Under existing law, the State Water Resources Control Board and the California regional water quality control boards prescribe waste discharge requirements for the discharge of stormwater in accordance with the federal national pollutant discharge elimination system permit program. Existing law requires the state board or the regional boards to issue waste discharge requirements that ensure compliance with the federal Clean Water Act and apply any more stringent effluent standards or limitations necessary to implement water quality control plans, or for the protection of beneficial uses, or to prevent nuisance.

This bill would require the state board, by July 1, 2019, to establish financial capability assessment guidelines for municipal separate storm sewer system permittees that are adequate and consistent when considering the costs to local jurisdictions.

Under existing law, the State Water Resources Control Board and the California regional water quality control boards prescribe waste discharge requirements for the discharge of stormwater in accordance with the federal national pollutant discharge elimination system permit program. Existing law requires the state board or the regional boards to issue waste discharge requirements that ensure compliance with the federal Clean Water Act and apply any more stringent effluent standards or limitations necessary to implement water quality control plans, or for the protection of beneficial uses, or to prevent nuisance.

This bill would require the state board, by July 1, 2019, to establish financial capability assessment guidelines for municipal separate storm sewer system permittees that are adequate and consistent when considering the costs to local jurisdictions.

Under existing law, the State Water Resources Control Board and the California regional water quality control boards prescribe waste discharge requirements for the discharge of stormwater in accordance with the federal national pollutant discharge elimination system permit program. Existing law requires the state board or the regional boards to issue waste discharge requirements that ensure compliance with the federal Clean Water Act and apply any more stringent effluent standards or limitations necessary to implement water quality control plans, or for the protection of beneficial uses, or to prevent nuisance.

This bill would require the state board, by July 1, 2019, to establish financial capability assessment guidelines for municipal separate storm sewer system permittees that are adequate and consistent when considering the costs to local jurisdictions.

Under existing law, the State Water Resources Control Board and the California regional water quality control boards prescribe waste discharge requirements for the discharge of stormwater in accordance with the federal national pollutant discharge elimination system permit program. Existing law requires the state board or the regional boards to issue waste discharge requirements that ensure compliance with the federal Clean Water Act and apply any more stringent effluent standards or limitations necessary to implement water quality control plans, or for the protection of beneficial uses, or to prevent nuisance.

This bill would require the state board, by July 1, 2019, to establish financial capability assessment guidelines for municipal separate storm sewer system permittees that are adequate and consistent when considering the costs to local jurisdictions. The bill would require the California Regional Water Quality Control Board, Los Angeles region, within 60 days of completion of the state boards financial capability assessment guidelines, to use the guidelines in a pilot project conducted to assess if a financial capability analysis can be effectively used to help municipalities to implement a municipal separate storm sewer system permit. The bill would require the state board to oversee the use of the guidelines and, upon the completion of the pilot project, to make statewide recommendations or site-specific recommendations based on feasibility and the need to address the most prominent pollutants.

Under existing law, the State Water Resources Control Board and the California regional water quality control boards prescribe waste discharge requirements for the discharge of stormwater in accordance with the federal national pollutant discharge elimination system permit program. Existing law requires the state board or the regional boards to issue waste discharge requirements that ensure compliance with the federal Clean Water Act and apply any more stringent effluent standards or limitations necessary to implement water quality control plans, or for the protection of beneficial uses, or to prevent nuisance.

This bill would require the state board, by an unspecified date, July 1, 2019, to establish financial capability assessment guidelines for municipal separate storm sewer system permittees that are adequate and consistent when considering the costs to local jurisdictions. The bill would require the California Regional Water Quality Control Board, Los Angeles region, within 60 days of completion of the state boards financial capability assessment guidelines, to use the guidelines in a pilot project conducted to assess if a financial capability analysis can be effectively used to help municipalities to implement a municipal separate storm sewer system permit. The bill would require the state board to oversee the use of the guidelines and, upon the completion of the pilot project, to make statewide recommendations or site-specific recommendations based on feasibility and the need to address the most prominent pollutants.

Existing law requires the State Water Resources Control Board to develop monitoring requirements for municipalities and industries that are required to obtain a stormwater permit in accordance with the federal Clean Water Act.

This bill would make nonsubstantive changes to that provision.

GOVERNOR'S VETO

GV Bill Id:AB 2538

Author:(Rubio)

As Enrolled Ver:September 10, 2018

2/3 vote

Original Committee Reference: E.S. & T.M.

SUMMARY: Requires the State Water Resources Control Board (State Water Board) to establish financial capability assessment (FCA) guidelines for municipal separate storm sewer system (MS4) permittees that are adequate and consistent when considering the costs to local jurisdictions. Specifically, this bill:

1. Requires, by an unspecified time frame, the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, including costs incurred in previous years.
2. Requires the State Water Board, in developing the guidelines, to document any source it uses to develop an estimate of local costs and the overall cost of stormwater management.
3. Requires the State Water Board to consider both of the following, but not limited to, United States Environmental Protection Agency (US EPA) policies in drafting the FCA guidelines: Combined Sewer Overflows—Guidance for FCA and Schedule Development, dated February 1997; and, Affordability Criteria for Small Drinking Water Systems: An EPA Science Advisory Board Report, dated December 2002.
4. Requires the Los Angeles Regional Water Quality Control Board (LA Regional Water Board) to use the guidelines developed by the State Water Board in a pilot project conducted to assess if a financial capability analysis can be effectively used to help municipalities implement a MS4 permit.
5. Requires the State Water Board to oversee the use of the guidelines and, upon completion of the pilot project, to make statewide recommendations or site-specific recommendations based on feasibility and the need to address the most prominent pollutants.

The Senate amendments add Senators Portantino and Stern as coauthors.

FISCAL EFFECT: According to the Senate Appropriations Committee, enactment of this bill could result in $300,000 and two positions as well as $100,000 in contract services for the State Water Board to develop required guidelines.

COMMENTS:

Stormwater: Stormwater is water from rain or snow melt that runs off surfaces such as rooftops, paved streets, highways, or parking lots and can carry with it pollutants such as oil, pesticides, herbicides, sediment, trash, bacteria, and metals. The runoff can then drain directly into a local stream, lake, or bay. Often, the runoff drains into storm drains which eventually drain untreated water into a local body of water. Both the US EPA and the regional water quality control boards (Regional Water Boards) have determined that stormwater and urban runoff are significant sources of water pollution that can threaten aquatic life and public health.

Regulating stormwater: To curb the harmful effects of pollution from stormwater runoff, federal law requires states to set restrictions on the amount of pollutants that can flow into water bodies and requires local jurisdictions, including cities, counties, and other public entities, to obtain storm sewer permits. The federal Clean Water Act (CWA) and federal stormwater regulations require MS4s subject to National Pollutant Discharge Elimination System (NPDES) permits to reduce the pollutants in stormwater discharges to the maximum extent practicable. MS4s are to implement an effective combination of these best management practices to reduce pollutants in stormwater discharges.

Cost of MS4 compliance: According to the most recent estimate by the US EPA, the nation's wastewater treatment facilities will need $271 billion over the next 20 years to meet the water quality objectives of the CWA. In 2012, the LA Regional Water Board issued a new MS4 stormwater permit in accordance with the NPDES permit pursuant to the CWA. That MS4 permit enacted some of the strictest permit standards with more than 30 pollutants being monitored. The total cost of compliance with the MS4 permit for the County of Los Angeles exceeds $20 billion.

Determining compliance affordability: An FCA is an analysis of a community's ability to pay for/deliver water services, with a focus on stormwater and wastewater requirements. FCAs consider a wide range of financial capacity factors, including residential capability (e.g. median household income (MHI)) and the financial strength of the permitted organization. Financial strength considers bond ratings, debt, MHI, unemployment rate, tax revenue, and property tax rates. AB 2538 requires the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, and specifies US EPA policies to consider when drafting the FCA guidelines.

State Audit on costs of stormwater regulation: On March 1, 2018, the California State Auditor released Report 2017‑118, State and Regional Water Boards: They Must Do More to Ensure That Local Jurisdictions' Costs to Reduce Storm Water Pollution Are Necessary and Appropriate, and found that when imposing stormwater requirements, the State Water Board and the Regional Water Boards lack consistent information on the costs that local jurisdictions incur in complying with storm water requirements, and have not adequately considered the costs that local jurisdictions would incur to comply with these requirements. Obtaining this information is important, as it can have a substantial effect on the pollutant control plans the regional board ultimately develops.

AB 2538 is responsive to the findings of the aforementioned State Audit report. The bill finds and declares that, "A FCA is necessary to set achievable schedules for water quality objectives in water quality control plans under the Porter-Cologne Water Quality Control Act (Division 7 (commencing with Section 13000) of the Water Code) and to develop integrated regional water management plans." AB 2538 would compel the creation of FCA guidelines for compliance with MS4 permit holders that take costs of compliance mechanisms into consideration.

GOVERNOR'S VETO MESSAGE:

This bill would require the State Water Resources Control Board to establish financial capability assessment guidelines for Municipal Separate Storm Sewer System permittees by July 1, 2019.

The State Water Board is currently working on guidelines to assist local agencies in estimating and tracking the cost of compliance with their stormwater permits. Additionally, the State Water Board and Regional Water Boards work with permittees to create customized compliance schedules and offer grants and loans.

Municipal finances are diverse and a generic financial analysis, as this bill suggests, will not meaningfully advance our understanding of the ability of municipalities to meet stormwater permitting requirements.

Analysis Prepared by: Paige Brokaw / E.S. & T.M. / (916) 319-3965 FN: 0005348

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2538

Author:(Rubio)

As Amended Ver:August 24, 2018

Majority vote

Original Committee Reference: E.S. & T.M.

SUMMARY: Requires the State Water Resources Control Board (State Water Board) to establish financial capability assessment (FCA) guidelines for municipal separate storm sewer system (MS4) permittees that are adequate and consistent when considering the costs to local jurisdictions. Specifically, this bill:

1. Requires, by an unspecified time frame, the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, including costs incurred in previous years.
2. Requires the State Water Board, in developing the guidelines, to document any source it uses to develop an estimate of local costs and the overall cost of stormwater management.
3. Requires the State Water Board to consider both of the following, but not limited to, United States Environmental Protection Agency (US EPA) policies in drafting the FCA guidelines: Combined Sewer Overflows – Guidance for FCA and Schedule Development, dated February 1997; and, Affordability Criteria for Small Drinking Water Systems: An EPA Science Advisory Board Report, dated December 2002.
4. Requires the Los Angeles Regional Water Quality Control Board (LA Regional Water Board) to use the guidelines developed by the State Water Board in a pilot project conducted to assess if a financial capability analysis can be effectively used to help municipalities implement a MS4 permit.
5. Requires the State Water Board to oversee the use of the guidelines and, upon completion of the pilot project, to make statewide recommendations or site-specific recommendations based on feasibility and the need to address the most prominent pollutants.

The Senate amendments add Senators Portantino and Stern as a coauthor.

FISCAL EFFECT: According to the Senate Appropriations Committee, enactment of this bill could result in $300,000 and two positions as well as $100,000 in contract services for the State Water Board to develop required guidelines.

COMMENTS:

Stormwater: Stormwater is water from rain or snow melt that runs off surfaces such as rooftops, paved streets, highways, or parking lots and can carry with it pollutants such as oil, pesticides, herbicides, sediment, trash, bacteria, and metals. The runoff can then drain directly into a local stream, lake, or bay. Often, the runoff drains into storm drains which eventually drain untreated water into a local body of water. Both the US EPA and the regional water quality control boards (Regional Water Boards) have determined that stormwater and urban runoff are significant sources of water pollution that can threaten aquatic life and public health.

