BILL NUMBER: SB 1119 CHAPTERED 10/10/99 CHAPTER 756 FILED WITH SECRETARY OF STATE OCTOBER 10, 1999 APPROVED BY GOVERNOR OCTOBER 7, 1999 PASSED THE SENATE SEPTEMBER 7, 1999 PASSED THE ASSEMBLY SEPTEMBER 1, 1999 AMENDED IN ASSEMBLY AUGUST 31, 1999 AMENDED IN ASSEMBLY AUGUST 18, 1999 AMENDED IN ASSEMBLY AUGUST 16, 1999 AMENDED IN SENATE APRIL 14, 1999 INTRODUCED BY Senator Alarcon (Coauthor: Assembly Member Romero) FEBRUARY 26, 1999 An act to amend Sections 44508, 44535, and 44559.1 of, and to add Section 44559.8 to, the Health and Safety Code, relating to pollution control financing, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 1119, Alarcon. Pollution control: financing: capital access. (1) The existing California Pollution Control Financing Authority Act establishes the California Pollution Control Financing Authority, with specified powers and duties, and authorizes the authority to approve financing for projects, as defined, to prevent or reduce environmental pollution, including projects to remediate environmental pollution, and projects for soil excavation and removal, and construction, operation, and maintenance of systems that extract, contain, or treat groundwater, soil vapor, gas, or leachate. This bill would expressly include, as an eligible project, payment of the cost to remediate environmental pollution by a de minimis or de micromis responsible party, in accordance with the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). The bill would revise the definition of "project" for purposes of the act to conform with these provisions. (2) The existing act establishes the California Pollution Control Financing Authority to provide financial assistance for pollution control facilities. Existing law establishes the Capital Access Loan Program, which is administered by the authority, and defines the term "financial institution," for purposes of that program, as a federal or state-chartered bank, savings association, credit union, or a consortium of these entities. Existing law provides, for the purpose of the definition of the term "qualified loan," that the loan may be made in the form of a line of credit, in which case the amount of the loan is required to be considered as the maximum amount that can be drawn against the line of credit. This bill would revise the definition of the term financial institution to include not-for-profit community development financial institutions and would specify that a consortium of financial institutions may include a nonfinancial corporation, if the percentage of capitalization by all nonfinancial corporations in the consortium does not exceed 49%. The bill would instead require a participating financial institution to specify the amount of the line of credit to be covered under the program, which may be equal to the maximum commitment under the line of credit or be an amount less than that maximum commitment. This bill would additionally authorize the authority to take specified actions to facilitate the development of a secondary market for a loan enrolled in the program by providing security for that loan. (3) The bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 44508 of the Health and Safety Code is amended to read: 44508. (a) "Project" and "pollution control facility," respectively, mean any land, building, improvement thereto, work, property or structure, real or personal, providing or designed to provide for the control, reduction, abatement, elimination, remediation, or prevention of pollution, including, but not limited to, hydrostatic control facilities, dust collectors, smoke bags, settling ponds, filtration plants, sewage disposal facilities, garbage disposal facilities, recycling facilities, dumps, filling grounds, chlorination ponds, treatment works, water utility property, soil excavation and removal, construction, operation, and maintenance of systems that extract, contain, or treat groundwater, soil vapor, gas, or leachate, and all other structures, systems, or facilities now or hereafter developed or useful in the control of pollution of any type or character, including any structure, equipment, or other facilities for the purpose of the purchase, production, distribution, or sale of water, or of reducing, treating, neutralizing, or cooling the temperature of any liquid, gaseous, or solid or hazardous waste substance or discharge resulting from the process of manufacture, industry, or commerce, or from the development, processing, or recovery of any natural resource or the generation of electricity, steam heat, or manufactured gas, together with the recovery, treatment, neutralizing, stabilizing, or cooling equipment, facilities, plants, or structures necessary to reduce, control, remediate, or eliminate pollution, and any and all facilities which may hereafter be developed through science, study, and investigation to aid and assist in the control of pollution or the removal or treatment of any substance that might otherwise cause or contribute to pollution, and including the use of renewable energy resource devices or the development of an energy conservation program where that action is designed to reduce onsite emissions or pollutants. (b) "Project" also means payment by a party for the party's share of the cost of remediation of pollution at a contaminated site for which the party is a de minimis or de micromis responsible party, and the party has been accorded that status in an expedited final settlement or other settlement with the United States Environmental Protection Agency, reached in accordance with subsection (g) of Section 122 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Sec. 9601 et seq.) and the regulations and guidance issued by the United States Environmental Protection Agency pursuant to that act. SEC. 2. Section 44535 of the Health and Safety Code is amended to read: 44535. (a) The authority may separately approve financing for projects, the purpose of which is to prevent, remediate, or reduce environmental pollution resulting from the disposal of solid, hazardous, or liquid waste. (b) The following projects shall be considered for financing: (1) Projects utilizing recognized resource recovery or energy conversion processes. (2) Projects utilizing new technologies or processes for resource recovery or energy conversion. (3) Projects utilizing technologies designed to reduce the level of pollutants found in water. (4) Recycled water facilities. (5) Water main replacements. (6) Water filtration facilities. (7) Projects for the disposal of agricultural wastes. (8) Soil excavation and removal, and construction, operation, and maintenance of systems that extract, contain, or treat groundwater, soil vapor, gas, or leachate. (9) Other projects for the reduction or remediation of environmental pollution resulting from the disposal of solid, hazardous, or liquid waste, including, but not limited to, payment of the cost to remediate environmental pollution by a party that is a de minimis responsible party, in accordance with the standards for an expedited final settlement specified in subdivision (g) of Section 9622 