This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0828 - Allows Creditor Access To Underground Tank Fund
L.R. NO. 3151-03
BILL NO. SB 828
SUBJECT: Underground Storage Tank Fund
TYPE: Original
DATE: February 12, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Underground
Storage Tank
Insurance Fund ($918,840) ($1,162,608) ($551,304)
Total Estimated
Net Effect on All
State Funds ($918,840) ($1,162,608) ($551,304)
* Oversight assumes additional unknown costs due to lifting the restriction
on reimbursements for cleanup being remediated prior to August 28, 1989,
eliminating competitive bids, and interest expense.
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
The Department of Natural Resources (DNR) assumes the proposed legislation
allows creditors who are a successor in interest of qualified specific real
property the right to be listed as insured or additional insured on the
insurance fund and not just mortgagees.
In addition, DNR assumes the proposed legislation removes language that
prohibits the expenditure of money for cleanup of releases being remediated
prior to August 28, 1989. Potentially, the fund could receive claims for all
past cleanups if the participant met other applicant requirements.
Oversight assumes there will be additional unknown costs due to lifting the
restriction on reimbursements for cleanup being remediated prior to August
28, 1989.
DNR assumes a person would not be required to bid the costs and expenses
associated with the environmental consultant who inspects the project or who
performs remediation or cleanup. Current DNR policy is to require
competitive bids when requesting reimbursement for cleanup expenses.
Oversight assumes there will be additional unknown costs if competitive
bidding of services is not required.
The DNR assumes there are approximately 8,600 leaking underground storage
tanks. The department estimates 25% of the 8,600 tanks have remedial action
plans on file. DNR assumes these will be grandfathered in and will not be
eligible for the new time frames stated in the proposed legislation. DNR
assumes since the deadline for entering the fund was not extended, only 6,450
(8,600 leaking tanks x .75-estimated outstanding corrective action plans)
tanks will be affected by the proposed legislation.
The DNR assumes the review of corrective action plans and the subsequent
reimbursement of claims will be spread over an 18-month period. Therefore,
DNR expects 358 (6,450-75% of universe / 18-month period) corrective action
reviews will need to be completed each month. The DNR estimates contractor
costs to review the corrective action plans and the related claims will be
approximately $3,000 per review or about $1,074,000 per month for 18 months.
The legislation states that monthly payments are to be made until the
insurance funds are exhausted. Therefore, the amount available for claim
payments is limited by the fund balance. The department estimates 358 tanks
will be reviewed and payments will be submitted each month. The average cost
per site cleanup is estimated at $45,000 ($55,000 - $10,000 deductible),
which would result in monthly payments of $16,110,000 for eighteen months.
Currently, the fund generates approximately $15,000,000 annually. DNR
assumes the fund would not be able to support its payment and interest
obligations.
DNR assumes this proposal would be effective August 28, 1996. DNR assumes
they cannot meet these deadlines with existing staff and would, therefore,
contract for services.
Cost estimates submitted by DNR represent contractor costs related to the
increased requirements of this proposal. DNR costs do not include payment of
the claims since these claims would have to be paid regardless of the passage
of this legislation.
As the estimated monthly claims exceed the annual revenue of the fund,
Oversight assumes there will be additional unknown costs to the fund due to
the interest which accrues on unpaid claims.
Oversight assumes this proposal does not add any new duties to the DNR. All
of the costs associated with the proposal are already present or future
obligations of the Underground Storage Tank Insurance Fund. However,
Oversight assumes this proposal compresses the amount of time the DNR will
have to review all the remediation plans and make payments on claims into
eighteen months.
Oversight assumes 184 (6,450 leaking storage tanks without plans / 35 months)
remedial action plans will be filed with DNR each month from February 1996
through December 31, 1998. At the rate of 184 plans per month approximately
1,300 additional plans will be in the program prior to the effective date of
this proposal, leaving approximately 5,150 plans to be reviewed using the
compressed timeframe. Of these 5,150, DNR staff would be able to process
1,960.
After the effective date of this proposal, of the 184 plans filed monthly,
DNR would be able to process 70 plans per month. DNR would not have the
capacity to process 114 claims per month for a total of 3,190 from August
1996 to December 31, 1998.
Therefore, Oversight assumes DNR would have additional administrative costs
associated with compressing the duties from an estimated seven years to
eighteen months. DNR proposed contract staff to meet the requirements of the
proposal.
DNR's estimate of contract costs includes a charge of 5% of the estimated
$14,000,000 annual payments for the purpose of processing claim payments.
Oversight has not included any additional costs for processing payments as
those costs would be incurred as payments are made under present
circumstances.
After adjusting DNR estimates to bring them in line with Office of
Administration guidelines, costs to hire contract staff to review the plans
submitted would be approximately $806 per plan. Assuming contract staff
would be needed to process 114 plans per month, the total monthly cost for
contract staff including expenses, equipment and rental space would be
estimated at $91,884.
Oversight assumes all income to, and expenditures from the fund will cease on
December 31, 1998, when the fund is scheduled to expire pursuant to 319.129
section 15. Oversight also assumes the transport load fees will be reduced
to $0 effective December 31, 1998. Oversight assumes future legislation will
address the disposition of any money remaining in the fund on that date.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
UNDERGROUND STORAGE TANK
INSURANCE FUND
Costs * - DNR
Contractor Costs ($918,840) ($1,162,608) ($551,304)
* Oversight assumes additional unknown costs due to lifting the
restriction on reimbursements for cleanup being remediated prior to August
28, 1989, eliminating competitive bids, and interest expense.
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
$0 $0 $0
DESCRIPTION
This act modifies Chapter 319, RSMo, the Underground Storage Tank Insurance
Fund. Section 319.131.3, RSMo, has been modified to allow a commercial
creditor to become a "successor in interest" to a debtor who participates in
the Fund. The commercial creditor is allowed to "cure any of the debtor's
defaults in payments required by the" Fund.
The last sentence in Section 319.131.5, RSMo, has been deleted. This section
stated that "Money from the fund shall not be expended for cleanup of
releases being remediated prior to August 28, 1989".
Section 319.131.9, RSMo, has been modified to address remedial action plans.
The new language gives the DNR forty-five days to either "approve, modify or
disapprove" the Plan. If DNR takes no action within forty-five days, the
person may proceed with the Plan. A modification or disapproval of the Plan
by DNR must include "specific recommendations for appropriate cleanup which
takes into consideration cost efficient cleanup procedures and other relevant
factors".
A person who receives Plan approval from DNR may thereafter submit a request
for the approval and payment of Plan expenses. DNR must act upon this
request within forty-five days. If DNR takes no action, the person may
proceed with the Plan expenses.
Plan payments must be made by DNR at least monthly until the insurance funds
are exhausted. Any person who does not receive payment within thirty days in
entitled to interest on the unpaid amount. Lastly, new language is added
stating the bidding of remediation and consultant expenses is not required.
This legislation is not federally mandated, would not duplicate any other
program. Additional rental space would be needed for the contract staff
requested in this proposal.
SOURCES OF INFORMATION
Department of Natural Resources