CC - Item 8B - Possible Support for Senate Bill 589 ieE b f
�� ROSEMEAD CITY COUNCIL
STAFF REPORT
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TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: BILL R. MANIS, CITY MANAGER ¢"‘
DATE: MARCH 28, 2017
SUBJECT: POSSIBLE SUPPORT FOR SENATE BILL 589 (AGENDIZED BY
COUNCILMEMBER CLARK)
SUMMARY
This item is presented to the City Council at the request of Councilmember Clark. Please see a
proposed draft letter of support (Attachment A) and the language for Senate Bill (SB) 589
(Attachment B).
STAFF RECOMMENDATION
Discuss and provide direction to staff.
FISCAL IMPACT —None
STRATEGIC PLAN IMPACT—None
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Prepared by:
Marc Donohue, City Clerk
Attachment A: Draft Letter of Support—City of Rosemead
Attachment B: SB 589 Language
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Attachment A
Draft Letter of Support — City of Rosemead
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March 28, 2017
The Honorable Ed Hernandez, O.D.
California State Senate
State Capitol, Room 2080
Sacramento, CA 95814
FAX: (916) 651-4922
RE: SB 589 Municipal Separate Storm Sewer Systems: Financial Capability Analysis
NOTICE OF SUPPORT
Dear Senator Hernandez:
The City of Rosemead strongly supports your Senate Bill (SB) 589, which codifies U.S.
Environmental Protection Agency's (EPA) 2014 Financial Capability Analysis allowing the
state's Water Quality Control Boards and permittees to consider alternative compliance
pathways when communities are addressing the integrated utilities of drinking water, sanitary
sewer, flood control, and stormwater programs.
A U.S. Conference of Mayors (USCM) report, Public Water Costs Per Household: Assessing
Financial Impact of EPA Affordability Criteria for California Cities found that integrated water
quality requirements of drinking water, sanitary sewer, flood control, and storm water programs
require significant investments which often compete with other public services. The study
reviewed over 30 California cities (a majority in Los Angeles County) to EPA's affordability
criteria under the Clean Water Act and found that many communities are paying greater than
4.5% of Medium Household Income on water costs. This creates what EPA considers a "high
burden" on the average household. Since this study was completed prior the implementation the
most recent Multiple Separate Storm Sewer System (MS4) permit adopted by the Los Angeles
Regional Water Quality Control Board, some of the strongest water quality guidelines in the
county, the financial burdens arc likely higher.
The City of Rosemead reported expending over$500,000 in Fiscal Year 2015-2016, and projects
to expend over $750,000 in Fiscal Year 2016-2017 to implement a stormwater compliance
monitoring program and upgraded its stormwater catch basins. By 2037. The Upper Los
Angeles River Watershed Management Group (ULAR WMG) Enhanced Watershed
Management Program (EWMP) Plan has identified over $110,110,000 in needed capital
expenditures for the City of Rosemead alone, with another $3,760,000 per year in future
operation and maintenance costs to achieve MS4 permit compliance.
SB 589 does not alter or waive water quality standards, but offers sustainable compliance options
for MS4 permittees and particularly disadvantaged communities, which are poorly equipped to
handle the proposed extraordinary diversion of meager general fund resources to expanded state
programs. For these reasons, the City of Rosemead supports passage of SB 589.
Sincerely,
Sandra Armenta
Mayor
City of Rosemead
cc: Susan Reyes, Office of Senator Hernandez, susan.revesAsen.ca.gov
Ed Chau.Assembly Member, District 49, assemblvmember.chau(alassemblv.ca.uov
Jennifer Quan, Regional Public Affairs Manager, iquan,(a cacities.ore
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Attachment B
SB 589 Language
SENATE BILL No. 589
Introduced by Senator Hernandez
February 17,2017
An act to add Section 13263.8 to the Water Code, relating to water
quality.
LEGISLBrI V E COUNSEL'S DIGEST
SB 589, as introduced, Hernandez. Municipal separate storm sewer
systems: financial capability analysis.
