Agenda

Return

C. 28

To:	Board of Supervisors
From:	LEGISLATION COMMITTEE
Date:	July 19, 2016

Contra

Costa

County

Subject:

"Oppose Unless Amended" position AB 1550 (Gomez): Greenhouse Gases

APPROVE	OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR	RECOMMENDATION OF BOARD COMMITTEE

Action of Board On: 07/19/2016

APPROVED AS RECOMMENDED

OTHER

Clerks Notes:

VOTE OF SUPERVISORS

AYE:

John Gioia, District I Supervisor
Candace Andersen, District II Supervisor
Mary N. Piepho, District III Supervisor
Federal D. Glover, District V Supervisor

ABSENT:

Karen Mitchoff, District IV Supervisor

Contact:

L. DeLaney, 925-335-1097

I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown.
ATTESTED: July 19, 2016
David Twa,

BY:	, Deputy

RECOMMENDATION(S):

ADOPT a position of "Oppose Unless Amended" on AB 1550 (Gomez) "Oppose Unless Amended" on AB 1550 (Gomez): Greenhouse Gases: Investment Plan: Communities, a bill that requires 25% of the Greenhouse Gas Reduction Fund be spent on projects located within disadvantaged communities and requires that an additional 25% be spent on projects that benefit low-income households, as recommended by the Legislation Committee.

FISCAL IMPACT:

According to the Assembly Appropriations Committee, this bill has the following State costs:


1) Increased GGRF expenditures in disadvantaged and low-income communities. The Governor's budget proposes appropriating $3.1 billion GGRF funds this year.

FISCAL IMPACT: (CONT'D)

2) Increased annual ongoing costs of approximately $600,000 (GGRF) for the California Air Resources Board (ARB) to modify existing guidelines and tracking systems, provide guidance to state agencies, and conduct outreach.

Unless the bill is amended, as requested, the impact on Contra Costa County could be reduced accessibility to Cap and Trade funds for our disadvantaged communities that do not meet the CalEnviroScreen 2.0.

BACKGROUND:

At its July 11, 2016 meeting, the Legislation Committee voted to recommend that the Board of Supervisors adopt an "Oppose Unless Amended" position on AB 1550 (Attachment A). The bill was introduced on 01/01/16 and last amended on 05/31/16. The bill is presently pending on the Senate Second Reading File.

The Metropolitan Transportation Commission has taken an "Oppose Unless Amended" position on AB 1550 due to its concerns about the definition of "Disadvantaged communities" (DACs), which presently excludes many communities characterized by poor socio-economic conditions. The position letter is attached (Attachment B), as are the requested amendments (Attachment C).

2015 CA A 1550: Bill Analysis - 06/27/2016 - Senate Environmental Quality Committee

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular

Bill No:           AB 1550                                                 
Author:            Gomez                                                   
Version:           5/31/2016          Hearing Date:      6/29/2016         
Urgency:           No                 Fiscal:            Yes               
Consultant:        Rebecca Newhouse

SUBJECT: Greenhouse gases: investment plan: disadvantaged communities.

ANALYSIS:

Existing law:

1) Under the California Global Warming Solutions Act of 2006, requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. (Health and Safety Code (HSC) Section 38500 et seq.)

2) Establishes the Greenhouse Gas Reduction Fund (GGRF) as a special fund in the State Treasury; requires that all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund; and requires the Department of Finance, in consultation with the state board and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (Government Code Section 16428.8)

3) Requires that GGRF moneys be used to facilitate the achievement of reductions of GHG emissions in the state consistent with the Global Warming Solutions Act of 2006. Appropriations of the GGRF funds in the annual budget are required to be consistent with the three-year investment plan. (HSC Section 39712)

4) Under the GGRF Investment Plan and Communities Revitalization Act, requires the California Environmental Protection Agency (CalEPA) to identify disadvantaged communities for investment opportunities related to the Act. (HSC Section 39711)

5) Requires the GGRF investment plan to allocate a minimum of 25% of the funds to projects that benefit disadvantaged communities and to allocate 10% of the funds to projects located within disadvantaged communities. (HSC Section 39713)

6) Requires the California Environmental Protection Agency (CalEPA) to identify disadvantaged communities for GGRF investment opportunities and requires those communities be identified based on geographic, socioeconomic, public health, and environmental hazard criteria. (HSC Section 39711)

7) Requires the ARB, in consultation with the California Environmental Protection Agency (CalEPA), to develop funding guidelines for administering agencies receiving allocations of GGRF funds that include a component for how agencies should maximize benefits to disadvantaged communities. (HSC Section 39715)

This bill:

1) Revises the requirement that 25% of the GGRF be expended to benefit disadvantaged communities to require that the funding be allocated for projects located within the boundaries of, and benefiting individuals in, disadvantaged communities.

