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 








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            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.








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          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;








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             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 








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            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