BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1408
                                                                  Page  1


          ASSEMBLY THIRD READING
          AB 1408 (Krekorian)
          As Amended  April 30, 2009
          Majority vote 

           LOCAL GOVERNMENT    5-2         WATER, PARKS AND WILDLIFE      
          8-4                 
          
           ----------------------------------------------------------------- 
          |Ayes:|Caballero, Arambula,      |Ayes:|Huffman, Arambula,        |
          |     |Davis, Krekorian, Skinner |     |Blumenfield, Caballero,   |
          |     |                          |     |Krekorian, Bonnie         |
          |     |                          |     |Lowenthal, John A. Perez, |
          |     |                          |     |Salas                     |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Knight, Duvall            |Nays:|Fuller, Anderson, Tom     |
          |     |                          |     |Berryhill, Fletcher       |
           ----------------------------------------------------------------- 

           APPROPRIATIONS      10-5                                        
           
           ----------------------------------------------------------------- 
          |Ayes:|De Leon, Ammiano, Davis,      | |                          |
          |     |Fuentes, Hall, John A. Perez, | |                          |
          |     |Price, Skinner, Torlakson,    | |                          |
          |     |Krekorian                     | |                          |
          |     |                              | |                          |
           ----------------------------------------------------------------- 
           ----------------------------------------------------------------- 
          |Nays:|Nielsen, Duvall, Harkey,  |     |                          |
          |     |Miller, Audra Strickland  |     |                          |
           ----------------------------------------------------------------- 
           
          SUMMARY  :  Establishes a Water Demand Mitigation Fund (Fund) that  
          a public water system may authorize a subdivision project  
          applicant to voluntarily contribute to in order to offset at  
          least 100% of the projected water demand associated with the  
          subdivision, and requires all monies in the Fund to be expended  
          on water conservation measures that will offset at least 100% of  
          the subdivision's projected water demand.  Specifically,  this  
          bill  :  

          1)Defines "projected water demand associated with the  








                                                                  AB 1408
                                                                  Page  2


            subdivision" as the anticipated water demand associated with  
            the subdivision that is determined by the public water system  
            and is based on physical characteristics of the subdivision,  
            including, but not limited to, lot size and use, current water  
            conservation standards required by local ordinance or state  
            regulation, and optional water conservation measures that  
            exceed all applicable local and state standards that are  
            agreed to by the public water system and the subdivision  
            applicant.

          2)Defines "water conservation measures" as measures from which  
            substantial evidence in the record demonstrates that the  
            measures will result in water efficiency and have a life  
            expectancy of at least 20 years.

          3)States that substantial evidence in relation to water  
            conservation measures may include, but is not limited to,  
            water efficiency projections calculated by the California  
            Urban Water Conservation Council (CUWCC) or data that  
            demonstrates that water efficiencies are quantifiable and  
            verifiable. 
           
          4)Defines "Water Demand Mitigation Fund" as the fund used to  
            finance conservation measures implemented by the public water  
            system and funded by the subdivision applicant in sufficient  
            amount to offset 100% of the projected water demand associated  
            with the subdivision. 
          5)States that participation in the Fund shall be at the mutual  
            agreement of the public water system and the subdivision  
            applicant. 

          6)States that a legislative body of a city, county or advisory  
            agency, to the extent that it is authorized by local ordinance  
            to approve, conditionally approve, or disapprove a tentative  
            map, would be required to include as a condition in any  
            tentative map that includes a subdivision a requirement that a  
            sufficient water supply be available or that sufficient water  
            supplies will be available through a Fund held by the public  
            water system.

          7)States that if the public water system and the subdivision  
            applicant mutually choose to demonstrate that a sufficient  
            water supply will be available through the use of water  
            conservation measures, then the subdivision applicant shall  








                                                                  AB 1408
                                                                  Page  3


            enter into an agreement with the public water system to  
            mitigate demand associated with the subdivision by depositing  
            monies in to the Fund.

          8)Specifies that the amount of funding required for  
            participation by the subdivision applicant in the Fund shall  
            be determined by the public water system and be based on  
            offsetting at least 100% of the projected water demand  
            associated with the subdivision.  

