SUMMARY REPORT on HEARING of the SELECT COMMITTEE ON CALIFORNIA JOB CREATION AND RETENTION
OCTOBER 6, 2011 in the STATE CAPITOL
OVERVIEW
The State Water Resources Control Board (SWRCB) recently proposed a new set of rules on stormwater permits and regulatory requirements. These proposed new rules created great concern in the business and manufacturing sectors, as well as local municipalities, who say compliance would be prohibitively expensive and excessively burdensome to implement.
As Chair of the Select Committee on California Job Creation and Retention, Senator Roderick D. Wright convened a hearing to have SWRCB explain the provisions of the pending revisions and detail the process for renewing the permits that currently that the agency has proposed. The Committee would also hear from other state agencies, local municipalities, the business community, and the public on what effect – and cost – these new permit processes would have on job creation and retention, and the subsequent effect on California’s economic recovery.
OPENING REMARKS
Senator Wright opened the hearing by pointing out the US EPA has recommended a different set of Best Management Practices in lieu of numeric effluent limitations, and expressed concern that California would be the only state in the nation to impose such stringent and cumbersome permitting processes.
Senator Dutton then stated he was concerned no cost study had been done before proposing the new regulations. He noted that costs not only affect businesses but schools, local governments and citizens.
Senator Gaines, sitting at the dais as guest of the committee, echoed Sen. Dutton’s concerns over lack of cost studies on so many regulatory decisions. He pointed out that many businesses will be forced to shut down if they attempt to follow the letter of the law on these regulations.
Senator Huff stated that this issue is complex enough to warrant several hearings so at this particular hearing, he hoped to focus on what these regulations will mean for the business community in California.
SUMMARY OF TESTIMONY (excluding Q&A between witnesses and committee members)
Tom Howard, Executive Director SWRCB, addressed the need for achieving higher water quality standards, and that permitting rules had not changed in five years and were thus long overdue. He stressed the dangers of water pollution, referencing that urban runoff contains metals, pesticides and other toxins that cause beach closures and kill or contaminate fish. He also talked about California’s obligation to follow the federal Clean Water Act. However, Mr. Howard then acknowledged that upon announcing the new permitting rules, he heard many complaints about the new processes being too costly and time-consuming. He stated that for these reasons, SWRCB was revising the requirements and would be re-issuing permitting guidelines in a few months.
Geoff Brosseau, Executive Director, California Stormwater Quality Association (a non-profit composed of various cities, counties, special districts, as well as businesses and industries, involved with stormwater quality management) testified that the poor economy will greatly affect the ability of all permittee types – construction, industrial, and municipal – to comply with the new rules due to the cost. He also pointed out that there was a significant increase in permit fees adopted by SWRCB in September of this year – almost a 35% increase. Additionally, permits were previously just a few pages long; the new permits are written in regulatory language hundreds of pages long, adding to an already cumbersome burden to each entity charged with complying to a myriad of regulations required by the state. He also questioned the efficacy of such new regulations as outdoor water runoff is characteristically difficult to control and/or predict, as well as measure.
Robert Ketley, Water Quality Manager for City of Watsonville, testified that he has spent 25 years working on every aspect of stormwater including working with a number of environmental groups. He said “Water quality is both my job and my passion.” He then talked about the need for local governments to be fiscally responsible and questioned the ability of locals to not just afford clean water programs, but to get the “best bang for the buck”. He pointed out the high unemployment in his own city, cutting into revenues. He said complying with the new permits would surely mean cuts to public programs.
Kelye McKinney, Engineering Manager for Environmental Utilities, City of Roseville, said California’s existing regulatory environment is chasing business out. She noted a large solar panel maker was looking to build a manufacturing facility in Roseville that would have employed up to 4,500 people. But they determined the time and money needed to do business in the state did not “pencil out” and they chose Arizona for their facility. She also testified that an EPA representative stated to at a recent SWRCB workshop that these new permitting requirements would be the most stringent in the nation. Ms. McKinney expressed great concern that implementing these new rules would require layoffs of essential city personnel in order to cover the costs of compliance.