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 apply and ensure compliance
with the federal Clean Water Act and 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 a regional board or the state board, when
approving a municipal separate storm sewer system permit,to establish
schedules for compliance with water quality objectives in water quality
control plans after consideration of a financial capability analysis, that
includes, among other things, a consideration of the financial burden
to individual customers and the pemlittee's financial strength, as
prescribed. The bill would require a regional board or the state board
to renegotiate a schedule for compliance, alternative compliance
pathways, or both if the financial burden to individual customers is
high, as prescribed. The bill would require the regional board or state
board to consider if the permittee's financial strength is weak in
negotiating schedules for compliance and consideration of alternative
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compliance pathways. The bill would authorize the regional board or
state board to revise an existing schedule for compliance if the board
finds certain extraordinary stressors.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
The people Ulrike State of California do enact as follows:
1 SECTION I. The Legislature finds and declares as follows:
2 (a) On November 24,2014,the federal Environmental Protection
3 Agency, Office of Enforcement and Compliance Assurance,
4 announced it had adopted a refined financial capability assessment
5 framework to aid in negotiating schedules for compliance with the
6 municipal federal Clean Water Act requirements and in developing
7 integrated management plans.
8 (b) The financial capability assessment framework does not
9 alter or waive water quality standards, but offers alternative
10 compliance pathways to municipal separate storm sewer system
11 permittees and achievable schedules for compliance for
12 disadvantaged communities.
13 (c) A financial capability assessment is necessary to set
14 achievable schedules for water quality objectives in water quality
15 control plans under the Porter-Cologne Water Quality Control Act
16 (Division 7(commencing with Section 13000)of the Water Code)
17 and to develop integrated regional water management plans.
18 SEC. 2. Section 13263.8 is added to the Water Code, to read:
19 13263.8. (a) When approving a municipal separate storm sewer
20 system permit,a regional board and the state board shall establish
21 schedules for compliance with water quality objectives in water
22 quality control plans after consideration of a financial capability
23 analysis.
24 (b) As used in this section:
25 (1) "Financial strength indicator"means the municipal separate
26 storm sewer system permittee's financial strength, taking into
27 consideration metrics in the categories of debt indicators,
28 socioeconomic indicators, and financial management indicators
29 as described in paragraph (3) of subdivision (c).
30 (2) `Residential indicator" means the financial burden to
31 individual customers as described in paragraph(1)of subdivision
32 (c). Two percent to 3.24 percent, inclusive, is a low burden, 3.25
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1 percent to 4.4 percent, inclusive, is a midrange burden, and 4.5
2 percent or higher is a high burden.
3 (c) A financial capability analysis shall consider the residential
4 indicator,residential impacts,and the financial strength indicator
5 as follows:
6 (1) The residential indicator shall assess the annual costs that
7 would be borne by residential households for water,flood control,
8 wastewater,compliance with this division,and municipal separate
9 storm sewer system permit-related expenses by dividing these
10 annual costs by the number of households. The residential share
I I of the annual costs of these obligations shall then be compared to
12 the mean household income of the service area. The mean
13 household income shall be calculated using current census data
14 and may be adjusted based on the current Consumer Price Index.
15 The compliance costs per household shall then be divided by the
16 adjusted mean household income to calculate the residential
17 indicator.
I8 (2) Where available,the following residential impact information
19 shall be considered:
20 (A) Income distribution.
21 (B) Poverty rates.
22 (C) Sewer and stormwatcr fees.
23 (D) Flood control costs.
24 (E) Water rates as a percentage of household income.
25 (F) Flood control.
26 (0) Sewer and water usage for classes of ratepayers or by type
27 of dwelling unit.
28 (H) The percent of households that own versus rent.
29 (I) The housing cost burden of the population.
30 (J) Average utility costs.
31 (K) Mortgage and insurance costs.
32 (L) The cost of living in the community.
