BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 240|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 240
Author: Rendon (D)
Amended: 8/13/13 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 4-1, 6/12/13
AYES: Wolk, Beall, DeSaulnier, Liu
NOES: Knight
NO VOTE RECORDED: Emmerson, Hernandez
SENATE BUDGET & FISCAL REVIEW COMMITTEE : 13-0, 8/22/13 (FAIL)
AYES: Leno, Emmerson, Anderson, Beall, Berryhill, Block,
DeSaulnier, Hancock, Monning, Nielsen, Roth, Torres, Wyland
NO VOTE RECORDED: Jackson, Wright, Vacancy
SENATE BUDGET & FISCAL REVIEW COMMITTEE : 9-5, 8/29/13
AYES: Leno, Beall, Block, DeSaulnier, Hancock, Jackson,
Monning, Roth, Torres
NOES: Emmerson, Anderson, Berryhill, Nielsen, Wyland
NO VOTE RECORDED: Wright, Vacancy
ASSEMBLY FLOOR : 76-0, 4/29/13 - See last page for vote
SUBJECT : Mutual water companies
SOURCE : Author
DIGEST : 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.
CONTINUED
AB 240
Page
2
Allows the Water Replenishment District (WRD) 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.
ANALYSIS : Existing law exempts a mutual water company from
state regulation if it is organized to deliver water to its
stockholders and members, with specified exceptions.
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, 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 access to
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.
This bill:
CONTINUED
AB 240
Page
3
1. Enacts the Mutual Water Company Opening Meeting Act, which
applies to all 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.
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 related to 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, a
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 agency that
can consolidate drinking water services for the people and
businesses of that city.
8. Allows the WRD of Southern California to receive grant
funding from $7.5 million appropriated to the Department of
CONTINUED
AB 240
Page
4
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.
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.
Background
In response to concerns that that some mutual water companies
lacked capital to pay for needed water quality improvements and
the managerial capacity to operate successful public water
systems, the Legislature passed AB 54 (Solorio, Chapter 512,
Statutes of 2011). The bill established training requirements
for mutual water districts' board members, made mutual water
companies liable for specified fines and penalties for violating
the California Safe Drinking Water Act, and expanded local
agency formation commissions' authority to review matters
related to mutual water companies.
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 water they
receive, citing problems with discoloration, odors, and taste.
Deteriorated water supply infrastructure may be a primary cause
of these problems. A substantial portion of Maywood's residents
are renters. Because they don't own real property in Maywood,
they are not stockholders or members of the mutual water
companies that serve Maywood and cannot participate in those
companies' corporate governance.
CONTINUED
AB 240
Page
5
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/30/13)
Central Basin Municipal Water District
Sierra Club
Union de Vecinos
OPPOSITION : (Verified 8/30/13)
Amarillo Mutual Water Company
Bellflower-Somerset Mutual Water Company
California Association of Mutual Water Companies
California Domestic Water Company
Central Basin Water Association
Cities of Bellflower, Covina and Lakewood
Covina Irrigation Company
Del Rio Mutual Water Company
Lake Elizabeth Mutual Water Company
Lawndale Mutual Water Company
Loma Mar Mutual Water & Improvement Company
Long Beach Water Department
Montebello Land & Water Company
Muscoy Mutual Water Company
Oildale Mutual Water Company
San Andreas Mutual Water Company
San Gabriel Valley Water Association
Santa Teresa Mutual Water Company
Southeast Water Coalition
Valencia Heights Water Company
ARGUMENTS IN SUPPORT : According to the author's office, this
bill makes several changes to the law of mutual water companies,
to make those that operate "public water systems" more public.
By opening the practices of mutual water companies up to those
who drink their water, this bill brings increased oversight to
their operations. Additionally, this bill takes important steps
to improve water quality in the City of Maywood.
The authors office further notes, that this bill brings badly
needed transparency and oversight to mutual water companies.
This bill requires these companies to provide access to meetings
CONTINUED
AB 240
Page
6
and records to all individuals that receive drinking water from
mutual water companies. This bill brings greater accountability
to these companies and compels them to disclose information to
those that they serve.
The author's office further states, this bill moves
significantly closer to the goal of resolving the City of
Maywood's water issues. This bill amends the 2011-12 State
Budget appropriation to allow the WRD to build water quality
improvement projects for the people of Maywood. WRD has both
the necessary resources to remedy Maywood's water issues and a
proven track record in improving water quality. This record
includes the District's work in Maywood, where it has already
installed a water treatment plant on one of the mutual water
company's wells. Allowing WRD access to state funding will kick
start efforts to resolve long-standing drinking water quality
problems for the people of Maywood.
ARGUMENTS IN OPPOSITION : The opposition states that this bill
sets no threshold for mutual water companies to adopt it
provision based upon lack of customer service and/or water
quality standards, laws and practices. Instead, it applies to
all without regard to already practiced best management
standards which many mutual water companies can document. This
bill makes it more difficult for board of directors to promptly
address pressing issues by restricting board communication and
actions. This bill requires companies to hire accountants to
conduct expensive financial reviews without any triggers that
would warrant the expense. This will result in costs that will
increase water rates, diverting much needed resources from other
priorities. Mutual water companies are already subject to
provisions under the California Corporate Code, the California
Health Department, county health departments, regional water
quality control boards, state and federal employment laws.
Extra requirements that single out small mutual water companies
are not needed and are hurtful. This bill will have the effect
of confusing already well-established channels for addressing
water supply and water quality issues.
ASSEMBLY FLOOR : 76-0, 4/29/13
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Frazier, Beth
CONTINUED
AB 240
Page
7
Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Grove,
Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin,
Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,
V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,
Stone, Ting, Torres, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Atkins, Donnelly, Fox, Vacancy
AB:d 8/31/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED