BILL ANALYSIS Ó AB 54 Page 1 Date of Hearing: April 13, 2011 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT Cameron Smyth, Chair AB 54 (Solorio) - As Amended: April 4, 2011 SUBJECT : Drinking water. SUMMARY : Adds additional requirements on to mutual water companies, authorizes a local agency formation commission (LAFCO) to include mutual water companies in its municipal service reviews, and provides the California Department of Public Health (CDPH) more guidance regarding issuing Safe Drinking Water Revolving Fund money to mutual water companies. Specifically, this bill : 1)Specifies in statute that a corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for domestic use shall be known as a mutual water company. 2)Requires, no later than December 31, 2012, each mutual water company operating as a public water system to submit to the Secretary of State and the LAFCO a map depicting the boundaries of the property that the corporation serves. 3)States that if the LAFCO or a county department requests information from a mutual water company, the corporation shall, within 45 days of the request, provide all reasonably available information and explain, in writing, why any requested information is not reasonably available. 4)Specifies that all Governmental Accounting Standards Board (GASB) standards apply to mutual water companies. 5)Requires each board member of a mutual water company operated as a public water system to, within six months of taking office, complete a four-hour course offered by a public water agency or a public utility that operates a public water system regarding the duties of board members of public water systems and the duties of public water systems to provide clean drinking water that complies with the federal and state Safe Drinking Water Acts. 6)States that, if no public water agency in the county where the AB 54 Page 2 mutual water company operates offers a course, the director of the mutual water company shall certify to the State Department of Public Health, within nine months of taking office, that no such training was available. 7)Specifies that fines established under the Safe Drinking Water Act may be imposed on directors of a mutual water company if the mutual water company has received notice of a violation of the Safe Drinking Water Act more than one year previously and has not taken action to resolve the violation. 8)Requires all improvements to public water systems operated by a mutual water company to be designed and constructed to comply with the applicable California Water Works standards. 9)Requires all construction projects related to public water systems to comply with prevailing wage standards. 10)Gives LAFCO the power to review and approve or disapprove, at the commission's discretion, the annexation of territory served by a mutual water company into the jurisdiction of a city, a public utility, or a special district that operates a public water system, with the consent of the respective public agency or public utility and mutual water company. 11)Gives LAFCO the power to request information, as part of a municipal service review, from identified public or private entities that provide wholesale or retail supply of drinking water, including mutual water companies and private utilities. 12)Provides that in conducting a municipal service review, the LAFCO may include a review of whether the agencies under review, including any public water system, are in compliance with the Safe Drinking Water Act. 13)Authorizes the CDPH to issue a "letter of no prejudice" that allows an applicant for Safe Drinking Water Revolving Fund money to start clean drinking water project construction before final approval of funding without prejudicing CDPH's final decision on funding. 14)Allows CDPH to impose an alternative penalty on a small public water system for violation of the Safe Drinking Water Act that would require completion of a project that brings the small public water system into compliance, instead of imposing monetary fines. AB 54 Page 3 15)Makes legislative findings regarding drinking water quality. EXISTING LAW : 1)Requires a corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for domestic use (i.e., mutual water company) to specify in its articles or bylaws, its provision of water only to owners of its shares and that these shares must be appurtenant to specified lands. 2)Requires a mutual water company formed after January 1, 1998, in connection with the sale or lease of lots within a subdivision to meet specified standards including supply and distribution system design standards and water service standards. A mutual water company formed prior to January 1, 1998, may elect to meet all of these requirements. 3)Requires any person who intends to sell or lease lots within a subdivision involving a mutual water company to attach a document with prescribed information to an application for a public report. 4)Requires LAFCO to conduct a service review of the municipal services provided in the county or other appropriate area designated by LAFCO. 5)Requires LAFCO to include in the area designated for service review the county, the region, the subregion, or any other geographic area as is appropriate for an analysis of the service or services to be reviewed,. 6)Requires LAFCO to prepare a written statement of its determinations with respect to each of the following: a) Growth and population projections for the affected area; b) Present and planned capacity of public facilities and adequacy of public services, including infrastructure needs or deficiencies; c) Financial ability of agencies to provide services; d) Status of, and opportunities for, shared facilities; AB 54 Page 4 e) Accountability for community service needs, including governmental structure and operational efficiencies; and, f) Any other matter related to effective or efficient service delivery, as required by commission policy. 7)Requires LAFCO, in conducting a service review, to comprehensively review all of the agencies that provide the identified service or services within the designated geographic area. FISCAL EFFECT : Unknown COMMENTS : 1)As California has grown and communities have merged into metropolitan areas, some drinking water systems have not been able to keep pace. Infrastructure, built long ago, has deteriorated. Many water sources have become contaminated. The economic base of some communities has declined or stagnated, leading to less investment in water infrastructure for basic maintenance and modernization. The state provides funding to public water systems to improve drinking water quality through the Safe Drinking Water Revolving Fund, but demand far exceeds the available funding. According to the United States Environmental Protection Agency's Drinking Water Infrastructure Needs Survey and Assessment, which was performed in 2007, the California Department of Public Health estimates that the 20-year drinking water infrastructure need for California is $39 billion. Funding for such projects, however, for 1997-2008, totaled only $1.2 billion. 2)According to the author, smaller public water systems, particularly those operated by "mutual water companies," often lack the funding to improve their systems and eliminate contamination. They rely on state funding and cooperation by larger, neighboring water systems to improve their systems, but sometimes suffer years of contaminated water. 3)AB 54 would facilitate state and local funding for clean water projects and level the playing field between public water agencies and mutual water companies. It authorizes "letters AB 54 Page 5 of no prejudice" which would allow local agencies, with their own resources to get started on resolving water quality problems before the state finalizes a loan or grant from the Safe Drinking Water State Revolving Fund. AB 54 also allows mutual water companies to be considered by "local agency formation commissions" and requires mutual water companies operating public water systems to follow some of the same rules as public agencies. 4)Support arguments: Support may argue that mutual water companies are under regulated and that AB 54 is a small step in trying to identify these often unknown water providers to local governments in order to provide more awareness and accountability to these entities that provide drinking water to their constituents. Opposition arguments: Opposition, the Central Basin Water Association, argues that AB 54 seeks to subject mutual water companies to the same standards and requirements as public agencies, without bestowing any of the benefits of a public agency. Moreover, it gives LAFCO authority that should belong to the CDPH. 5)This bill is double-referred to the Environmental Safety and Toxic Materials Committee. REGISTERED SUPPORT / OPPOSITION : Support None on file (as of 4/7/11) Opposition Central Basin Water Association Analysis Prepared by : Katie Kolitsos / L. GOV. / (916) 319-3958