BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1292 (Hernandez)
Hearing Date: 08/22/2011 Amended: 07/12/2011
Consultant: Mark McKenzie Policy Vote: G&F 9-0
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BILL SUMMARY: AB 1292 would authorize the issuance of revenue
bonds for deposit into the Safe Drinking Water State Revolving
Fund (SDWSRF) to satisfy federal matching requirements under the
Safe Drinking Water Act. Specifically, this bill would:
Authorize the Department of Public Health (DPH) to contract
with the California Infrastructure and Economic Development
Bank (I-Bank) to issue taxable or tax-exempt revenue bonds for
use as the 20% state match for federal grant funds.
Authorize bond proceeds to be deposited into the SDWSRF or to
refund bonds previously issued, and to fund necessary
reserves, capitalized interest, or issuance costs.
Require revenue bonds to be repaid from, and secured by,
revenues in the SDWSRF, including loan repayments and interest
earned on loans.
Require biennial DPH reports on SDWSRF activities submitted
after January 1, 2013 to include: (1) results of a federal
survey of California's public water infrastructure needs; (2)
amount of funds available in the fund to finance those needs;
(3) amount of all funding agreements executed since the last
report; (4) the fund utilization rate; (5) amount of
unliquidated obligations; and (6) the total dollar amount paid
to funding recipients since the last report.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Financial services contract $55 $110
$110Special*
Enhanced reporting absorbable costs to include
additionalSpecial*
information on future biennial reports
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* Safe Drinking Water State Revolving Fund, Administration
Account
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AB 1292 (Hernandez)
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STAFF COMMENTS:
Existing law creates the I-Bank within the Business,
Transportation and Housing Agency, to promote economic
revitalization, enable future development, and encourage a
healthy climate for jobs in California. The I-Bank also serves
as the state's only general purpose financing authority with
broad statutory authority to issue revenue bonds, loans, and
loan guarantees.
Existing law establishes the SDWSRF and continuously
appropriates the funds to DPH to provide grants or revolving
fund loans for the design and construction of projects for
public water systems that enable suppliers to meet safe drinking
water standards. The SDWSRF receives annual capitalization
grants from the U.S. Environmental Protection Agency (EPA), for
which the state must provide a 20% match. Federal grants have
ranged from $66 million to $126 million, and state matching
funds have historically been provided by the General Fund and
general obligation bond funds. The award for 2011-12 is $86
million, so the state will need to provide a match of $17.2
million to receive the full federal grant. DPH indicates that
current state match resources are insufficient to cover the full
match required for the 2011 federal grant or in subsequent
years.
AB 1292 would authorize DPH to contract with the I-Bank to issue
revenue bonds for deposit into the SDWSRF for use as the 20%
match for federal Clean Water Act capitalization grants. Under
current federal law, the principal and interest payments that
are repaid into the SDWSRF cannot be used as state matching
funds, but this bill would allow those payments to be used to
repay the revenue bonds. DPH indicates that it currently
receives approximately $40 million annually in principal and
interest payments on outstanding loans.
DPH would incur costs of approximately $110,000 annually to
contract for financial expertise related to the revenue bonding
authority provided by this bill. Currently, 4% of federal
grants may be used for administrative purposes related to the
SDWSRF. DPH indicates that there is sufficient capacity in the
administrative set-aside to cover the annual financial contract
AB 1292 (Hernandez)
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costs.
The bill authorizes the use of revenue bond proceeds for deposit
into the SDWSRF, to refund previously issued revenue bonds, and
to fund any necessary reserves, capitalized interest, or costs
of issuance. All I-Bank issuance costs and fees would be
included in the bond issuance.
Staff notes that this bill would relieve future pressure on the
General Fund, to the extent that revenue bonds are used as a
state match to maximize federal clean drinking water funds,
rather than direct General Fund appropriations or proceeds of
general obligation bonds, which must be repaid from the General
Fund.