BILL ANALYSIS                                                                                                                                                                                                    

                              Senator Wieckowski, Chair
                                2015 - 2016  Regular 
          Bill No:            AB 274
          |Author:    |Committee on Environmental Safety and Toxic          |
          |           |Materials                                            |
          |Version:   |5/27/2015              |Hearing      | 6/17/2015      |
          |           |                       |Date:        |                |
          |Urgency:   |No                     |Fiscal:      |Yes             |
          |Consultant:|Rachel Machi Wagoner                                 |
          |           |                                                     |
          SUBJECT:  Oversight costs: uncollectible accounts.

          Existing law:  
          1)Under the Carpenter-Presley-Tanner Hazardous Substance Account  
            Act, authorizes DTSC to take or oversee removal and remedial  
            actions related to the release of hazardous substances. 

          2)Requires any costs incurred by the Department of Toxic  
            Substances Control (DTSC) or a regional board to be  
            recoverable from the liable person or persons, and requires  
            the amount of any response action costs that may be recovered  
            to include interest on any amount paid.  

          3)Requires DTSC to review all current outstanding receivables  
            and make an appropriate adjustment for estimated uncollectible  
            amounts, consistent with current accounting practices and  
            recognizing the present value of future collection, and  
            authorizes DTSC to write off or write down those receivable  

          4)Authorizes DTSC to consider whether to enter into a contract  
            with a private collection agency to collect substantially  
            past-due accounts, and for longer term receivables consider  
            whether credit arrangements should be made with banks or other  
            institutions willing to assist in financing a potentially  


          AB 274 (Committee on Environmental Safety and Toxic Materials)    
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            responsible party's obligation for remediation. 

          This bill:  

          Allows DTSC to not pursue and write off an uncollectible  
          account, as defined.  Specifically, this bill defines an  
          uncollectible account as an oversight cost that meets the  
          following conditions:

             1)   The cost was incurred by DTSC on or after July 1, 1987  
               and prior to December 31, 2013, while overseeing an action.

             2)   The amount of the uncollectible cost is not more than  

             3)   The estimated cost for DTSC to pursue the oversight cost  
               exceeds the cost itself.

          1)State Audit Report:  On August 7, 2014, the Bureau of State  
            Audits (BSA) released a report on DTSC's cost recovery.  The  
            BSA found long-standing shortcomings resulting in millions of  
            dollars in unbilled and uncollected cleanup costs dating back  
            to 1987.   

            According to DTSC, efforts to address the backlog have led to  
            a reduction in the number of sites without payment from 2,700  
            to fewer than 1,600 (40% reduction), and a reduction in the  
            amount of outstanding costs by more than $24 million, which  
            includes settlements paid, cash collected, and data cleanup.   
            Of the remaining outstanding costs, there are 865 projects, or  
            about $1 million worth of projects valued at less than $5,000  
            each.  Of that, 235 projects have bills less than $500, and 61  
            projects billed at less than $25.  


          AB 274 (Committee on Environmental Safety and Toxic Materials)    
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          2)One-time Fix.  This bill provides a one-time fix and  
            specifically only applies to uncollectible bills for costs  
            accrued between July 1, 1987, and December 31, 2013.  The  
            authorization in this bill will not apply to any oversight  
            costs accrued after January 1, 2014.

          1) Purpose of Bill.  According to the author, authorizing DTSC  
             to cut its losses on low-dollar uncollected projects valued  
             at less than $5,000 will assist with the backlog of  
             outstanding costs and free-up resources to address larger,  
             higher priority cleanup cost recoveries.

             According to DTSC, the initial cost to send a collection  
             letter is roughly $72.70.  The cost to conduct a responsible  
             party search costs, on average, is $7,800.  Therefore, DTSC's  
             costs to identify a responsible party for some projects often  
             far exceed the recoverable costs, resulting in a financial  
             loss to DTSC, and therefore to taxpayers. 

          2) One-time fix- amendment.  As noted above, this legislation  
             applies to outstanding bills for costs accrued prior to  
             December 31, 2013.  DTSC has stated that pursuant to the  
             audit, new accounting systems are in place that will allow  
             better tracking and oversight of billing activities.  As DTSC  
             has said that there is a prospective solution in place to  
             prevent this type of backlog in the future, an amendment  
             should be taken to sunset this statute after DTSC has had an  
             opportunity to resolve these cases.

            Related/Prior Legislation  

          In addition to this bill, the Committee on Environmental Safety  
          and Toxic Materials has introduced the following bills to  
          address the shortcomings found in the BSA report:

             a)   AB 273 (ESTM) modifies provisions relating to DTSC's  
               authority to require corrective actions under hazardous  
               waste control laws.


          AB 274 (Committee on Environmental Safety and Toxic Materials)    
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             b)   AB 275 (ESTM) revises DTSC's statute of limitation for  
               cost recovery.

             c)   AB 276 (ESTM) allows DTSC to request financial  
               information from specified entities who claim inability to  

            SOURCE:          Committee on Environmental Safety and Toxic Materials

          California League of Conservation Voters
          Environment California
          Environmental Working Group
          Natural Resources Defense Council

          None received  

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