Regulating stormwater: To curb the harmful effects of pollution from stormwater runoff, federal law requires states to set restrictions on the amount of pollutants that can flow into water bodies and requires local jurisdictions, including cities, counties, and other public entities, to obtain storm sewer permits. The federal Clean Water Act (CWA) and federal stormwater regulations require MS4s subject to National Pollutant Discharge Elimination System (NPDES) permits to reduce the pollutants in stormwater discharges to the maximum extent practicable. MS4s are to implement an effective combination of these best management practices to reduce pollutants in stormwater discharges.

Cost of MS4 compliance: According to the most recent estimate by the US EPA, the nation’s wastewater treatment facilities will need $271 billion over the next 20 years to meet the water quality objectives of the CWA. In 2012, the LA Regional Water Board issued a new MS4 stormwater permit in accordance with the NPDES permit pursuant to the CWA. That MS4 permit enacted some of the strictest permit standards with more than 30 pollutants being monitored. The total cost of compliance with the MS4 permit for the County of Los Angeles exceeds $20 billion.

Determining compliance affordability: An FCA is an analysis of a community's ability to pay for/deliver water services, with a focus on stormwater and wastewater requirements. FCAs consider a wide range of financial capacity factors, including residential capability (e.g. median household income (MHI)) and the financial strength of the permitted organization. Financial strength considers bond ratings, debt, MHI, unemployment rate, tax revenue, and property tax rates. This bill the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, and specifies US EPA policies to consider when drafting the FCA guidelines.

State Audit on costs of stormwater regulation: On March 1, 2018, the California State Auditor released Report 2017‑118, State and Regional Water Boards: They Must Do More to Ensure That Local Jurisdictions’ Costs to Reduce Storm Water Pollution Are Necessary and Appropriate, and found that when imposing stormwater requirements, the State Water Board and the Regional Water Boards lack consistent information on the costs that local jurisdictions incur in complying with storm water requirements, and have not adequately considered the costs that local jurisdictions would incur to comply with these requirements. Obtaining this information is important, as it can have a substantial effect on the pollutant control plans the regional board ultimately develops.

This bill is responsive to the findings of the aforementioned State Audit report. This bill finds and declares that, "A FCA is necessary to set achievable schedules for water quality objectives in water quality control plans under the Porter-Cologne Water Quality Control Act (Division 7 (commencing with Section 13000) of the Water Code) and to develop integrated regional water management plans." AB 2538 would compel the creation of FCA guidelines for compliance with MS4 permit holders that take costs of compliance mechanisms into consideration.

Analysis Prepared by: Paige Brokaw / E.S. & T.M. / (916) 319-3965 FN: 0005165

 THIRD READING  

Bill No: AB 2538

Author: , et al.

Amended: 8/24/18 in Senate

Vote:

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-1, 6/20/18

AYES: Stone, Gaines, Hill, Lara, Stern

NOES: Wieckowski

NO VOTE RECORDED: Skinner

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/16/18

AYES: Portantino, Bates, Beall, Bradford, Hill, Nielsen, Wiener

ASSEMBLY FLOOR: 75-0, 5/30/18 - See last page for vote

SUBJECT:

SOURCE: San Gabriel Valley Council of Governments

DIGEST:

This bill requires the State Water Resources Control Board to establish financial capability assessment guidelines for municipal separate storm sewer permittees by July 1, 2019.

Senate Floor Amendments of 8/24/18 make technical changes and add a coauthor.

ANALYSIS:

Existing federal law, under the Clean Water Act (CWA):

1. Establishes the structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters.
   
2. Makes it unlawful to discharge any pollutant from a point source into navigable waters, unless a permit is obtained.
   
3. Provides that the National Pollutant Discharge Elimination System (NPDES) permit program controls discharges and authorizes states to implement and enforce the NPDES permit program as long as the state’s provisions are as stringent as the federal requirements.
   

Existing state law, the Porter- Cologne Water Quality Control Act (Porter-Cologne):

1. Establishes the State Water Resources Control Board (SWRCB) and regional water quality control boards (regional boards) to preserve, enhance, and restore the quality of California’s water resources and drinking water for the protection of the environment, public health, and all beneficial uses.
   
2. Prohibits the discharge of pollutants to surface waters unless the discharger obtains a permit from the SWRCB.
   

This bill:

1. Makes various findings about local government compliance with the CWA and the NPDES stormwater permits.
   
2. Requires SWRCB, by July 1, 2019, to establish financial capability assessment guidelines for municipal separate storm sewer system permittees that are adequate and consistent when considering the costs to local jurisdictions.
   
3. Requires SWRCB, when developing the guidelines, to document any source it uses to develop an estimate of local costs and overall costs of stormwater management and consider specified US EPA policies.

Background

1. Municipal Stormwater. Municipal separate stormwater systems (MS4s) discharge both waste and pollutants. State law controls waste discharges impacting water. Federal law regulates discharges of pollutants. Both state and federal law require a permit to operate such systems.
   

California‘s Porter-Cologne established SWRCB, along with nine regional water quality control boards, and gave those agencies primary responsibility for the coordination and control of water quality. SWRCB establishes statewide policy. The regional boards formulate and adopt water quality control plans and issue permits governing the discharge of waste.

Porter-Cologne requires any person discharging, or proposing to discharge, waste that could affect the quality of state waters to file a report with the appropriate regional board. The regional board then prescribes requirements as to the nature of the discharge, implementing any applicable water quality control plans.

The CWA is a comprehensive water quality statute designed to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. CWA prohibits pollutant discharges unless they comply with: (a) a permit; (b) established effluent limitations or standards; or (c) established national standards of performance. CWA allows any state to adopt and enforce its own water quality standards and limitations, so long as those standards and limitations are not less stringent than those in effect under CWA.

CWA created NPDES, authorizing US EPA to issue a permit for any pollutant discharge that will satisfy all requirements established by CWA or the US EPA. A state may administer its own permitting system if authorized by the US EPA. US EPA may withdraw approval of a state’s program and retains some supervisory authority:

1. Municipal Stormwater Permits. Stormwater is runoff from rain or snow melt that runs off surfaces such as rooftops, paved streets, highways or parking lots and can carry with it pollutants such as oil, pesticides, trash, bacteria, and metals. The runoff can then drain directly into a local stream, lake, or bay. Often, the runoff drains into storm drains which eventually drain untreated into a local waterbody.
   

SWRCB and regional boards are responsible for regulating stormwater discharges under the CWA and the NPDES permit program. To maintain the beneficial uses of receiving waters, municipalities must operate MS4s in accordance with a permit issued by the water boards under the Municipal Storm Water Permitting Program.

1. Why Is Stormwater Pollution A Problem? Stormwater pollution is a major environmental and public health issue. It leads to unsanitary living environments, unhealthy surface waters, such as lakes, creeks and rivers, unhealthy ocean and beach conditions, and street and neighborhood flooding during the rainy season. It's created when trash, cigarette butts, animal waste, pesticides, motor oil and other contaminants left on the ground are washed or thrown directly into storm drains. This toxic soup mixes with millions of gallons of rainwater and flows untreated into local creeks, rivers and the ocean - polluting our waterways and degrading neighborhoods and natural resources.
   
2. NPDES - MS4 permit compliance. Stormwater runoff from MS4s, construction sites, and industrial facilities continues to be a source of pollutants and has contributed to water quality impairments in California.
   

In urban areas, polluted stormwater runoff is commonly transported through MS4s and local municipalities are required to meet MS4 permit water quality standards for these discharges. However, some cities and counties, especially in urban areas, are struggling to find adequate funding and open space sites to capture and treat stormwater.

For a municipality out of compliance with their MS4 permit standards, the SWRCB works closely with them to develop a process for reaching compliance. The city or county is given a schedule to comply, based off of various technical, infrastructure and funding factors.

1. Cost of MS4 compliance. Southern California cities have some of the most expensive MS4 compliance costs nation-wide. The City of Industry cites its annual costs at $476,261,000. The City of Monrovia has estimated its cost to address stormwater would result in an annual parcel cost of $1,334 for 30 years. The City of Carson estimates its cost of addressing stormwater will consume an amount equivalent to more than 13% of its operating budget for the first ten years.
   

Compliance is critical for protecting public health and the environment, but fines for non-compliance can add up, making compliance even more costly. According to the LA Regional Board, failure to comply with the MS4 Permit conditions could result in mandatory minimum $3,000/day per violation, and can go up to a maximum of $10,000/day; and, maximum $25,000/day per violation if imposed by state court.

Furthermore, violations of federal CWA can result in penalties as much as $37,500/day.

1. State Funding for Stormwater Projects. Over the last decade, the Legislature recognized that assistance to local governments to fund stormwater projects was warranted. The state has provided funding through grants to local governments through bond funding and other programs. Funds through loan programs would also have been available, but as most local government do not have designated fees for stormwater to repay loans, no loans have been made.
   
   Bonds that have provided funding for stormwater projects include the Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002 ($15 million for Urban Storm Water grants); the Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006 ($90 million for matching grants to local public agencies for the reduction and prevention of stormwater contamination); and the Water Quality, Supply, and Infrastructure Improvement Act of 2014 ($200 million for matching grants for multi-benefit stormwater projects).
   

Despite these funding opportunities, the State Auditor has found that because of the significant costs to address stormwater pollution, the demand for grants for stormwater projects has exceeded the funding available. In 2016, the SWRCB received grant applications requesting $322 million, and it awarded $105 million for 27 projects.

1. State Audit on costs of stormwater regulation. On March 1, 2018, the California State Auditor released Report 2017‑118, State and Regional Water Boards: They Must Do More to Ensure That Local Jurisdictions’ Costs to Reduce Storm Water Pollution Are Necessary and Appropriate, and found the following:
   

• When imposing stormwater requirements, the SWRCB and the regional boards lack consistent information on the costs that local jurisdictions incur in complying with storm water requirements, and have not adequately considered the costs that local jurisdictions would incur to comply with these requirements.
  
• Federal regulation requires local jurisdictions to annually report their actual and projected costs for meeting storm water requirements to the regional boards. However, SWRCB has not provided guidance to local jurisdictions on how to track or report their storm water management expenditures, and as a result, the costs reported have been inconsistent.
  
• The regional boards did not always consider the overall cost of storm water management that local jurisdictions paid.
  
• The regional boards did not obtain all relevant information on some water bodies before imposing storm water requirements, potentially resulting in local jurisdictions incurring excessive costs or failing to meet water quality goals.
  

1. Financial Capability Assessments (FCA). An FCA is an analysis of a community's ability to pay for/deliver water services, with a focus on stormwater and wastewater requirements. FCAs consider a wide range of financial capacity factors, including residential capability (e.g. median household income) and the financial strength of permittee organization. Financial strength considers bond ratings, debt, median household income, unemployment rate, tax revenue, and property tax rates.

Comments

1. Purpose of bill. According to the author, “the Clean Water Act (CWA) requires local agencies to obtain permits to operate their stormwater systems. Permits serve as licenses for permittees to discharge stormwater into rivers, lakes, ocean or streams (known as receiving waters). Many local governments are also required to implement waste load allocations for pollutants, in accordance with strict compliance schedules. Cities and counties must also comply with the Safe Drinking Water Act and ongoing operations and maintenance costs for drinking water and waste water systems. The totality of these stormwater, wastewater, and drinking water regulations, places a heavy, sometimes impossible, liability on local governments, and in the case of stormwater, there is no dedicated funding for compliance. Instead, communities are forced to make tradeoffs between funding permit requirements and funding other local services paid for out of the general fund.
   

