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 AmendedAmended:8/19/15 in Senate Vote: 21 SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 6/17/15 AYES: Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 78-0, 4/23/15 (Consent) - See last page for vote 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. Senate Floor Amendments of 8/19/15 clarify the responsibility of the DTSC in determining recoverability of outstanding costs incurred by the DTSC as a regulatory oversight agency. ANALYSIS: Existing law: 1)Authorizes the DTSC, under the Carpenter-Presley-Tanner Hazardous Substance Account Act, the DTSC to take or oversee AB 274 Page 2 removal and remedial actions related to the release of hazardous substances. 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 remediation. This bill allows, until January 1, 2019, 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. Background 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 AB 274 Page 3 of dollars in unbilled and uncollected cleanup costs dating 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. Comments 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. Related Legislation In addition to this bill, the Committee on Environmental Safety and Toxic Materials (ESTM) has introduced the following bills to AB 274 Page 4 address the shortcomings found in the BSA report: 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: (Verified8/20/15) California League of Conservation Voters Environment California Environmental Working Group Natural Resources Defense Council OPPOSITION: (Verified8/20/15) 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, AB 274 Page 5 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, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Campos, Salas Prepared by:Rachel Machi Wagoner / E.Q. / (916) 651-4108 8/21/15 11:35:28 **** END ****