BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 407
                                                                  Page  1

          Date of Hearing:   June 30, 2009

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                     SB 407 (Padilla) - As Amended:  May 20, 2009

                              As Proposed to Be Amended

           SENATE VOTE  :   22-15
           
          SUBJECT  :   WATER CONSERVATION: PLUMBING FIXTURES REPLACEMENT

           KEY ISSUE  :  IN RESPONSE TO CALIFORNIA'S URGENT NEED TO MAXIMIZE  
          WATER EFFICIENCY AND CONSERVE ITS WATER RESOURCES, SHOULD ALL  
          PLUMBING FIXTURES IN RESIDENTIAL AND COMMERCIAL PROPERTIES BUILT  
          PRIOR TO 1994 THAT DO NOT MEET SPECIFIED STANDARDS OF WATER  
          CONSERVATION BE REPLACED WITH WATER-CONSERVING FIXTURES, BY  
          EITHER 2017 OR 2019, AS PROVIDED?
           
          FISCAL EFFECT  :   As currently in print this bill is keyed  
          non-fiscal.

                                      SYNOPSIS

          This bill seeks to require the replacement ("retrofit") of all  
          non-water conserving plumbing fixtures with water-conserving  
          fixtures, as defined, in every single-family residential,  
          multi-family residential, and commercial property built prior to  
          1994.  For single family residential properties, the bill  
          requires the retrofit of all non-compliant fixtures by 2017,  
          while for multifamily residential real properties (i.e. having  
          more than one unit) and commercial properties, this deadline for  
          compliance is extended until 2019.  In addition, beginning in  
          2014, the bill will also require retrofit of non-compliant  
          plumbing fixtures as a condition of receiving a building permit  
          for major improvements or renovations.  In cases where property  
          is being sold or transferred, this bill seeks to require  
          property owners to disclose the requirements for replacement of  
          non-compliant plumbing fixtures and whether non-water conserving  
          fixtures have been replaced prior to the sale or transfer.  The  
          bill does not preempt local retrofit ordinances adopted by a  
          city or county prior to July 1, 2009.  The bill is sponsored by  
          the Association of California Water Agencies (ACWA), the  
          Metropolitan Water District of Southern California (MWD), and  
          the San Francisco Public Utilities Commission (SF-PUC).  The  








                                                                  SB 407
                                                                  Page  2

          author's proposed amendments, the result of extensive  
          negotiations, are expected to remove opposition to the bill from  
          realtors and business property owners because the amendments  
          unlink retrofit requirements from the sale or transfer of  
          property.  The bill as proposed to be amended is quite different  
          from the version of the bill that passed off the Senate Floor by  
          a 22-15 vote.  Although the bill retains the same objectives of  
          increasing water conservation through retrofit of plumbing  
          fixtures, this Committee is the first to evaluate the bill's  
          mechanism for accomplishing these goals by targeting the  
          approval process for building permits.

           SUMMARY  :  Seeks to require the replacement of all non-water  
          conserving plumbing fixtures, as defined, in commercial and  
          residential properties built prior to 1994 with water-conserving  
          fixtures by either 2017 or 2019, depending on the type of  
          property.  Specifically, among other things,  this bill  :    
          1)Makes legislative findings and declarations, including that  
            economic analysis has identified urban water conservation as a  
            cost-effective approach to addressing water supply needs.

          2)Proposes requirements that will apply to residential and  
            commercial real property built and available for use on or  
            before January 1, 1994, with the exception of:  a) registered  
            historical sites; b) real property for which a licensed  
            plumber certifies that, due to the age or configuration of the  
            property or its plumbing, installation of water-conserving  
            plumbing fixtures is not technically feasible; c) a building  
            that has had its water service permanently disconnected.

          3)With respect to single family residential real property:

               a)   Requires the property owner to replace all noncompliant  
               plumbing fixtures in the property with water-conserving  
               plumbing fixtures on or before January 1, 2017.

             b)   Requires a building permit applicant to replace all  
               noncompliant plumbing fixtures in the property with  
               water-conserving plumbing fixtures as a condition for (i)  
               issuance of a certificate of final completion and  
               occupancy, or (ii) approval of a final building permit by  
               the local building department, for all building alterations  
               or improvements on or after January 1, 2014.

             c)   Requires a seller or transferor of the property, in  








                                                                  SB 407
                                                                  Page  3

               providing the Real Estate Transfer Disclosure Statement  
               ("TDS") required by Insurance Code Section 1102.6, to  
               disclose in writing to the prospective purchaser or  
               transferee the following information:

                i)     The requirement that the property owner must replace  
                 all noncompliant plumbing fixtures in the property with  
                 water-conserving plumbing fixtures on or before January  
                 1, 2017.

               ii)    Whether the real property includes any noncompliant  
                 plumbing fixtures.

           4)With respect to multifamily residential or commercial real  
            property:

               a)   Requires that all noncompliant plumbing fixtures in the  
               property be replaced with water-conserving plumbing  
               fixtures on or before January 1, 2019.

             b)   Requires a building permit applicant to replace all  
               noncompliant plumbing fixtures in the property with  
               water-conserving plumbing fixtures, as a condition for (i)  
               issuance of a certificate of final completion and  
               occupancy, or (ii) approval of a final building permit by  
               the local building department, for all building alterations  
               or improvements on or after January 1, 2014, subject to the  
               following provisions:

               i)     For building additions in which the sum of  
                 concurrent building permits by the same building permit  
                 applicant would increase the floor area of the space in a  
                 building by more than 10 percent, the building permit  
                 applicant shall replace all non-compliant plumbing  
                 fixtures in the building.

               ii)    For building alteration or improvements in which the  
                 total construction cost estimated in the building permit  
                 is greater than one hundred fifty thousand dollars  
                 ($150,000), the building permit applicant shall replace  
                 all noncompliant plumbing fixtures that serve the  
                 specific area of alteration or improvement.

               iii)   For any alterations or improvements to that room in  
                 a building that contains any noncompliant plumbing  








                                                                  SB 407
                                                                  Page  4

                 fixtures and that requires a building permit, the  
                 building permit applicant shall replace all noncompliant  
                 plumbing fixtures in that room, notwithstanding i) and  
                 ii) above.

               c)   Requires a seller or transferor of the property to  
               disclose in writing to the prospective purchaser or  
               transferee the following information:

               i)     The requirement that all noncompliant plumbing  
                 fixtures in the property be replaced with  
                 water-conserving plumbing fixtures on or before January  
                 1, 2019.
                
               ii)    Whether the real property includes any noncompliant  
                 plumbing fixtures.

          5)Permits a city or county to enact local ordinances or  
            established policies that promote compliance with this  
            article, or to enact local ordinances that will result in a  
            greater amount of water savings than those provided for in  
            this bill.

          6)Does not preempt local ordinances requiring retrofit of  
            noncompliant plumbing fixtures adopted prior to July 1, 2009  
            by a city or county.

           EXISTING LAW  :  

          1)Requires all water closets sold or installed in the state to  
            use no more than an average of 1.6 gallons per flush.  Further  
            requires that on and after January 1, 2014, all water closets,  
            other than institutional water closets, sold or installed in  
            this state must be high-efficiency water closets.  (Health &  
            Safety Code Section 17921.3(b)(1).)

          2)Requires all urinals sold or installed in the state to use no  
            more than an average of one gallon per flush.  Further  
            requires that on and after January 1, 2014, all urinals sold  
            or installed in this state, other than blow-out urinals, must  
            be high-efficiency urinals.  (Health & Safety Code Section  
            17921.3(b)(2).)

          3)Declares that it is the policy of the state that the  
            management of urban water demands and efficient use of water  








                                                                  SB 407
                                                                  Page  5

            shall be actively pursued to protect both the people of the  
            state and their water resources.  (Water Code Section  
            10610.4.)

