BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 246 HEARING: 4/17/13 AUTHOR: Fuller FISCAL: No VERSION: 4/4/13 TAX LEVY: No CONSULTANT: Weinberger BIGHORN-DESERT VIEW WATER AGENCY [REVISED] Repeals and amends numerous state laws governing the Bighorn-Desert View Water Agency. Background and Existing Law The Legislature created the Bighorn Mountains Water Agency as a special act special district governed by the uncodified "Bighorn Mountains Water Agency Law" (SB 1175, Coombs, 1969). To allow the Agency to merge with the Desert View Water District, which was governed by the County Water District Law, the Legislature enacted the Desert View Water District-Bighorn Mountains Water Agency Consolidation Law (AB 1819, Woodruff, 1989). The merged Bighorn-Desert View Water Agency provides retail water service to residents within a 45-square mile area encompassing the San Bernardino County communities of Flamingo Heights, Landers, and Johnson Valley. The 1989 consolidation bill required the Bighorn-Desert View Water Agency to "separately account" for specified funds of the two precursor agencies. After two decades operating as a merged district, Bighorn-Desert View officials find this requirement for segregated accounting to be unnecessary and burdensome. They want the Legislature to repeal the entire Desert View Water District-Bighorn Mountains Water Agency Consolidation Law and amend the Bighorn Mountains Water Agency Law to make it a more modern, transparent, and functional statute. Proposed Law Senate Bill 246 repeals the Desert View Water District-Bighorn Mountains Water Agency Consolidation Law SB 246 -- 4/4/13 -- Page 2 and deletes cross-references to the law from the Bighorn-Desert View Water Agency's special act. SB 246 requires the Agency to separately account for and use funds derived from the operation of the Desert View Water District and the Bighorn Mountains Water Agency for the purpose of bond debt service for each of the former systems. The bill declares that its provisions must not be construed to impair any contract entered into prior to January 1, 2014. SB 246 reduces, from 3 months to 30 days, the period during which legal actions can be initiated to contest, question, or deny the validity of the Agency's bonds, improvement districts, annexations, or other proceedings. SB 246 allows the Agency to file legal actions, pursuant to specified statutes in the Code of Civil Procedure, to determine the validity of the Agency's bonds, warrants, promissory notes, contracts, or other evidences of indebtedness. SB 246 deletes a 50-year limit on the length of the Agency's contracts for selling hydroelectric energy or selling the right to use falling water for electric energy. The bill also deletes a requirement that the Agency only sell hydroelectric energy at wholesale to public agencies. SB 246 reduces, from 6 to 3, the number of public places in which the Agency must post specified hearing notices. SB 246 deletes current statutory language governing compensation for the Agency's board of directors. The bill requires the Agency's board members to receive compensation for attending board meetings that does not exceed the maximum amount authorized by specified statutes that govern compensation for water districts' directors. SB 246 deletes current statutory language relating to vacancies on the Agency's board of directors and specifies that the Agency must fill vacancies on its board pursuant to specified statutes in the Government Code. SB 246 reorganizes current statutory language allowing the Agency's board to appoint, define the duties of, and provide compensation for specified offices. The bill prohibits the board from appointing a sitting member of the SB 246 -- 4/4/13 -- Page 3 board to one of those offices. The bill deletes statutory language authorizing the board to appoint a treasurer and to consolidate specified offices. SB 246 requires the Agency's board to adopt a resolution specifying the date, time, and place of its meetings and deletes conflicting and redundant statutory language relating to board meetings. SB 246 specifies that the Agency's board can act by minute order and details specific notice, posting, and publication procedures that the board must follow to adopt an ordinance. SB 246 deletes current statutory language governing the Agency's elections and allows the Agency's voter to pass an initiative or disapprove of an ordinance by referendum subject to specified statutes in the Elections Code. SB 246 specifies that the Agency's powers include the power to: Construct, maintain, and operate water wells. Construct, maintain, and operate property useful or necessary to produce water. Enlarge any waterworks or waterworks system acquired by the Agency. SB 246 deletes a requirement that the Agency's board regulate specified recreational facilities' use by adopting an ordinance. The bill repeals language defining a violation of those regulations as a misdemeanor. Instead, SB 246 makes a violation of the specified regulations an infraction, punishable by a fine of $300 or less. SB 246 specifies that the Agency's board, to restrict the use of water during a drought or water shortage, must comply with specified statutes in the Water Code governing water shortage emergencies. The bill deletes language defining a violation of specified water restrictions as a misdemeanor and deletes other related statutory language. SB 246 deletes statutory language requiring the board to adopt an