BILL ANALYSIS Ó SB 1456 Page 1 SENATE THIRD READING SB 1456 (Galgiani) As Amended April 27, 2016 Majority vote SENATE VOTE: 38-0 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Environmental |7-0 |Alejo, Dahle, | | |Safety | |Arambula, | | | | | | | | | | | | | | |Beth Gaines, Gray, | | | | |Lopez, McCarty | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |15-0 |Gonzalez, Bigelow, | | | | |Bloom, Bonilla, | | | | |Bonta, Chang, Eggman, | | | | |Eduardo Garcia, | | | | |Jones, Obernolte, | | | | |Quirk, Santiago, | | | | |Weber, Wood, McCarty | | | | | | | | | | | | SB 1456 Page 2 ------------------------------------------------------------------ SUMMARY: Expands the eligibility for grants and principal loan forgiveness under the Safe Drinking Water State Revolving Fund (SDWSRF) to water corporations regulated by the California Public Utilities Commission (CPUC). 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 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. SB 1456 Page 3 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 that are regulated by the CPUC to finance the project from other sources and to repay the financing. EXISTING LAW: 1)Establishes the SDWSRF to provide financial assistance for community water systems to achieve compliance with the Safe Drinking Water Act. (Health and Safety Code (HSC) Section 116760 et seq.) 2)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. 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 Section 116761.20 (a)) 3)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 SB 1456 Page 4 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 Section 116761.20 (b)(1)) FISCAL EFFECT: According to the Assembly Appropriations Committee, if this bill is enacted, there would be unknown, potentially significant, cost pressures on the SDWRF resulting from eligibility for grants and loan forgiveness for an increased number of water systems. 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. 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. SB 1456 expands the eligibility for loan forgiveness for capital improvements to all water systems serving severely disadvantaged communities with fewer than 200 service connections. Safe Drinking Water State Revolving Fund (SDWSRF): The SDWSRF provides low-interest loans, zero-interest loans, debt SB 1456 Page 5 refinancing, principal forgiveness, and grants to public water systems for infrastructure improvements to correct system deficiencies and improve drinking water quality. The SDWSRF is funded by annual grants from the United States Environmental Protection Agency and a federally required 20% 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 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% of California's residents. Approximately 95% 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 author argues that it makes sense to allow CPUC regulated water companies to be eligible for the grant and loan forgiveness element of the SDWSRF in light of the fact that the customers of these water corporations pay taxes, along with the customers of all other public water systems, which provide funding for these programs. SB 1456 Page 6 Analysis Prepared by: Josh Tooker / E.S. & T.M. / (916) 319-3965 FN: 0004017