2) Requires that an additional 20% of the GGRF be allocated for projects that benefit low-income households.

3) Defines "low-income household" as those with household incomes at or below 80% of the statewide median income or with household incomes at or below the threshold designated as low income by the Department of Housing and Community Development's list of state income limits.

4) Requires that, to the extent feasible, a "fair share" of the moneys allocated to benefit low-income households target households with incomes at or below 200% of the federal poverty level.

Background

1) Cap-and-trade auction revenue. Since November 2012, ARB has conducted 15 cap-and-trade auctions, generating over $4 billion in proceeds to the state.

State law specifies that the auction revenues must be used to facilitate the achievement of GHG emissions reductions and outlines various categories of allowable expenditures. Statute further requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop a three-year investment plan for the auction proceeds, which are deposited in the GGRF.

SB 535 (de Leon, Chapter 830, Statutes of 2012) requires the Department of Finance, in the investment plan, to allocate at least 25% of available moneys in the GGRF to projects that provide benefits to disadvantaged communities, and at least 10% to projects located within disadvantaged communities.

Additionally, SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014) requires ARB to develop guidelines on maximizing benefits for disadvantaged communities by agencies administering GGRF funds, and guidance for administering agencies on GHG emissions reduction reporting and quantification methods.

Legal consideration of cap-and-trade auction revenues. The 2012-13 Budget analysis of cap-and-trade auction revenue by the Legislative Analyst's Office noted that, based on an opinion from the Office of Legislative Counsel, the auction revenues should be considered mitigation fee revenues, and their use requires that a clear nexus exist between an activity for which a mitigation fee is used and the adverse effects related to the activity on which that fee is levied. Therefore, in order for their use to be valid as mitigation fees, revenues from the cap-and-trade auction must be used to mitigate GHG emissions or the harms caused by GHG emissions.

In 2012, the California Chamber of Commerce filed a lawsuit against the ARB claiming that cap-and-trade auction revenues constitute illegal tax revenue. In November 2013, the superior court ruling declined to hold the auction a tax, concluding that it is more akin to a regulatory fee. The plaintiffs filed an appeal with the 3rd District Court of Appeal in Sacramento in February of 2014, and that case is pending.

Budget allocations. SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014), a budget trailer bill, established a long-term cap-and-trade expenditure plan by continuously appropriating portions of the funds for designated programs or purposes. The legislation appropriates 25% for the state's high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to the Transit and Intercity Rail Capital Program, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature.

The Governor's 2016-17 proposed budget appropriates over $3 billion to a variety of programs and projects in the transportation, energy, natural resources, and waste diversion sectors.

2) CalEnviroScreen and disadvantaged communities. CalEnviroScreen was developed by OEHHA, at the request of CalEPA and pursuant to the GGRF Investment Plan and Communities Revitalization Act (SB 535, de Leon, Chapter 830, Statutes of 2012), to determine a list of disadvantaged communities in California that are the most vulnerable and pollution-burdened. The tool is used to help direct those GGRF investments targeted for disadvantaged communities, as well as to guide CalEPA in administering its Environmental Justice Small Grants Program and prioritizing resources for cleanup and abatement projects and outreach efforts by the Agency.

Using CalEnviroScreen, CalEPA determined a list of disadvantaged communities throughout California in October 2014. According to CalEPA, the current version incorporates 19 indicators, including those for exposures, environmental effects, sensitive populations, and socioeconomic factors.

Census tracts in the top 25th percentile of cumulative CalEnviroScreen scores have been designated disadvantaged communities for the purposes of SB 535 (de Leon).

The areas where the majority of disadvantaged communities were identified included the San Joaquin Valley, parts of Los Angeles and the Inland Empire, and large portions of the Coachella Valley and Mojave Desert, in addition to communities located near industrial areas and major roadways.

Update. OEHHA intends to update CalEnviroScreen this year to incorporate the most current information available. Other improvements are also expected to be part of this update. The proposed changes will be released in a draft version of the tool this summer.

3) ARB Guidance on GGRF. In 2014, ARB published interim guidance for meeting the requirements associated with GGRF appropriations, as well as maximizing benefits to disadvantaged communities, for agencies appropriated GGRF moneys. This guidance was finalized and released in late 2015.

