BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de Le�n, Chair


          AB 30 (Perea) - Water Quality
          
          Amended: May 24, 2013           Policy Vote: EQ 9-0
          Urgency: No                     Mandate: No
          Hearing Date: August 30, 2013                     Consultant:  
          Marie Liu     
          
          SUSPENSE FILE.
          
          
          Bill Summary: AB 30 would remove restrictions on the State Water  
          Resources Control Board's (SWRCB) authority to collect an in  
          lieu surcharge on loans from the Clean Water State Revolving  
          Fund (CWSRF) in order to fund grants to small communities for  
          wastewater management. 

          Fiscal Impact: Ongoing costs in the tens of millions of dollars  
          to the CWSRF (special) for lost interest payments that are  
          instead deposited into the Small Communities Grant (SCG) Fund. 

          Background: The CWSRF is created under the federal Clean Water  
          Act to provide funding for water quality protection projects for  
          wastewater treatment, nonpoint source pollution control, and  
          watershed and estuary management. The California Porter-Cologne  
          Water Quality Control Act authorizes the SWRCB to administer the  
          CWSRF. 

          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 required to be  
          deposited into the SCG Fund for the purpose of providing grants  
          to small communities for the construction of wastewater  
          collection, treatment, or disposal projects. 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 remove the $50 million dollar cap  
          on deposits to the SCG Fund and allow the SWRCB to continue to  








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          assess an in lieu surcharge beyond 2014.

          This bill would also give SWRCB the ability to adjust the  
          surcharge if an adjustment is necessary to avoid a negative  
          impact on the board's ability to fund projects. 

          Related Legislation: AB 2356 (Arambula) Chapter 609/2008  
          authorized the SWRCB to assess the annual surcharge in order to  
          fund the SCG Fund. 

          Staff Comments: To date, the SWRCB has collected approximately  
          $15.7 million to the SCG Fund and anticipates collecting  
          approximately a total of $30 million by December 31, 2014. By  
          removing the sunset date and cap on the SWRCB's authorization to  
          assess an annual surcharge in lieu of interest payments, this  
          bill would create an ongoing loss of revenue to the CWSRF,  
          thereby limiting future financial assistance that may be issued  
          from that fund. However, the losses to the CWSRF are partially  
          offset by deposits to the SCG Fund, which makes monies  
          accessible to small and economically-disadvantaged communities  
          that may be unable to use loans from the CWSRF to finance  
          critical wastewater projects.

          A sizable reserve has been building in the SCG Fund. At the end  
          of FY 2011-12, there was a balance of approximately $10.5  
          million after a $4 million loan to the General Fund. Also, there  
          have been minimal expenditures from the grant in the past two  
          budget years. In each FY 2010-11 and FY 2011-12, only one $1  
          million grant agreement was issued. Staff notes that there is a  
          minimal record of program performance on which to judge whether  
          it is desirable to lift the sunset date and the fiscal cap.

          According to the SWRCB, the fund has built a large reserve and  
          has had minimal expenditures because the SWRCB has been focused  
          on distributing monies made available through the American  
          Recovery and Reinvestment Act (ARRA) for similar purposes. Now  
          that the ARRA funding has wound down, the SWRCB anticipates  
          significantly increasing expenditures from the SCG Fund. In  
          fact, the 2013-14 budget, as approved by the Legislature,  
          included a $12 million augmentation from the SCG Fund. Once the  
          fund is drawn down to a reasonable reserve, the SWRCB  
          anticipates issuing between $8 and $10 million annually in  
          grants. The bill's provision that gives SWRCB flexibility in  
          adjusting deposits to the SCG Fund will help prevent a future  








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          reserve buildup.

          The SCG Fund is administered together with the CWSRF Program and  
          monies from the two funds are often used in conjunction to fund  
          wastewater projects. Administrative costs for both programs are  
          funded from the CWSRF.