AB407 - California Pollution Control Financing Authority.

Amended IN Assembly May 05, 2025 Amended IN Assembly April 23, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 407 Introduced by Assembly Member Jackson February 04, 2025 An act to amend Section 6588.7 of the Government Code, and to amend Sections 44559.1, 44559.13, and 44559.14 of, and to add Section 44559.10 to, the Health and Safety Code, relating to state government, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST AB 407, as amended, Jackson. California Pollution Control Financing Authority. (1) Existing law, the Marks-Roos Local Bond Pooling Act of 1985, authorizes certain joint powers authorities, among other powers, to issue bonds and loan the proceeds to local agencies to finance specified types of projects and programs. The act authorizes a local agency that owns and operates a publicly owned utility to apply to specified joint power authorities to finance costs of a utility project for the publicly owned utility with the proceeds of rate reduction bonds if certain conditions are satisfied. The act requires the California Pollution Control Financing Authority (CPCFA) to review each issue of bonds and make specified determinations and imposes related duties on the CPCFA. This bill would remove the requirements and duties imposed on the CPCFA described above. (2) (1) Existing law establishes the California Pollution Control Financing Authority (CPCFA), consisting of 3 members: the Director of Finance, the State Treasurer, and the State Controller. Existing law establishes the Capital Access Loan Program for Small Businesses, which is administered by the CPCFA, to assist qualifying small businesses in the state access capital.Existing capital. Existing law establishes the California Capital Access Fund within the authority to be used for purposes of the program. This bill would require all moneys accruing to the authority pursuant to the program to be deposited into the fund. The bill would authorize other private, state, or federal funding sources to be received and accepted into the fund, as specified. By creating a continuously appropriated fund, this bill would make an appropriation. (3) (2) Existing law establishes the California Americans with Disabilities Act Small Business Capital Access Loan Program to assist small businesses in complying with the federal Americans with Disabilities Act of 1990. Existing law establishes the California Americans with Disabilities Act Small Business Capital Access Loan Program Fund, which is continuously appropriated to CPCFA for carrying out the purposes of the program. Existing law requires that all moneys in the fund be held in trust for the life of the program, subject to program expenditures and costs of administering the program. Existing law specifies those program expenditures. This bill would include financial assistance, as defined and specified, as a program expenditure described above. By expanding the expenditures that may be made from a continuously appropriated fund, this bill would make an appropriation. (4) (3) Existing law establishes the California Seismic Safety Capital Access Loan Program to cover losses on qualified loans by participating lenders to qualified residential property owners or qualified small businesses, as those terms are defined. Existing law establishes the California Seismic Safety Capital Access Loan Program Fund, which is continuously appropriated to CPCFA for carrying out the purposes of the program. Existing law requires that all moneys in the fund be held in trust for the life of the program, subject to program expenditures and costs of administering the program. Existing law specifies those program expenditures. This bill would include financial assistance, as defined and specified, as a program expenditure described above. By expanding the expenditures that may be made from a continuously appropriated fund, this bill would make an appropriation. Digest Key Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 6588.7 of the Government Code is amended to read: 6588.7. (a) An authority whose financing activities are limited to financing utility projects and projects for the use or benefit of public agencies providing water, wastewater, or electrical service may finance utility projects as provided in this section, including the issuance of rate reduction bonds and the imposition and adjustment of utility project charges. (b) A local agency that owns and operates a publicly owned utility may apply to an authority specified in subdivision (a) to finance costs of a utility project for the publicly owned utility with the proceeds of rate reduction bonds if at the time of application, bonds payable from revenues of the publicly owned utility are, or upon issuance would be, rated investment grade by a nationally recognized rating agency. In its application to an authority for the financing or refinancing, the local agency shall specify the utility project to be financed by the rate reduction bonds, the maximum principal amount, the maximum interest rate, and the maximum stated terms of the rate reduction bonds. (c) A local agency shall not apply to an authority for financing or refinancing of a utility project pursuant to this section unless the legislative body of the local agency has determined all of the following: (1) The project to be financed or refinanced is a utility project. (2) The local agency is electing to finance or refinance costs of the utility project pursuant to this section and the financing costs associated with the financing or refinancing are to be paid from utility project property, including the utility project charge for the rate reduction bonds issued for the utility project in accordance with this section. (3) Based on information available to, and projections used by, the legislative body, the rates of the publicly owned utility plus the utility project charge resulting from the financing or refinancing of the utility project with rate reduction bonds are expected to be lower than the rates of the publicly owned utility if the utility project was financed or refinanced with bonds payable from revenues of the publicly owned utility. (4) A local agency with a publicly owned utility having 500,000 or more retail customers may, in lieu of making the determination in paragraph (3), determine that the use of rate reduction bonds to finance or refinance utility projects provides substantial benefits to the publicly owned utility. These benefits may include, but are not limited to, lower interest rates on rate reduction bonds and more favorable capitalization and debt service coverage ratio treatment that results in gross or present value lifetime savings for the publicly owned utility. (d) (1) Subject to the requirements of Article XIII D of the California Constitution, to the extent applicable, an authority financing the costs of a utility project or projects for a local agency’s publicly owned utility with rate reduction bonds is authorized and directed to impose and collect a utility project charge with respect to the rate reduction bonds as provided in this section. The imposition of the utility project charge shall be made and evidenced by the adoption of a financing resolution by the governing body of the authority. Upon the issuance of rate reduction bonds, the financing resolution adopted in connection with the issuance of rate reduction bonds shall be irrevocable. The financing