In meeting the SB 535 requirement, the guidance states that agencies should first assess whether projects will be located within a disadvantaged community, as identified through CalEnviroScreen, and whether the project will provide direct benefits to that community, consistent with specific criteria in the guidance document for each program type. If investments meet this requirement, then the guidance specifies that the projects and administrative funds count towards both the 10% and 25% requirements for GGRF investments within, and providing benefits to, disadvantaged communities.

If the project is not within the disadvantaged community, the guidance directs agencies to evaluate whether the project provides direct, meaningful, and assured benefits in accordance with specified criteria for each project type. Projects within a half-mile of a disadvantaged community and that provide increased service or access to those communities, or projects that result in at least 25% of project work hours performed by residents of disadvantaged communities, may count towards the SB 535 mandate requiring a minimum of 25% of GGRF money benefit disadvantaged communities.

4) GGRF benefits report. AB 1532 (Perez, Chapter 807, Statutes of 2012) requires the Department of Finance (DOF) to submit an annual report to the Legislature on the status and outcomes of projects funded from the GGRF. The 2016 Annual Report describes the status of funded programs and lists the projects funded and also provides estimates of the GHG reductions expected from project investments and statistics on benefits to disadvantaged communities, demand for funding, and leveraging of funds. Specifically, the report states that for implemented projects funded through GGRF, 51% of investments provided benefits to disadvantaged communities, with 39% of GGRF investments directed within disadvantaged communities.

According to the Annual Report, "CALFIRE's urban forestry program is planting trees in disadvantaged communities throughout the State, providing community shading and reducing energy demand while improving active transportation and recreational opportunities for these residents. Caltrans' Low Carbon Transit Operations Program is supporting new and expanded services and facilities that improve mobility for disadvantaged communities and low-income residents in these communities. The Department of Community Services and Development's (CSD) Low-Income Weatherization Program is helping low-income residents in disadvantaged communities reduce their energy use and energy costs. The current appropriations will easily meet and exceed the SB 535 disadvantaged community targets without including High Speed Rail. However, the High Speed Rail Project is expected to greatly benefit disadvantaged communities throughout the State by creating thousands of direct construction-related jobs as well as indirect jobs and related economic development benefits in communities of the Central Valley, which has some of the highest unemployment rates in the country."

Comments

1) Purpose of Bill. According to the author, "Low-income communities and communities of color are and will continue to be disproportionately impacted by the effects of our changing climate. As we think about how to structure our state's climate programs - as we discuss percentages and parameters - this is a reality we cannot ignore and must strive to remedy. AB 1550 builds on the successes of our climate equity efforts to date by ensuring a greater investment in California's environmentally and socioeconomically disadvantaged populations. The bill requires that at least 25% of cap-and-trade funds be spent on projects located directly within disadvantaged communities, as identified by the state's environmental health screening tool, to ensure that the level of investment in DACs equals their share of the population. The bill also requires an additional 20% of funds to benefit low-income households.

"While CalEnviroScreen is a valuable tool for capturing cumulative impacts in communities, it is widely recognized that there are poor and working-class households that lie outside of DACs - but that struggle to make ends meet and spend a large portion of their incomes on necessitates - such as energy, water, housing, and transportation. If we wish to foster a shared, statewide commitment to tackling pressing environmental issues, we must take advantage of opportunities to reduce greenhouse gas emissions and build sustainable communities while lifting poor and working Californians out of poverty.

"A greater investment in California's environmentally and socioeconomically disadvantaged populations has the potential to yield significant climate, public health, and cost benefits while helping bridge the 'green divide'."

2) Amending SB 535. AB 1550 amends requirements put in place through SB 535 (de Leon, Chapter 830, Statutes of 2012) for spending cap-and-trade auction proceeds in disadvantaged communities and adds additional requirements for minimum spending for low-income households. Specifically, SB 535 requires a minimum of 25% of GGRF moneys benefit disadvantaged communities and 10% be spent within those communities. AB 1550 eliminates the distinction created in SB 535, where appropriating funds to "benefit" a disadvantaged community do not necessarily have to be spent within the disadvantaged community, and instead requires a minimum of 25% GGRF moneys be spent to benefit disadvantaged communities within those communities. Additionally, AB 1550 requires a minimum of 20% of GGRF moneys be directed to benefit "low-income households," as defined, and does not allow investments toward disadvantaged communities to count toward the minimum percentage required to benefit low-income households, or the reverse.

3) Benefiting low-income households. The bill requires a minimum of 20% of GGRF be spent to benefit "low-income households." AB 1550 defines these households as those at or below 80% of the statewide median income, or as households designated as low-income based on area-wide median incomes, based on figures from the Department of Housing and Community Development (DHCD). The area-wide "low-income" income thresholds better account for high cost of living and rent burdens in various regions across the state.