“California’s own State Auditor released a report on March 1, 2018, stating that Regional Water Boards do not adequately consider the costs that local jurisdictions face in compliance, and that the State Water Board lacks expertise in municipal finance and accounting. Without closing these gaps, local communities will continue to be faced with ever-increasing unfunded regulations and no defined process for prioritizing compliance.”

1. Are FCA guidelines useful? The financial capability assessment methodology required by this bill is designed to provide information on the capabilities of a municipality to pay for the costs of implementing the regulatory requirements associated with their MS4 permit. It seems that the author’s intent is to help lessen the impact of the permits on local agencies, including potentially reduced regulatory requirements or longer compliance timelines, to the extent that municipalities can demonstrate that they do not have sufficient funding available to pay for the costs of implementing the permit requirements.
   
   However, there is an assumption that the current financial situation of the MS4 is fixed and that municipalities are unable to raised additional revenues or obtain financial assistance to help them comply with the permit requirements. It does not take into consideration other potential sources of money, such as bond moneys, state programs, or local programs or taxes. In fact, the SWRCB alone has provided hundreds of millions of dollars in assistance to local agencies for stormwater projects to help them comply with their permit requirements, and Proposition 68, recently passed by the voters, provides additional funding for stormwater projects. The Department of Water Resources also provides funding for stormwater projects through the Integrated Regional Water Management Program.  Additionally, local governments themselves have the ability to raise revenues to pay for stormwater projects. As a result, information on a municipality’s current financial capability to comply with stormwater permit requirements is not useful, as it does not take into account other financial options that may be available. 
   

Additionally, the federal CWA requires that the regional boards set water quality standards at a level to protect beneficial uses such as swimming, fish and wildlife and drinking water; it does not allow the regional boards to consider a municipality’s ability to pay in setting the stormwater permit standards.  So even if the regional boards were to develop the guidelines as required by the bill, the regional boards could not revise the water quality standards based on a municipality’s financial capability assessment. 

The CWA does allow the regional boards to adjust the timeframes for municipalities to come into compliance, and the regional boards already actively work with municipalities to adjust the timeframes for municipalities to come into compliance based on the municipality’s costs-of-compliance.

As a result, it appears that the financial capability assessment guidelines required by this bill will not yield any useful information.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, $300,000 and two positions as well as $100,000 in contract services for the SWRCB to develop required guidelines is needed.

SUPPORT: (Verified 8/16/18)

San Gabriel Valley Council of Governments (source)

Association of California Water Agencies

City of Duarte

City of El Monte

City of Glendora

City of South Pasadena

City of Thousand Oaks

City of West Covina

Engineering Contractors’ Association

Los Angeles County Division-League of California Cities

San Gabriel Valley Water Association

OPPOSITION: (Verified 8/16/18)

None received

ASSEMBLY FLOOR: 75-0, 5/30/18

AYES: Acosta, Arambula, Baker, Berman, Bigelow, Bloom, Bonta, Brough, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Aguiar-Curry, Travis Allen, McCarty

Prepared by:

8/27/18 19:47:21

**** END ****

 THIRD READING  

Bill No: AB 2538

Author:

:

Vote:

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-1, 6/20/18

AYES: Stone, Gaines, Hill, Lara, Stern

NOES: Wieckowski

NO VOTE RECORDED: Skinner

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/16/18

AYES: Portantino, Bates, Beall, Bradford, Hill, Nielsen, Wiener

ASSEMBLY FLOOR: 75-0, 5/30/18 - See last page for vote

SUBJECT:

SOURCE: San Gabriel Valley Council of Governments

DIGEST:

This bill requires the State Water Resources Control Board to establish financial capability assessment guidelines for municipal separate storm sewer permittees by July 1, 2019.

ANALYSIS:

Existing federal law, under the Clean Water Act (CWA):

1. Establishes the structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters.
   
2. Makes it unlawful to discharge any pollutant from a point source into navigable waters, unless a permit is obtained.
   
3. Provides that the National Pollutant Discharge Elimination System (NPDES) permit program controls discharges and authorizes states to implement and enforce the NPDES permit program as long as the state’s provisions are as stringent as the federal requirements.
   

Existing state law, the Porter- Cologne Water Quality Control Act (Porter-Cologne):

1. Establishes the State Water Resources Control Board (SWRCB) and regional water quality control boards (regional boards) to preserve, enhance, and restore the quality of California’s water resources and drinking water for the protection of the environment, public health, and all beneficial uses.
   
2. Prohibits the discharge of pollutants to surface waters unless the discharger obtains a permit from the SWRCB.
   

This bill:

1. Makes various findings about local government compliance with the CWA and the NPDES stormwater permits.
   
2. Requires SWRCB, by July 1, 2019, to establish financial capability assessment guidelines for municipal separate storm sewer system permittees that are adequate and consistent when considering the costs to local jurisdictions.
   
3. Requires SWRCB, when developing the guidelines, to document any source it uses to develop an estimate of local costs and overall costs of stormwater management and consider specified US EPA policies.

Background

1. Municipal Stormwater. Municipal separate stormwater systems (MS4s) discharge both waste and pollutants. State law controls waste discharges impacting water. Federal law regulates discharges of pollutants. Both state and federal law require a permit to operate such systems.
   

California‘s Porter-Cologne established SWRCB, along with nine regional water quality control boards, and gave those agencies primary responsibility for the coordination and control of water quality. SWRCB establishes statewide policy. The regional boards formulate and adopt water quality control plans and issue permits governing the discharge of waste.

Porter-Cologne requires any person discharging, or proposing to discharge, waste that could affect the quality of state waters to file a report with the appropriate regional board. The regional board then prescribes requirements as to the nature of the discharge, implementing any applicable water quality control plans.

The CWA is a comprehensive water quality statute designed to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. CWA prohibits pollutant discharges unless they comply with: (a) a permit; (b) established effluent limitations or standards; or (c) established national standards of performance. CWA allows any state to adopt and enforce its own water quality standards and limitations, so long as those standards and limitations are not less stringent than those in effect under CWA.

CWA created NPDES, authorizing US EPA to issue a permit for any pollutant discharge that will satisfy all requirements established by CWA or the US EPA. A state may administer its own permitting system if authorized by the US EPA. US EPA may withdraw approval of a state’s program and retains some supervisory authority:

1. Municipal Stormwater Permits. Stormwater is runoff from rain or snow melt that runs off surfaces such as rooftops, paved streets, highways or parking lots and can carry with it pollutants such as oil, pesticides, trash, bacteria, and metals. The runoff can then drain directly into a local stream, lake, or bay. Often, the runoff drains into storm drains which eventually drain untreated into a local waterbody.
   

SWRCB and regional boards are responsible for regulating stormwater discharges under the CWA and the NPDES permit program. To maintain the beneficial uses of receiving waters, municipalities must operate MS4s in accordance with a permit issued by the water boards under the Municipal Storm Water Permitting Program.

1. Why Is Stormwater Pollution A Problem? Stormwater pollution is a major environmental and public health issue. It leads to unsanitary living environments, unhealthy surface waters, such as lakes, creeks and rivers, unhealthy ocean and beach conditions, and street and neighborhood flooding during the rainy season. It's created when trash, cigarette butts, animal waste, pesticides, motor oil and other contaminants left on the ground are washed or thrown directly into storm drains. This toxic soup mixes with millions of gallons of rainwater and flows untreated into local creeks, rivers and the ocean - polluting our waterways and degrading neighborhoods and natural resources.
   
2. NPDES - MS4 permit compliance. Stormwater runoff from MS4s, construction sites, and industrial facilities continues to be a source of pollutants and has contributed to water quality impairments in California.
   

In urban areas, polluted stormwater runoff is commonly transported through MS4s and local municipalities are required to meet MS4 permit water quality standards for these discharges. However, some cities and counties, especially in urban areas, are struggling to find adequate funding and open space sites to capture and treat stormwater.

For a municipality out of compliance with their MS4 permit standards, the SWRCB works closely with them to develop a process for reaching compliance. The city or county is given a schedule to comply, based off of various technical, infrastructure and funding factors.

1. Cost of MS4compliance. Southern California cities have some of the most expensive MS4 compliance costs nation-wide. The City of Industry cites its annual costs at $476,261,000. The City of Monrovia has estimated its cost to address stormwater would result in an annual parcel cost of $1,334 for 30 years. The City of Carson estimates its cost of addressing stormwater will consume an amount equivalent to more than 13% of its operating budget for the first ten years.
   

Compliance is critical for protecting public health and the environment, but fines for non-compliance can add up, making compliance even more costly. According to the LA Regional Board, failure to comply with the MS4 Permit conditions could result in mandatory minimum $3,000/day per violation, and can go up to a maximum of $10,000/day; and, maximum $25,000/day per violation if imposed by state court.

Furthermore, violations of federal CWA can result in penalties as much as $37,500/day.

1. State Funding for Stormwater Projects. Over the last decade, the Legislature recognized that assistance to local governments to fund stormwater projects was warranted. The state has provided funding through grants to local governments through bond funding and other programs. Funds through loan programs would also have been available, but as most local government do not have designated fees for stormwater to repay loans, no loans have been made.
   
   Bonds that have provided funding for stormwater projects include the Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002 ($15 million for Urban Storm Water grants); the Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006 ($90 million for matching grants to local public agencies for the reduction and prevention of stormwater contamination); and the Water Quality, Supply, and Infrastructure Improvement Act of 2014 ($200 million for matching grants for multi-benefit stormwater projects).
   

Despite these funding opportunities, the State Auditor has found that because of the significant costs to address stormwater pollution, the demand for grants for stormwater projects has exceeded the funding available. In 2016, the SWRCB received grant applications requesting $322 million, and it awarded $105 million for 27 projects.

1. State Audit on costs of stormwater regulation: On March 1, 2018, the California State Auditor released Report 2017‑118, State and Regional Water Boards: They Must Do More to Ensure That Local Jurisdictions’ Costs to Reduce Storm Water Pollution Are Necessary and Appropriate, and found the following:
   

• When imposing stormwater requirements, the SWRCB and the regional boards lack consistent information on the costs that local jurisdictions incur in complying with storm water requirements, and have not adequately considered the costs that local jurisdictions would incur to comply with these requirements.
  
• Federal regulation requires local jurisdictions to annually report their actual and projected costs for meeting storm water requirements to the regional boards. However, SWRCB has not provided guidance to local jurisdictions on how to track or report their storm water management expenditures, and as a result, the costs reported have been inconsistent.
  
• The regional boards did not always consider the overall cost of storm water management that local jurisdictions paid.
  
• The regional boards did not obtain all relevant information on some water bodies before imposing storm water requirements, potentially resulting in local jurisdictions incurring excessive costs or failing to meet water quality goals.
  

1. Financial Capability Assessments (FCA): An FCA is an analysis of a community's ability to pay for/deliver water services, with a focus on stormwater and wastewater requirements. FCAs consider a wide range of financial capacity factors, including residential capability (e.g. median household income) and the financial strength of permittee organization. Financial strength considers bond ratings, debt, median household income, unemployment rate, tax revenue, and property tax rates.