Jim Earp, Commission, California Transportation Commission, and CEO of California Alliance for Jobs, testified about the detrimental effect the cost of the new regulations would have on road construction projects. He said there have been reports about a cost of $900 million a year to Caltrans for implementation and compliance (SWRCB director Howard had earlier said he did not know how Caltrans reached that figure, but that he disputed it would be that large). Mr. Earp said even if that figure is off by 50%, that’s still half a billion dollars a year. The state’s State Highway Operation and Protection Program (SHOPP) – the program that maintains the state’s current transportation system - is funded at $6 billion yearly but needs $7 billion a year to keep up with need so such cost would put the state further “in the hole”. Mr. Earp offered suggestions including consolidating some regional water boards into the state board, as the different boards’ rules often contradict each other making it more confusing for business. He cited the example of a businessman in Oakland who keeps in compliance with current construction permits by cleaning all the water coming off of his project, but noted that water goes directly into a filthy storm drain full of dirty water, so “what’s the logic in that?”
Rick Land, Acting Chief Deputy Director for Caltrans, spoke about the effect the new permitting rules would have on his agency. He stated that while Caltrans takes environmental stewardship very seriously, it also needs to balance that responsibility with its duty to the taxpayer. He stated Caltrans already spends approximately $200 million a year on stormwater permit compliance. The only way to raise more money for revenues would be to raise gas taxes; current funding for all CalTrans projects is only about 25% of what’s needed, he said, and these new permits would gravely impact improvements to the state’s transportation system.
Sara Aminzadeh, Interim Executive Director California Coastkeeper Alliance, testified to the need for achieving higher water quality standards. She cited from a report on “Green Infrastructure” as to the hundreds of billions of dollars that could be generated nationally from jobs performed in water infrastructure. She also pointed out the billions of dollars poured into California’s economy as a result of millions of tourists visiting and enjoying our state’s beaches and rivers. She stated that millions of dollars are lost each year as tourists are turned away from beaches or other waterways that must be closed to the public when pollution levels become so high that the water is toxic to humans.
Senator Rubio joined the committee at this point and expressed agreement with Ms. Aminzadeh over the need for clean water but that in his district, there is no coastline. He stated that these regulations would negatively impact the poorest region in California, shutting down businesses that simply cannot afford compliance costs.
James Simonelli, executive director of the California Metals Coalition, testified that in addition to the cost to business, he was very concerned over the process of dealing with the SWRCB. He said he received an email from the Board telling him Board staff was not allowed to discuss the new permit revisions until they were published. Mr. Simonelli felt communication was an essential part of having the Board and business work together. He added that for his member companies, they anticipate a cost of between $10 and $12,000 per company (total: $48-72 million) per year. He added that certain components of storm water compliance are always difficult for his member firms using zinc as an example: Less than 1% of his industry processes zinc but over 50% of his industry cannot pass the benchmark for zinc because it’s in metal roofs and gutters, it comes off of cars entering property – all of which have nothing to do with actual revenue-generating manufacturing process. He asked that in particular, the legislature address the ex parte problem of dealing with the water board, as well as finding a way to reign in these new regulations.
Dorothy Rothrock, VP Government Relations for California Manufacturers and Technology Association, reiterated what previous speakers had said about costs, particularly in this very bad economy. She questioned the sense of going beyond federal legal requirements – how to justify that cost? She also stressed the need to send a very strong message to the investment community that California is a safe place to come and do business and mentioned California’s having been named worst place to do business by CEO Magazine for 7 years running. She also stressed the need to remove uncertainty in all agency dealings as certainty is a key point for businesses choosing where to set up shop. She also questioned SWRCB’s ex parte rule, and said there is no need for the process to be made “quasi-judicial”.
COMMENTS FROM THE PUBLIC
Josh Pane, on behalf of the California Refuse Recycling Council, brought up the issue of lawsuits. He requested the legislature pass a law stating that if a company is in the process of compliance, then let that company move forward with no threat of lawsuit at that point.
Steven Desjardin, a business owner in Roseville, testified that the new regulations regulate him as a tenant of a building, to do things outside his building as a tenant, and in the parking lot that has a separate ownership. He stated he’s received awards for smart growth and environmental stewardship from Sierra Club and others. He also compared dealings with other agencies on regulations, that he was able to communicate with them, as opposed to not being able to communicate SWRCB which he felt has been unresponsive to him as a business owner. He also said he feels the regulations are very costly yet gain only a small percent of additional cleanup from what’s currently being done.
Ian Padilla, Coalition for Adequate School Housing, said CASH represents 500 districts and about 92% of school kids on school facilities and maintenance issues. His concerns are the cumulative impact of all the permits, especially the cost implications for schools of all these. He pointed out that every dollar going to a non-educational requirement is a dollar that won’t go to educating kids. He added that the confusion created by the complexity of the numeric-based approach will get schools into a situation of perpetual noncompliance. He said CASH schools are very worried about monitoring requirements, particularly the prohibition on group monitoring. His numbers show that compliance could cost each site (permits apply to schools operating school bus maintenance yards) between $30,000 to about $130,000, annually.
Nicole Hernandez, on behalf of CAPA, the California Association of Port Authorities, which is comprised of the State’s 11 commercial and publicly owned seaports, told the Committee said CAPA had submitted concerns to SWRCB in April, and they wanted the Committee to know they still have concerns.
Susan Rohan, vice mayor City of Roseville, echoed the sentiments of other witnesses are regards cost; lack of interaction by the Board with businesses; and lack of cost analysis before issuing the new permits.
Lori Chen with Clean Water Action rose to say that her organization feels that preventing the pollution to begin with is probably the most cost-effective way, and to include that approach and to understand that any cost benefit analysis would need to look at impacts beyond the direct impacts—the secondary health impacts—and the impacts to communities that are often the least capable of dealing with the pollution.
Trudi Hughes with the California League of Food Processors and co-chair of the Water Coalition thanked the Committee for addressing this issue. She said businesses and municipalities in the Coalition would prefer to have workshops and discussion with the Board upfront rather than “panic at the end”. She hoped future reforms would result in water quality benefits as well. She stressed that her industry creates 160,000 direct, permanent jobs in California and indirectly creates more than 5 times that number. She noted that onerous regulatory burdens on her industry results in higher food prices for Californians, but also impacts their ability to do business both nationally and internationally.
Tom Jacob, on behalf of the Chemical Industry Council of California, endorsed the comments that have been made about the Industrial Permit and expressed particular concern with a process that would have allowed this permit to be put forward despite the extreme misgivings expressed by all who’d be affected.
Jerry Desmond, representing the Metal Finishing Associations of Southern and Northern California, talked of his concern about eliminating group monitoring. He said they have 25 other industries that have for 14 years had group monitoring programs with a group leader that helps the small businesses that we are, and many others are, as well as the school districts, for monitoring, inspection, reporting, and sampling so that they can comply and not have to spend the kind of resources they would have to as small businesses individually. He hoped there will be a collaborative effort to change that.
Randall Friedman, spokesman for the United States Navy, referenced the fact that the Navy represents direct expenditures in the state of $57 billion a year. He repeated comments by prior witnesses about the cost of the new permits as well as challenge of being unable to talk to the State Board, adding that various permits can have a profound impact on the Navy’s ability to do its national security mission in the state.
Ermina Karim. president and CEO of the San Luis Obispo Chamber of Commerce, spoke on behalf of the Chamber's 1,400 small business members and the thousands of people they employ in that region. She said the number one point in the Chamber’s six-point economic strategy is proactively protecting and enhancing San Luis Obispo’s quality of life with objectives like protecting signature landscapes, creeks, and riparian habitats, and opposing activities that will harm the regional environment and pointed out that the chamber fought offshore oil drilling in the 90’s and led the city to enforce the first ban on indoor smoking in the world. Chamber studies show the new permitting processes will double the cost of the city’s current stormwater management program. She also said that 60% of the chamber’s members have five or fewer employees; 80% have 20 or fewer. So these are small businesses but they represent the bulk of job creation over the last decade, and she is astounded they have not been included in since they will be so adversely affected financially.
Erik Justesen, President/CEO of rrmdesigngroup, testified that he is very concerened with the process and lack of public outreach and education to the business community. As a member of the Engineering Society of California, he believes other businesses like his are not fully informed and will be “hit over the head” by the new rules. He believes these new regulations will cost many jobs, many thousands of dollars to business, that the state will lose many good jobs at a time when the economy has already cost so many. He stated he’s had to lay off half his staff as he struggles to stay in business.
Tim Chou, on behalf of the San Francisco Bay Area Rapid Transit District (BART), testified that it has a specific concern in the MS4 Permit. BART is concerned that any time during the permit process the State Board or local regional water quality management districts could draw BART into the permit process and it would be very, and perhaps prohibitively, expensive for BART to retroactively apply the requirements of the MS4 Permit along its 104 miles of track and 44 stations. The cost burden would have to be passed on to riders of the system. He also said BART is also seriously concerned that it was not invited or involved in stakeholder discussions.
