BILL ANALYSIS                                                                                                                                                                                                    

                                                                     AB 274

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          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  


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             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  


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            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  

          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.  


          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.  


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          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: