BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 21 (Alejo) - Safe Drinking Water Small Community Emergency
Grant Fund.
Amended: February 14, 2013 Policy Vote: EQ 9-0, Health 9-0
Urgency: No Mandate: No
Hearing Date: August 30, 2013 Consultant:
Marie Liu
SUSPENSE FILE. AS AMENDED.
Bill Summary: AB 21 would create the Safe Drinking Water Small
Community Emergency Grant Fund (fund) which would be
administered by the Department of Public Health (DPH) and used
to provide grants for emergency drinking water projects that
serve disadvantaged and severely disadvantaged communities.
Fiscal Impact (as approved on August 30, 2013):
Unknown on-going costs, up to $50 million, in the form of
reduced revenues to the Safe Drinking Water State Revolving
Fund (SDWSRF) (special) due to forgone interest payments.
One-time costs of approximately $100,000 from the SDWSRF
for the development of regulations guiding the allocation of
the fund.
Unknown, but likely minimal, increases administrative costs
to SDWSRF for the administration of the fund.
Background: The California Safe Drinking Water Act requires the
Department of Public Health to regulate drinking water and the
SDWSRF, which provides funding to correct public water system
deficiencies. The SDWSRF provides funding for projects that
correct public water system deficiencies, including financial
assistance for the capital costs associated with water quality
infrastructure projects, but not ongoing operations and
maintenance costs. The majority of SDSRF funds are allocated to
construction projects, though funding is also available for
planning and feasibility studies for certain eligible
applicants. Financial assistance is given in several forms
including low-interest loans, zero-interest loans, debt
refinancing, principal forgiveness, and grants.
Under the California Porter-Cologne Water Quality Control Act,
AB 21 (Alejo)
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the SWRCB also administers the Clean Water State Revolving Fund
(CWSRF) in order to fund grants to small communities for
wastewater management. Until January 1, 2014, the SWRCB is
authorized to assess an annual surcharge on loans issued from
the CWSRF in lieu of interest on the loans. This surcharge is
then deposited into the Small Communities Grant Fund (SCG Fund)
for the purpose of funding the construction of wastewater
collection, treatment, or disposal projects for small
communities. No more than $50 million in surcharges may be
collected. Projects that serve severely disadvantaged
communities have priority for grants from the SCG Fund. The
surcharge may be authorized at any time during the loan
repayment schedule, but once the surcharge is applied, it must
remain unchanged unless the SWRCB is ceasing collection of the
surcharge.
Proposed Law: This bill would create the Safe Drinking Water
Small Community Emergency Grant Fund, which may be expended
through grants for projects that are eligible for financial
assistance from the SDWSRF and serve disadvantaged and severely
disadvantaged communities. The fund would be funded by a
surcharge on a loan issued from the SDWSRF in lieu of interest.
The surcharge may be applied at any time during the loan
repayment, but once the surcharge is applied, it must remain
unchanged. The charge cannot increase the financing repayment
amount.
Related Legislation: AB 30 (Perea) would remove restrictions on
the SWRCB's authority to collect an in lieu surcharge on loans
from the CWSRF in order to fund grants to small communities for
wastewater management.
Staff Comments: This bill gives DPH full authority in
determining the size of the fund as DPH will determine how many
loans will be assessed the surcharge instead of interest and how
much the surcharge will be. The size of the fund ultimately
represents a lost to the SDWSRF as the SDWSRF will receive less
loan interest repayments. The SDWSRF currently has a large
reserve, which is representative of problematic administration
of the monies rather than a lack of demand.
As this bill does not allow the fund to be used for
administrative costs, presumably the administration of grants
from this program are likely to be paid by the SDWSRF and
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therefore, staff believes the financial assistance programs from
the two funding sources should be administered together. The
administrative costs caused by this bill will be dependent on
the number of applicants to the fund. While this new grant
program may bring out some new applicants, staff anticipates
that most applicants could have, or already have, applied for
assistance from the SDWSRF especially since the eligibility
requirements are the same between the two programs and the
SDWSRF can already be awarded as grants (HSC �116761.21).
Therefore this bill may not necessarily increase the number of
applicants seeking assistance, but would rather shift applicants
for the SDWSRF assistance to the fund. Staff notes that the
SDWSRF has been criticized for having a lengthy and burdensome
application process that is particularly difficult to navigate
for disadvantaged communities. There is no language in the bill
that suggests that the fund will be administered any different
than the SDWSRF, which further increases the likelihood that
there will not be a significant increase in applications, and
therefore administration of the program.
Committee Amendments: Amend to cap the amount of in lieu fees
collected to $50 million.