BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                        AB 274|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |

                                    THIRD READING

          Bill No:  AB 274
          Author:   Committee on Environmental Safety and Toxic Materials   

          Amended:  6/24/15 in Senate
          Vote:     21  

           AYES:  Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley


           ASSEMBLY FLOOR:  78-0, 4/23/15 (Consent) - See last page for  

           SUBJECT:   Oversight costs:  uncollectible accounts

          SOURCE:    Author

          DIGEST:  This bill allows, until January 1, 2019, the Department  
          of Toxic Substances Control (DTSC) to not pursue and write off  
          an uncollectible account, as defined.  


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


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                                                                    Page  2

          2)Requires any costs incurred by the 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 the 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 the DTSC to write off or write down  
            those receivable amounts.  

          4)Authorizes the 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 responsible party's obligation for  

          This bill allows, until January 1, 2019, the 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 the 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 $5,000.

          3)The estimated cost for the 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 the DTSC's cost recovery.   
            The BSA found long-standing shortcomings resulting in millions  
            of dollars in unbilled and uncollected cleanup costs dating  


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                                                                    Page  3

            back to 1987.   

            According to the 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.  

          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 the  
             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 the DTSC, the initial cost to send a collection  
             letter is roughly $72.70.  The cost to conduct a responsible  
             party search, on average, is $7,800.  Therefore, the 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. 

          Prior/Related Legislation  

          In addition to this bill, the Assembly Committee on  
          Environmental Safety and Toxic Materials (ESTM) has introduced  
          the following bills to address the shortcomings found in the BSA  


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

           AB 275 (ESTM) revises the DTSC's statute of limitation for  
            cost recovery.

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

          FISCAL EFFECT:    Appropriation:     No         Fiscal  
          Com.:YesLocal:                 No

          SUPPORT:   (Verified7/7/15)

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

          OPPOSITION:   (Verified7/7/15)

          None received

          ASSEMBLY FLOOR:  78-0, 4/23/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,  
            Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,  
            Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,  
            Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,  


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                                                                    Page  5

            Waldron, Weber, Wilk, Williams, Wood, Atkins
          NO VOTE RECORDED:  Campos, Salas

          Prepared by:Rachel Machi Wagoner / E.Q. / (916) 651-4108
          7/9/15 9:05:16

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