Comments

1. Purpose of bill. According to the author, “the Clean Water Act (CWA) requires local agencies to obtain permits to operate their stormwater systems. Permits serve as licenses for permittees to discharge stormwater into rivers, lakes, ocean or streams (known as receiving waters). Many local governments are also required to implement waste load allocations for pollutants, in accordance with strict compliance schedules. Cities and counties must also comply with the Safe Drinking Water Act and ongoing operations and maintenance costs for drinking water and waste water systems. The totality of these stormwater, wastewater, and drinking water regulations, places a heavy, sometimes impossible, liability on local governments, and in the case of stormwater, there is no dedicated funding for compliance. Instead, communities are forced to make tradeoffs between funding permit requirements and funding other local services paid for out of the general fund.
   

“California’s own State Auditor released a report on March 1, 2018, stating that Regional Water Boards do not adequately consider the costs that local jurisdictions face in compliance, and that the State Water Board lacks expertise in municipal finance and accounting. Without closing these gaps, local communities will continue to be faced with ever-increasing unfunded regulations and no defined process for prioritizing compliance.”

1. Are FCA guidelines useful? The financial capability assessment methodology required by this bill is designed to provide information on the capabilities of a municipality to pay for the costs of implementing the regulatory requirements associated with their MS4 permit. It seems that the author’s intent is to help lessen the impact of the permits on local agencies, including potentially reduced regulatory requirements or longer compliance timelines, to the extent that municipalities can demonstrate that they do not have sufficient funding available to pay for the costs of implementing the permit requirements.
   
   However, there is an assumption that the current financial situation of the MS4 is fixed and that municipalities are unable to raised additional revenues or obtain financial assistance to help them comply with the permit requirements. It does not take into consideration other potential sources of money, such as bond moneys, state programs, or local programs or taxes. In fact, the SWRCB alone has provided hundreds of millions of dollars in assistance to local agencies for stormwater projects to help them comply with their permit requirements, and Proposition 68, recently passed by the voters, provides additional funding for stormwater projects. The Department of Water Resources also provides funding for stormwater projects through the Integrated Regional Water Management Program.  Additionally, local governments themselves have the ability to raise revenues to pay for stormwater projects. As a result, information on a municipalities current financial capability to comply with stormwater permit requirements is not useful, as it does not take into account other financial options that may be available. 
   

Additionally, the federal CWA requires that the regional boards set water quality standards at a level to protect beneficial uses such as swimming, fish and wildlife and drinking water; it does not allow the regional boards to consider a municipality’s ability to pay in setting the stormwater permit standards.  So even if the regional boards were to develop the guidelines as required by the bill, the regional boards could not revise the water quality standards based on a municipality’s financial capability assessment. 

The CWA does allow the regional boards to adjust the timeframes for municipalities to come into compliance, and the regional boards already actively work with municipalities to adjust the timeframes for municipalities to come into compliance based on the municipality’s costs-of-compliance.

As a result, it appears that the financial capability assessment guidelines required by this bill will not yield any useful information.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, $300,000 and two positions as well as $100,000 in contract services for the SWRCB to develop required guidelines is needed.

SUPPORT: (Verified 8/16/18)

San Gabriel Valley Council of Governments (source)

Association of California Water Agencies

City of Duarte

City of El Monte

City of Glendora

City of South Pasadena

City of Thousand Oaks

City of West Covina

Engineering Contractors’ Association

Los Angeles County Division-League of California Cities

San Gabriel Valley Water Association

OPPOSITION: (Verified 8/16/18)

None received

ASSEMBLY FLOOR: 75-0, 5/30/18

AYES: Acosta, Arambula, Baker, Berman, Bigelow, Bloom, Bonta, Brough, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Aguiar-Curry, Travis Allen, McCarty

Prepared by:

8/21/18 20:10:36

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2017 - 2018 Regular Session

AB 2538 (Rubio) - Municipal separate storm sewer systems: financial capability analysis

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 16, 2018

Bill Summary:

This bill would require the State Water Resources Control Board (SWRCB) to establish financial assessment capability guidelines for municipal separate storm sewer system permittees.

Fiscal Impact:

• $300,000 and 2 positions as well as $100,000 in contract services for the SWRCB to develop required guidelines.

Committee Amendments:

Add a coauthor.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2017 - 2018 Regular Session

AB 2538 (Rubio) - Municipal separate storm sewer systems: financial capability analysis

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

This bill would require the State Water Resources Control Board (SWRCB) to establish financial assessment capability guidelines for municipal separate storm sewer system permittees.

Fiscal Impact:

• $300,000 and 2 positions as well as $100,000 in contract services for the SWRCB to develop required guidelines.

Background: Existing law charges the SWRCB and regional water quality control boards with implement federal and state water quality laws. Federal law requires regional boards to develop pollution control plans for impaired water bodies. These Total Maximum Daily Loads (TMDLs) are intended to improve water quality by establishing numeric goals for specified pollutants. Cities and other jurisdictions that operate storm water systems must apply for storm water permits. California has several storm water regulatory programs including those for construction, industrial, and municipal stormwater.

Proposed Law:

This bill would require the SWRCB to establish financial assessment capability guidelines for municipal separate storm sewer system permittees. It would also require those guidelines to be adequate and consistent when considering the costs to local jurisdictions, including costs already incurred. The bill would require the SWRCB to consider specified U.S. Environmental Protection Agency policies in drafting its guidelines.

Staff Comments: The SWRCB estimates it would need 2 positions and $100,000 in contract services to develop these guidelines. This estimate is based off the resource needs for the development of guidance for low impact development and green infrastructure best management practices in new schools (SB 541 2017), a similarly scaled guideline development concept.

The $100,000 in contract services would be necessary to secure the services of an accredited accountant and a socioeconomic research specialist to support and document the guidelines.

-- END --

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Wieckowski, Chair

2017 - 2018 Regular

Bill No: AB 2538

SUBJECT: Municipal separate storm sewer systems: financial capability analysis

ANALYSIS:

Existing federal law under the Clean Water Act (CWA):

1. Establishes the structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters.
   
2. Makes it unlawful to discharge any pollutant from a point source into navigable waters, unless a permit is obtained.
   
3. Provides that the National Pollutant Discharge Elimination System (NPDES) permit program controls discharges. Point sources are discrete conveyances such as pipes or man-made ditches. (Individual homes that are connected to a municipal system, use a septic system, or do not have a surface discharge do not need an NPDES permit; however, industrial, municipal, and other facilities must obtain permits if their discharges go directly to surface waters.)
   
4. Authorizes states to implement and enforce the NPDES permit program as long as the state’s provisions are as stringent as the federal requirements.
   
   1. In California, the State Water Resources Control Board (SWRCB) is the delegate agency responsible for the NPDES permit program.
      

Existing state law, the Porter- Cologne Water Quality Control Act (Porter-Cologne):

1. Establishes the SWRCB and regional water quality control boards (regional boards) to preserve, enhance, and restore the quality of California’s water resources and drinking water for the protection of the environment, public health, and all beneficial uses, and to ensure proper water resource allocation and efficient use, for the benefit of present and future generations.
   
2. Requires SWRCB formulate and adopt state policy for water quality control and each regional board formulate and adopt water quality control plans (aka basin plans) for all areas within the region that ensure the reasonable protection of beneficial uses and the prevention of nuisance as specified.
   
3. Prohibits the discharge of pollutants to surface waters unless the discharge obtains a permit from the SWRCB. (Water (WAT) Code § 13000 et seq.)
   
4. Authorizes the regional boards to adopt water quality standards within its jurisdiction. (WAT Code § 13240)
   
5. Requires SWRCB to establish an online resource center that addresses measures available for municipalities to comply with municipal stormwater permit requirements. (WAT Code § 13383.9)
   

This bill:

1. Makes various findings about local government compliance with the CWA and the NPDES stormwater permits.
   
2. Requires SWRCB, by July 1, 2019, to establish financial capability assessment guidelines for municipal separate storm sewer system permittees that are adequate and consistent when considering the costs to local jurisdictions.
   
3. Requires SWRCB, when developing the guidelines, to do both of the following:
   
   1. Document any source it uses to develop an estimate of local costs and overall costs of stormwater management.
      
   2. Consider specified US EPA policies, but is not limited to those policies. Specifically requires consideration of:
      
      1. Combined Sewer Overflows – Guidance for Financial Capability Assessment and Schedule Development, dated February 1997.
         
      2. Affordability Criteria for Small Drinking Water Systems: An EPA Science Advisory Board Report, dated December 2002.
         

Background

1. Municipal Stormwater. Municipal stormwater systems discharge both waste and pollutants. State law controls waste discharges impacting water. Federal law regulates discharges of pollutant[s]. Both state and later-enacted federal law require a permit to operate such systems.
   

The systems at issue here are municipal separate stormwater systems, sometimes referred to by the acronym MS4. A municipal separate storm sewer is a system owned or operated by a public agency with jurisdiction over disposal of waste and designed or used for collecting or conveying stormwater.

California‘s Porter-Cologne, enacted in 1969, established SWRCB, along with nine regional water quality control boards, and gave those agencies primary responsibility for the coordination and control of water quality. SWRCB establishes statewide policy. The regional boards formulate and adopt water quality control plans and issue permits governing the discharge of waste.

Porter-Cologne requires any person discharging, or proposing to discharge, waste that could affect the quality of state waters to file a report with the appropriate regional board. The regional board then prescribes requirements as to the nature of the discharge, implementing any applicable water quality control plans. The Operators must follow all requirements set by the regional board.

CWA was enacted in 1972, and also established a permitting system. CWA is a comprehensive water quality statute designed to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. CWA prohibits pollutant discharges unless they comply with: (1) a permit; (2) established effluent limitations or standards; or (3) established national standards of performance.

CWA allows any state to adopt and enforce its own water quality standards and limitations, so long as those standards and limitations are not less stringent than those in effect under CWA.

CWA created NPDES, authorizing US EPA to issue a permit for any pollutant discharge that will satisfy all requirements established by CWA or the US EPA Administrator. The federal system notwithstanding, a state may administer its own permitting system if authorized by the EPA. If the EPA concludes a state has adequate authority to administer its proposed program, it must grant approval and suspend its own issuance of permits.

For a state to acquire permitting authority, the governor must give US EPA a description of the program proposed to be established and the attorney general must affirm that the laws of the state provide adequate authority to carry out the described program.

US EPA may withdraw approval of a state’s program and also retains some supervisory authority: States must inform US EPA of all permit applications received and of any action related to the consideration of a submitted application. California was the first state authorized to issue its own pollutant discharge permits. Shortly after the CWA’s enactment, the Legislature amended Porter-Cologne, to authorize state issuance of permits, specifying that state and regional boards issue waste discharge requirements ensuring compliance with all applicable provisions of CWA together with any more stringent effluent standards or limitations necessary to implement water quality control plans, or for the protection of beneficial uses, or to prevent nuisance. To align the state and federal permitting systems, the legislation provided that the term “waste discharge requirements” under the Act was equivalent to the term “permits” under the CWA. Accordingly, California’s permitting system now regulates discharges under both state and federal law.

In 1987, Congress amended the CWA to clarify that a permit is required for any discharge from a municipal storm sewer system serving a population of 100,000 or more. Under those amendments, a permit may be issued either on a system- or jurisdiction-wide basis, must effectively prohibit non-stormwater discharges into the storm sewers, and must require controls to reduce the discharge of pollutants to the maximum extent practicable. The phrase “maximum extent practicable” is not further defined.

