Existing law requires the Department of Toxic Substances Control to comply with specified procedures when recovering oversight costs for corrective action taken pursuant to the hazardous waste control laws or for certain other actions taken pursuant to the Carpenter-Presley-Tanner Hazardous Substances Account Act. The department is required to take specified actions with regard to uncollectible accounts, including reviewing all current outstanding receivables and making an appropriate adjustment for estimated uncollectible amounts. The department is authorized, if warranted, to write off or write down those receivable amounts.

This bill, until January 1, 2019, would define the term uncollectible account and would authorize the department not to pursue an uncollectible account and to write off or write down that uncollectible account, as specified.

Existing law requires the Department of Toxic Substances Control to comply with specified procedures when recovering oversight costs for corrective action taken pursuant to the hazardous waste control laws or for certain other actions taken pursuant to the Carpenter-Presley-Tanner Hazardous Substances Account Act. The department is required to take specified actions with regard to uncollectible accounts, including reviewing all current outstanding receivables and making an appropriate adjustment for estimated uncollectible amounts. The department is authorized, if warranted, to write off or write down those receivable amounts.

This bill, until January 1, 2019, would define the term uncollectible account and would authorize the department not to pursue an uncollectible account and to write off or write down that uncollectible account, as specified.

Existing law requires the Department of Toxic Substances Control to comply with specified procedures when recovering oversight costs for corrective action taken pursuant to the hazardous waste control laws or for certain other actions taken pursuant to the Carpenter-Presley-Tanner Hazardous Substances Account Act. The department is required to take specified actions with regard to uncollectible accounts, including reviewing all current outstanding receivables and making an appropriate adjustment for estimated uncollectible amounts. The department is authorized, if warranted, to write off or write down those receivable amounts.

This bill, until January 1, 2019, would define the term uncollectible account and would authorize the department not to pursue an uncollectible account and to write off or write down that uncollectible account, as specified.

Existing law requires the Department of Toxic Substances Control to comply with specified procedures when recovering oversight costs for corrective action taken pursuant to the hazardous waste control laws or for certain other actions taken pursuant to the Carpenter-Presley-Tanner Hazardous Substances Account Act. The department is required to take specified actions with regard to uncollectible accounts, including reviewing all current outstanding receivables and making an appropriate adjustment for estimated uncollectible amounts. The department is authorized, if warranted, to write off or write down those receivable amounts.

This bill bill, until January 1, 2019, would define the term uncollectible account and would authorize the department not to pursue an uncollectible account and to write off or write down that uncollectible account, as specified.

Existing law requires the Department of Toxic Substances Control to comply with specified procedures when recovering oversight costs for corrective action taken pursuant to the hazardous waste control laws or for removal or remedial certain other actions taken pursuant to the Carpenter-Presley-Tanner Hazardous Substances Account Act. The department is required to take specified actions with regard to uncollectible accounts, including reviewing all current outstanding receivables and making an appropriate adjustment for estimated uncollectible amounts. The department is authorized, if warranted, to write off or write down those receivable amounts.

This bill would define the term uncollectible account and, in addition to the authority specified above, and would authorize the department not to pursue an uncollectible account and to write off or write down that uncollectible account. account, as specified.

Existing law requires the Department of Toxic Substances Control to comply with specified procedures when recovering oversight costs for corrective action taken pursuant to the hazardous waste control laws or for removal or remedial actions taken pursuant to the Carpenter-Presley-Tanner Hazardous Substances Account Act. The department is required to take specified actions with regard to uncollectible accounts, including reviewing all current outstanding receivables and making an appropriate adjustment for estimated uncollectible amounts. The department is authorized, if warranted, to write off or write down those receivable amounts.

This bill would define the term uncollectible account and, in addition to the authority specified above, would authorize the department not to pursue an uncollectible account and to write off that uncollectible account.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 274

Author:(Committee on Environmental Safety and Toxic Materials)

As Amended Ver:August 19, 2015

Majority vote

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:

   1. 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;

   2. The response action, corrective action, or oversight costs are not more than $5,000;

   3. 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 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.

