BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: SB 760 ----------------------------------------------------------------- |Author: |Mendoza | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |4/6/2015 |Hearing | 4/29/2015 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Rebecca Newhouse | | | | ----------------------------------------------------------------- SUBJECT: Disadvantaged Community Enhancement Act of 2015 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 and requires the Department of Finance, in consultation with the state board and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (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 SB 760 (Mendoza) Page 2 of ? facilitate the achievement of reductions of GHG emissions in California. (HSC §39712) 4. 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. (HSC §39713 ) 5. Continuously appropriates 60% of GGRF moneys to transit, affordable housing and sustainable communities, including 20% continuously appropriated to the Strategic Growth Council (SGC) for the Affordable Housing and Sustainable Communities Program. (HSC §39719) 6. Requires 50% of AHSC Program expenditures be for projects benefitting disadvantaged communities. (Public Resources Code §75214) 7. Establishes the SGC, consisting of the Director of State Planning and Research, several agency secretaries, and one member of the public, and tasks the Council with managing and awarding grants and loans to support the planning and development of sustainable communities (PRC §75120). This bill: 1. Requires SGC to develop and implement a Disadvantaged Community Enhancement Program. 2. Provides that this program shall award grants to disadvantaged communities for "community enhancement improvement projects" to reduce GHG emissions in, and provide multiple environmental benefits to, disadvantaged communities. 3. Provides that eligible projects shall include, but are not limited to: A. Land acquisitions in urban settings of blighted or contaminated properties serving little sequestration benefit for greenspace conversion. B. Urban greening projects, including urban forestry and SB 760 (Mendoza) Page 3 of ? landscaping. C. Park development and land protection for passive or active recreation. D. Hardscape conversions and repurposing of lands to serve greenspace benefits. E. Non-motorized trail and other active transportation projects. F. Heat island mitigation. G. Planning of a sustainable community. 4. Requires SGC to award grants through a competitive process. 5. Requires SGC to consider all of the following factors in prioritizing awards: poverty rate, unemployment rate, childhood obesity rate and incidents of asthma, availability of greenspace and venues for physical activity, lack of non-motorized infrastructure supporting an active transportation program, levels of air pollution, drinking water quality, and groundwater quality (if applicable). 6. Requires SGC to also consider the environmental benefits resulting from the project, including, but not limited to, water quality improvement; groundwater storage, recharge, or remediation; and storm water capture. 7. Requires SGC to prioritize eligible applicants and projects located wholly within distressed watershed areas with significant populations and heavy concentrations of industrial facilities and trade corridor activity. 8. Requires an applicant to articulate how the grant would be used to address the factors described above; explain what other funding sources the applicant will leverage for the project; and demonstrate how the project would help the state meet its AB 32 goals. 9. Provides that funds awarded under this program shall not supplant other sources of funding designed to benefit disadvantaged communities. SB 760 (Mendoza) Page 4 of ? 10.Requires ARB to determine a methodology to quantify the carbon reduction benefits of applicant projects. Background 1. The Strategic Growth Council. The SGC was established in 2008 by SB 732 (Steinberg), Chapter 729, Statutes of 2008. The Council is comprised of eight members representing six state agencies, the Office of Planning and Research and a public member appointed by the Governor. The Council is responsible for coordinating a variety of state programs and activities related to sustainable communities and the environment, such as the implementation of SB 375 (Steinberg), Chapter 728, Statutes of 2008, which incorporates sustainable community development into transportation planning. SB 375 requires each of the state's 17 metropolitan planning organizations to prepare a sustainable communities strategy as part of its regional transportation plan, to help the region meet its GHG emissions reduction target. The Sustainable Communities Planning Grants and Incentives Program, authorized under Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006 (Proposition 84) and administered by the SGC, assists local governments in developing sustainable communities strategies in order to meet the requirements of SB 375. At its June 3, 2014 meeting, SGC approved the final $16 million in Round 3 Proposition 84 Sustainable Communities Planning Grants. In addition, Proposition 84 also authorized the Legislature to appropriate $70 million for urban greening projects and plans that reduce energy consumption, conserve water, improve air and water quality, and provide other community benefits. SGC administers these funds for the Urban Greening Program. In the last round of funding for the program approved by SGC in June of last year, 40 urban greening grants were awarded, totaling almost $24 million. Of those projects, all but five were for disadvantaged communities. 