BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1232
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          Date of Hearing:  May 13, 2009

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                             Anna Marie Caballero, Chair
                     AB 1232 (Huffman) - As Amended:  May 7, 2009
           
          SUBJECT  :  Local agency formation commissions:  powers and  
          duties.

           SUMMARY  :  Allows the Marin County Local Agency Formation  
          Commission (LAFCO), when specific conditions are met, to  
          initiate and approve the consolidation of small wastewater  
          agencies, without protest hearings.  Specifically,  this bill  :  

          1)Provides the Marin LAFCO, after notice and hearing, with the  
            power to initiate and approve a reorganization or  
            consolidation of small wastewater agencies, without protest  
            hearings, if all of the following conditions exist:

             a)   The Marin LAFCO, in its municipal services review (MSR)  
               of the wastewater agencies, completed within the last 10  
               years, makes findings or determinations related to  
               reorganization or consolidation, that if implemented, would  
               improve the financial and service level benefits, improve  
               government accountability, improve operational  
               efficiencies, and provide cost savings for the ratepayers;

             b)   The wastewater agencies have not implemented LAFCO's  
               findings or determinations as provided in the MSR; and,

             c)   The wastewater agencies affected have had three or more  
               illegal discharges in the last five years, based on  
               violations identified by the San Francisco Regional Water  
               Quality Control Board (SFRWQCB) that exceed 5,000 gallons  
               of untreated or partially treated wastewater to waters of  
               the state.

          2)Defines "small wastewater agencies" to mean sanitation  
            districts and local governments that provide sewer and  
            wastewater collection or treatment services to 10,000 service  
            connections or less.

          3)States that the provisions of this measure will become  
            effective on January 1, 2011.









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          4)Makes findings and declarations about the impact of illegal  
            sewage spills.

          5)Declares that this bill is a special statute because of the  
            unique circumstances applicable to the County of Marin.

           EXISTING LAW  :

          1)Establishes the procedures for the organization and  
            reorganization of cities, counties, and special districts  
            under the Cortese-Knox-Hertzberg Local Reorganization Act of  
            2000 (Act).

          2)Allows a LAFCO to initiate proposals for changes or  
            organization, including consolidation.

          3)Defines "change of organization" in the Act to include  
            consolidation of cities or special districts.

          4)Defines "proceedings" to mean proceedings taken by the LAFCO  
            for a proposed change of organization or reorganization.

          5)Provides for noticing requirements for a protest hearing, and  
            specifies that during the hearing the LAFCO shall hear and  
            receive any oral or written protests, objections, or evidence  
            that is made, presented or filed.  

          6)Provides that a proposal for change of organization must be  
            abandoned if a majority protest is deemed to exist.

          7)Requires a LAFCO to revisit its municipal service reviews and  
            adopted spheres of influence every five years.

           FISCAL EFFECT  :  Unknown

           COMMENTS  :   

           LAFCO LAW:  PROCESS FOR CONSOLIDATION OF DISTRICTS
           
          1)Current law specifies various ways that special districts and  
            other agencies can be reorganized and modified, including  
            consolidation, dissolution, including dissolution with  
            annexation, a merger, or establishment of a subsidiary  
            district.  AB 1232 focuses on consolidation - the formal  
            restructuring transactions that would combine two or more  








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            agencies into a single organization and would require a formal  
            LAFCO review and approval process - as the means to modify  
            special districts.  A consolidation can be initiated by a  
            petition of registered voters or landowners, by a resolution  
            of the governing body of an affected local agency, or by LAFCO  
            itself.

          BACKGROUND OF MARIN SITUATION
           
          2)AB 1232 originates from problems in eleven sewer services  
            agencies located in southern Marin County, including six  
            sanitary districts, three cities, one community services  
            district and one joint powers agency.  Three of the agencies  
            operate wastewater treatment plants - Sanitary District No. 5  
            (Tiburon), the Joint Powers Agency (Sewerage Agency of  
            Southern Marin - SASM), and the Sausalito-Marin City Sanitary  
            District (SMCSD).  Ten of the eleven agencies operate sewerage  
            collection systems and pumping stations.  All of the special  
            districts providing sanitary sewer services are governed by  
            independent boards, except for SASM, whose members are  
            appointed by each of its six member agencies.  

          3)The author notes that "the frequency and size of illegal  
            sewage spills of raw or partially treated sewage are  
            increasing often because of the improper sewer system  
            maintenance.  By providing limited new authority to a LAFCO,  
            AB 1232 would increase the cost effectiveness and efficiency  
            of small wastewater agencies and reduce the impacts on water  
            quality due to illegal sewage spills.  The San Francisco Bay  
            Regional Water Quality Control Board reports that over 2,000  
            separate illegal sewage spills occurred in the bay and  
            coastline between 2004 
          and 2007.  Over 500 of the spills exceeded 1,000 gallons.  One  
            of the largest spills was 2.5 million gallons in Marin County  
            which illegally discharged both untreated and partially  
            treated sewage into the San Francisco Bay."