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

 THIRD READING  

Bill No: AB 274

Author: Committee on Environmental Safety and Toxic Materials

Amended: 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 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 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 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.: Yes Local: No

SUPPORT: (Verified 8/20/15)

California League of Conservation Voters

Environment California

Environmental Working Group

Natural Resources Defense Council

OPPOSITION: (Verified 8/20/15)

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, 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 ****

 THIRD READING 

Bill No: AB 274

Author: Committee on Environmental Safety and Toxic Materials

Amended: 6/24/15 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.

ANALYSIS:

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 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, 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.

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 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.

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 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.: Yes Local: No

SUPPORT: (Verified 7/7/15)

California League of Conservation Voters

Environment California

Environmental Working Group

Natural Resources Defense Council

OPPOSITION: (Verified 7/7/15)

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, 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

**** END ****

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Wieckowski, Chair

2015 - 2016 Regular

Bill No: AB 274

SUBJECT: Oversight costs: uncollectible accounts.

ANALYSIS:

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 amounts.

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 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 $5,000.

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

Background

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.

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 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:

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

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

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

SOURCE:

Committee on Environmental Safety and Toxic Materials

SUPPORT:

California League of Conservation Voters

Environment California

Environmental Working Group

Natural Resources Defense Council

OPPOSITION:

None received

-- END --

Date of Hearing: April 15, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 274

Author:(Committee on Environmental Safety) – As Introduced Ver:February 11, 2015

Urgency: No State Mandated Local Program: No Reimbursable:

SUMMARY:

This bill allows the Department of Toxic Substance Control (DTSC) to not pursue and write off an uncollectible account, as defined. Specifically, this bill defines an uncollectible account as an oversight costs 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 $5,000.

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

FISCAL EFFECT:

Minor forgone revenues associated with cost recovery offset by the savings associated with not pursuing collection.

COMMENTS:

1. Purpose. 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.

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.

2. Background. 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.

3. 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.

4. Related 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:

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

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

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

All four bills will be heard in this Committee on April 15, 2015

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: March 24, 2015

ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS

Alejo, Chair

ABPCA Bill Id:AB 274

Author:(Committee on Environmental Safety and Toxic Materials) – As Introduced Ver:February 11, 2015

SUBJECT:

Oversight costs: uncollectible accounts.

SUMMARY:

Authorizes the Department of Toxic Substances Control (DSTC) 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;

3. Defines "uncollectible account" as an oversight cost that meets the following conditions:

1. The oversight was incurred by DTSC on or after July 1, 1987, but not later than December 31, 2013, while overseeing a cleanup action;

2. The amount of the uncollectible cost is not more than five thousand dollars ($5,000); and

3. DTSC's estimated cost to pursue the oversight costs exceeds the value of the oversight costs.

4. Authorizes DTSC to not pursue an uncollectible account.

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 & Safety Code (H&S) § 25360)

2. 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 amounts. (H&S § 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 § 25269.8)

FISCAL EFFECT:

Unknown.

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.

Audit follow up: DTSC is required to respond to the BSA's audit recommendations within 60 days, 6 months, and 1 year after the report. In its 60-day response, DTSC stated it conducted a cost recovery work analysis to determine costs associated with conducting outstanding cost collection. DTSC coordinated with the Department of Finance and the State Controller’s Office for clarification on authority to write off outstanding costs less than $5,000. While attachments to DTSC's response are considered confidential, according to DTSC staff, it is unclear under current law whether DTSC is authorized to write off its due diligence on cleanup costs and, therefore, statutory authorization would remove that legal ambiguity.

Fixing the Foundation: In early 2012, DTSC launched an internal initiative, "Fixing the Foundation," to address issues that threatened DTSC’s ability to achieve its mission and to ensure accountability. One of DTSC's stated goals is to "[m]aximize the recovery of DTSC’s past, present, and future response costs by comprehensively evaluating its unbilled and uncollected costs with the ultimate goal of pursuing collection efforts for all unbilled and uncollected costs to the maximum extent reasonably possible."

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.

Need for the 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.

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 the department 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. The 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.

REGISTERED SUPPORT / OPPOSITION:

Support

Natural Resources Defense Council

Opposition

None on file

Analysis Prepared by:

Paige Brokaw / E.S. & T.M. / (916) 319-3965