Amended in Senate June 5, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 240

Introduced by Assembly Member Rendon

February 5, 2013

An act to add begin delete Section 14304 end delete begin insert Sections 14304, 14305, and 14306 end insert to the Corporations Code, to amend Section 116755 of the Health and Safety Code, and to add Section 10531.5 to the Water Code, relating to mutual water companies.

LEGISLATIVE COUNSEL’S DIGEST

AB 240, as amended, Rendon. Mutual water companies.

Under existing law, a mutual water company is defined as a corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for irrigation or domestic purposes that provides in its articles or bylaws that the water shall be sold, distributed, supplied, or delivered only to owners of its shares, as specified.

(1) Existing law requires each board member of a mutual water company that operates a public water system to complete a training course regarding the duties of board members of mutual water companies, as specified.

This bill would require a board member to repeat this training course every 6 years.

(2) Existing law permits a mutual water company that is not a public utility to levy assessments upon its shares, unless otherwise provided in its articles or bylaws.

This bill would also permit the board of directors of a mutual water company, if authorized by its articles or bylaws, to record a notice of lien against a shareholder’s property if the shareholder has not timely paid any rate, charge, or assessment arising from, or related to, water services provided by the mutual water company to the shareholder’s property and if the shareholder was given at least 20 days’ notice of the lien.

begin insert

(3) Existing law, the California Public Records Act, provides that public records are open to inspection at all times during the office hours of the state or local agency that retains those records, and that every person has a right to inspect any public record, except as provided. The Ralph M. Brown Act requires, with specified exceptions, that all meetings of a legislative body of a local agency, as those terms are defined, be open and public and that all persons be permitted to attend and participate.

end insert begin insert

This bill would require a mutual water company that operates a public water system to comply with the Ralph M. Brown Act and the California Public Records Act, as specified. The bill would require the board of the mutual water company to adopt, in an open meeting, an annual budget on or before the start of each fiscal year. The bill would require the board of a mutual water company that operates a public water system to contract with a certified public accountant or public accountant to make an annual audit of the accounts and records of the mutual water company, and would require the report to be filed, within 12 months of the end of the mutual water company’s fiscal year under examination, as a public record with the mutual water company, and to be sent to the Controller and any person served by the mutual water company that submits a written request to the board, as specified.

end insert begin delete

(3)

end delete

begin insert (4) end insert  Existing law declares that water is a valuable natural resource in California and should be managed to ensure the availability of sufficient supplies to meet the state’s agricultural, domestic, industrial, and environmental needs. Existing law declares that local agencies can realize efficiencies by coordinating and integrating their assets and seeking mutual solutions to water management issues.

This bill would declare the intent of the Legislature to encourage collaboration among mutual water companies that operate public water systems in the City of Maywood to create a public agency that can consolidate drinking water services for the people and business of that city.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 14304 is added to the Corporations Code,
to read:

14304.  

If a shareholder of a mutual water company has not
timely paid any rate, charge, or assessment arising from, or related
to, water service provided by the mutual water company to the
shareholder’s property, and if authorized by its articles or bylaws,
then after providing at least 20 days’ written notice to the
shareholder, the board of directors of the mutual water company
may authorize the recording of a notice of lien against that
shareholder’s property to secure the collection of the rates, charges,
and assessments owed to the mutual water company by the
shareholder.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 14305 is added to the end insert begin insert Corporations Code end insert begin insert , to
read: end insert

begin insert

begin insert 14305. end insert   

(a) A mutual water company that operates a public
water system shall comply with the Ralph M. Brown Act (Chapter
9 (commencing with Section 54950) of Part 1 of Division 2 of Title
5 of the Government Code) and the California Public Records Act
(Chapter 3.5 (commencing with Section 6250) of Division 7 of
Title 1 of the Government Code).

(b) The board of a mutual water corporation that operates a
public water system shall contract with a certified public
accountant or public accountant to make an annual audit of the
accounts and records of the mutual water company. The audit
shall conform to generally accepted auditing standards. A report
of the audit shall be filed as a public record with the mutual water
company and shall be sent to the Controller and any person served
by the mutual water company that submits a written request to the
board. The report shall be filed within 12 months of the end of the
mutual water company’s fiscal year under examination.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 14306 is added to the end insert begin insert Corporations Code end insert begin insert , to
read: end insert

begin insert

begin insert 14306. end insert   

The board of a mutual water company that operates a
public water system shall adopt, in an open meeting, an annual
budget on or before the start of each fiscal year of the mutual water
company.

end insert

begin delete SEC. 2. end delete
begin insert SEC. 4. end insert   

Section 116755 of the Health and Safety Code is
amended to read:

116755.  

(a) Each board member of a mutual water company
that operates a public water system, as defined in Section 116275,
shall, within six months of taking office, or by December 31, 2012,
if that member was serving on the board on December 31, 2011,
complete a two-hour course offered by a qualified trainer regarding
the duties of board members of mutual water companies, including,
but not limited to, the duty of a corporate director to avoid
contractual conflicts of interest and fiduciary duties, the duties of
public water systems to provide clean drinking water that complies
with the federal Safe Drinking Water Act (42 U.S.C. Sec. 300f et
seq.) and this chapter, and long-term management of a public water
system. A board member of a mutual water company shall repeat
this training every six years. For the purposes of this subdivision,
a trainer may be qualified in any of the following ways:

(1) Membership in the California State Bar.

(2) Accreditation by the International Association of Continuing
Education and Training (IACET) ANSI/IACET 1-2007.

(3) Sponsorship by either the Rural Community Assistance
Corporation or the California Rural Water Association.

(b) A mutual water company formed pursuant to Part 7
(commencing with Section 14300) of Division 3 of Title 1 of the
Corporations Code shall be liable for the payment of any fines,
penalties, costs, expenses, and other amounts that may be imposed
upon the mutual water company pursuant to this chapter. The
mutual water company may levy an assessment, pursuant to Section
14303 of the Corporations Code, to pay these fines, penalties,
costs, expenses, and other amounts so imposed. If the amount of
outstanding fines, penalties, costs, expenses and other amounts
imposed pursuant to this chapter exceed 5 percent of the annual
budget of the mutual water company, then the mutual water
company shall levy an assessment, pursuant to Section 14303 of
the Corporations Code, to pay those fines, penalties, costs,
expenses, and other amounts so imposed.

begin delete SEC. 3. end delete
begin insert SEC. 5. end insert   

Section 10531.5 is added to the Water Code, to read:

10531.5.  

It is the intent of the Legislature to encourage
collaboration among mutual water companies that operate public
water systems in the City of Maywood to create a public agency
that can consolidate drinking water services for the people and
businesses of that city.