of Title 42 of the United States Code, or a de micromis responsible party, under the regulations adopted by the Environmental Protection Agency pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Sec. 9601 et seq.). (c) The projects specified in subdivision (b) may include elements that provide for new refuse removal vehicles, transfer stations, resource recovery or energy conversion plants, source separation, or any solid or liquid waste disposal facilities involved in resource recovery systems. "Solid, hazardous, or liquid waste disposal facilities" means any property, or portion thereof, used for the collection, storage, treatment, utilization, processing, or final disposal of solid, hazardous, or liquid waste in resource recovery systems. SEC. 3. Section 44559.1 of the Health and Safety Code is amended to read: 44559.1. As used in this article, unless the context requires otherwise: (a) "Authority" means the California Pollution Control Financing Authority. (b) "California Capital Access Fund" means a fund created within the authority to be used for purposes of the program. (c) "Executive director" means the Executive Director of the California Pollution Control Financing Authority. (d) "Financial institution" means a federal or state-chartered bank, savings association, credit union, not-for-profit community development financial institution certified under Part 1805 (commencing with Section 1805.100) of Chapter XVIII of Title 12 of the Code of Federal Regulations, or a consortium of these entities. A consortium of those entities may include a nonfinancial corporation, if the percentage of capitalization by all nonfinancial corporations in the consortium does not exceed 49 percent. (e) "Loss reserve account" means an account in the State Treasury or any financial institution that is established and maintained by the authority for the benefit of a financial institution participating in the Capital Access Loan Program established pursuant to this article for the purpose of the following: (1) Depositing all required fees paid by the participating financial institution and the qualified business. (2) Depositing contributions made by the state and, if applicable, the federal government or other sources. (3) Covering losses on enrolled qualified loans sustained by the participating financial institution by disbursing funds accumulated in the loss reserve account. (f) "Participating financial institution" means a financial institution that has been approved by the authority to enroll qualified loans in the program and has agreed to all terms and conditions set forth in this article and as may be required by any applicable federal law providing matching funding. (g) "Passive real estate ownership" means ownership of real estate for the purpose of deriving income from speculation, trade, or rental, but does not include any of the following: (1) The ownership of that portion of real estate being used or intended to be used for the operation of the business of the owner of the real estate. (2) The ownership of real estate for the purpose of construction or renovation, until the completion of the construction or renovation phase. (h) "Program" means the Capital Access Loan Program created pursuant to this article. (i) "Qualified business" means a small business concern that meets both of the following criteria: (1) It is a corporation, partnership, cooperative, or other entity, whether that entity is a nonprofit entity or an entity established for profit, that is authorized to conduct business in the state. (2) It has its primary business location within the boundaries of the state. (j) (1) "Qualified loan" means a loan or a portion of a loan made by a participating financial institution to a qualified business for any business activity that has its primary economic effect in California. A qualified loan may be made in the form of a line of credit, in which case the participating financial institution shall specify the amount of the line of credit to be covered under the program, which may be equal to the maximum commitment under the line of credit or an amount that is less than that maximum commitment. A qualified loan made under the program may be made with the interest rates, fees, and other terms and conditions agreed upon by the participating financial institution and the borrower. (2) "Qualified loan" does not include any of the following: (A) A loan for the construction or purchase of residential housing. (B) A loan to finance passive real estate ownership. (C) A loan for the refinancing of an existing loan when and to the extent that the outstanding balance is not increased. (D) A loan, the proceeds of which will be used in any manner that could cause the interest on any bonds previously issued by the authority to become subject to federal income tax. (k) "Severely affected community" means any area classified as an enterprise zone pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), any area, as designated by the executive director, contiguous to the boundaries of a military base designated for closure pursuant to Section 2687 of Title 10 of the United States Code, as amended, and any other comparable economically distressed geographic area so designated by the executive director from time to time. (l) "Small Business Assistance Fund" means a fund created within the authority that may only be used to pay the authority's contribution to a loss reserve account for a qualified small business that has operations that affect the environment. (m) "Small business concern" has the same meaning as in Section 632 of Title 15 of the United States Code, or as otherwise provided in regulations of the authority. SEC. 4. Section 44559.8 is added to the Health and Safety Code, to read: 44559.8. Notwithstanding this article, the authority may facilitate the development of a secondary market for a loan enrolled in the capital access loan program by providing security for that loan, thereby increasing participation in the program by financial institutions and improving access to capital for small businesses. For purposes of this section, the actions that the authority may take include, but are not necessarily limited to, assigning all, or a portion of, any loss reserve account to any other entity in connection with providing security for a loan, including a trustee of a securitization trust, transferring an enrolled loan from a participating financial institution to a securitization trust, and assisting underwriters in marketing a loan to the secondary market. SEC. 5. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to allow the California Pollution Control Financing Authority to issue revenue bonds on behalf of certain responsible parties, before their federal obligations become due, thereby facilitating response actions to hazardous substance releases as soon as possible, and to increase access to capital for small businesses for financing pollution control facilities, thereby protecting the environment and furthering public health and safety as soon as possible, it is necessary that this act take effect immediately.