ordinance to exercise specified powers related to pensions. SB 246 amends the current statute governing the Agency's SB 246 -- 4/4/13 -- Page 4 power to enter into contracts. The bill deletes a requirement that the Agency must get 2/3-voter approval for specified contracts that incur long-term debt. SB 246 deletes current statutory language allowing the Agency to incur debt, issue bonds and promissory notes, and impose assessments. The bill authorizes the Agency to: Borrow money, incur indebtedness, and issue bonds or other evidences of indebtedness at an annual interest rate that must not exceed 12%, pursuant to state law. Refund or retire any indebtedness or lien against the agency or its property. Issue negotiable promissory notes that are general obligations of the Agency payable from revenues and taxes in the same manner as the Agency's bonds and subject to the same 12% annual interest rate limit. Cause taxes to be levied to pay the Agency's obligations, subject to constitutional and statutory requirements. To issue improvement bonds in accordance with and pursuant to the: o Improvement Act of 1911 o Improvement Bond Act of 1915 o Municipal Improvement Act of 1913 o Refunding Assessment Bond Act of 1935 o Revenue Bond Law of 1941 SB 246 specifies that the maximum allowable annual interest rate on debt issued by the Agency is 12%, pursuant to specified statutes in the Government Code. SB 246 allows the Agency to sell bonds through negotiated sale or private sale subject to specified conditions. The bill prohibits bonds from being sold for less than 94% of par value. SB 246 replaces the term "bonded debt" with the term "debt" in numerous places throughout the Bighorn-Desert View Water Agency Law and deletes outdated references to bonds' interest coupons. SB 246 specifies the manner in which the Agency can record liens for unpaid water service charges. SB 246 clarifies that bond proceeds and surplus revenues SB 246 -- 4/4/13 -- Page 5 from water rates can be used to pay for replacement of the Agency's works. SB 246 renames the special act governing the Bighorn-Desert View Water Agency as the "Bighorn-Desert View Water Agency Law." Throughout the Law, SB 246 replaces the name "Bighorn Mountains Water Agency" with "Bighorn-Desert View Water Agency." SB 246 updates the statutory metes-and-bounds description of the Bighorn-Desert View Water Agency's boundaries. The bill deletes statutory language relating to a potential future consolidation of the Bighorn Mountains Water Agency with the Desert View Water Agency. SB 246 makes numerous technical, non-substantive amendments to the statutes governing the Bighorn-Desert View Water Agency to conform the statutes to other changes made by the bill and to modernize the statutory language. State Revenue Impact No estimate. Comments 1. Purpose of the bill . The statutes that govern the Bighorn-Desert View Water Agency are outdated, disorganized, and difficult to use. Provisions of the Agency's special act have been rendered obsolete by changes that Propositions 13 and 218 made to the State Constitution. Although the District maintains separate accounting of pre-consolidation debt, it does not operate as two separate enterprise districts, as may be required under its consolidation statute. The amendments SB 246 makes to the Agency's governing statutes will eliminate legal uncertainties, reorganizes the statutes to make them more transparent, modernize the language governing some of the Agency's powers, and make the statutes easier to use. 2. Validations . Public officials can file validating lawsuits, asking the courts to validate their actions, contracts, agreements, and bonds. Successful validation SB 246 -- 4/4/13 -- Page 6 suits reassure private investors and public agencies that their decisions are reliable. Generally, the Code of Civil Procedure allows public officials to initiate a validation suit within 60 days of taking the action to be validated. SB 246 reduces, from 3 months to 30 days, the amount of time during which members of the public can initiate a legal challenge against some of the Agency's actions. To make the deadline for legal challenges consistent with the Code of Civil Procedure's deadline for validation suits, the Committee may wish to consider amending SB 246 to give individuals up to 60 days to initiate a legal challenge to specified Agency actions. 3. Electricity contracts . SB 246 deletes a 50-year limit on the length of the Agency's hydroelectric contracts and deletes a requirement that the Agency only sell hydroelectric energy at wholesale to public agencies. These deletions may raise questions about the Agency's ability to enter into long-term retail contracts for hydroelectricity. To eliminate uncertainty, the Committee may wish to consider amending SB 246 to restore the restrictions that current law places on the Agency's hydroelectric contracts. 4. Findings and declarations . Proposition 59 (2004) requires that new statutes which limit public access to meetings of public bodies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest. Because SB 246 reduces the number of public locations in which the Agency must post notices of some hearings, it could be interpreted as limiting access to public meetings. The Committee may wish to consider amending SB 246 to include findings and declarations that comply with Proposition 59's requirements. Support and Opposition (4/11/13) Support : Bighorn-Desert View Water Agency. Opposition : Unknown.