BILL ANALYSIS Ó
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Mark Leno, Chair
Bill No: AB 240
Author: Rendon
As Amended: August 13, 2013
Consultant: Catherine Freeman
Fiscal: Yes
Hearing Date: August 22, 2013
Subject: Mutual Water Companies
Summary: This bill requires mutual water companies to
comply with open meeting, public record, audit, and budget
requirements and allows them to impose liens to collect
unpaid charges. Allows the Water Replenishment District of
Southern California to receive specified Department of
Public Health grants to improve drinking water
infrastructure in communities served by mutual water
companies in the City of Maywood.
Background: Existing law exempts a mutual water company
from state regulation if it is organized to deliver water
to its stakeholders and members, with specified exemptions.
Governance of a mutual water company is generally limited
to shareholders or members of the company. While the
details of any particular company's governing structure are
determined by its articles and bylaws, most mutual water
companies allow only shareholders and members to vote on
organizational matters and serve on the company's governing
board.
The Ralph M. Brown Act (Brown Act), first enacted by the
Legislature in 1953, is the set of existing laws which
guarantees the public's right to attend and participate in
local legislative bodies' meetings. As private
corporations, mutual water companies are not subject to the
Brown Act. Instead, existing law gives mutual water
companies broad authority to specify in their articles and
bylaws how their meetings are conducted, and who may
attend.
In 1968, the Legislature enacted the Public Records Act,
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which generally requires that government records must be
provided to the public, upon request, unless there is a
specific reason, specified in state law, to withhold a
record. Private corporations, including mutual water
companies are not subject to the Public Records Act.
Existing law requires that mutual water companies must
allow members to inspect specified records including
accounting books, meeting minutes, articles and bylaws, and
election results. A mutual water company's articles and
bylaws determine whether non-members are permitted to
access the company's records.
Existing law requires most local governments to prepare
annual budgets and requires periodic audits of most local
governments' accounts and records. Existing law requires
private corporations to prepare and distribute annual
reports and other specified financial statements.
Regarding the City of Maywood, three mutual water companies
deliver water to residents of the City of Maywood, in Los
Angeles County. Maywood residents have, for years,
expressed concerns about the quality of the water they
receive, citing problems with discoloration, odors and
taste. A deteriorating water supply infrastructure may be
a primary cause. A substantial portion of Maywood's
residents are renters and do not own real property in
Maywood. Because of this, they are not stockholders or
members of the mutual water companies that serve Maywood
and cannot participate in those companies' corporate
governance.
Analysis: This bill:
1. Enacts the Mutual Water Company Open Meeting Act,
which applies to mutual water companies, and permits
an eligible person to attend a meeting of a mutual
water company, as those terms are defined, or to speak
at a meeting, except as provided.
2. Requires the board of a mutual water corporation
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. The audit must conform to
generally accepted auditing standards.
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3. Requires the board of a mutual water company that
operates a public water system to adopt, in an open
meeting, an annual budget, on or before the start of
each fiscal year of the mutual water company.
4. Allows a mutual water company's board of directors,
after providing at least 20 days written notice and if
authorized by its articles or bylaws, to authorize the
recording of a lien against a shareholder's property
to secure the collection of rates, charges, and
assessments owed to the mutual water company by the
shareholder.
5. Requires mutual water company board members to
repeat, every six years, training on the duties of
mutual water companies' board members.
6. Requires the board of directors of a mutual water
company that operates a public water system to make
specified documents available to an eligible person,
as defined, upon payment of fees covering the direct
costs of duplication, as specified.
7. Expresses the Legislature's intent to encourage
collaboration among mutual water companies that
operate public water systems in the City of Maywood to
create a public water agency that can consolidate
drinking water services for the people and businesses
of that city.
8. Allows the Water Replenishment District (WRD) of
Southern California to receive grant funding from $7.5
million appropriated to the Department of Public
Health from the Safe Drinking Water, Water Quality and
Supply, Flood Control, River and Coastal Protection
Fund of 2006. The WRD must use the grant funds for
water quality improvement projects to benefit the
residents of the City of Maywood, subject to the
following three conditions:
a. WRD manages the design and implementation
or construction of the project.
b. WRD retains ownership of the project and
oversees its operation.
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c. A mutual water company that incorporates
the project into its systems complies with
specified open meeting requirements.
9. In keeping with other bond allocations in the
budget, the appropriation allows for the use of funds
for engineering including planning and California
Environmental Quality Act analyses.
Support: Central Basin Municipal Water District
Sierra Club
Union de Vecinos
Opposed: Unknown
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