2. Affordable Housing and Sustainable Communities Program. SB 760 (Mendoza) Page 5 of ? The Budget Act of 2014 appropriates $130 million from the GGRF to develop and implement the Affordable Housing and Sustainable Communities Program (AHSC). SB 862 (Committee on Budget and Fiscal Review), Chapter 36, Statutes of 2014, continuously appropriates 20% of GGRF annual proceeds to the AHSC beginning in FY 2015-16. The Governor's proposed 2015-16 Budget appropriates $200 million for the AHSC. The AHSC, administered by the Strategic Growth Council, is tasked with reducing GHG emissions through projects that implement land use, housing, transportation, and agricultural land preservation practices to support infill and compact development. Additionally, the statute specifies that project objectives include reducing air pollution, improving connectivity and accessibility to jobs, housing and services, and increasing options for mobility, including implementation of the Active Transportation Program. Statute establishing the AHSC program establishes the goal of 50% of AHSC Program expenditures be directed to projects benefitting disadvantaged communities. Full applications are due in late April for the first round of funding, with the SGC considering and approving awards for selected applications in late June. 3. Use of Cap and Trade Auction Revenue. ARB has conducted ten cap-and-trade auctions, generating almost $1.6 billion in proceeds to the state. Several bills in 2012, and one in 2014, provide legislative direction for the expenditure of auction proceeds including SB 535 (de León) Chapter 830, Statutes of 2012, AB 1532 (J. Pérez) Chapter 807, Statutes of 2012, SB 1018 (Budget Committee) Chapter 39, Statutes 2012, and SB 862 (Budget Committee) Chapter 36, Statutes of 2014. SB 535 (De León), Chapter 830, Statutes of 2012, requires that 25% of auction revenue be used to benefit disadvantaged communities and requires that 10% of auction revenue be invested in disadvantaged communities. SB 760 (Mendoza) Page 6 of ? AB 1532 (J. Pérez), Chapter 807, Statutes of 2012, directs the Department of Finance to develop and periodically update a three-year investment plan that identifies feasible and cost-effective GHG emission reduction investments to be funded with cap-and-trade auction revenues. AB 1532 requires that SB 1018 (Budget Committee), Chapter 39, Statutes of 2012, created the GGRF, into which all auction revenue is to be deposited. The legislation requires that before departments can spend moneys from the GGRF, they must prepare a record specifying: (1) how the expenditures will be used, (2) how the expenditures will further the purposes of AB 32 (Nuñez, Pavley), Chapter 488, Statutes of 2006, (3) how the expenditures will achieve GHG emission reductions, (4) how the department considered other non-GHG-related objectives, and (5) how the department will document the results of the expenditures. SB 862 (Budget Committee) Chapter 36, Statutes of 2014, requires the ARB to develop guidelines on maximizing benefits for disadvantaged communities by agencies administering GGRF funds, and guidance for administering agencies on GHG emission reduction reporting and quantification methods. 4. 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 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. 5. GGRF moneys for Urban Forestry. SB 760 (Mendoza) Page 7 of ? The Department of Forestry and Fire Protection implements the Urban & Community Forestry Program pursuant to the Urban Forestry Act, and works to expand and improve the management of trees and related vegetation in communities throughout California. According to the Department's website, "The mission of the Urban Forestry Program is to lead the effort to advance the development of sustainable urban and community forests in California." The 2014-15 budget appropriated $17 million for Sustainable Forests and Urban forestry to the Department of Forestry and Fire Protection from the GGRF. The 2015-16 budget proposal appropriates $18 million for urban forestry, and the Department of Finance is requiring all of these moneys go toward disadvantaged communities. The Department has established several urban forestry project types, all of which require applicants to demonstrate GHG emissions reductions. Some of these eligible projects include planting of trees to optimize the multiple benefits of urban forests in environmental justice communities; establishing a new tree inventory, and urban forest mapping, and long-term management plan; and projects to assist local entities to purchase and improve unused, vacant urban neighborhood properties in environmental justice communities to repurpose it for a use consistent with the CA Urban Forestry Act and with a positive GHG benefit. The Program's Request for Proposal states that all grant projects must track their GHG reductions and emissions. The Department notes that they have worked with ARB, USDA Forest Service, and other partners to develop a methodology and tools to assist grantees with the GHG emission reporting requirements. 6. Disadvantaged Communities. State law 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. This requirement is SB 760 (Mendoza) Page 8 of ? commonly referred to as the SB 535 requirement (SB 535, De León, Chapter 830, Statutes of 2012). To meet the SB 535 mandate, the California Environmental Protection Agency (CalEPA) is developing options to identify disadvantaged communities for investment based on a tool called CalEnviroScreen. The Office of Environmental Health Hazard Assessment (OEHHA) developed this tool under CalEPA's guidance to assess census tracts across the state that are disproportionately affected by multiple types of pollution and areas with vulnerable populations. The latest version of the tool, CalEnviroScreen version 2.0, is based on19 indicators for pollution burden and population characteristic. The indicator scores were combined to determine an overall CalEnviroScreen score. The higher the score, the greater the impact. For the first round of GGRF allocations, CalEPA has designated the top 25% of census tracts in California as disadvantaged communities for the purpose of investing cap-and-trade proceeds. 