resolution with respect to financing or refinancing a utility project or projects with rate reduction bonds for a publicly owned utility shall include all of the following: (A) The addition of a separate charge to the bill of each customer of the publicly owned utility in the class or classes of customers specified in the financing resolution. (B) A description of the financial calculation, formula, or other method that the authority is to use to determine the utility project charge. The calculation, formula, or other method shall include a periodic adjustment method to the then current utility project charge, to be applied at least annually, that shall be used by the authority to correct for any overcollection or undercollection of financing costs from the utility project charge or any other adjustment necessary to ensure timely payment of the financing costs of the rate reduction bonds, including, but not limited to, the adjustment of the utility project charge to pay any debt service coverage requirement for the rate reduction bonds. The financial calculation, formula, or other method, including the periodic adjustment method, established in the financing resolution pursuant to this section, and the allocation of utility project charges to, and among, customers of the publicly owned utility shall be decided solely by the governing body of the authority and shall be final and conclusive. In no event shall the periodic adjustment method established in the financing resolution be applied less frequently than required by the financing resolution and the documents relating to the applicable rate reduction bonds. Once the financial calculation, formula, or other method for determining the utility project charge, and the periodic adjustment method, have been established in the financing resolution and have become final and conclusive as provided in this section, they shall not be changed. (C) Notwithstanding any other provision of this section, the imposition of a utility project charge shall comply with the requirements of Article XIII D of the California Constitution, to the extent applicable, including, but not limited to, the provision of a notice containing the initial amount of the proposed utility project charge and the periodic adjustment method by which the utility project charge amount could subsequently change. (D) A requirement that the authority enter into a servicing agreement for the collection of the utility project charge with the local agency for which the financing is undertaken or its publicly owned utility and the local agency or its publicly owned utility shall act as a servicing agent for purposes of collecting the utility project charge as long as the servicing agreement remains in effect. Moneys collected by the local agency or its publicly owned utility, acting as a servicing agent on behalf of the authority, as a utility project charge shall be held in trust for the exclusive benefit of the persons entitled to the financing costs to be paid, directly or indirectly, from the utility project charge and shall not lose their character as revenues of the authority by virtue of possession by the local agency or its publicly owned utility. The local agency or its publicly owned utility shall provide the authority with the information as to estimated sales of water, wastewater, or electrical services and any other information concerning the publicly owned utility required by the authority in connection with the initial establishment and the adjustment of the utility project charge. (2) The determination of the legislative body of the local agency that a project to be financed with rate reduction bonds is a utility project shall be final and conclusive and the rate reduction bonds issued to finance the utility project and the utility project charge imposed relating to the rate reduction bonds shall be valid and enforceable in accordance with the terms of the financing resolution and the documents relating to the rate reduction bonds. The authority shall require, in its financing resolution with respect to a utility project charge, that as long as a customer in the class or classes of customers specified in the financing resolution receive water or electricity or discharge wastewater through the facilities of the publicly owned utility, the customer shall pay the utility project charge regardless of whether or not the customer has an agreement to purchase water or electricity or discharge wastewater from a person or entity other than the publicly owned utility. The utility project charge shall be a nonbypassable charge to all customers of the publicly owned utility in the class or classes of customers specified in the financing resolution at the time of adoption of the financing resolution and all future customers in that class or classes. If a customer of the publicly owned utility that is subject to a utility project charge enters into an agreement to purchase water or electricity or discharge wastewater from a person or entity other than the publicly owned utility, the customer shall remain liable for the payment of its share of the utility project charge as if it had not entered into the agreement. The liability may be discharged by the continued payment of its share of the utility project charge as it accrues or by a one-time payment, as determined by the authority. All provisions of a financing resolution adopted pursuant to this subdivision shall be binding on the authority. (3) The timely and complete payment of all utility project charges by a person liable for the charges shall be a condition of receiving water, wastewater, or electrical service, as applicable, from the publicly owned utility of the local agency and each of the local agencies and their publicly owned utilities is authorized to use its established collection policies and all rights and remedies provided by law to enforce payment and collection of the utility project charge. In no event shall a person liable for a utility project charge be entitled or authorized to withhold payment, in whole or in part, of the utility project charge for any reason. (4) The authority shall determine whether adjustments to the utility project charge relating to rate reduction bonds are required upon the issuance of the rate reduction bonds and at least annually, and at additional intervals as may be provided for in the financing resolution or the documents relating to the rate reduction bonds. Each adjustment shall be made and put into effect in accordance with the financial calculation, formula, or other method that the authority is to use to determine the utility project charge pursuant to the financing resolution expeditiously after the authority’s determination that the adjustment is required. (5) All revenues with respect to utility project property related to rate reduction bonds, including payments of the utility project charge, shall be applied first to the payment of the financing costs of the related rate reduction bonds then due, including the funding of reserves for the rate reduction bonds, with any excess being applied as determined by the authority for the benefit of the utility for which the rate reduction bonds were issued. (6) The authority shall be obligated to impose and collect the utility project charge relating to rate reduction bonds in amounts, based on estimates of water or electricity u [Text truncated for display. 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