BILL ANALYSIS Ó AB 54 Page 1 ASSEMBLY THIRD READING AB 54 (Solorio) As Amended May 31, 2011 Majority vote LOCAL GOVERNMENT 6-0 ENVIRONMENTAL SAFETY 6-3 ----------------------------------------------------------------- |Ayes:|Alejo, Bradford, Campos, |Ayes:|Wieckowski, Campos, | | |Davis, Gordon, Hueso | |Chesbro, | | | | |Davis, Feuer, Bonnie | | | | |Lowenthal | | | | | | |-----+--------------------------+-----+--------------------------| | | |Nays:|Miller, Morrell, Valadao | | | | | | ----------------------------------------------------------------- APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Fuentes, Harkey, | | | | |Blumenfield, Bradford, | | | | |Charles Calderon, Campos, | | | | |Davis, Donnelly, Gatto, | | | | |Hall, Hill, Lara, | | | | |Mitchell, Nielsen, Norby, | | | | |Solorio, Wagner | | | ----------------------------------------------------------------- SUMMARY : Adds additional requirements on 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 AB 54 Page 2 company operating as a public water system to submit to the LAFCO a map depicting the approximate boundaries of the property that the company serves. 3)States that if the LAFCO requests information, in connection with the preparation of a municipal service review or spheres of influence, 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)Requires a mutual water company that operates a public water system to maintain a financial reserve fund for repairs and replacements to its water production, transmission, and distribution facilities equal to the reserve fund for these purposes required for a public water system or equal size. 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 two-hour course offered by a qualified trainer regarding the duties of board members of a mutual water company, duties of a corporate director to avoid financial conflicts of interest in contracts, and the duties of public water systems to provide clean drinking water that complies with the federal and state Safe Drinking Water Acts. 6)Defines the qualification requirements of a qualified trainer. 7)Requires a mutual water company to be liable for the payment of any fines, penalties, expenses, and other amounts that may be imposed. 8)Authorizes a mutual water company to levy an assessment in order to pay the fines, penalties, expenses, and other amounts so imposed and specifies that if these exceed 5% of the annual budget of the mutual water company, then the assessment must be imposed. 9)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. AB 54 Page 3 10)Gives LAFCO the power to review and approve or disapprove, at the LAFCO'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)Specifies that any annexation approved shall be subject to the state and federal constitutional prohibitions against the taking of private property without the payment of just compensation. 12)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. 13)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. 14)States that a public may satisfy any request for information as to compliance with the Safe Drinking Water Act by the submission of the consumer confidence or water quality report prepared by the public water system. 15)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. 16)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. 17)Makes legislative findings regarding drinking water quality. AB 54 Page 4 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)Authorizes a corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for irrigation purposes or domestic use, and not as a public utility, to levy assessments upon its shares. 5)Requires LAFCO to conduct a service review of the municipal services provided in the county or other appropriate area designated by LAFCO. 6)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. 7)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; AB 54 Page 5 d) Status of, and opportunities for, shared facilities; 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. 8)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 : According to the Assembly Appropriations Committee, costs of an unknown amount, but likely no more than tens of thousands of dollars annually, to CDPH to develop and review letters of no prejudice (Special fund). COMMENTS : 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 CDPH 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. 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. AB 54 Page 6 This bill 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 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. This bill also allows mutual water companies to be considered by "LAFCOs" and requires mutual water companies operating public water systems to follow some of the same rules as public agencies. Support arguments: Support may argue that mutual water companies are under regulated and this bill 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 this bill 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. Analysis Prepared by : Katie Kolitsos / L. GOV. / (916) 319-3958 FN: 0000995