The following report provides the Law and Regulation (L&R) Committee with an update on the existing legislation and advocacy activities that staff has been engaged in.

This report focuses on two key state policy areas that Environmental Utilities staff have been engaged in during the 2017 state legislative session - (1) statewide long-term water use efficiency policy (Senate Bill (SB) 606 and Assembly Bill (AB) 1668); and, (2) a proposed statewide water tax (SB 623). These bills were a key focus for staff due to their potential to significantly impact city operations and the community.

Long-Term Water Use Efficiency (AB 1668 and SB 606) - SUPPORT

After months of intense advocacy by many stakeholders, two key long-term water efficiency bills – AB 1668 (Friedman) and SB 606 (Hertzberg/Skinner/Friedman) – were held in the State Legislature as it entered into recess on September 15, making the measures two-year bills.

Since early 2017, the City of Roseville, worked within a statewide coalition of water agencies to support AB 968 and AB 1654, by Assemblymember Blanca Rubio, which contained a range of policy proposals on long-term drought planning, enhanced reporting, water efficiency target setting, treatment of recycled water, enforcement of state water efficiency targets and other provisions.

There were other bills with competing policy proposals as well, specifically AB 1667 by Assemblymember Laura Friedman (Friedman), AB 1668 (Friedman), that contained the Governor’s Office and environmental community’s preferred policy proposals that included providing the State Water Resources Control Board with unlimited regulatory power on setting long-term water efficiency targets, aggressive enforcement and no acknowledgement of drought resilient investments by local agencies, such as the use of recycled water and other drought resilient investments.

Earlier in the summer, after significant work by stakeholders and Senator Robert Hertzberg (Hertzberg), Chair of Senate Natural Resources Committee, AB 968 and AB 1654 were parked and new policy was proposed, as a gut and amend, into AB 1668 (Friedman) and SB 606 by Senator Hertzberg and Senator Nancy Skinner. Senator Hertzberg’s proposed package was not everything that the City of Roseville wanted; however, it was a significant improvement and was movement in the right direction. Most specifically, Senator Hertzberg’s shared concern over handing over the SWRCB unlimited regulatory power on setting long-term water efficiency targets, was substantively addressed as detailed below.

Positive policy changes in AB 1668 (Friedman) and SB 606 (Hertzberg/Skinner/Friedman) included:

• One-time, limited opportunity by the State Water Resources Control Board to establish long-term water efficiency standards and targets, with any additional regulatory efforts needing additional statutory authority via new legislation.

This is contrasted with the original Governor’s Office proposal that sought to provide ongoing and unlimited regulatory authority to the State Water Resources Control Board.

• Establishing formal legislative oversight through compelling the Chair of the SWRCB and the Department of Water Resources (DWR) Director to appear several times in front of the Assembly Water Parks and Wildlife Committee and the Senate Natural Resources Committee, to report on progress on regulatory implementation, over the next few years.

This is contrasted with the original Governor’s Office proposal that had no role for the State Legislature in oversight and ensuring accountability by the regulating agencies - the Department of Water Resources (DWR) and the SWRCB.

• DWR and the SWRCB would also be subject to a review by the Legislative Analyst’s Office (LAO) and a published report to the State Legislature on regulatory implementation.

This is contrasted with the original Governor’s Office proposal that had no role for the State Legislature in oversight and ensuring accountability by the DWR and the SWRCB.

• Significant softening of enforcement provisions such as the removal of cease and desist authority for the SWRCB to impose upon water agencies struggling to comply with the law.

• Removal of arbitrary requirements on local water agencies, such as imposing a one-size fits all water emergency staging system with a specific requirement of when and under what conditions a local water emergency is declared, which served as an affront to local control and decision making.

After gut and amending of AB 1668 (Friedman) and SB 606 (Hertzberg/Skinner/Friedman) in late August, there were several weeks of negotiating behind the scenes by stakeholders in the water community and the environmental community.

On August 24, 2017, the cities of Roseville and Sacramento, with the Placer County Water Agency, changed their agencies’ positions on AB 1668 (Friedman) and SB 606 (Hertzberg/Skinner/Friedman) from Oppose Unless Amended to a Support, Only if Amended, to include several proposed amendments, the most important being either a CEQA or similar environmental analysis, this is publicly available for scrutiny and comment, that considers and assesses how the future SWRCB proposed regulations, that implement AB 1668 and SB 606 – impact local agencies like local wastewater management, developed and natural parklands, and urban tree health.