33 (3) The financial strength indicator shall rate a municipal
34 separate storm sewer system permittee as weak,midrange,or strong
35 after consideration of the following factors:
36 (A) Bond ratings, except that bond ratings shall not be the sole
37 basis for evaluating financial capability.
38 (B) Service area unemployment data and trends, or other labor
39 market indicators, including unemployment on an absolute basis.
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I (C) Median household income, except that median household
2 income shall not be the sole consideration.
3 (D) Property tax revenue collection rates and the revenue
4 collection rate of the permittee's system.
5 (4) Consideration of the following factors, as applicable:
6 (A) Rate or revenue models, including, but not limited to,
7 dynamic financial planning models showing the projections of
8 impacts over the program period. All revenue sources tied to the
9 permit obligations may be included as appropriate.
10 (B) Rate determination studies used to develop and support rate
II increases.
12 (C) Historical population trends or population projections.
13 (D) State or local legal restrictions or limitations on property
14 taxes, other revenue streams, or debt levels.
15 (E) If available, anonymized data and trends on late payments,
16 disconnection notices,service terminations,uncollectible accounts,
17 or revenue collection rates.
18 (F) Historical increases in rates or other dedicated revenue
19 streams.
20 (0) Other costs or financial obligations, including, but not
21 limited to,those that relate to drinking water or other infrastructure
22 that significantly affect a municipal separate storm sewer system
23 permittee's ability to raise revenue.
24 (H) Circumstances that may affect a municipal separate storm
25 sewer system permittee's bond rating.
26 (I) Financial plans that show the implications of incurring
27 additional debt for a municipal separate storm sewer system
28 permittee's ability to secure financing, including projections of
29 metrics such as debt ratios, debt service coverage, debt per
30 customer,days of cash on hand,days of working capital,and other
31 metrics used by rating agencies.This data should be benchmarked
32 to metrics such as rating agency medians and relative to similar
33 entities. This will be especially relevant where the municipal
34 separate storm sewer system permittee does not have a bond rating.
35 (J) Extraordinary stressors such as those from natural disasters,
36 municipal bankruptcies,unusual capital market conditions,or other
37 situations that impact a municipal separate storm sewer system
38 permittee's ability to raise revenue or acquire needed financing.
39 (5) The cost to the community of compliance, including, but
40 not limited to, the residential impact,with the municipal separate
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I storm sewer system permit,watershed management plan,integrated
2 or enhanced watershed management plan,the federal Clean Water
3 Act (33 U.S.C. Sec. 1251 et seq.), the California Safe Drinking
4 Water Act(Chapter 4(commencing with Section 116270)of Part
5 12 of Division 104 of the Health and Safety Code), and this
6 division.
7 (6) The relative effectiveness and benefits of water quality
8 improvements.
9 (7) The reasonableness of the schedule for compliance and time
10 within which the municipal separate storm sewer system permittec
11 is required to achieve water quality objectives and comply with
12 permit requirements.
13 (8) A municipal separate storm sewer system perrnittee's current
14 municipal separate storm sewer system infrastructure, its function,
15 and its condition.
16 (9) Studies a city, a municipal separate storm sewer system
17 permittee, or a municipal separate storm sewer system permit
18 applicant would like to submit for consideration, including, but
19 not limited to, rate studies in support of the residential indicator
20 or financial strength indicator. The cost, if any, associated with
21 the development of any study submitted pursuant to this paragraph
22 shall be borne by the city,permittee, or applicant.
23 (d) (1) If the residential indicator finds a high burden, the
24 regional board or state board shall renegotiate a schedule for
25 compliance,alternative compliance pathways,or both, so that the
26 residential indicator shall result in a low burden or midrange
27 burden.
28 (2) If the financial strength indicator finds a weak condition,
29 the regional board or state board shall consider this condition in
30 negotiating schedules for compliance and consideration of
31 alternative compliance pathways.
32 (3) If an extraordinary stressor as described in subparagraph(J)
33 of paragraph(4) of subdivision (c)is found, the regional hoard or
34 state board may revise an existing schedule for compliance.
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