          9)Prohibits the funding required for participation in the Fund  
            from exceeding the amount necessary to offset the actual water  
            demand impact of the subdivision.  

          10)Requires the public water system to include in the written  
            verification of its ability or inability to provide sufficient  
            water supply an assessment pf the projected water demand  
            associated with the subdivision.

          11)Provides that if the public water system bases its assessment  
            of the projected water demand associated with the subdivision  
            on inclusion of optional water conservation measures that  
            exceed all applicable local and state standards, the  
            assessment shall be conditioned with appropriate measures to  
            ensure that the optional water conservation measures will be  
            retained by future homeowners and that actual long-term water  
            demand associated with the subdivision will be consistent with  
            the water demand projection. 

          12)Specifies that the conditions listed above shall be included  
            in the covenants, conditions, and restrictions (CC&Rs), or in  
            an equivalent legally enforceable mechanism that is associated  
            with the property and that the conditions may be enforced by  
            the imposition of financial penalties for any violations of  
            them. 

          13)Authorizes water savings projections to be calculated using  
            the water savings projections adopted by CUWCC, or data that  
            demonstrates that water efficiencies are quantifiable and  
            verifiable.  

          14)Authorizes a public water system to impose a more stringent  
            requirement than provided for in this measure.









                                                                  AB 1408
                                                                  Page  4


          15)Requires that, when the written verification relies on  
            voluntary participation in the Fund held by the public water  
            system, the written verification include an assessment by the  
            public water system of funds needed for the public water  
            system to implement water conservation measures that offset at  
            least 100% of the projected water demand associated with the  
            subdivision and proof that the funds have been voluntarily  
            deposited in a Fund held by the public water system.

          16)Requires the public water system's assessment of funds to  
            include identification and quantification of the water savings  
            resulting from the water conservation measures that the public  
            water system will implement to offset at least 100% of the  
            demand.

          17)Requires the public water system to expend all monies from  
            the Fund on water conservation measures that will reduce 100%  
            of the projected demand associated with the subdivision.

          18)Requires that the water conservation measures chosen be the  
            least expensive and most cost-effective means to yield the  
            applicable amount of water.

          19)Specifies that the expenditure of monies from the Fund may be  
            made within the subdivision or elsewhere within the service  
            area of the public water supplier, at its discretion. 

          20)Prohibits monies from the Fund from being used to supplant  
            funding for water conservation programs already required under  
            existing law or paid for by existing rates and surcharges.

          21)Authorizes the public water system to use monies from the  
            Fund to expand existing water conservation programs beyond the  
            requirements of the CUWCC Memorandum of Understanding. 

          22)Requires that not less than 40% of the proceeds from the Fund  
            be directed to water conservation programs in disadvantaged  
            communities, as defined, within the public water system's  
            service area. 

          23)Requires that actions for which the public water supplier may  
            use water demand mitigation funding are conservation measures  
            that have a planned completion date that is concurrent with  
            when the buildings within the subdivision will require  








                                                                  AB 1408
                                                                  Page  5


            service.

          24)Specifies the types of actions that can be taken by the  
            public water supplier to reduce water demand, which include,  
            but are not limited to, all of the following:

             a)   Water efficient appliances;

             b)   Water efficient landscapes and irrigation controllers;

             c)   Water recycling;

             d)   Stormwater capture, grey water systems, and groundwater  
 
               treatment; and, 

             e)   Other water conservation measures for which substantial  
               evidence demonstrates the measure will achieve a  
               quantifiable reduction in demand.

          25)Requires that the public water system document all  
            expenditures from the Fund in its Urban Water Management Plan  
            and confirm that the water conservation mitigation funding was  
            not used to supplant funding for water conservation programs  
            required by existing law, paid for by existing customers  
            through water rates and surcharges, or that are required for  
            participation in the California Urban Water Conservation  
            Council.

          26)Requires that the public water system document the measured  
            annual water use of each subdivision.