          4)Requires the seller or transferor of any residential real  
            property consisting of one to four dwelling units to deliver  
            to the prospective transferee, as soon as practicable before  
            transfer or execution of the sales contract, the Real Estate  
            Transfer Disclosure Statement ("TDS") specified by Section  
            1102.6 of the Civil Code.  (Civil Code Section 1102.3.) 

           COMMENTS  :  This bill seeks to require the replacement of all  
          non-water conserving plumbing fixtures ("retrofit") in  
          commercial and residential properties built prior to 1994 with  
          water-conserving fixtures by either 2017 or 2019, depending on  
          the type of property.  The bill now imposes date-certain  
          deadlines by which all non-water conserving plumbing fixtures  
          should be replaced, regardless of whether the property has been  
          sold, transferred, renovated, or otherwise improved in that  
          time.  In addition, beginning in 2014, the bill will also  
          require retrofits of the plumbing fixtures as a condition of  
          receiving building permits for major improvements or  
          renovations.  In cases where property is being sold or  
          transferred, this bill seeks to require property owners to  
          disclose the requirements for plumbing fixtures and whether  
          non-water conserving fixtures have been replaced prior to the  
          sale or transfer.

           Statutes to Reform Plumbing Laws Are Effective in Increasing  
          Water Efficiency  .  According to the author, reforms through  
          legislation or plumbing code changes have encouraged the  
          installation of new, more water-conserving devices and led to  
          significant water savings statewide.  As the author explains:

               [E]xisting reforms-most notably the plumbing code  
               changes that have led to the sale of highly efficient  
               toilets throughout California-are the primary reasons  
               why conservation activities have lowered water use in  
               Southern California by an estimated 1 million acre  
               feet-per-year.  This is more water, as an important  
               comparison, than Southern California will receive this  
               year from the Sacramento- San Joaquin Delta.

               Although reforms to date on water use efficiency have  
               been significant, much more must be done.  While  








                                                                  SB 407
                                                                  Page  6

               California retailers are now required to sell  
               low-flush toilets, literally millions of inefficient  
               toilets still exist in homes and businesses throughout  
               the state.  Replacing an old, inefficient toilet with  
               a new one can save 31 gallons per day, every day, for  
               years.  Low-flow showerheads and faucets will save  
               additional water. . . SB 407 is an essential tool to  
               help the state conserve water as part of our ongoing  
               water supply efforts.

          The bill is sponsored by the Association of California Water  
          Agencies (ACWA), the Metropolitan Water District of Southern  
          California (MWD), and the San Francisco Public Utilities  
          Commission (SF-PUC).  ACWA has written in support:

               Currently many water agencies have been implementing  
               voluntary incentive based programs which provide  
               consumers with rebates, vouchers, or in some cases the  
               fixtures themselves to promote water conservation and  
               efficiency.  SB 407 would be the next step in the  
               process to take such local efforts to a larger scale  
               and implement a [similar] program statewide.

           The Proposed Amendments Move Away From a Retrofit-At-Resale  
          Approach  .  The author has significantly rewritten the bill to  
          shift away from a strategy of requiring the owner of a property  
          to replace non-compliant plumbing fixtures prior to any sale or  
          transfer, where compliance would have been a condition of  
          escrow.  Instead, the author has proposed major amendments that  
          simply require the replacement of all non-compliant plumbing  
          fixtures by a specified date, as provided, without inextricably  
          linking that requirement to the sale or transfer of the  
          property.

          Whereas the event that previously triggered the requirement to  
          replace the plumbing fixtures was the sale or transfer of the  
          property, the author has proposed to amend the bill so that any  
          major alteration or improvement to the property that requires a  
          local building permit will trigger the requirement to retrofit  
          with compliant water-conserving plumbing fixtures.  Generally  
          speaking, as proposed to be amended, the applicant must replace  
          all noncompliant plumbing fixtures with water-conserving models  
          as a condition for approval of a building permit or issuance of  
          a certificate of occupancy.  Additional limitations, related to  
          the size and cost of the improvement, modify this requirement  








                                                                  SB 407
                                                                  Page  7

          for multifamily residential and commercial properties.  

