BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                              Senator Wieckowski, Chair
                                2015 - 2016  Regular 
           
          Bill No:            SB 760
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          |Author:    |Mendoza                                              |
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          |-----------+-----------------------+-------------+----------------|
          |Version:   |4/6/2015               |Hearing      | 4/29/2015      |
          |           |                       |Date:        |                |
          |-----------+-----------------------+-------------+----------------|
          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Rebecca Newhouse                                     |
          |           |                                                     |
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          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  







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             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  








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                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.








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          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. 








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             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. 









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             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.









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             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  








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             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  








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             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  








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                  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  








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             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









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          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 --