          4)In 2004, the Marin County Grand Jury (Grand Jury) released a  
            report on the southern Marin districts entitled "Southern  
            Marin Sewers - So Many Districts, So Few Users."  The Grand  
            Jury reviewed the operations of the eleven agencies and found  
            that, for the most part, these agencies "appear to be  
            operating in a responsible and environmentally sound manner."   
            The Grand Jury pointed out that the "the unique patchwork  
            quilt of agencies, however, lacks a forum for cooperatively  








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            examining transcend district boundaries."  The Grand Jury  
            recommended:

             a)   A periodic forum for interagency information sharing,  
               discussion, and dispute resolution be established;

             b)   A facilitator-run meeting of the eleven agencies  
               involved in southern Marin's wastewater collection be held  
               to identify opportunities for consolidation, collaboration,  
               and cooperation; and,

             c)   The opportunities identified in the facilitated meeting  
               become the basis for an in-depth study of consolidation  
               options.

          5)In 2005, to reduce water quality problems and to increase  
            system efficiencies, the Marin County LAFCO conducted an MSR  
            and recommended a consolidation plan for the eleven small  
            wastewater agencies in southern Marin County.  The report  
            concluded that the operation of numerous separate agencies  
            with duplicated staff, and over 40 elected officials, is not a  
            cost effective way to manage the single purpose service of  
            wastewater collection and treatment.  The MSR identified  
            significant cost savings for the ratepayers that would occur  
            if agency functions were consolidated.  

          6)In a November 7, 2008, memo from the Executive Director of the  
            Marin County LAFCO to members of the LAFCO, it was noted that  
            the "Commission's actions in 2005 [through the MSR] recognized  
            the need for evolutionary change to southern Marin sewer  
            agencies and emphasized the efficiencies available from  
            functional consolidation as a preparation for eventual  
            political consolidation.  SASM and its member agencies then  
            initiated but quickly discontinued a series of cooperative  
            actions to achieve those efficiencies" meaning that the  
            districts in southern Marin did convene meetings, as suggested  
            in the Grand Jury report, to identify opportunities for  
            collaboration and consolidation, but the collaborative  
            approach was stopped shortly thereafter.

           PROVISIONS OF AB 1232
           
          7)This bill sets up a process that would allow Marin LAFCO to  
            force the consolidation of small wastewater districts, when  
            specific conditions are met, without protest hearings.  The  








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            specific conditions provided in the bill are the following:

             a)   Small wastewater agencies provide services for up to  
               10,000 service connections; and

             b)   The Marin LAFCO's MSR (completed in the prior 10 years)  
               recommends consolidation or reorganization that, if  
               implemented, would improve the financial and service level  
               benefits, improve government accountability, improve  
               operational efficiencies, and provide cost savings for the  
               ratepayers.

             c)   The wastewater agencies affected have had three or more  
               illegal discharges of untreated or partially untreated  
               wastewater that exceed 5,000 gallons in the previous five  
               years, as identified by the San Francisco Regional Water  
               Quality Control Board.

           IS CONSOLIDATION OF DISTRICTS THE ANSWER  ?

          8)Protest proceedings are established in existing law to allow  
            registered voters and landowners to give oral or written  
            protests against a change of organization.  AB 1232 removes  
            the ability of the Marin LAFCO to hold protest hearings for  
            public input and for an affected district to speak and  
            deliberate in a public forum on the issue of forced  
            consolidation and whether it is the best option for the  
            community.  Protest proceedings are removed from the bill  
            because, according to the author, "there has been strong local  
            agency resistance to consolidation.  That resistance has made  
            it impossible under existing laws to implement the LAFCO  
            consolidation recommendation because existing law requires a  
            majority of voters in the affected districts to approve the  
            consolidation."

          9)There is the potential that a district would be forced,  
            against its will, under the provisions of this bill, to  
            consolidate with other districts or agencies.  An unwilling  
            district could then sue LAFCO because LAFCO would be the  
            entity that initiates the forced consolidation.  The Committee  
            may wish to consider whether Marin LAFCO would ever use this  
            process, given the legal implications.