          27)Requires that the public water system calculate the water  
            savings attributable to both of the following:

             a)   The water conservation measures financed by the water  
               conservation mitigation funding from each subdivision; and,

             b)   The water conservation measures implemented in the  
               subdivision that exceed all applicable local and state  
               standards in the absence of a Fund. 

          28)Provides that in the event that the calculated water savings  
            do not equal or exceed the measured water demand over a  








                                                                  AB 1408
                                                                  Page  6


            five-year period, the public water system shall include in its  
            Urban Water Management Plan a schedule of actions designed to  
            achieve the savings necessary to offset 100% of the actual  
            demand of the subdivision.

           EXISTING LAW  prohibits approval of a tentative map, or a parcel  
          map for which a tentative map was not required, or a development  
          agreement for a subdivision of property of more than 500  
          dwelling units, except as specified, including the design of the  
          subdivision or the type of improvement, 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 available or, in  
          addition, a specified finding is made by the local agency that  
          sufficient water supplies are, or will be, available prior to  
          completion of the project.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, there are negligible costs, if any, to the Department  
          of Water Resources.

           COMMENTS  :  The Subdivision Map Act prohibits approval of a  
          tentative map for a subdivision of property of more than 500  
          dwelling units, unless the legislative body of a city or county  
          provides written verification from the applicable public water  
          system that a sufficient water supply is available or, in  
          addition, a specified finding is made by the local agency that  
          sufficient water supplies are, or will be, available prior to  
          completion of the project.  This requirement was placed into law  
          by SB 221 (Kuehl), Chapter 642, Statutes of 2001.  This bill  
          established the Fund that a public water system may authorize a  
          subdivision project applicant to voluntarily contribute to in  
          order to offset at least 100% of the projected water demand  
          associated with the subdivision, and requires all monies in the  
          Fund to be expended on water conservation measures that will  
          offset at least 100% of the subdivision's projected water  
          demand.

          According to the author, this bill 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  








                                                                  AB 1408
                                                                  Page  7


          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 this bill also 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.

          This bill authorizes a subdivision applicant to offset at least  
          100% of the projected water demand for their project by paying  
          into the Fund.  Furthermore, the bill authorizes a public water  
          system to purchase conservation measures with these funds to  
          offset the projected water demand by 100%.  However, what is not  
          considered in the bill is how a public agency will deal with  
          actually achieving the 100% offset if the conservation devices  
          do not work at full capacity.  These devices are estimated to  
          perform at specified standards; however, certain conditions must  
          exist in order to ensure that a product performs at the  
          estimated standard.  How will the public water system be able to  
          ensure that every device is going to be able to perform at the  
          estimated standard?  These devices will be installed in homes  
          and businesses and the conditions will be different at each  
          location.  The Legislature may wish to consider whether the bill  
          should ensure that the public water system includes a degree of  
          error when determining how many devices will be necessary.  This  
          is especially key to ensuring that a 100% conservation level is  
          met since the public water system is not required to consider a  
          back up water source if 100% conservation is not achieved. 

          Although this bill requires the written verification regarding  
          water supply include an assessment by the public water system of  
          funds needed for the public water system to implement water  
          conservation measures that offset at least 100% of the projected  
          water demand, there is no specific methodology sited in the bill  
          to determine how those amounts will be calculated.  The  
          Legislature may wish to consider requiring specific methodology  
          in the bill on how the financial costs of a particular  
          conservation measure will be determined so that there is  








                                                                  AB 1408
                                                                  Page  8


          consistency across the state on how these costs are calculated. 

          This bill requires that the public water system calculate the  
          water savings attributable to the water conservation measures  
          financed by the water conservation mitigation funding from each  
          subdivision.  However, the Legislature may wish to consider how  
          the public water system is going to calculate the water savings  
          from water conservation measures put on existing facilities that  
          are not required to have a water meter?  Moreover, the  
          Legislature may also wish to place a limit on the number of  
          projects that a public water system can approve using the 100%  
          mitigation fund offset, because there may come a point when a  
          community can only conserve so much and an actual water supply  
          may be necessary. 


           Analysis Prepared by  :    Katie Kolitsos / L. GOV. / (916)  
          319-3958 


                                                                FN: 0001309