Some of the current programs funded through GGRF, like weatherization programs and car retirement and replacement programs, may be counted as benefiting a household. However, it is difficult to ascribe benefits specifically to individual households for a number of other GGRF programs, including transportation projects that provide enhanced or improved public transit (i.e., the Low Carbon Transit Operations program or the Transit and Intercity Rail Capital program, which both receive continuous GGRF appropriation) and, urban forestry and greening projects. In this way, the 20% requirement for benefiting low-income households may be 1) difficult to measure, 2) limit access of low-income households to a variety of other GGRF programs with more community-wide impacts, and 3) create implementation challenges, since funding for the subset of programs directly benefiting households may not be sufficient to meet the bill's 20% requirement.

To address this issue, amendments are needed to require 20% of GGRF moneys be directed to "low-income households" or "low-income communities," and to define a "low-income community" as a census tract with a median household income at or below 80% of the statewide median income or with a median household income at or below the threshold designated as low-income by the Department of Housing and Community Development.

4) Smaller pot. As the cap for the state's cap-and-trade program is reduced, so are allowances that are offered for sale. As it is the sale of these allowances at auctions that generate cap-and-trade proceeds, this revenue source will continue to shrink. Additionally, only 2% of the state allowances sold at the auction in May, and resulted in the state receiving only $10 million in proceeds where up to $500 million was projected.

A larger fraction of moneys for disadvantaged communities and low-income households, as prescribed in AB 1550, of a shrinking pot of GGRF moneys may result in a significantly reduced fraction of money from GGRF for emissions reduction projects in the rest of the state.

5) More constraints on funding. As larger amounts of GGRF are set aside to benefit various groups, flexibility for allocating those funds is reduced. For example, a project that does not rank as high may be funded over a project ranked more highly in order to satisfy a requirement that a certain percentage of funds be spent to benefit a particular group. In situations where a tradeoff is required, policy goals of providing benefits to vulnerable populations may outweigh other policy goals for the GGRF, including funding only the most highly ranked project. However, the more these constraints are added to the fund, the more frequently these policy tradeoffs will arise.

As the bill already specifically targets low-income households with a significant fraction of the GGRF, the committee may wish to consider removing the requirement in the bill that a "fair share" of GGRF moneys target households with incomes at or below 200% of the federal poverty level "to the maximum extent feasible."

6) How will this change the way GGRF moneys are appropriated? It is not clear how agencies will implement an increased requirement for spending within disadvantaged communities, and an additional mandate for spending to benefit low-income households.

According to the annual DOF report on GGRF benefits and funded projects to date, about 39% of GGRF has been spent within disadvantaged communities--14% over the AB 1550 requirement. Assuming that the majority of those disadvantaged communities would also qualify as low-income under the bill, that 14% of GGRF investment over the 25% mandate could potentially count toward the 20% requirement for low-income households or communities, leaving only 6% more directed toward low-income households to meet the new requirements under AB 1550. Under this scenario, there may not be significant change in the way current GGRF investments are made. However, as the author would like to capture a distinct population from disadvantaged communities by requiring a minimum investment for "low-income households," agencies may work to implement the intent of the legislation by specifically directing expenditures to low-income communities that are not also disadvantaged communities. Therefore, it is not clear to what extent low-income populations that are not identified as disadvantaged communities according to CalEnviroScreen, will benefit from the additional set-aside in AB 1550.

7) Targeting disadvantaged communities. SB 535 requires disadvantaged communities for GGRF investment opportunities be identified based on geographic, socioeconomic, public health, and environmental hazard criteria. The resulting tools uses socioeconomic and environmental pollution indicators throughout the state to evaluate those vulnerable populations experiencing cumulative pollution burdens and specifically targets them for GGRF investment. The analysis is complex, relying on 19 different indicators for an aggregate score to identify disadvantaged communities for targeted GGRF investment.

AB 1550 does not alter the methodology behind how disadvantaged communities are identified, but further expands investments to those communities as well as requiring 20% of GGRF moneys be directed toward low-income households. In contrast to CalEnviroScreen, this criterion is a relatively simple method for targeting vulnerable populations.

In this way, the bill seems to establish an inconsistent policy for identifying vulnerable or distressed populations for GGRF investments--on one hand relying on a complex analysis to assess aggregate socioeconomic factors and environmental burdens, and on the other hand, simply directing moneys to communities or households based on a single economic metric.

This also raises questions surrounding the original policy goals of SB 535 in requiring CalEPA identify disadvantaged communities based on a variety of criteria. Does singling out an additional population for investment based on a single measure fit within the original policy goals of SB 535?

