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  








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               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.









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             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.








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          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  








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          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  








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            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