BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2529 (Wieckowski) - Safe Drinking Water State Revolving Fund.
Amended: August 6, 2012 Policy Vote: EQ 5-1
Urgency: No Mandate: No
Hearing Date: August 16, 2012
Consultant: Brendan McCarthy
SUSPENSE FILE.
Bill Summary: AB 2529 would make a variety of changes to the
laws governing the Safe Drinking Water State Revolving Fund -
under which the Department of Public Health makes grants and
loans for drinking water projects.
Fiscal Impact: The bill will have several fiscal impacts on the
Safe Drinking Water State Revolving Fund:
By authorizing the Department to provide loans up to the
full amount of a project's costs, the bill increases the
risk of investment loss to the Fund. Under current
regulation, the Department can loan up to $20 million for a
project. The Department indicates that there are a small
number of potential projects that could be funded at
considerably higher levels under the bill. The Department
has never experienced the default of a lender. However,
increasing the size of potential loans makes any potential
future default more costly to the Fund.
By limiting grant funding to 30 percent of the federal
capitalization grant received each year, the bill will
reduce the number of grants made and increase the number of
loans. In recent years, the Fund has had fund balance of
between $150 million and $250 million, whereas the federal
capitalization grant has been about $80 million per year.
Reducing the amount of funding available for grants to 30
percent of the federal capitalization grant means that tens
of millions per year in loans will ultimately return to the
Fund, to fund additional projects.
Other changes in the bill are expected to lead to minor
cost savings.
AB 2529 (Wieckowski)
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Background: Under current law, the Department of Public Health
manages the Safe Drinking Water State Revolving Fund program.
The Fund is supported by an annual federal capitalization grant
(about $80 million per year in recent years) and a required 20
percent state match.
The Department makes both grants and loans from the Fund to
public drinking water systems.
Proposed Law: AB 2529 makes a variety of changes to the statutes
governing the Safe Drinking Water State Revolving Fund.
Specific provisions of the bill would:
Deem that a small community water system serving a severely
disadvantaged community has no ability to repay a loan (and
therefore is eligible for grants).
Limit the amount of grant funding to 30 percent of the
annual federal capitalization grant (current law limits
grant to 30 percent of the Fund balance).
Authorize the Department to provide loans up to the full
cost of a construction project.
Make a variety of technical and definitional changes to the
governing code sections.
Related Legislation:
AB 2208 (Perea) would authorize the Department of Public
Health to combine proposed projects from multiple applicants
for funding from the Safe Drinking Water State Revolving
fund . That bill is on the Senate Floor.
AB 2238 (Perea) would require the Department of Public
Health to review certain information from local agency
formation commissions when reviewing Safe Drinking Water
State Revolving Fund applications. That bill will be heard
in this committee.