          Because the mechanism employed to facilitate retrofit of  
          inefficient plumbing fixtures now only minimally impacts the  
          sale or transfer process of real property, it is believed that  
          these proposed amendments, developed after extensive negotiation  
          with major stakeholders, will remove opposition from groups  
          including realtors and business property owners.  

           The Bill Targets Properties Built Before Statewide Efficiency  
          Requirements for Toilets and Urinals Became Effective in 1994  .   
          In 1992, the Legislature passed SB 1224, Chapter 1347, that  
          required all water closets (toilets) sold or installed on or  
          after January 1, 1994 to use no more than an average of 1.6  
          gallons per flush, and likewise for urinals, to use no more than  
          an average of one gallon per flush.  As a result, any new  
          buildings or structures built after 1994 have presumably  
          included the installation of toilets and urinals that meet these  
          water efficiency standards, which mirror those specified in this  
          bill for toilets and urinals.  The same is true of older homes  
          where remodeling plans include replacement of the plumbing  
          fixtures.  For these properties, existing law is sufficient to  
          ensure eventual, but not necessarily swift, compliance with  
          prescribed conservation standards for plumbing fixtures.

          Given these facts, this bill appropriately targets the  
          cross-section of older properties in California that are not yet  
          equipped with water-conserving plumbing fixtures that are now  
          found in more recently built structures.  For these reasons, the  
          retrofit requirements under the bill as proposed to be amended  
          would not apply to any properties built after January 1, 1994.  

          Nevertheless, even though this bill does not reach properties  
          built during or after 1994, existing law prohibiting the sale or  
          installation of inefficient toilets and urinals will force these  
          properties to eventually come into compliance when those  
          fixtures need to be replaced, either due to normal wear and tear  
          or because of remodeling.  In any case, the bill sets a certain  
          deadline of 2017 for compliant fixtures in single family  
          residences, and a deadline of 2019 for compliance in multifamily  
          residential and commercial real property.  This has the added  
          benefit of enabling policymakers to know with more certainty by  
          what date statewide compliance should be achieved, without  
          having to rely on estimated rates of real estate sales and other  
          factors to make that determination.








                                                                  SB 407
                                                                  Page  8


           Written Disclosure Requirements.   When residential real property  
          is to be sold or transferred, existing law requires the seller  
          or transferor to make certain written disclosures, including the  
          broad Transfer Disclosure Statement (TDS) (specified in Civil  
          Code Section 1102.6), as well as other information relating to  
          Mello-Roos liens, property taxes, former use of the property as  
          a federal or state military training location that could  
          possibly contain explosive munitions, and a natural hazard  
          disclosure statement (NHDS), disclosing risks of flooding, fire,  
          and other natural hazards to the property.  (Civil Code Section  
          1102 et seq.)  Failure to provide the statutory disclosures does  
          not, by itself, invalidate a transfer, but any negligent or  
          willful violation subjects the seller to liability for damages  
          as a result of that failure.  (Civil Code Sections 1102.13 &  
          1103.12.)

          This bill would augment those existing disclosures for  
          single-family residential real property sales by including  
          written disclosure of:  (1) the date by which the property owner  
          must ensure that all noncompliant plumbing fixtures in the  
          property have been replaced with water-conserving plumbing  
          fixtures; and (2) whether the property includes any noncompliant  
          plumbing fixtures.  It is envisioned that this disclosure will  
          be invariably made by adding a few lines of text to the Transfer  
          Disclosure Statement that sellers must already provide to  
          purchasers of single-family residential real property.  However,  
          the bill also permits the disclosure to be included in other  
          transactional documents, if not included in the TDS.

