BILL ANALYSIS Ó
AB 240
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 240 (Rendon)
As Amended August 13, 2013
Majority vote
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|ASSEMBLY: |76-0 |(April 29, |SENATE: |22-13|(September 3, |
| | |2013) | | |2013) |
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Original Committee Reference: L. GOV.
SUMMARY : Requires mutual water companies to comply with public
record, audit, and budget requirements, allows mutual water
companies to impose liens to collect unpaid charges, and enacts
the Mutual Water Company Open Meeting Act.
The Senate amendments :
1)Enact the Mutual Water Company Open Meeting Act, which would
apply to all mutual water companies, and would permit an
eligible person to attend a meeting of a mutual water company,
and to speak during the meeting, except as provided.
2)Require the board of the 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.
3)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.
4)Require 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.
5)Amend an item in the Budget Act of 2011 related to funding for
local assistance from the Department of Public Health, payable
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from the Safe Drinking Water, Water Quality and Supply, Flood
Control, River and Coastal Protection Fund of 2006 (Prop. 84),
to specify that the funds appropriated from this item shall be
to provide grants to public agencies to improve drinking water
infrastructure in communities served by mutual water companies
in the City of Maywood. Grants may be made to the Water
Replenishment District of Southern California for water
quality improvement projects to benefit the residents of the
City of Maywood, subject to the following conditions:
a) The district manages the design and implementation or
construction of the project;
b) The district oversees its operation;
c) A public agency remains the owner of the project after
construction; and,
d) The mutual water company that incorporates the project
into its system complies with the section contained in this
bill known as the Mutual Water Company Open Meeting Act.
6)Provide, notwithstanding any other law, the funds appropriated
in the budget item specified in 5) above, shall be available
for expenditure until January 1, 2018, and provide that any
funds not awarded on or before January 1, 2018, shall revert
back to the Prop. 84 fund.
EXISTING LAW :
1)Specifies that any corporation organized for or engaged in the
business of selling, distributing, supplying, or delivering
water for irrigation purposes or for domestic use must be
known as a mutual water company.
2)Requires each mutual water company operating as a public water
system to, no later than December 31, 2012, submit to the
Secretary of State and the local agency formation commission
(LAFCO) a map depicting the boundaries of the property that
the corporation serves.
3)Requires a mutual water company that operates a public water
system, if the LAFCO or a county department requests
information, to, within 45 days of the request, provide all
reasonably available, nonconfidential information and explain,
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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 to be used for
repairs and replacements to its water productions,
transmission and distribution facilities at a level sufficient
for continuous operation of facilities in compliance with the
federal Safe Drinking Water Act.
5)Authorizes the LAFCO to approve with or without amendment,
wholly, partially, or conditionally or disapprove the
annexation of territory served by a mutual water company
operate a public water system, to a city or special district.
6)Authorizes the LAFCO, in conducting a service review, to
include a review of whether the agencies under review,
including any public water system, are in compliance with
California Safe Drinking Water Act (SDWA).
7)Authorizes the LAFCO to request information, as part of a
service review, from identified public or private entities
that provide wholesale or retail supply of drinking water,
including mutual water companies and private utilities.
8)Requires each board member of a mutual water company operated
as a public water system to, within six months of taking
office, complete a four-hour course, as specified.
9)Authorizes fines pursuant to the SDWA to be imposed on
directors of a mutual water company if the mutual water
company has received notice of a violation as specified.
AS PASSED BY THE ASSEMBLY , this bill:
1)Permitted 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, if the shareholder was
given at least 20 days' notice of the lien.
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2)Required board members to repeat, every six years, a training
course required in existing law regarding the duties of board
members of mutual water companies.
3)Stated 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.
FISCAL EFFECT : According to the Senate Budget Committee, this
bill allocates $7.5 million in Prop. 84 bond funds contained in
the 2011-12 Budget Act and changes the circumstances for how the
funds may be spent, subject to specified conditions.
COMMENTS : Most mutual water companies are organized pursuant to
the General Corporation Law or the Nonprofit Mutual Benefit
Corporation Law. Shareholders in a mutual water company hold a
right to purchase water from the company. Stock in a company is
usually linked to the ownership of a parcel served by the
company and transfers with the land when the parcel is sold to
successive owners. This type of corporate structure allows
landowners to establish, essentially, a customer-owned water
provider to serve their properties. State 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.
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 2011. That 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 LAFCOs'
authority to review matters related to mutual water companies.
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Despite these recent changes to state law, some public officials
and environmental justice advocates express frustration that
some mutual water companies remain unaccountable to water users
who are not shareholders or members.
This bill requires mutual water companies to comply with
specified public record, audit, and budget requirements, allows
mutual water companies to impose liens to collect unpaid
charges, and enacts the Mutual Water Company Open Meeting Act.
This bill also expresses the Legislature's intention 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.
The 2011-12 State Budget appropriated $7.5 million in state bond
funds for improving water quality in the cities of Maywood and
Santa Ana, conditioned on a public agency assuming
responsibility for operation of the water systems from the
mutual water companies. The City of Santa Ana has completed its
improvements, expending approximately $1.5 million and leaving
approximately $6 million for Maywood to improve its water
quality. This bill changes that budget item appropriation to
instead specify that funds appropriated from this item shall be
to provide grants to public agencies to improve drinking water
infrastructure in communities served by mutual water companies
in the City of Maywood. Grants may be made to the Water
Replenishment District of Southern California for water quality
improvement projects to benefit the residents of the City of
Maywood, in certain circumstances, are met.
According to Union de Vecinos, in support, "The people of
Maywood have suffered from poor quality water from their taps
for several years. Maywood water often comes out of the tap as
brown, smelly liquid that tastes bad. The groundwater coming
out of wells and imported surface water have various primary and
secondary contaminants, including manganese, perchlorate, and
arsenic?the people and business in the City of Maywood received
their drinking water from three separate mutual water companies,
which are private companies controlled by landowners."
Many mutual water companies are opposed to the bill, noting that
they are already subject to provisions under the California
Corporate Code, the California Health Department, County health
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departments, regional water quality control boards, and state
and federal employment laws. These companies argue that they
already work cooperatively with local cities on a variety of
issues which include timing of infrastructure repairs, water
conservation, applying for state and federal clean water funding
and water supply assessments. Additionally, the mutual water
companies note that this bill "will have the effect of confusing
already well-established channels for addressing water supply
and water quality" in their service areas.
Support arguments: Supporters argue that 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.
Opposition arguments: Mutual water companies throughout
California argue that they are already in full compliance with
the Corporations Code and other laws governing water quality,
employment practices, public notifications and public works, and
that the bill will result in increased operating costs that will
be passed on to customers in the form of increased water rates.
The Senate amendments have significantly expanded the scope of
this measure; therefore, these policy changes have not been seen
in any Assembly policy committee this legislative session.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
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