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. ARB staff released preliminary guidance in the fall of last year on approaches that agencies can use to maximize the benefits of investments to disadvantaged communities and how agencies can determine whether their GGRF investments are located within, or provide benefits to, disadvantaged communities. The guidance establishes screening criteria to determine whether a specific project qualifies toward the 25% target of funds providing benefits to a disadvantaged community, or the 10% target of investments spent within a disadvantaged community. The guidelines specify that benefits must be "direct, meaningful, and assured." The interim guidance also recommends that agencies expending GGRF moneys maximize the percentage of those funds that are allocated for projects that benefit disadvantaged SB 760 (Mendoza) Page 9 of ? communities, preferably in a way that exceeds the minimum 10% and 25% investment targets. The guidelines also suggest that agencies give priority to those projects that maximize benefits to disadvantaged communities when selecting projects for a given investment by scoring criteria that favors projects which provide multiple benefits or the most significant benefits. Comments 1. Purpose of Bill. According to the author, "California's most distressed communities face unique challenges in their efforts to improve infrastructure and environmental sustainability. A recent UCLA Luskin study, Envisioning a Greener LA 2014, found that certain areas in close proximity to freeways, goods movement corridors and industrial facilities suffer from higher rates of asthma, heart disease and other harmful health impacts, especially for children and the elderly. This bill seeks to establish and implement a more targeted method to the allocation of Greenhouse Gas Reduction Fund revenues to California's most challenged communities and amplifies previous expenditure plans in the area of 'natural resources related' investment by providing funding for specified park improvements and other transformative co-benefit type projects that demonstrate GHG benefits." 2. Why is a New Program Needed? SB 760 specifies a number of project categories that would be eligible under the new program. It appears that most of these project categories are already included in other programs. For example: This bill would fund "planning of a sustainable community," but SGC already administers sustainable communities programs. This bill would also provide funds to non-motorized trail and other active transportation SB 760 (Mendoza) Page 10 of ? projects, but the state Department of Transportation already administers an Active Transportation Program. This bill specifies urban greening projects including urban forestry and landscaping and park development and land protection, but the SGC already implements an urban greening program that administered $23 million of Proposition 84 funds in June 2014, primarily to disadvantaged communities. Additionally CALFIRE was just awarded $17 million from the GGRF in 2014-15 and may receive $18 million in 2015-16, for urban forestry projects in disadvantaged communities. Why is another new program needed when many of the eligible projects specified by this bill are already being funded through existing programs and targeting disadvantaged communities? 1. Disadvantaged Communities. This bill aims to target funds to disadvantaged communities. As noted above, SB 535 (De León) established the requirement in 2012 that 25% of GGRF moneys go toward projects that provide benefits to disadvantaged communities, and allocates a minimum of 10% of GGRF moneys to projects located within disadvantaged communities. Existing law has also established a process for identifying these communities through a comprehensive screening tool designed by OEHHA based on 19 indicators for pollution burden and population characteristics. The program proposed by this bill specifies grants be awarded to disadvantaged communities, as defined through the SB 535 process, but then requires that SGC prioritize awards to those disadvantaged communities based on poverty rate, unemployment rate, childhood obesity rate and incidents of asthma, availability of greenspace and venues for physical activity, lack of nonmotorized infrastructure supporting active transportation, levels of air pollution, drinking water quality and other factors. Additionally, the bill requires priority for funding be given to projects located wholly within distressed watershed areas with significant SB 760 (Mendoza) Page 11 of ? populations and heavy concentration of industrial facilities and trade corridor activity. The SB 535 process of identifying these communities has gone through a comprehensive, scientific and public process. SB 760 layers a subjective determination of which communities are the most disadvantaged on the SB 535 process and adds criteria for GGRF moneys that do not have a direct nexus with GHG emission reductions. How will SGC prioritize one disadvantaged community over another where one has a higher incidence of asthma, and the other a higher poverty rate, or where one has higher levels of air pollution and another one has worse drinking water quality? How are "distressed watershed areas with significant populations and heavy concentration of industrial facilities and trade corridor activity" defined? This bill sets up a confusing, and potentially conflicting process with SB 535 for determining which communities are considered disadvantaged in order to be eligible for funding from the GGRF. Additionally, some of these criteria do not have a clear nexus to GHG emission reductions. 2. Contaminated Property. SB 760 specifies that land acquisitions in urban settings of blighted or contaminated properties serving little sequestration benefit for greenspace conversion are eligible community enhancement improvements. Does the bill intend, and would the program use, GGRF moneys for the remediation of contamination after the purchase of the contaminated property in order to be able to utilize the property for greenspace conversion? Any remediation to clean up contaminated properties would undoubtedly increase GHG emissions, due to the energy intensive nature of certain technologies used for remediation. Are GGRF moneys an appropriate source of revenue for purchasing contaminated properties? Related/Prior Legislation SB 760 (Mendoza) Page 12 of ? AB 156 (Perea), pending hearing in the Assembly Natural Resources Committee, requires ARB to establish a comprehensive technical assistance program, and a three-year investment plan, to assist disadvantaged community applicants. AB 1336 (Salas), currently on the Assembly floor, requires a minimum of 40% of cap-and-trade funds to be allocated to projects that provide benefits to disadvantaged communities. SOURCE: Watershed Conservation Authority SUPPORT: Safe Routes to School National Partnership Sierra Club California OPPOSITION: None on file DOUBLE REFERRAL: This measure was heard in the Senate Transportation and Housing Committee on April 14, 2015, and passed out of committee with a vote of 10-1. -- END --