BILL ANALYSIS Ó AB 274 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 274 (Committee on Environmental Safety and Toxic Materials) As Amended August 19, 2015 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | 78-0 | (April 23, |SENATE: |40-0 | (August 31, | | | |2015) | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: E.S. & T.M. SUMMARY: Authorizes the Department of Toxic Substances Control (DTSC) to not pursue specified uncollected invoices. Specifically, this bill: 1)Finds and declares that DTSC should prioritize its cost recovery efforts to make the most efficient use of its resources available for that activity. 2)Finds and declares that it is not cost effective or practicable to seek recovery of an uncollectible account consistent with a determination by DTSC. 3)Defines "uncollectible account" as an a response action, corrective action, or oversight costs, including accrued interest, incurred by DTSC that meets the following conditions: AB 274 Page 2 a) The response action, corrective action, or oversight costs were incurred by DTSC on or after July 1, 1987, but not later than December 31, 2013, while carrying out or overseeing a response or corrective action; b) The response action, corrective action, or oversight costs are not more than $5,000; c) DSTC will not incur further response action, corrective action, or oversight costs related to the site for which the costs were incurred; and, 4)States DTSC is not required to pursue an uncollectible account and may write off or write down that uncollectible account. 5)Sunsets the provisions of this bill on January 1, 2019. The Senate amendments: 1)Make technical changes to conform terminology used in Health and Safety Code Chapters 6.5 and 6.8. 2)Delete the condition that DTSC's estimated cost to pursue the oversight costs exceeds the value of the oversight costs. 3)Add a sunset date. EXISTING LAW: 1)Requires any costs incurred by 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. (Health and Safety Code (H&S) Section 25360) 2)Requires DTSC to review all current outstanding receivables AB 274 Page 3 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 amounts. (H&S Section 25269.8) 3)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 responsible party's obligation for remediation. (H&S Section 25269.8) FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS: State Audit Report: On August 7, 2014, the Bureau of State Audits (BSA) released a report on DTSC's cost recovery. The BSA found that long-standing shortcomings with DTSC's recovery of costs have resulted in millions of dollars in unbilled and billed but uncollected cleanup costs dating back to 1987. As of March 2014, DTSC had 1,661 projects totaling almost $194 million in outstanding costs, of which nearly $142 million was unbilled and almost $52 million was billed but uncollected. These outstanding costs were incurred between July 1987 and December 2013. Need for this bill: 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 Page 4 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 those projects often far exceed the recoverable costs, resulting in a financial loss to DTSC, and therefore to taxpayers. Authorizing DTSC to cut its losses on low-dollar uncollected projects valued at less than $5,000 would enable the department to more expeditiously get through the backlog of outstanding costs and free up resources to address larger, higher priority cleanup costs. One-time fix: This bill is a one-time fix to allow DTSC to dig out of its backlog of uncollected bills. This bill specifically states that the covered uncollectible bills, as defined, are only those costs accrued between July 1, 1987, and December 31, 2013. The authorization in this bill shall not be applied to any oversight costs accrued after January 1, 2014, and sunsets on January 1, 2019. Analysis Prepared by: Paige Brokaw / E.S. & T.M. / (916) 319-3965 FN: 0001483