US EPA regulations specify the information to be included in a permit application. Among other things, an applicant must set out a proposed management program that includes management practices; control techniques; and system, design, and engineering methods to reduce the discharge of pollutants to the maximum extent practicable. The permit-issuing agency has discretion to determine which practices, whether or not proposed by the applicant, will be imposed as conditions.

1. Municipal Stormwater Permits. Stormwater is runoff from rain or snow melt that runs off surfaces such as rooftops, paved streets, highways or parking lots and can carry with it pollutants such as: oil, pesticides, herbicides, sediment, trash, bacteria and metals. The runoff can then drain directly into a local stream, lake or bay. Often, the runoff drains into storm drains which eventually drain untreated into a local waterbody.
   

Municipal or urban areas commonly include large impervious surfaces which contribute to an increase in runoff flow, velocity and volume. As a result streams are hydrologically impacted through streambed and channel scouring, instream sedimentation and loss of aquatic and riparian habitat. In addition to hydrological impacts, large impervious surfaces contribute to greater pollutant loading, resulting in turbid water, nutrient enrichment, bacterial contamination, and increased temperature and trash.

SWRCB and regional water quality control boards (regional boards) are responsible for regulating stormwater discharges under the federal Clean Water Act and the NPDES permit program. To maintain the beneficial uses of receiving waters, municipalities must operate municipal separate storm sewer systems in accordance with a permit issued by the water boards.

The Municipal Storm Water Permitting Program regulates storm water discharges from municipal separate storm sewer systems (MS4s).

Large and small municipal sewer system operators must comply with MS4 permits issued by the State Water Board or applicable regional board. MS4 permits regulate stormwater entering local municipal systems under the following two-phase system:

Under Phase I, which started in 1990, regional boards have NPDES General Permit stormwater permits for medium (serving between 100,000 and 250,000 people) and large (serving 250,000 people) municipalities. Most of these permits are issued to a group of co-permittees encompassing an entire metropolitan area. These permits are reissued as the permits expire. The Phase I MS4 permits require the discharger to develop and implement a Storm Water Management Plan/Program with the goal of reducing the discharge of pollutants to the maximum extent practicable (MEP). MEP is the performance standard specified in Section 402(p) of the Clean Water Act. The management programs specify what best management practices (BMPs) will be used to address certain program areas. The program areas include public education and outreach; illicit discharge detection and elimination; construction and post-construction; and good housekeeping for municipal operations. In general, medium and large municipalities are required to conduct monitoring.

On April 30, 2003 as part of Phase II, SWRCB issued a General Permit for the Discharge of Storm Water from Small MS4s to provide permit coverage for smaller municipalities (population less than 100,000), including non-traditional Small MS4s, which are facilities such as military bases, public campuses, prison and hospital complexes. The Phase II Small MS4 General Permit covers Phase II Permittees statewide. On February 5, 2013 the Phase II Small MS4 General Permit was adopted and became effective on July 1, 2013. They will expire on June 30, 2018.

While early regulatory efforts focused on controlling pollutants and implementing best management practices, current regulatory decisions also emphasize holistic strategies that will result in multiple community benefits while concurrently managing pollution. With the focus on stormwater as a resource, newer low impact development and green infrastructure techniques are now capitalizing on opportunities to capture stormwater runoff and use it for local landscape and agricultural irrigation, and groundwater recharge, with further description as follows. Well-conceived stormwater management actions provide multiple benefits for California communities, including improved water quality, increased water supply, increased space for public recreation, increased tree canopy, enhanced stream and riparian habitat area, as well as many other benefits.

1. Why Is Stormwater Pollution A Problem? Stormwater pollution is a major environmental and public health issue. It leads to unsanitary living environments, unhealthy surface waters, such as lakes, creeks and rivers, unhealthy ocean and beach conditions, and street and neighborhood flooding during the rainy season. It's created when trash, cigarette butts, animal waste, pesticides, motor oil and other contaminants left on the ground are washed or thrown directly into storm drains. This toxic soup mixes with millions of gallons of rainwater and flows untreated into local creeks, rivers and the ocean - polluting our waterways, as well as degrading neighborhoods and other natural resources.
   

As an example, according to a factsheet posted by SWRCB in 2009.

With nearly 10 million people living in Los Angeles County, each resident’s contribution to stormwater pollution adds up quickly to create a serious public health situation. In a 1997 study conducted by Pelegrin Research Group, an estimate of the number of times per month that Los Angeles County residents engage in polluting activities was established, known as pollution volumetrics. According to an updated 2001 study, it is conservatively estimated that each month in LA County, residents contribute to stormwater pollution by:

• Dropping cigarette butts on the ground nearly 915,000 times.
  
• Dropping litter on the ground or out a car window more than 830,000 times.
  
• Allowing paper or trash to blow into the street more than 800,000 times.
  
• Throwing something in the gutter or down a storm drain nearly 280,000 times.
  
• Emptying a car ashtray into the street more than 40,000 times.
  
• Hosing leaves or dirt off a driveway or sidewalk into the street nearly 420,000 times.
  
• Washing off paint brushes under an outdoor faucet more than 130,000 times.
  
• Spraying the garden or lawn with pesticide more than 210,000 times.
  
• Walking a dog without picking up the droppings more than 82,000 times.

Also, in Los Angeles County, approximately 100 million gallons of contaminated water and debris drain through the storm drain system each dry day. That would fill the Rose Bowl 1.2 times. (On rainy days the daily flow can increase to 10 billion gallons per day).

1. Natural Resource Degradation. Stormwater pollution in Los Angeles County has significant impacts on the region's water quality, while also posing risks to the health and safety of residents, degrading natural resources, threatening the area's tourist driven economy and lowering property values in local neighborhoods. The impacts of stormwater pollution include:
   

Health Impacts. Stormwater pollution increases serious health risks to people swimming or fishing in the Santa Monica or San Pedro Bay, especially within 400 yards of storm drain outlets.

A study conducted by the Santa Monica Bay Restoration Project found that stormwater pollution in the ocean leads to increased risk of viral infections, earaches, sinus problems, fever, flu and skin rashes and viral diseases such as hepatitis for those swimming in the ocean close to storm drain outfalls, especially following a rainstorm when litter and contaminants are flushed into the storm drain system. The Governor’s Clean Beaches Initiative (CBI), funded by portions of four voter-approved bond measures, has already begun the cleanup effort statewide through construction of diversion and treatment facilities. The Erase the Waste campaign provides an educational link to the CBI, focused on Los Angeles County, and helps residents become part of the solution.

The Los Angeles County Department of Health Services recognizes the increased health danger associated with stormwater pollution and has a standing rain advisory that “recommends that beach users avoid contact with ocean water, especially near flowing storm drains, creeks and rivers for a period of 3 days after rainfall ends.”

Heal the Bay’s 2002-2003 Annual Beach Report Card on the health of Los Angeles County’s beaches gave 56% of monitored beaches a failing grade during wet weather, meaning the conditions were hazardous to human health and would have adverse health effects to swimmers who enter the water.

When bacteria levels exceed the State Standards, a warning sign is posted and swimmers are encouraged not to enter the water. Stormwater contaminants are one of the main causes of increased bacteria levels at our local beaches. During 2002, there were 269 warnings posted on Los Angeles County beaches for a total of 1,181 days where the ocean was too polluted for human use.

Research conducted by regional agencies, respected environmental nonprofit organizations and academic institutions have identified stormwater pollution and urban runoff as the leading sources of pollutants to Los Angeles County’s inland rivers, creeks, the ocean and beaches along the area’s coastline. The widespread critical issue has reached a level that has prompted local, state and federal policymakers and regulatory agencies to enact and enforce more stringent stormwater permit regulations, financial penalties and other compliance measures.

Economic Impacts. Beach attendance has dropped by 56% since 1983. The recreation and tourism industry is one of the top employers in the nation, and is a particularly valuable part of the Los Angeles coastal economy. Each year, Americans take more than 1.8 billion trips to water destinations, largely for recreation, spending money and creating jobs in the process. Activities related to the county’s $2 billion annual tourism industry depend largely on the access and enjoyment of clean waters. If the perception of our beaches deteriorates, it poses broader implications for the region’s financial growth.

1. NPDES - MS4 permit compliance. Thirty years after the federal CWA was amended to address stormwater pollution, stormwater runoff from MS4s, construction sites, and industrial facilities continues to be a source of pollutants and has contributed to water quality impairments in California.
   

In urban areas, polluted stormwater runoff is commonly transported through MS4s and local municipalities are required to meet MS4 permit water quality standards for these discharges. However, some cities and counties, especially in urban areas, are struggling to find adequate funding and open space sites to capture and treat stormwater.

For a municipality out of compliance with their MS4 permit standards, the SWRCB works closely with them to develop a process for reaching compliance. The city or county is given a schedule to comply, based off of various technical, infrastructure and funding factors. According to SWRCB, the percentage of MS4 permitted entities found out of compliance ranged from 6-11% (of 725 permits total) over the last five years; of which 0-7% of recorded violations have formal enforcement action brought on them.

1. Cost of MS4compliance. According to the most recent estimate by the US EPA, the nation’s wastewater treatment facilities will need $271 billion over the next 20 years to meet the water quality objectives of the CWA.
   

In 2012, the LA Regional Water Board issued a new MS4 stormwater permit in accordance with the NPDES permit pursuant to the CWA. That MS4 permit enacted some of the strictest permit standards with more than 30 pollutants being monitored. The total cost of compliance with the MS4 permit for the County of Los Angeles exceeds $20 billion.

Southern California cities have some of the most expensive MS4 compliance costs nation-wide. The City of Industry cites its annual costs at $476,261,000. The City of Monrovia has estimated its cost to address stormwater would result in an annual parcel cost of $1,334 for 30 years. The City of Carson estimates its cost of addressing stormwater will consume an amount equivalent to more than 13% of its operating budget for the first ten years.

Compliance is critical for protecting public health and the environment, but fines for non-compliance can add up, making compliance even more costly. Federal and state law allows regional boards to levy fines for non-compliance.

According to the LA Regional Board, failure to comply with the MS4 Permit conditions could result in the following non-compliant fines: mandatory minimum $3,000/day per violation, and can go up to a maximum of $10,000/day; and, maximum $25,000/day per violation if imposed by state court.

Furthermore, violations of federal CWA can be enforced by US EPA, and federal penalties could reach $37,500/day.

1. State Funding for Stormwater Projects. Over the last decade, the Legislature recognized that assistance to local governments to fund stormwater projects was warranted. The state has provided funding through grants to local governments through bond funding and other programs. Funds through loan programs would also have been available, but as most local government do not have designated fees for stormwater to repay loans, no loans have been made. Funds for stormwater projects received specific funds from bonds as follows:
   

• The Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002 (Proposition 40) provided the State Water Board with $15 million for Urban Storm Water grants; Proposition 84 - $90 million;
  
• The Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006 (Proposition 84) made $90 million available to the State Water Board for matching grants to local public agencies for the reduction and prevention of stormwater contamination of rivers, lakes, and streams; and,
  
• The Water Quality, Supply, and Infrastructure Improvement Act of 2014 (Proposition 1) authorized $200 million to the State Water Board for providing matching grants to public agencies, nonprofit organizations, public utilities, state and federally recognized Indian tribes, and mutual water companies for multi-benefit stormwater projects.
  