          With respect to multifamily residential and commercial real  
          property, the bill also requires the seller to make written  
          disclosure of the same two items of information to the  
          purchaser.  However, in those types of transactions, the parties  
          to the sale, typically two businesses, are not required to and  
          do not use the TDS common to single-family residential sales  
          because they generally are experienced enough or employ  
          attorneys to ensure that necessary disclosures are included in  
          the contract or other transactional documents used to complete  
          the sale.  This bill authorizes the sellers of these properties  
          to include the required disclosures in the other transactional  
          documents they already use.

           Reasonable Exceptions for Buildings Pending Demolition and Other  
          Properties.   As proposed to be amended, the bill provides that  








                                                                  SB 407
                                                                  Page  9

          the duty of an owner or building permit applicant to comply with  
          retrofit requirements shall be postponed for one year from the  
          date of issuance of a demolition permit for the building.  This  
          means that, on or after January 1, 2014, the owner of a building  
          for which a demolition permit has been issued has no duty for  
          the next year to retrofit that building with water-conserving  
          plumbing fixtures.  This makes sense because a building pending  
          demolition should be unoccupied during that time, thus almost no  
          water use by way of its interior plumbing fixtures.  If the  
          building is actually demolished during that year, then these  
          provisions would no longer apply.  In that case, any replacement  
          building would assuredly incorporate the use of water-conserving  
          plumbing fixtures as all new buildings do, thus would  
          appropriately fall outside the scope of this bill.

          In addition, the bill makes reasonable exemptions for registered  
          historical sites, buildings that have had water service  
          permanently disconnected, and real property where a licensed  
          plumber certifies that installation of compliant plumbing  
          fixtures is not technically feasible because of the age or  
          configuration of the property.

           Existing Retrofit Ordinances in 11 Local Jurisdictions Will Be  
          Grandfathered.   At least 11 cities or local water district  
          authorities, including the cities of Los Angeles, San Francisco,  
          and San Diego, have already enacted retrofit ordinances that  
          implement similar requirements and water conservation standards  
          as this bill.  This bill would not preempt any local ordinance  
          requiring retrofit of noncompliant plumbing fixtures adopted  
          prior to July 1, 2009, but instead grandfather them into law.   
          Furthermore, this bill permits a city or county to enact local  
          ordinances that promote compliance with this legislation or that  
          will result in an equivalent or greater amount of water savings.  
           

           Prior Legislation  :  SB 1224 (Killea), Chapter 1347 of the 1992  
          Statutes, requires all water closets (toilets) sold or installed  
          on or after January 1, 1994 to use no more than an average of  
          1.6 gallons per flush, and requires all urinals sold or  
          installed on or after January 1, 1994 to use no more than an  
          average of one gallon per flush.  

          AB 715 (Laird), Chapter 499 of the 2007 Statutes, prohibits the  
          sale, after January 1, 2014, of toilets that exceed 1.28 gallons  
          per flush and urinals that exceed 0.5 gallon per flush.








                                                                  SB 407
                                                                  Page  10


           Pending Legislation  :  AB 49 (Feuer) of 2008, requires the state  
          to achieve a 20% reduction in urban per capita water use in  
          California on or before December 31, 2020, with incremental  
          progress of at least 10% by 2015.  AB 49 also requires urban  
          retail water suppliers to develop urban water use targets and  
          interim water use targets by December 31, 2010.  This bill  
          passed the Assembly by a 43-30 vote and has been referred to the  
          Senate Committee on Natural Resources and Wildlife.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Association of California Water Agencies (co-sponsor)
          Metropolitan Water District of Southern California (co-sponsor)
                                                                                San Francisco Public Utilities Commission (co-sponsor)
          California Municipal Utilities Association
          Green Plumbers
          East Bay Municipal Utility District (EBMUD)
          Plumbing, Heating, Cooling Contractors of California
          San Diego County Water Authority
            U.S. Green Building Council, Northern California Chapter

           Opposition 
           
          None on file


           Analysis Prepared by  :    Anthony Lew / JUD. / (916) 319-2334