          10)In their initial letter of concern, the California  
            Association of Sanitation Agencies (CASA), writes:








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            "CASA's major concern is that LAFCOs have little expertise in  
            water quality or wastewater treatment issues.  CASA feels the  
            more appropriate way to address sanitary sewer overflows  
            (SSOs) is pursuant to existing statutory and regulatory  
            requirement under the Clean Water Act and Porter Cologne Act,  
            or direct consolidation such as designating agencies to be  
            consolidated in legislation.  To provide a consistent,  
            statewide regulatory approach to address SSOs, the State Water  
            Resources Control Board adopted Statewide General Waste  
            Discharge Requirements for Sanitary Sewer Systems, Water  
            Quality Order No. 2006-0003 (Sanitary Sewer Order) on May 2,  
            2006.  The Sanitary Sewer Order requires public agencies that  
            own or operate sanitary sewer systems to develop and implement  
            sewer system management plans and report all SSOs to the State  
            Water Board's online SSO database.  Consequently, we feel that  
            the [CAL] EPA, State Water Board, and Regional Boards are in a  
            far better position to address SSOs than are LAFCOs.  In fact  
            it is our understanding that the particular agencies  
            contributing to recent spills are currently under EPA orders."

          11) Clean Water Action and San Francisco Baykeeper, writing in  
            support of AB 1232, note that "illegal sewage spills of raw or  
            partially treated sewage occur frequently in the Bay Area when  
            heavy rains infiltrate aging pipes and overwhelm poorly  
            maintained sewer systems.  This problem has been particularly  
            evident in Marin, where small wastewater agencies have had a  
            history of capacity and compliance issues?.the problem is a  
            systemic one and requires a change to the wastewater  
            management framework."  Additionally, "small wastewater  
            agencies, like the eleven small agencies in southern Marin,  
            are often unable or unwilling to bear the high cost of  
            maintenance and repair of sewer lines and treatment plants."

          12)In their opposition letter, Ross Valley Sanitation District  
            (located in central Marin County), notes that "(1) it is  
            unfair for any LAFCO to impose reorganization or consolidation  
            of any public agency without the opportunity for a protest  
            hearing, and (2) if the bill is intended to affect southern  
            Marin then the language should be explicit to southern Marin."

          13)While consolidation of smaller agencies may increase  
            administrative effectiveness and provide for better management  
            of those agencies, there are no guarantees that consolidation  
            is the answer to the question of how to prevent illegal sewage  








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            discharges.  There may be other avenues to pursue that would  
            help sanitary districts update their aging infrastructure  
            including federal and state grants or funding, or heavier  
            enforcement if negligence is found on the part of the sanitary  
            districts.  The Committee may wish to consider whether the  
            approach in the bill is the correct approach to address  
            illegal sewage discharges.

          14)Right now this bill gives Marin LAFCO the power, under narrow  
            circumstances, to initiate consolidation of agencies without  
            protest hearings.  The Committee may wish to consider whether  
            it makes more sense to have SFRWQCB serve as the petitioner  
            for the reorganization or consolidation through Marin LAFCO  
            because of SFRWQCB 's expertise in water quality issues and  
            enforcement actions related to sewage spills.

          15)This bill will set a precedent of giving LAFCO more power  
            than under current law.  This bill, if signed into law, could  
            pave the way for other instances where power could be taken  
            away from agencies and their customers and given to LAFCO.   
            The Committee may wish to consider the future implications  
            that this bill may set.

           THRESHOLDS, TIMELINES AND BILL SCOPE
           
          16)AB 1232 specifies several thresholds and timelines that would  
            need to be met in order for consolidation to be forced by the  
            Marin LAFCO.  First, the bill specifies that there must be  
            three or more sewage discharges of 5,000 gallons in a  
            five-year period.  Second, the definition of small wastewater  
            agencies applies to those sanitary districts that have 10,000  
            service connections or less.  Lastly, the municipal services  
            review done by the commission has to be completed within the  
            prior 10-year period and make findings that reorganization or  
            consolidation would improve the financial and service level  
            benefits, increase operational efficiency, and provide cost  
            savings for the ratepayers.  The Committee may wish to discuss  
            whether these thresholds are appropriate.

          17)AB 1232, if signed into law, will take effect on January 1,  
            2011.  The assumption for the smaller wastewater agencies in  
            southern Marin is that they have a few years to figure out a  
            plan to consolidate on their own terms, and then can initiate  
            consolidation before the bill's effective date.  However, this  
            is not explicitly spelled out in the bill.  The Committee may  








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            wish to consider giving a date certain to have LAFCO start the  
            consolidation process, but only if a solution has not been  
            reached locally by the agencies.

          18)Currently AB 1232 only deals with Marin County, because of  
            the unique nature of the problems in southern Marin.  The  
            Committee may wish to ask the author to narrow the scope of  
            the bill further, specifically to the agencies in southern  
            Marin County, and provide for a one-time special statute,  
            rather than setting up a process that can be used in the  
            future anywhere in Marin County.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Clean Water Action
          San Francisco Baykeeper

           Opposition 
           
          Ross Valley Sanitary District
           
          Analysis Prepared by  :    Debbie Michel / L. GOV. / (916)  
          319-3958