SOURCE:

Author

SUPPORT:

Alameda County Board of Supervisors

Amigos de los Rios

Asian Pacific Environmental Network

Asian Pacific Policy and Planning Council

California Association of Local Conservation Corps

California Bicycle Coalition

California Black Health Network

California Black Health Network

California Center for Public Health Advocacy

California Environmental Justice Alliance

California Environmental Justice Alliance

California Housing Partnership Corporation

California League of Conservation Voters

California ReLeaf

California Urban Forests Council

California Vanpool Authority

California Voices for Progress

Canopy

Catholic Charities

Catholic Charities, Diocese of Stockton

Center for Community Action and Environmental Justice

Center on Race, Poverty and the Environment

Central California Asthma Collaborative

Central Coast Alliance United for a Sustainable Economy

Central Coast Energy Services

City Project

Coalition for Clean Air

Communities for a Better Environment

Community Action to Fight Asthma

Community Health for Asian Americans

Defenders of Wildlife

Energy Solidarity Cooperative

Environment California

Environmental Defense Fund

Environmental Health Coalition

Fallbrook Land Conservancy

Filipino/American Coalition for Environmental Solidarity

Fresno Economic Opportunities Commission

Fresno Interdenominational Refugee Ministries

Friends Committee on Legislation of California

Grayson Neighborhood Council

Green Education, Inc.

Green for All

Greenlining Institute

Greenspace-The Cambria Land Trust

GRID Alternatives

Growing Together

Huntington Beach Tree Society, Inc.

Liberty Hill Foundation

Little Tokyo Service Center

Los Angeles Conservation Corps

Los Angeles Neighborhood Land Trust

Move LA

National Parks Conservation Association

Pacific Asian Consortium in Employment (PACE)

Pacoima Beautiful

People Organizing to Demand Environmental and Economic Rights

Physicians for Social Responsibility - Los Angeles

Placer Land Trust

Propel Fuels

Public Advocates

Regional Asthma Management and Prevention

Rising Sun Energy Center

Rural County Representatives of California

Sacramento Tree Foundation

Safe Routes to School National Partnership

Santa Clara Valley Open Space Authority

Save the Bay

SCOPE

Sierra Business Council

Sierra Climate Adaptation and Mitigation Partnership (Sierra CAMP)

Sierra Club California

Sierra Foothill Conservancy

Solar-Oversight

Stone Soup Fresno

Strategic Actions for a Just Economy

Strategic Concepts in Organizing and Policy Education

The Nature Conservancy

TransForm

Tree Davis

Tree San Diego

Truckee Donner Land Trust

Trust for Public Land

TRUST South LA

Union of Concerned Scientists

Urban Releaf

Valley Clean Air Now

Watershed Conservation Authority

OPPOSITION:

California Chamber of Commerce

California Taxpayers Association

Metropolitan Transportation Commission

ARGUMENTS IN SUPPORT:

Supporters state that, since CalEnviroScreen classifies a quarter of the state's population as living in disadvantaged communities, at least a quarter of GGRF proceeds should be invested directly within the boundaries of disadvantaged communities, which generally provides more assistance than simply "benefiting" these communities. They further add that this is a simple equity adjustment to the existing formula that reflects the need to invest in these communities hit first and worst by the adverse impacts of climate change. Additionally, they state that some of the best GHG reduction strategies are those that benefit low-income households whether they lie inside or outside CalEnviroScreen-designated disadvantaged communities. They further note that low-income Californians often lack adequate and affordable transportation and housing choices, access to green spaces, and spend a significant percentage of their budget on necessities including fuel and energy, and for those reasons, AB 1550 directs additional investments to low-income households, communities and populations, as well.

ARGUMENTS IN OPPOSITION:

The Metropolitan Transportation Commission (MTC) states that, as written, AB 1550 would expand the state's reliance upon a flawed definition of disadvantaged communities that excludes many communities characterized by poor socio-economic conditions, and state that the CalEnviroScreen should not be relied upon exclusively to target cap-and-trade funds to disadvantaged communities. They argue that CalEnviroScreen has the perverse public health effect of encouraging growth and development in locations where residents have greater exposure to environmental harm. MTC states that they are opposed to the bill unless AB 1550 is amended to broaden the definition of disadvantaged communities so that it includes communities with concentrations of people living with poor socio-economic conditions--regardless of their exposure to environmental hazards. California Chamber of Commerce and California Taxpayers Association are opposed as they argue that ARB lacks the authority to raise revenue through auction of allowances.

CONSEQUENCE OF NEGATIVE ACTION:

The County would not have an official position on the bill.