BILL ANALYSIS Ó
SB 1456
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Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 1456
(Galgiani) - As Amended April 27, 2016
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill expands the eligibility for Safe Drinking Water State
Revolving Fund (SDWSRF) grants and principal loan forgiveness to
water corporations regulated by the California Public Utilities
Commission (PUC). Specifically, this bill:
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1)For PUC-regulated water corporations, limits principal loan
forgiveness to capital improvements serving severely
disadvantaged communities with fewer than 200 service
connections. Requires the State Water Resources Control Board
(SWRCB) to consider the water corporation's realized rate of
return as criteria for determining its ability to repay the
loan.
2)Deems all public water systems serving disadvantaged
communities with fewer than 200 service connections, other
than PUC-regulated water corporations, without the ability to
repay any financing for projects serving severely
disadvantaged communities.
FISCAL EFFECT:
1)Unknown, potentially significant, cost pressures on the SDWRF
resulting from eligibility for grants and loan forgiveness for
an increased number of water systems.
2)Minor, absorbable SWRCB.
COMMENTS:
1)Purpose. According to the author, SWRCB is allowed to
authorize a grant or principal forgiveness under the SDWSRF in
cases where the SWRCB finds a public agency or private
not-for-profit water company is unable to repay the full costs
of the financing.
This bill expands the eligibility for grants, or specified
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loan forgiveness for capital improvements, to all water
systems serving severely disadvantaged communities with fewer
than 200 service connections.
2)Background. The 1996 amendments to the Federal Safe Drinking
Water Act re-establish the SDWSRF to provide financial
assistance in the form of capitalization grants to states to
provide low-interest loans and other assistance to public
water systems.
In order to receive funds, states must provide a match equal
to 20% of the federal grants and must create a drinking water
state revolving fund program for public water system
infrastructure needs and other drinking water-related
activities. California established the SDWSRF through SB 1307
(Costa, Chapter 734, Statutes of 1997) to help fund the
state's drinking water needs.
SDWSRF provides low-interest preconstruction and construction
loans or grants to drinking water systems. These loans or
grants cover capital improvements that increase public health
and compliance with drinking water regulations. Financial
incentives including reduced interest rates, extended
financing terms, principal forgiveness and grants targeted
toward small disadvantaged communities with financial
hardship.
The SDWSRF uses the repayment of loans as a source of funding
for future projects, so anytime there is a grant or loan
forgiveness, it will reduce the amount of funds available in
the future.
3)PUC-Regulated Water Corporations. There are 108
investor-owned water utilities (water corporations) under the
PUC's jurisdiction providing water service to about 16% of
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California's residents. Approximately 95% of that total is
served by nine large water corporations, each serving more
than 10,000 connections. Annual water and wastewater revenues
under the PUC's regulation total $1.4 billion.
The PUC regulates 70 Class D water utilities that have less
than 500 connections. Of these, 55 have less than 200 service
connections. The after-tax authorized rate of return on a
utility's rate base is between 10.2% and 11.2% for Class D
water utilities.
There are also eight districts of Class A and B multi-district
utilities that have less than 200 connections. The PUC's
regulation of water utilities does not consider or maintain
information on whether or not the utility is serving severely
disadvantaged communities.
Analysis Prepared by:Jennifer Galehouse / APPR. / (916)
319-2081