BILL ANALYSIS AB 1408 Page 1 Date of Hearing: April 28, 2009 ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE Jared William Huffman, Chair AB 1408 (Krekorian) - As Proposed to Be Amended: April 28, 2009 SUBJECT : Subdivisions: water demand mitigation fund SUMMARY : Allows local agencies to incorporate water demand reductions into water supply verifications for new developments, if the developer agrees to install conservation measures or pay into a Water Conservation Mitigation Fund operated by the water supplier that will achieve 100% elimination of new water demand from proposed development. Specifically, this bill : 1)Defines or retains definitions of certain terms necessary for voluntary program to encourage developers to implement or pay for water conservation measures in new developments. a) "Projected water demand associated with the subdivision" is determined based on physical characteristics of the subdivision. b) "Public water system" means the water supplier that may supply water to the proposed subdivision (herein "water supplier"). c) "Water conservation measures" include those measures shown, by evidence in the record (as defined), to result in water efficiency and have a life expectancy of at least 20 years. d) "Water Demand Mitigation Fund" (Fund) means the fund used to finance water conservation measures implemented by the water supplier. 2)Authorizes city/county to determine sufficient water supply for a proposed subdivision exceeding 500 residential units with either an estimate of available water or water supplies made available through water conservation measures funded by the Fund, if the developer volunteers to participate. a) Allows developer and water supplier to agree to terms to mitigate subdivision water demands and demonstrate AB 1408 Page 2 sufficient water supply through conservation measures. b) Requires developer to contribute enough money to pay for water conservation measures that offset 100% of the proposed subdivision's projected water demand, as determined by water supplier. c) Requires water conservation measures to exceed all applicable local and state standards. d) Limits required developer funding for the Fund to the amount necessary to offset the actual water demand impact of the subdivision. e) Requires water supplier assessment to be conditioned with appropriate measures to ensure optional water conservation measures will be retained by future homeowners and actual long-term water demand associated will be consistent with projections. f) Allows enforcement of water conservation by financial penalties pursuant to existing authority of water supplier to enforce its ordinances. g) Requires water supplier to determine projected water savings for water conservation measures incorporated into the subdivision's design, based on substantial evidence that may include projections by California Urban Water Conservation Council (CUWCC). h) Requires water supplier to calculate water savings associated with optional water conservation measures required by local ordinance or state regulation. i) Requires water supplier verification of water supply to include estimation of funds needed to offset 100% of the proposed subdivision's projected water demand. 3)Establishes requirements for operating the Fund to pay for water conservation measures. a) Requires water supplier to expend all funds on water conservation measures that will offset at least 100% of the subdivision's projected demand. AB 1408 Page 3 b) Requires selection of water conservation measures that are least expensive and most cost-effective means to yield the applicable amount of water. c) Requires 40% of Fund proceeds to be directed to water conservation programs in any disadvantaged community within the water supplier's service area. d) Prohibits use of Fund to supplant funding for water conservation programs required by existing law or paid for by existing customers through water rates and surcharges, but allows expansion of existing water conservation efforts beyond CUWCC requirements. e) Requires conservation measures paid for by the Fund to be quantifiable, verifiable, have a planned completion date that is concurrent with when the buildings within the subdivision will require service, and have a life expectancy of at least 20 years. f) Specifies categories of eligible water conservation measures but allows other measures for which "substantial evidence demonstrates" a quantifiable reduction in demand. g) Requires water supplier to document and calculate fund expenditures, measured annual water conservation of the subdivisions involved in the Fund, and water savings attributable to water conservation measures. 4)Requires water supplier, if calculated water savings to do not equal or exceed the measured water demand in the subdivision, to include actions designed to achieve the necessary savings in its urban water management plan. 5)Provides for reimbursement of local costs mandated by the bill. EXISTING LAW 1)Prohibits approval of a subdivision of property of more than 500 dwelling units, except as specified, unless the legislative body of a city or county or the designated advisory agency provides written verification from the applicable public water system that a sufficient water supply is or will be available prior to completion of the project. AB 1408 Page 4 2)Requires an assessment of future water supply whenever a city or county determines that a project, as defined, is subject to the California Environmental Quality Act (CEQA). 