Stormwater projects were also eligible funding under other programs:

• Prop 50 IRWM– SWRCB administered $250 million
  
• Clean Beaches Initiative (from Props 13, 40, 50 and 84) - $148 million
  
• Areas of Special Biological Significance program grants (from Prop. 84) - $35 million
  
• Santa Monica Bay Restoration (from Props 50 and 84) -  $38 million

Despite these funding opportunities, the State Auditor has found that because of the significant costs to address stormwater pollution, the demand for grants from the state for stormwater projects has far exceeded the funding available. In 2016, the State Water Board received grant applications requesting $322 million, and it awarded $105 million for 27 projects.

1. State Audit on costs of stormwater regulation: On March 1, 2018, the California State Auditor released Report 2017‑118, State and Regional Water Boards: They Must Do More to Ensure That Local Jurisdictions’ Costs to Reduce Storm Water Pollution Are Necessary and Appropriate, and found the following:
   

• When imposing stormwater requirements, the SWRCB and the regional boards lack consistent information on the costs that local jurisdictions incur in complying with storm water requirements, and have not adequately considered the costs that local jurisdictions would incur to comply with these requirements.
  
• Federal regulation requires local jurisdictions to annually report their actual and projected costs for meeting storm water requirements to the regional boards. However, the SWRCB has not provided guidance to local jurisdictions on how to track or report their storm water management expenditures, and as a result, the costs that local jurisdictions reported have been inconsistent.
  
• The regional boards did not always consider the overall cost of storm water management that local jurisdictions paid.
  
• The regional boards did not obtain all relevant information on some water bodies before imposing storm water requirements, potentially resulting in local jurisdictions incurring excessive costs or failing to meet water quality goals. Obtaining this information is important, as it can have a substantial effect on the pollutant control plans the regional board ultimately develops.
  

1. Financial Capability Assessments (FCA): An FCA is an analysis of a community's ability to pay for/deliver water services, with a focus on stormwater and wastewater requirements. FCAs consider a wide range of financial capacity factors, including residential capability (e.g. median household income) and the financial strength of permittee organization. Financial strength considers bond ratings, debt, median household income, unemployment rate, tax revenue, and property tax rates.

Comments

1. Purpose of Bill. According to the author, “the Clean Water Act (CWA) requires local agencies to obtain permits to operate their stormwater systems. Permits serve as licenses for permittees to discharge stormwater into rivers, lakes, ocean or streams (known as receiving waters). Many local governments are also required to implement waste load allocations for pollutants, in accordance with strict compliance schedules. Cities and counties must also comply with the Safe Drinking Water Act and ongoing operations and maintenance costs for drinking water and waste water systems. The totality of these stormwater, wastewater, and drinking water regulations, places a heavy, sometimes impossible, liability on local governments, and in the case of stormwater, there is no dedicated funding for compliance. Instead, communities are forced to make tradeoffs between funding permit requirements and funding other local services paid for out of the general fund.
   

“California’s own State Auditor released a report on March 1, 2018, stating that Regional Water Boards do not adequately consider the costs that local jurisdictions face in compliance, and that the State Water Board lacks expertise in municipal finance and accounting. Without closing these gaps, local communities will continue to be faced with ever-increasing unfunded regulations and no defined process for prioritizing compliance.”

1. Are FCA guidelines useful? As outlined above, SWRCB and the nine regional boards are responsible for regulating stormwater discharges under the federal Clean Water Act and the NPDES permit program. The Municipal Storm Water Permitting Program regulates stormwater from MS4s. Under the program, municipal sewer system operators must comply with the MS4 permits issued by SWRCB or the regional boards. Under no circumstances can a regional board lower the standards that have been set by CWA.
   

AB 2538 requires SWRCB to establish FCA guidelines for MS4 permittees, which is an analysis of a community’s financial capability to pay for or deliver water services, with a focus on stormwater and wastewater requirements.

The financial capability assessment methodology required by this bill is designed to provide information on the capabilities of a municipality to pay for the costs of implementing the regulatory requirements associated with their municipal stormwater permit. It seems that the author’s intent is to help lessen the impact of the stormwater permits on local agencies, including potentially reduced regulatory requirements or longer compliance timelines, to the extent that municipalities can demonstrate that they do not have sufficient funding available to pay for the costs of implementing the permit requirements.

When developing FCA guidelines, there is an assumption that the current financial situation of the MS4 is fixed and that municipalities are unable to raised additional revenues or obtain financial assistance from the state to help them comply with the stormwater permit requirements. It does not take into consideration other sources of money that could be coming to the MS4, such as bond moneys, state programs, or local programs or taxes. In fact, the State Water Board alone has provided hundreds of millions of dollars in assistance to local agencies for stormwater projects to help them comply with their permit requirements, and Proposition 68, recently passed by the voters, provides additional funding for stormwater projects. The Department of Water Resources also provides funding for stormwater projects through the Integrated Regional Water Management Program.  Additionally, local governments themselves have the ability to raise revenues to pay for stormwater projects. Los Angeles County currently is considering assessing a tax to pay for stormwater projects which will help them comply with their permit requirements.  As a result, information on a municipalities current financial capability to comply with stormwater permit requirements is not useful, as it does not take into account other financial options that may be available to them. 

Additionally, the federal CWA requires that the regional boards set water quality standards at a level to protect beneficial uses such as swimming, fish and wildlife and drinking water; it does not allow the regional boards to consider a municipality’s ability to pay in setting the stormwater permit standards.  So even if the regional boards were to develop the guidelines as required by the bill, the regional boards could not revise the water quality standards based on a municipality’s financial capability assessment. 

The CWA does allow the regional boards to adjust the timeframes for municipalities to come into compliance with their permits, but the regional boards already actively work with municipalities to adjust the timeframes for municipalities to come into compliance with their stormwater permits based on the municipality’s costs-of-compliance; often allowing municipalities 20 to 30 years to come into compliance with their stormwater permits.  Additionally, pursuant the findings of a recent audit by the State Auditor, SWRCB is in the process of developing guidelines to further assist municipalities in estimating and tracking the costs of compliance. These guidelines will provide useful information to assist the regional boards and municipalities to estimate the costs of compliance and to set reasonable compliance timeframes.

As a result, it appears that the financial capability assessment guidelines required by this bill will not yield any useful information.

1. Repeat bill. The contents of AB 2538 are very similar to last year’s SB 589 (Hernandez, 2017). The main difference between this year’s AB 2538 and last year’s SB 589 is the removal of the requirement for the Los Angeles regional board to use the guidelines as a pilot project. More minor changes include specifying the date by which the guidelines must be established, specifying that the guidelines be adequate and consistent with considering the costs to local jurisdictions, and requiring SWRCB to document sources it uses to develop an estimate of local costs and overall cost of stormwater management. SB 589 was held on the Senate Appropriations Committee Suspense File.
   

Related/Prior Legislation

SB 541 (Allen, Chapter 811, Statutes of 2017) requires the SWRCB, in consultation with the regional water quality control boards, and the Division of the State Architect within the Department of General Services, to recommend best design and use practices for stormwater and dry weather runoff capture practices that can be applied to new, reconstructed, or altered public schools, including school grounds.

SB 589 (Hernandez, 2017) was very similar to AB 2538, with the exception that SB 589 was not amended to remove the requirement that the regional water quality board for the Los Angeles region use the guidelines in a pilot project. SB 589 did not get out of Senate Appropriations Committee.

SB 633 (Portantino, 2017) requires a regional board preparing a water quality control plan for a region having a population in excess of 10 million residents to additionally consider opportunities to convey stormwater to a regional site within the watershed in which the stormwater originated for capture and infiltration and to consider the opportunity for stormwater capture when determining past and probable future beneficial uses of water, as specified. SB 633 did not get out of Senate Appropriations Committee.

SOURCE:

San Gabriel Valley Council of Governments

SUPPORT:

Association of California Water Agencies

City of Duarte

City of El Monte

City of Glendora

City of Thousand Oaks

City of West Covina

Engineering Contractors’ Association

League of California Cities, Los Angeles County Division

San Gabriel Valley Council of Governments (sponsor)

OPPOSITION:

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 2538

Author:(Rubio)

As Amended Ver:May 25, 2018

Majority vote

SUMMARY: Requires the State Water Resources Control Board (State Water Board) to establish financial capability assessment (FCA) guidelines for municipal separate storm sewer system (MS4) permittees that are adequate and consistent when considering the costs to local jurisdictions. Specifically, this bill:

1. Requires, by July 1, 2019, the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, including costs incurred in previous years.
2. Requires the State Water Board, in developing the guidelines, to document any source it uses to develop an estimate of local costs and the overall cost of stormwater management.
3. Requires the State Water Board to consider at least both of the following United States Environmental Protection Agency (US EPA) policies in drafting the FCA guidelines: Combined Sewer Overflows – Guidance for FCA and Schedule Development, dated February 1997; and, Affordability Criteria for Small Drinking Water Systems: An EPA Science Advisory Board Report, dated December 2002.

FISCAL EFFECT: According to the Assembly Appropriations Committee, enactment of this bill would result in costs of approximately $1.75 million to the State Water Board (Water Discount Permit Fund) for staff in fiscal years 2017-18 through 2021-22 and contract fees.

In addition, the bill would result in unknown potential costs to the University of California system or California State University system if either or both participates, some or all of which may be recovered from fees.

COMMENTS:

Stormwater: Stormwater is water from rain or snow melt that runs off surfaces such as rooftops, paved streets, highways, or parking lots and can carry with it pollutants such as oil, pesticides, herbicides, sediment, trash, bacteria, and metals. The runoff can then drain directly into a local stream, lake, or bay. Often, the runoff drains into storm drains which eventually drain untreated water into a local body of water. Both the US EPA and the Regional Water Boards have determined that stormwater and urban runoff are significant sources of water pollution that can threaten aquatic life and public health.

Regulating stormwater: To curb the harmful effects of pollution from stormwater runoff, federal law requires states to set restrictions on the amount of pollutants that can flow into water bodies and requires local jurisdictions, including cities, counties, and other public entities, to obtain storm sewer permits.

The federal Clean Water Act (CWA) and federal stormwater regulations require MS4s subject to National Pollutant Discharge Elimination System (NPDES) permits to reduce the pollutants in stormwater discharges to the maximum extent practicable (MEP). The regulations require the implementation of best management practices (BMPs) to meet the MEP discharge standard. BMPs include both source controls and treatment measures. MS4s are to implement an effective combination of these BMPs to reduce pollutants in stormwater discharges.

Cost of MS4 compliance: According to the most recent estimate by the US EPA, the nation’s wastewater treatment facilities will need $271 billion over the next 20 years to meet the water quality objectives of the CWA. In 2012, the LA Regional Water Board issued a new MS4 stormwater permit in accordance with the NPDES permit pursuant to the CWA. That MS4 permit enacted some of the strictest permit standards with more than 30 pollutants being monitored. The total cost of compliance with the MS4 permit for the County of Los Angeles exceeds $20 billion.

Determining compliance affordability: An FCA is an analysis of a community's ability to pay for/deliver water services, with a focus on stormwater and wastewater requirements. FCAs consider a wide range of financial capacity factors, including residential capability (e.g. median household income (MHI)) and the financial strength of permitted organization. Financial strength considers bond ratings, debt, MHI, unemployment rate, tax revenue, and property tax rates.

This bill requires the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, and specifies US EPA policies to consider when drafting the FCA guidelines.