After direct discussions with Senator Hertzberg and the Governor’s Office staff, with exchanged offers and counter-offers on proposed amendment language, Senator Hertzberg and the Governor’s Office accepted an amendment, developed by the cities of Roseville and Sacramento, that required by May 31, 2021 that the SWRCB provide an analysis for public review and comment that, in the context of any SWRCB regulatory proposal, assesses and accounts for projected impacts upon local wastewater systems, developed and natural park lands, and urban tree health.

The acceptance of our amendment, along with most of our other original requested amendments being adequately addressed through other simultaneous negotiations with other water agency stakeholders, the cities of Roseville and Sacramento made the determination that our shared Support, Only if Amended position, could then be switched to Support. That switch in positions was formalized in a letter to Senator Hertzberg on September 8. Around that time, many other larger urban water agencies, as they saw their key issues addressed, switched from oppose positions to support, including Metropolitan Water District of Southern California, Los Angeles Department of Water and Power, Contra Costa Water District and East Bay Municipal Water District, among others. There are several other water agencies that remain Oppose Unless Amended on AB 1668 (Friedman) and SB 606 (Hertzberg/Skinner/Friedman).

On the last day of the first half of the legislative session (September 15), both AB 1668 (Friedman) and SB 606 (Hertzberg/Skinner/Friedman) went through an hour-by-hour process to make their way towards the floor of each house, with several hearings in both the Rules and the Appropriations Committees along the way. With major policy issues being debated on housing and sanctuary state, AB 1668 (Friedman) and SB 606 (Hertzberg/Skinner/Friedman) ultimately did not make it to a floor vote and are now classified as two-year bills, with action expected to start immediately in January 2018.

With 2018 being an election year, we expect both bills to quickly move to passage, and on to the Governor, as the political will to take up complex and controversial policy initiatives wanes in the State Legislature, the closer it gets to November 6, 2018 – election day.

The possibility remains that if AB 1668 (Friedman) and SB 606 (Hertzberg/Skinner/Friedman) are unsuccessful in early 2018, the Governor may then introduce a Trailer Bill as a policy end-run, which significantly decreases the ability for stakeholders to influence and shape this significant statewide policy.

Statewide Water Tax (SB 623) - OPPOSE

Senate Bill (SB) 623 by Senator Bill Monning, a bill that proposes a tax on drinking water, via local utility bills, as a means of funding safe drinking water solutions for disadvantaged communities, became a two-year bill on Sept. 1.

SB 623 seeks to solve a longstanding safe drinking water problems in part of California that disproportionately affect residents in disadvantaged communities, most acutely in portions of the Central Valley. More than 300 drinking water systems in disadvantaged communities, serving approximately 200,000 people, are unable to provide safe drinking water. In those communities, there is often a lack of a rate base, to fund the technical, managerial, and financial capacity needed to manage and maintain water systems that are compliant with state and federal laws regarding drinking water quality.

SB 623 also proposed a tax on fertilizer and a tax on milk, which was specifically negotiated by Central Valley agricultural interests, forming an unusual alliance where both agricultural and environmental interests were in support of SB 623. This created a tricky political dynamic where SB 623, a bill that has a 2/3 voting threshold, was supported by some Republican state legislators that had significant agriculture interests within their districts.

For supporting a tax on fertilizer and a tax on milk, regulated agricultural interests facing possible water quality violations, who pay the milk and fertilizer taxes, would get a 15 year period where water quality enforcement by Regional Water Quality Control Boards would be limited.

The City of Roseville is opposed to SB 623, on the basis that it includes the state water tax on local utility bills.

We anticipate that activity on SB 623 will resume quickly after the State Legislature reconvenes in January 2018.

This report is for informational purposes only with no specific recommendations that could result in additional costs to the City of Roseville.

The activities contained in this report will not result in job development or creation.

The California Environmental Quality Act (CEQA) does not apply to activities that will not result in a direct or reasonably foreseeable indirect physical change in the environment (CEQA Guidelines §1506(b) (3). The action of reviewing proposed CEQA legislation does not include the potential for a significant environmental effect, therefore is not subject to CEQA.

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Rob Jensen, City Manager