BILL ANALYSIS Ó
SB 1456
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Date of Hearing: June 28, 2016
ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS
Luis Alejo, Chair
SB
1456 (Galgiani) - As Amended April 27, 2016
SENATE VOTE: 38-0
SUBJECT: Safe Drinking Water State Revolving Fund Law of 1997:
public water systems: financing
SUMMARY: Expands the eligibility for grants and principal loan
forgiveness to water corporations regulated by the California
Public Utilities Commission (CPUC) for projects funded under the
Safe Drinking Water State Revolving Fund (SDWSRF).
Specifically, this bill:
1)Expands the eligibility for projects under the SDWSRF by
allowing water corporations regulated by the CPUC to be
eligible for grants and principal loan forgiveness.
2)Requires the State Water Resources Control Board (State Water
Board) to determine what portion of the full costs the public
water system is capable of repaying and authorizes funding in
the form of a loan or other repayable financing. Requires the
State Water Board to authorize a grant or principal
forgiveness only to the extent the State Water Board finds the
public water system is unable to repay the full costs of the
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financing.
3)Limits principal forgiveness to capital improvements serving
severely disadvantaged communities with fewer than 200 service
connections, where the public water system is a water
corporation regulated by the CPUC. Requires the State Water
Board to consider the realized rate of return for the public
water system as criteria for determining the public water
system's ability to repay the costs of the financing.
4)Provides that a public water system, other than those
regulated by the CPUC, serving a severely disadvantaged
community with fewer than 200 service connections is deemed to
have no ability to repay any financing for a project serving a
severely disadvantaged community.
5)Requires the CPUC, at the request of the State Water Board, to
submit comments, to the State Water Board, concerning the
ability of public water systems, regulated by the CPUC, to
finance the project from other sources and to repay the
financing.
EXISTING LAW:
1)Establishes the California Safe Drinking Water Act (SDWA) and
requires the State Water Board to maintain a drinking water
program. (Health & Safety Code (HSC) § 116270, et seq.)
2)Defines a "public water system" as a system for the provision
of water for human consumption through pipes or other
constructed conveyances that has 15 or more service
connections or regularly serves at least 25 individuals daily
at least 60 days out of the year. (HSC § 116275)
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3)Establishes the SDWSRF to provide financial assistance for
community water systems to achieve compliance with the SWDA.
(HSC §116760 et seq.)
4)Defines a "severely disadvantaged community" as a community
with a median household income of less than 60 percent of the
statewide average. (HSC § 116760.20)
5)Allows costs incurred by a community and not-for-profit
noncommunity public water system for planning and preliminary
engineering studies, project design, and construction to be
funded from the SDWSRF by loans or other repayable financing.
Further allows public water systems that are owned by public
agencies or private not-for-profit water companies to be
eligible for grants, principal forgiveness, or a combination
of grants and loans or other financial assistance under the
SDWSRF. (HSC § 116761.20 (a))
6)Requires the State Water Board to determine what portion of
the full costs the public agency or private not-for-profit
water company is capable of repaying and authorizes funding in
the form of a loan or other repayable financing. Requires the
State Water Board to authorize a grant or principal
forgiveness only to the extent the State Water Board finds the
public agency or not-for-profit water company is unable to
repay the full costs of the financing. (HSC § 116761.20
(b)(1))
7)Provides that where a public agency or private not-for-profit
water company serving a severely disadvantaged community with
fewer than 200 service connections owns a small community
water system or nontransient noncommunity water system, the
public agency or private not-for-profit serving the severely
disadvantaged community is deemed to have no ability to repay
any financing for a project serving the severely disadvantaged
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community. (HSC § 116761.20 (b)(2))
8)Defines a "water corporation" to include every corporation or
person owning, controlling, operating, or managing any water
system for compensation within this State. (Public Utilities
Code (PUC) § 241)
9)Defines a "public utility" to include every common carrier,
toll bridge corporation, pipeline corporation, gas
corporation, electrical corporation, telephone corporation,
telegraph corporation, water corporation, sewer system
corporation, and heat corporation, where the service is
performed for, or the commodity is delivered to, the public.
(PUC § 216 (a))
10)Provides that when any public utility performs a service for,
or delivers a commodity to, the public for which any
compensation or payment is received, it is subject to the
jurisdiction, control, and regulation of the CPUC. (PUC §
216(b))
FISCAL EFFECT: According to the Senate Appropriations
Committee, if this bill is enacted, there could be cost
pressures on the SDWSRF resulting from eligibility for loan
forgiveness for an increased number of water systems.