3)Requires urban water suppliers to prepare Urban Water Management Plans. FISCAL EFFECT : Unknown COMMENTS : AB 1408 is one of two bills proposing to incorporate water conservation measures into the water supply assessment/verification processes required of new development in California. The other bill is AB 300 (Caballero), which will be heard during this same hearing. Both bills purport to encourage greater investment in water conservation measures by developers of housing and commercial projects, based on the incentive of increased likelihood of project approval with lower demand for new water supplies. They also have a relationship to previous bills - AB 2153 (Krekorian/2008) and AB 2219 (Parra/2008). Both failed to pass in 2008. Determinations as to sufficiency of water supply occur at two points in the development process. First, when CEQA requires a city/county to comply on a project, the water supplier for the property must assess future water supply sufficiency upon the city/county's request. Second, for residential developments of more than 500 units, the city/county must verify the sufficiency of the 20-year water supply, based on the water supplier's assessment. These requirements were enacted by SB 610 (Costa), Chapter 643, Statutes of 2001 and SB 221 (Kuehl), Chapter 642, Statutes of 2001. This bill focuses on the second stage of the process - the verification of future water supply - that was enacted by SB 221. According to the author, AB 1408 would provide the framework for an optional program that would allow developers to get credit in the water supply assessment for implementing conservation measures at the development that go beyond what is required. This includes the use of a legally enforceable mechanism, such as the CC&Rs, to notify the purchasers of the homes that they are buying a special home with unique requirements to conserve water. These legally enforceable mechanisms will help ensure that the anticipated level of conservation is achieved and remains durable over time. The author states that AB 1408 also AB 1408 Page 5 provides the framework for an optional arrangement between developers and water suppliers where developers can offset 100% or more of the projected water demand of the development by paying into a water conservation mitigation fund that is managed by the water supplier. The author believes that for highly water constrained areas, this optional program can provide water suppliers with a way to provide a water supply assessment so that developers can proceed with a development that might otherwise be uncertain. AB 300 and AB 1408 have many similarities, but also some differences, which the Committee may wish to consider: 1)Conservation Enforcement : AB 300 relies largely on the water supplier to enforce, through the agreement with the developer at the time of the assessment, the water conservation measures. It allows for, but does not require, inclusion of water conservation conditions in the "covenants, conditions and restrictions" (CCRs) in the property title. It also requires the water supplier to complete a report on the project 5 years after development completion, and the developer to provide a manual for water conservation devices to each homeowner. AB 1408 also relies on the water supplier, but requires enforcement tools (e.g. CCRs), subsequent monitoring, and further water supplier actions if the projected water savings do not materialize. 2)Amount of Conservation :AB 300 allows for a range of water conservation targets for new developments, which allow the proposed conservation measures to reduce, but not necessarily eliminate, water demand from a proposed project. AB 1408 requires that the conservation achieve a 100% elimination of new water demands from a proposed development, if the developer chooses to participate. Because this program is a new concept, it is not clear whether the 100% target is attainable. East Bay MUD, a sponsor of AB 1408, has tried this program with a new development in its own area, but has not reported on whether its program has achieved a 100% elimination of new water demand. Finally, AB 1408 puts the burden on the water supplier to estimate the costs of sufficient water measures to offset 100% of the water supply. 3)Assessment & Verification :AB 300 provides for this program to apply to both the assessment and verification stages. Association of California Water Agencies has suggested that AB 1408 Page 6 using both stages is redundant, and suggested the program apply to only one stage. AB 1408 applies the program only to verification stage. The preceding water assessment may provides sufficient information for the developer and the supplier to determine how much water demand needs to be offset, either to achieve the 100% elimination target or a reduction that would allow the development's water demand to fall within projected water supply. 4)Restrictions on Fund :AB 300 requires use of Fund monies on water conservation measures and bars supplanting other water conservation funding with Fund money. AB 1408 then adds requirements on Fund expenditures, for quantifiable and verifiable conservation measures and water conservation in disadvantaged communities (40%). It also requires more substantial water supplier follow-up, with documentation/calculation of expenditures, actual resulting conservation and water savings. These differences deserve more analysis and consideration. AB 300 does not include the level of detail in AB 1408. On the other hand, the AB 1408 amendments proposed for Committee adoption today are substantial. The Committee may consider whether to encourage the authors to collaborate with each other and with the sponsors, to work out a consensus bill that addresses this concept in a comprehensive way. REGISTERED SUPPORT / OPPOSITION : Support: East Bay Municipal Utilities District (Sponsor) Planning & Conservation League (Sponsor) Association of California Water Agencies (if amended) California Special Districts Association Opposition :None submitted Analysis Prepared by : Alf W. Brandt / W., P. & W. / (916) 319-2096