BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 54
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          ASSEMBLY THIRD READING
          AB 54 (Solorio)
          As Amended  May 31, 2011
          Majority vote 

           LOCAL GOVERNMENT    6-0         ENVIRONMENTAL SAFETY      6-3   
           
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          |Ayes:|Alejo, Bradford, Campos,  |Ayes:|Wieckowski, Campos,       |
          |     |Davis, Gordon, Hueso      |     |Chesbro,                  |
          |     |                          |     |Davis, Feuer, Bonnie      |
          |     |                          |     |Lowenthal                 |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |Nays:|Miller, Morrell, Valadao  |
          |     |                          |     |                          |
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           APPROPRIATIONS      17-0                                        
           
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          |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 








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            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.









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          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.
           











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          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;








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             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.









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          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 


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