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COMMENTS:
Need for the bill: According to the author,
"Water utilities regulated by the CPUC are eligible for
water-related state and federal funding programs, like the
Prop.1 Water Bond, as long as the funding is used for projects
to benefit their customers. This is due to the fact that
customers of regulated utilities pay for the funding of
programs through taxes just like every other taxpayer in the
state. The CPUC has rules governing the water utilities'
receipt and use of state and federal funds, which, among other
things, ensure the customers directly benefit from the receipt
and use of these funds.
CPUC-regulated water utilities are eligible for loans from the
SDWSRF. This program, under the State Water Board, assists
water systems in financing the cost of drinking water
infrastructure projects needed to achieve or maintain
compliance with SDWA requirements. CPUC-regulated water
utilities are not eligible for loan forgiveness under this
statute. There are water service territories of
CPUC-regulated water utilities in distressed communities where
their customers would benefit from loan forgiveness by the
State Water Board.
The State Water Board is allowed to authorize a grant or
principal forgiveness under the SDWSRF in cases where the
State Water Board finds a public agency or private
not-for-profit water company is unable to repay the full costs
of the financing. Again, CPUC-regulated water utilities are
not eligible for loan forgiveness under state law.
SB 1456 expands the eligibility for loan forgiveness for
capital improvements to all water systems serving severely
disadvantaged communities with fewer than 200 service
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connections."
Safe Drinking Water Act: The federal Safe Drinking Water Act
(SDWA) was enacted in 1974 to protect public health by
regulating drinking water. California has enacted its own safe
drinking water act to implement the federal law and establish
state standards. The United States Environmental Protection
Agency (US EPA) enforces the federal SDWA at the national level.
Most states, including California, have been granted "primacy"
by the US EPA, giving them the authority to implement and
enforce the federal SDWA at the state level. In accordance with
the federal SDWA, the US EPA provides funds to states for their
drinking water loan programs, conducts an annual oversight
review of each state's SDWSRF program, and issues an annual
program evaluation report.
Safe Drinking Water State Revolving Fund (SDWSRF): The SDWSRF
provides low-interest loans, zero-interest loans, debt
refinancing, principal forgiveness, and grants to public water
systems for infrastructure improvements to correct system
deficiencies and improve drinking water quality. Eligible
projects include the planning, design, and construction of
drinking water projects such as water treatment systems,
distribution systems, and consolidations of two or more water
systems. Eligible applicants for SDWSRF monies include publicly
owned community water systems (counties, cities, and districts),
privately owned community water systems (for-profit water
utilities, nonprofit mutual water companies), and nonprofit or
publicly owned noncommunity water systems (public school
districts).
The State Water Board maintains a list, posted on its website,
to identify potentially eligible future projects. A project
must be on this list to be considered for financing. However,
placement on the list does not guarantee a project will be
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funded. Priority is given to projects that address the most
serious risk to human health; are necessary to ensure compliance
with the requirements of the federal SDWA; and, assist systems
most financially in need on a per household basis.
The SDWSRF is funded by annual grants from the US EPA and a
federally required 20 percent match from the state. The federal
and state funds are used to provide financial assistance for
eligible projects. The proceeds from these loans are then paid
back, with interest, into the SDWSRF in later years, providing
funding for new loans in the future.
Water companies regulated by the CPUC: The California Public
Utilities Commission (CPUC) is responsible for ensuring that
California's investor-owned water utilities deliver clean, safe,
and reliable water to their customers at reasonable rates. There
are 108 investor-owned water utilities under the CPUC's
jurisdiction providing water service to about 16 percent of
California's residents. Approximately 95 percent of that total
is served by 9 large water utilities each serving more than
10,000 connections.
Under current law, only public agencies or not-for-profit water
companies are eligible for grants or principal loan forgiveness
through the SDWSRF. This bill would expand that eligibility by
allowing water companies that are regulated by the CPUC to be
eligible for loan forgiveness and grants for capital
improvements. The customers of these water companies pay taxes,
along with the customers of all other public water systems,
which provide funding for these loan programs. Given that, the
author argues that it does make sense to allow these CPUC
regulated water companies to be eligible for the grant and loan
forgiveness element of the SDWSRF. It is important to note
however, that the SDWSRF uses the repayment of loans as source
of funding for future projects, so anytime there is a grant or
loan forgiveness it could reduce the amount of funds available
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to the SDWSRF in the future.
REGISTERED SUPPORT / OPPOSITION:
Support
California Water Association
Opposition
None on file.
Analysis Prepared by:Josh Tooker / E.S. & T.M. / (916)
319-3965