State Audit on costs of stormwater regulation: On March 1, 2018, the California State Auditor released Report 2017‑118, State and Regional Water Boards: They Must Do More to Ensure That Local Jurisdictions’ Costs to Reduce Storm Water Pollution Are Necessary and Appropriate, and found that when imposing stormwater requirements, the State Water Board and the Regional Water Boards lack consistent information on the costs that local jurisdictions incur in complying with storm water requirements, and have not adequately considered the costs that local jurisdictions would incur to comply with these requirements. The Report also states that the Regional Water Boards did not obtain all relevant information on some water bodies before imposing storm water requirements, potentially resulting in local jurisdictions incurring excessive costs or failing to meet water quality goals. Obtaining this information is important, as it can have a substantial effect on the pollutant control plans the regional board ultimately develops.

This bill is responsive to the findings of the aforementioned State Audit report. The bill finds and declares that, "A FCA is necessary to set achievable schedules for water quality objectives in water quality control plans under the Porter-Cologne Water Quality Control Act (Division 7 (commencing with Section 13000) of the Water Code) and to develop integrated regional water management plans." This bill would compel the creation of FCA guidelines for compliance with MS4 permit holders that take costs of compliance mechanisms into consideration.

Analysis Prepared by: Paige Brokaw / E.S. & T.M. / (916) 319-3965 FN: 0003387

Date of Hearing: May 9, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 2538

Author:(Rubio) – As Amended Ver:April 26, 2018

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the State Water Resources Control Board (State Water Board) to establish financial capability assessment (FCA) guidelines for municipal separate storm sewer system (MS4) permittees that are adequate and consistent when considering the costs to local jurisdictions. Specifically, this bill:

1. Requires, July 1, 2019, the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, including costs incurred in previous years.
2. Requires the State Water Board, in developing the guidelines, to document any source it uses to develop an estimate of local costs and the overall cost of stormwater management.
3. Requires the State Water Board to consider both of the following, but not limited to, United States Environmental Protection Agency (US EPA) policies in drafting the FCA guidelines:
   1. “Combined Sewer Overflows—Guidance for FCA and Schedule Development,” dated February 1997.
   2. “Affordability Criteria for Small Drinking Water Systems: An EPA Science Advisory Board Report,” dated December 2002.
4. Requires the Los Angeles Regional Water Quality Control Board (LA Regional Water Board) to use the guidelines developed by the State Water Board,in a pilot project conducted to assess whether a financial capability analysis can help municipalities implement a MS4 permit.
5. Requires the State Water Board to oversee the use of the guidelines and, upon completion of the pilot project, to make statewide recommendations or site-specific recommendations based on feasibility and the need to address the most prominent pollutants.

FISCAL EFFECT:

1. Approximately $1.75 million to the SWRCB (Water Discount Permit Fund) for staff in fiscal years 2017-18 through 2021-22 and contract fees.
2. Unknown potential costs to the University of California system or California State University system if either or both participates, some or all of which may be recovered from fees. (The language does not explicitly require or prohibit reimbursement for costs incurred.)

COMMENTS:

1. Purpose. According to the author:

The Clean Water Act (CWA) requires local agencies to obtain permits to operate their stormwater systems. Permits serve as licenses for permittees to discharge stormwater into rivers, lakes, ocean or streams (known as receiving waters). Many local governments are also required to implement waste load allocations for pollutants, in accordance with strict compliance schedules. Cities and counties must also comply with the Safe Drinking Water Act and ongoing operations and maintenance costs for drinking water and waste water systems. The totality of these stormwater, wastewater, and drinking water regulations, places a heavy, sometimes impossible, liability on local governments, and in the case of stormwater, there is no dedicated funding for compliance. Instead, communities are forced to make tradeoffs between funding permit requirements and funding other local services paid for out of the general fund.

California’s own State Auditor released a report on March 1, 2018, stating that Regional Water Boards do not adequately consider the costs that local jurisdictions face in compliance, and that the State Water Board lacks expertise in municipal finance and accounting. Without closing these gaps, local communities will continue to be faced with ever-increasing unfunded regulations and no defined process for prioritizing compliance.

1. State Audit Findings. On March 1, 2018, the California State Auditor released Report 2017‑118, “State and Regional Water Boards: They Must Do More to Ensure That Local Jurisdictions’ Costs to Reduce Storm Water Pollution Are Necessary and Appropriate.” The report found the following:

• When imposing stormwater requirements, the State Water Board and the Regional Water Boards lack consistent information on the costs local jurisdictions incur in complying with storm water requirements, and have not adequately considered the costs local jurisdictions would incur to comply with these requirements.
• Federal regulation requires local jurisdictions to annually report their actual and projected costs for meeting storm water requirements to the regional boards. However, the State Water Board has not provided guidance to local jurisdictions on how to track or report their storm water management expenditures, and as a result, the costs that local jurisdictions reported have been inconsistent.
• The Regional Water Boards did not always consider the overall cost of storm water management that local jurisdictions paid.
• The Regional Water Boards did not obtain all relevant information on some water bodies before imposing storm water requirements, potentially resulting in local jurisdictions incurring excessive costs or failing to meet water quality goals. Obtaining this information is important, as it can have a substantial effect on the pollutant control plans the regional board ultimately develops.

1. Background. Municipal stormwater systems discharge both waste and pollutants. State law controls waste discharges impacting water; federal law regulates discharges of pollutants. Both state and federal law require a permit to operate such systems. Municipal separate stormwater systems (called MS4) are owned or operated by a public agency with jurisdiction over waste disposal and designed or used for collecting or conveying stormwater.
2. Financial Capability Assessment Framework. Population growth increased demand on water supply, aging infrastructure, and increases in impervious surfaces exacerbate already complex local water issues. As a result, many local governments face economic challenges to implementing programs and investing in wastewater and stormwater infrastructure necessary to improve water quality and attain federal Clean Water Act (CWA) objectives. Recognizing this challenge, the US EPA identified, in the framework, the key elements it uses in working with permittees to evaluate how their financial capability should influence schedules. The framework attempted to implement new approaches that would achieve water quality goals at lower costs and in a manner that addresses the most pressing problems first.

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

Date of Hearing: April 24, 2018

ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS

Bill Quirk, Chair

ABPCA Bill Id:AB 2538 (

Author:Rubio) – As Amended Ver:March 23, 2018

SUBJECT: Municipal separate storm sewer systems: financial capability analysis: pilot project

SUMMARY: Requires the State Water Resources Control Board (State Water Board) to establish financial capability assessment (FCA) guidelines for municipal separate storm sewer system (MS4) permittees that are adequate and consistent when considering the costs to local jurisdictions. Specifically, this bill:

1. Requires, by an unspecified time frame, the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, including costs incurred in previous years.
2. Requires the State Water Board, in developing the guidelines, to document any source it uses to develop an estimate of local costs and the overall cost of stormwater management.
3. Requires the State Water Board to consider both of the following, but not limited to, United States Environmental Protection Agency (UE EPA) policies in drafting the FCA guidelines:
   1. Combined Sewer Overflows—Guidance for FCA and Schedule Development, dated February 1997; and,
   2. Affordability Criteria for Small Drinking Water Systems: An EPA Science Advisory Board Report, dated December 2002.
4. Requires the Los Angeles Regional Water Quality Control Board (LA Regional Water Board) to use the guidelines developed by the State Water Board in a pilot project conducted to assess if a financial capability analysis can be effectively used to help municipalities implement a MS4 permit.
5. Requires the State Water Board to oversee the use of the guidelines and, upon completion of the pilot project, to make statewide recommendations or site-specific recommendations based on feasibility and the need to address the most prominent pollutants.

EXISTING LAW:

1. Establishes the federal Clean Water Act (CWA) to regulate discharges of pollutants into the waters of the United States and regulate quality standards for surface waters. (33 United States Code (USC) §1251 et seq.)
2. Establishes the National Pollutant Discharge Elimination System (NPDES) permit program requiring the State Water Board and the nine California regional water quality control boards to prescribe waste discharge requirements which, among other things, regulate the discharge of pollutants in stormwater, including municipal stormwater systems. (33 USC § 1342)
3. Prohibits, pursuant to the Porter-Cologne Water Quality Control Act, the discharge of pollutants to surface waters unless the discharger obtains a permit from the State Water Board. (Water Code (WC) § 13000, et seq.)
4. Delegates to California’s Regional Water Quality Control Boards (Regional Water Boards) the ability to adopt water quality standards within their region of jurisdiction. (WC § 13240)
5. Requires the State Water Board to establish an online resource center that addresses measures available for municipalities to comply municipal stormwater permit requirements. (WC § 13383.9)

FISCAL EFFECT: Unknown.

COMMENTS:

Author's statement: According to the author,

"The Clean Water Act (CWA) requires local agencies to obtain permits to operate their stormwater systems. Permits serve as licenses for permittees to discharge stormwater into rivers, lakes, ocean or streams (known as receiving waters). Many local governments are also required to implement waste load allocations for pollutants, in accordance with strict compliance schedules. Cities and counties must also comply with the Safe Drinking Water Act and ongoing operations and maintenance costs for drinking water and waste water systems. The totality of these stormwater, wastewater, and drinking water regulations, places a heavy, sometimes impossible, liability on local governments, and in the case of stormwater, there is no dedicated funding for compliance. Instead, communities are forced to make tradeoffs between funding permit requirements and funding other local services paid for out of the general fund.

California’s own State Auditor released a report on March 1, 2018, stating that Regional Water Boards do not adequately consider the costs that local jurisdictions face in compliance, and that the State Water Board lacks expertise in municipal finance and accounting. Without closing these gaps, local communities will continue to be faced with ever-increasing unfunded regulations and no defined process for prioritizing compliance."

Stormwater: Stormwater is water from rain or snow melt that runs off surfaces such as rooftops, paved streets, highways, or parking lots and can carry with it pollutants such as oil, pesticides, herbicides, sediment, trash, bacteria, and metals. The runoff can then drain directly into a local stream, lake, or bay. Often, the runoff drains into storm drains which eventually drain untreated water into a local body of water. Both the US EPA and the Regional Water Boards have determined that stormwater and urban runoff are significant sources of water pollution that can threaten aquatic life and public health. However, stormwater may also act as a resource and recharge to groundwater when properly managed.

Why regulating stormwater is important: Pollution often contaminates stormwater runoff, resulting in a toxic soup of runoff entering California's water ways. Motor oil, cigarette butts, metals, trash, animal feces, bacteria, and pesticides get swept up in stormwater drains and runoff and lead to exceedances of total maximum daily loads and contamination of the water sources where the runoff flows.

Water bodies throughout the state are continually contaminated by various pollutants. According to the State Water Board, 1,357 of the 2,623 segments of water bodies in California contain harmful levels of one or more types of pollutants, such as bacteria, metals, and pesticides. Excessive amounts of these pollutants can detrimentally affect the environment, including the health of humans and aquatic life. For example, high levels of certain types of bacteria in a water body can cause serious illnesses, such as gastrointestinal illnesses, respiratory illnesses, and skin infections in people who come into contact with the water body. In Los Angeles County, approximately 100 million gallons of contaminated water and debris drain through the storm drain system each dry day.

How stormwater is regulated: To curb the harmful effects of pollution from stormwater runoff, federal law requires states to set restrictions on the pollutants that can be discharged into water bodies and requires local jurisdictions, including cities, counties, and other public entities, to obtain storm sewer permits.

