BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 467 (Eng) - Environment: Safe Drinking Water, Water Quality
and Supply, Flood Control, River and Coastal Protection Bond Act
2006.
Amended: May 31, 2012 Policy Vote: EQ 6-0
Urgency: Yes Mandate: No
Hearing Date: July 2, 2012 Consultant: Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 467 would authorize the Department of Public
Health (DPH) to enter into an agreement with a grantee, who
recovers groundwater cleanup funds from responsible parties, to
use the recovered funds for further groundwater cleanup
activities.
Fiscal Impact:
Ongoing costs of $150,000 per year from the General Fund
beginning in 2013-14 for staff time to review and track
recovered funds.
Unknown, but potentially in the millions of dollars, to the
General Fund by redirecting recovered funds for further
groundwater cleanup.
Background: In November 2006, the voters approved Proposition
84, which authorized the sale of general obligation to fund safe
drinking water, water quality and supply, flood control, and
other natural resource protection and conservation efforts,
including $60 million to DPH for loans and grants for projects
to prevent or reduce contamination of groundwater that serve as
a source of drinking water (Public Resources Code �75025). The
proposition requires repayment of costs that are subsequently
recovered from parties responsible for the contamination
("recovered funds"). The Legislature later enacted enabling
legislation that requires DPH to develop guidelines for the
distribution of loan and grant monies and regulations governing
the repayment of recovered funds (PRC �75101). DPH has developed
guidelines for the distribution of bond monies, but has not
adopted required regulations regarding recovered funds.
Proposed Law: This bill would require DPH to adopt the
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previously required regulations regarding recovered funds as
emergency regulations. The bill would require that these
regulations deposit all recovered funds into a new account, the
Groundwater Contamination Prevention Account, in the State
Treasury and be continuously appropriated to DPH for further
grants and loans for groundwater cleanup consistent with the
requirements of Proposition 84. The emergency regulations must
authorize DPH to enter into an agreement with a grantee, who
recovers funds from responsible parties, to allow the grantee to
use those recovered funds for its additional groundwater cleanup
needs. Up to three percent of the recovered funds could be kept
by DPH to cover administrative costs. The bill would further
allow DPH to enter into a memorandum of understanding with the
state water board to utilize the State Water Pollution Cleanup
and Abatement Account to administer recovered funds.
Staff Comments: Proposition 84 specified that recovered funds
must be repaid to the state, however it was silent as to
disposition of these funds once repaid. Recovered funds, for
example, can be used to repay Proposition 84 general obligation
bonds, provide general revenue to the General Fund, or, as this
bill proposes, to fund additional groundwater cleanup. As this
bill directs recovered funds for groundwater cleanup, this bill
has costs to the General Fund of an unknown amount because no
funds have been recovered from responsible parties to date.
Staff believes recovered funds have the potential to be in the
millions of dollars. Staff notes that it unclear why a
continuous appropriation is necessary and recommends it be
stricken from the bill.
Staff notes that the bill is unclear whether a grantee that has
been allowed to use recovered funds for further groundwater
remediation must use the funds for the same clean-up project for
which it was originally awarded grant money. If the grantee is
able to use the funds for any groundwater clean-up project, it
is possible that the recovered funds would be used on projects
that are not the highest statewide priorities. The sponsors of
the bill indicate that it is their intention that any redirected
recovered funds be used for remaining costs of the original
clean-up project. Staff recommends that the bill be amended to
reflect this intent.
As noted in the Background, DPH has not developed the
statutorily required regulations regarding recovered funds. This
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bill would maintain the requirement to develop regulations, but
specify that they should be emergency regulations. DPH
anticipates that the development of such regulations would cost
approximately $55,000 for 2.5 years. These would be incurred
costs regardless of the passage of this bill as current law
already requires the development of regulations, and therefore
are not attributable to the bill.
DPH believes that in order to track and provide oversight of the
use of recovered funds, this bill would require the workload
equivalent of one Associate Sanitary Engineer with moderate
travel costs at a cost of approximately $150,000 annually. While
Proposition 84 allowed up to 5% of the bond proceeds to be used
to cover administrative costs, this bill extends the duration of
the program beyond what Proposition 84 administrative monies can
cover. In response, this bill would allow DPH to retain 3% of
the recovered funds for administrative costs. As no funds have
been recovered from responsible parties to date, it is unclear
whether 3% is sufficient. As a reference point, staff notes that
if $5 million in recovered funds are received, DPH's
administrative costs could be covered for one year. However, DPH
notes that it is especially difficult to budget for its
administrative costs on the anticipation of receiving recovered
funds.
Staff notes that the author and sponsor of the bill are
currently in negotiations with the Administration to change and
potentially simplify the administration of recovered funds.
Recommended Amendments: Staff recommends that the bill be
amended to remove the continuous appropriation and to require
that a grantee receiving redirected recovered funds only use
those funds for the project for which they were originally
awarded grant funds.