BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    SB 1456


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          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


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          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.









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          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  








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            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  








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          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.  












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          Analysis Prepared by:                                             
                          Josh Tooker / E.S. & T.M. / (916) 319-3965  FN:  
          0004017