Specifically, the federal CWA defines stormwater discharges from industrial activities and municipal systems as point sources subject to the NPDES Permit Program. The CWA directed the US EPA to publish regulations to define the discharges subject to NPDES permits and to establish a framework for regulating these discharges. The stormwater regulations promulgated by US EPA established a two-phase approach for municipal systems. The first phase began in 1990 and addressed discharges from MS4s that serve populations greater than 100,000 people. The second phase began in 1999 and addressed discharges from MS4s that serve populations fewer than 100,000 and are located in urban areas. The State Water Board and the Regional Water Boards can apply the Phase I or Phase II rules to areas with smaller populations as needed to protect water quality. Local jurisdictions that operate municipal stormwater systems must obtain NPDES permit coverage for discharges of municipal stormwater to waters of the United States.

The CWA and federal stormwater regulations require MS4s subject to NPDES permits to reduce the pollutants in stormwater discharges to the maximum extent practicable (MEP). The regulations require the implementation of best management practices (BMPs) to meet the MEP discharge standard. BMPs include both source controls and treatment measures. MS4s are to implement an effective combination of these BMPs to reduce pollutants in stormwater discharges.

In California, MS4 permits also require permittees to reduce the discharge of pollutants so that water quality standards are met. However, the permits do not specify strict compliance with numeric water quality standards. Rather, the MS4 permits require the compliance with standards through an iterative approach. Permittees implement BMPs according to storm water management plans. If the current level of effort does not achieve water quality standards, additional BMPs are implemented until compliance has been achieved.

Cost of MS4 compliance: According to the most recent estimate by the US EPA, the nation’s wastewater treatment facilities will need $271 billion over the next 20 years to meet the water quality objectives of the CWA.

In 2012, the LA Regional Water Board issued a new MS4 stormwater permit in accordance with the NPDES permit pursuant to the CWA. That MS4 permit enacted some of the strictest permit standards with more than 30 pollutants being monitored. The total cost of compliance with the MS4 permit for the County of Los Angeles exceeds $20 billion.

Southern California cities have some of the most expensive MS4 compliance costs nation-wide. The City of Industry cites its annual costs at $476,261,000. The City of Monrovia has estimated its cost to address stormwater would result in an annual parcel cost of $1,334 for 30 years. The City of Carson estimates its cost of addressing stormwater will consume an amount equivalent to more than 13% of its operating budget for the first ten years.

Compliance is critical for protecting public health and the environment, but fines for non-compliance can add up, making compliance even more costly. Federal and state law allows Regional Water Boards to levy fines for non-compliance.

According to the LA Regional Water Board, failure to comply with the MS4 Permit conditions could result in the following non-compliant fines: mandatory minimum $3,000/day per violation, and can go up to a maximum of $10,000/day; and, maximum $25,000/day per violation if imposed by state court.

Furthermore, violations of federal CWA can be enforced by US EPA, and federal penalties could reach $37,500/day.

Existing efforts to make resources available: Over the last decade, the Legislature has recognized that assistance to local governments to fund stormwater projects was warranted. The state has provided funding through grants to local governments through bond funding and other programs. Funds through loan programs would also have been available, but as most local governments do not have designated fees for stormwater to repay loans, no loans have been made. Stormwater projects were eligible for funds from bonds as follows:

• The Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002 (Proposition 40) provided the State Water Board with $15 million for Urban Storm Water grants;
• The Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006 (Proposition 84) made $90 million available to the State Water Board for matching grants to local public agencies for the reduction and prevention of stormwater contamination of rivers, lakes, and streams; and,
• The Water Quality, Supply, and Infrastructure Improvement Act of 2014 (Proposition 1) authorized $200 million to the State Water Board for providing matching grants to public agencies, nonprofit organizations, public utilities, state and federally recognized Indian tribes, and mutual water companies for multi-benefit stormwater projects.

Despite these funding opportunities, the State Auditor has found that because of the significant costs to address stormwater pollution, the demand for grants from the state for stormwater projects has far exceeded the funding available. In 2016, the State Water Board received grant applications requesting $322 million, and it awarded $105 million for 27 projects.

Why additional resources are needed: In spite of the aforementioned funding sources, local governments need more assistance to comply with stormwater requirements. Many jurisdictions in Southern California are struggling to comply with new standards and upcoming enforcement of MS4 permits. While Proposition 1 most recently offered funds to help, the cost remains prohibitive for some municipalities.

Financial Capability Assessments (FCA): An FCA is an analysis of a community's ability to pay for/deliver water services, with a focus on stormwater and wastewater requirements. FCAs consider a wide range of financial capacity factors, including residential capability (e.g. median household income or MHI) and the financial strength of permittee organization. Financial strength considers bond ratings, debt, MHI, unemployment rate, tax revenue, and property tax rates.

Determining compliance affordability: AB 2538 requires the State Water Board to establish FCA guidelines for MS4 permittees that are adequate and consistent when considering the costs to local jurisdictions, and specifies US EPA policies to consider when drafting the FCA guidelines.

A long-standing concern for local governments is the US EPA’s process for evaluating how much communities can afford for CWA-mandated and other water infrastructure improvements. For communities to meet CWA requirements, affordability considerations can influence schedules established by US EPA and states. In assessing municipalities’ capability to finance infrastructure upgrades, the US EPA relies significantly on guidance issued in 1997.

That guidance, Combined Sewer Overflows—Guidance for FCA and Schedule Development, is intended to provide general boundaries to aid the US EPA, states, and cities in negotiating reasonable and effective schedules for implementing infrastructure upgrades.

It uses a two-phase approach to assess financial capability. First, the US EPA identified the combined impact of wastewater and control costs on individual households, calculating average costs per household as a percentage of the local MHI. This phase analyzes the residential share of current and planned controls needed to meet CWA requirements using a value range of whether the costs impose a "low" (less than 1% of MHI), "mid-range" (1%-2% of MHI), or "high" (more than 2% of MHI) financial impact on residential users, yielding a Residential Indicator. Second, the US EPA develops Financial Indicators to evaluate the debt, socioeconomic, and financial conditions that affect the community’s financial capability as "weak," "mid-range," or "strong." The combined indicators measure a community’s ability to afford compliance with CWA regulations.

For several years, municipalities have urged the US EPA to revise the guidance, arguing that it should take into consideration a larger set of factors and that MHI is a misleading indicator of a community’s ability to pay. In some cases, local governments have argued cost impacts for an entire community may be in the US EPA’s "mid-range," although impacts in portions of the community (e.g., low-income neighborhoods) are more than 2% of MHI. Alternative household affordability metrics could include average water rates as a percentage of income for potentially vulnerable populations, or expected future water rate increases, or using other indicators of economic need such as the unemployment rate or poverty rate, or percentage of households receiving public assistance. Further, they say that affordability should be tailored to each local government.

Permit requirements have changed since 1997, as well as compliance technologies and wherewithal, making this report from over twenty-years ago seem dated to include in the citations the State Water Board is required to consider under this bill; yet, the US EPA has repeatedly insisted that it is not necessary to revise this guidance, stating that it already provides flexibility for financially disadvantaged municipalities.

According to the March 2017 report prepared by the Congressional Research Service, [US EPA] Policies Concerning Integrated Planning and Affordability of Water Infrastructure, pressed by state and local municipalities about the financial challenges that they face in addressing needs for wastewater and stormwater control projects, in 2012 the US EPA issued an integrated permitting and planning policy. The intention of the policy is to provide communities with flexibility to prioritize and sequence needed water infrastructure investments so that limited public dollars can be invested in ways that each municipality finds most valuable.

That report notes that, in determining affordability, municipalities can factor in the costs to manage stormwater flows, along with combined sewer overflows and wastewater treatment. The 1997 guidance, however, did not include specific consideration of stormwater.

State Audit on costs of stormwater regulation: On March 1, 2018, the California State Auditor released Report 2017‑118, State and Regional Water Boards: They Must Do More to Ensure That Local Jurisdictions’ Costs to Reduce Storm Water Pollution Are Necessary and Appropriate, and found the following:

• When imposing stormwater requirements, the State Water Board and the Regional Water Boards lack consistent information on the costs that local jurisdictions incur in complying with storm water requirements, and have not adequately considered the costs that local jurisdictions would incur to comply with these requirements.

• Federal regulation requires local jurisdictions to annually report their actual and projected costs for meeting storm water requirements to the regional boards. However, the State Water Board has not provided guidance to local jurisdictions on how to track or report their storm water management expenditures, and as a result, the costs that local jurisdictions reported have been inconsistent.
• The Regional Water Boards did not always consider the overall cost of storm water management that local jurisdictions paid.
• The Regional Water Boards did not obtain all relevant information on some water bodies before imposing storm water requirements, potentially resulting in local jurisdictions incurring excessive costs or failing to meet water quality goals. Obtaining this information is important, as it can have a substantial effect on the pollutant control plans the regional board ultimately develops.

Need for the bill: AB 2538 is responsive to the findings of the aforementioned State Audit report.

The bill finds and declares that, "A FCA is necessary to set achievable schedules for water quality objectives in water quality control plans under the Porter-Cologne Water Quality Control Act (Division 7 (commencing with Section 13000) of the Water Code) and to develop integrated regional water management plans."

A 2017 US EPA presentation, Financial Capability Assessments & Stormwater Finance Plans, stated that Porter-Cologne is vague about consideration of economic factors. While California is governed by the 1969 Porter-Cologne Act, it is not subject to direct regulation by the US EPA; therefore, US EPA's FCA does not apply to California.

The San Gabriel Valley Council of Governments (SGVCOG), which is a joint powers authority comprised of 31 cities, three Los Angeles County Supervisorial Districts, and three Municipal Water Districts located in the San Gabriel Valley of Southern California, unanimously adopted Resolution 18-02 laying out their stormwater legislative agenda for the year. One element of that agenda addresses FCA: "Modify the Porter-Cologne Water Quality Control Act to adopt FCA guidance issued by the EPA, in order to address the total cost of all water and stormwater regulations on municipalities and households." SGVCOG argues that FCA should be codified in federal law and extended to states not directly governed by the US EPA.

Short of that, and short of requiring FCA in California law, AB 2538 would compel the creation of FCA guidelines for compliance with MS4 permit holders that take costs of compliance mechanisms into consideration.

Putting state FCA guidelines into practice: AB 2538 would require the LA Regional Water Board to use the guidelines developed by the State Water Board in a pilot project conducted to assess if a financial capability analysis can be effectively used to help municipalities to implement a MS4 permit.

Committee amendments:

1. The bill includes a blank space in section (a) where a date should be included by which the State Water Board should complete its FCA guidelines. Given the availability of federal resources, the Committee may wish to consider filling in that blank with July 1, 2019.

On this amendment, the author may wish to consider working with the State Water Board to determine a timeframe that may be better suited to the State Water Board's workload, should they need more or less time, and whether that guidance can be incorporated in the development of permit conditions in the next permit cycle up for renewal.

1. There is no mandated timeline in section (b) under which the LA Regional Board must do the pilot project. The Committee may wish to consider clarifying that the LA Regional Water Board shall initiate the pilot project within 60 days of completion of the State Water Board's FCA guidelines.

Related legislation: Last year, the Legislature considered SB 589 (Hernández, 2017) to require the State Water Board to establish FCA guidelines by an unspecified date and require the Los Angeles Regional Water Board to use the guidelines in a pilot project conducted by an independent or educational entity for assessing the financial capability of municipalities to implement a MS4 permit. That bill was held in Senate Appropriations Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

City of Glendora

Engineering Contractors' Association

San Gabriel Valley Council of Governments

Opposition

None on file

Analysis Prepared by: Paige Brokaw / E.S. & T.M. /