvantaged communities under limited circumstances. 2)Background: Numerous water bonds, including most recently Proposition 1, provide funding for projects and programs through IRWMP grants. Typically, the Legislature appropriates bond funds to DWR for a competitive grant solicitation. DWR SB 208 Page 5 then issues guidelines for a round of IRWMP funding, and RWMGs submit their list of local projects. DWR ranks the projects and makes the awards within each IRWMP funding region. In many cases, RWMGs contract with local entities to carry out projects. The typical reimbursement process is that the local entity submits invoices to its RWMG, who then submits the invoices to DWR. Upon review of the invoices, DWR then reimburses the RWMG who then reimburses the local entity. Depending on the specific details of the funding agreement and the administrative processes of the RWMG, 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. It can be a hardship for some nonprofit organizations or disadvantaged communities to bear the up-front cost of the project until reimbursed. 3)Prior and related legislation: AB 1874 (Gonzalez) of 2014 would have required DWR to pass IRWMP funding appropriated by the Legislature directly through to a regional group if that group was eligible for, and had completed, a streamlined application process and requested the funding. Like this bill, AB 1874 was introduced in order to address IRWMP project reimbursement delays, particularly for nonprofit organizations and disadvantaged communities. AB 1874 was held in the Assembly Appropriations Committee. 4)Supporting arguments: Supporters state that "Administration of the state's [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. Supporters add that IRWMP issues and concerns relate to delayed or untimely processing of IRWM project SB 208 Page 6 invoice reimbursements, resulting in significantly delayed reimbursement payment to those smaller nonprofit organizations and disadvantaged communities that can least afford it. Supporters advise that, on occasion, it has taken anywhere from 60 to 330 days to process regional invoices for payment and that such delays disenfranchise "smaller nonprofit organizations and disadvantaged communities, which could become less willing to meaningfully participate in the IRWM process." Supporters maintain that they strongly support this bill because it "would focus on removing these administrative challenges and allow for the continued meaningful participation of all regional interests in the IRWM process." 5)Opposing arguments: None on file. REGISTERED SUPPORT / OPPOSITION: Support San Diego Water Authority (sponsor) California Municipal Utilities Association Central Basin Municipal Water District City of Pasadena City of San Diego SB 208 Page 7 Support - continued City of Signal Hill Clean Water Action Coachella Valley Regional Water Management Group Coachella Valley Water District Community Water Center Council for Watershed Health County Sanitation District of Los Angeles Desert Water Agency East Bay Municipal Utility District Environmental Justice Coalition for Water Lakeside Water District SB 208 Page 8 Leadership Counsel for Justice and Accountability Los Angeles County Board of Supervisors Pueblo Unido Community Development Corporation Roots of Change Rural Community Assistance Corporation Rural County Representatives of California San Jerardo Cooperative Sierra Club California The Nature Conservancy Valley Ag Water Coalition Valley Center Municipal Water District of San Diego County Opposition SB 208 Page 9 None on file Analysis Prepared by:Tina Leahy / W., P., & W. / (916) 319-2096