BILL ANALYSIS �
SB 620
Page 1
SENATE THIRD READING
SB 620 (Wright)
As Amended August 30, 2013
Majority vote
SENATE VOTE : 31-4
LOCAL GOVERNMENT 9-0 WATER, PARKS & WILDLIFE 14-1
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|Ayes:|Achadjian, Levine, Alejo, |Ayes:|Rendon, Bigelow, |
| |Bradford, Gordon, | |Bocanegra, Dahle, Fong, |
| |Melendez, Mullin, Rendon, | |Frazier, Beth Gaines, |
| |Waldron | |Gatto, Gomez, Gonzalez, |
| | | |Gray, Patterson, Yamada, |
| | | |Williams |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Allen |
| | | | |
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APPROPRIATIONS 15-0
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|Ayes:|Gatto, Bigelow, | | |
| |Bocanegra, Bradford, Ian | | |
| |Calderon, Campos, Eggman, | | |
| |Gomez, Hall, Holden, | | |
| |Linder, Pan, Quirk, | | |
| |Wagner, Weber | | |
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SUMMARY : Amends state laws governing water replenishment
districts' annual budget reserves and the penalties a district
can impose on water-producing facility operators. Specifically,
this bill :
1)Eliminates, until the 2019-20 fiscal year, the requirement in
existing law that a minimum of 80% of a water replenishment
district's annual reserve fund shall be expended for water
purchases.
2)States the intent of the Legislature to provide the Water
Replenishment District of Southern California (District) with
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the ability to determine the appropriate use of moneys held in
its annual reserve fund, and that public records that are kept
by the district of expenditures from the annual reserve fund
shall help the Legislature determine whether the flexibility
provided should be permanently extended beyond the 2019-20
fiscal year.
3)Requires a water replenishment district to establish a budget
advisory committee for purposes of reviewing a replenishment
assessment, if any is proposed, and a district's annual
operating budget, including reserve funds maintained by the
district.
4)Specifies, for the budget advisory committee, the following:
a) The committee shall consist of seven members who shall
serve a two-year term and who shall be elected from among
representatives of producers who are owners or operators of
groundwater producing facilities who are subject to the
replenishment assessment, as specified;
b) Two members shall be elected by vote of entities with an
annual pumping allocation of less than 5,000 acre-feet;
c) Two members shall be elected by vote of entities with an
annual pumping allocation of at least 5,000 acre-feet but
less than 10,000 acre-feet; and,
d) Three members shall be elected by vote of entities with
an annual pumping allocation of 10,000 acre-feet or
greater;
5)Requires, on or before the first Tuesday in January on a
biennial basis, the district to provide by first-class mail to
each producer notice that includes information regarding the
purpose of the committee, the categories that determine
membership on the committee, as specified, the schedule for
the election of members, and any additional information the
district determines necessary. Requires the deadline for each
producer to inform the district that it would like to serve on
the committee and the category for which it is eligible to
serve, and requires an eligible producer that would like to
serve on the committee and informs the district to be included
on the election ballot.
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6)Requires the election of committee members to be conducted by
mail ballot not later than 90 days before the second Tuesday
in May, and specifies vote counting procedures.
7)Requires the committee to hold its first meeting within 30
days of the date the results of the election are announced by
the district, and requires the committee to develop rules for
its operation. Requires the committee to take action by
majority vote of its members, and prohibits members from
receiving compensation for serving on the committee.
8)Requires, no later than the second Tuesday of April of each
year, the district to consult with the budget advisory
committee, and requires the committee to make recommendations
to the board, as specified.
9)Requires the district to maintain records regarding the
recommendations of the budget advisory committee and the final
decisions made by the board with regard to those
recommendations.
10)Sunsets all provisions related to the budget advisory
committee as of June 30, 2019, and as of January 1, 2020,
repeals those provisions, as specified.
11)Increases the penalty from $150 to $1,000 for any operator of
a water-producing facility who knowingly fails to register his
or her water-producing facility or knowingly fails to file the
groundwater production statement, or knowingly fails to file
and furnish any other reports or statements required by
resolution of the board, as specified, and in addition to
interest.
12)Provides that the increase in penalty shall not apply to any
operator of a water-producing facility that is a party to
litigation involving a water replenishment district filed
before July 1, 2013, until after the litigation is settled or
all legal remedies have been exhausted.
13)Requires, for existing law that allows the water
replenishment district to proceed for injunctive relief, that
the court direct that the District be awarded the reasonable
attorney's fees and costs of seeking injunctive relief
whenever the district prevails on a petition or complaint.
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14)Provides that the provisions specifying the awarding of
attorney's fees in the bill shall not apply to any operator of
a water-producing facility that is a party to litigation
involving a water replenishment district filed before July 1,
2013, until after the litigation is settled or all legal
remedies have been exhausted.
15)Specifies that reimbursement to local agencies shall be made,
if the Commission on State Mandates determines that this act
contains costs mandated by the state.
EXISTING LAW :
1)Provides, under the Water Replenishment District Act, for the
formation of a water replenishment district and grants
authority to a water replenishment district relating to the
replenishment, protection, and preservation of groundwater
supplies within that district.
2)Allows a water replenishment district to establish an annual
reserve fund in an amount not to exceed $10 million commencing
with the 2000-01 fiscal year, and allows the maximum allowable
reserve fund to be adjusted annually commencing with the
2001-02 fiscal year to reflect percentage increases or
decreases in the blended cost of water from district supply
sources.
3)Requires a minimum of 80% of the annual reserve fund to be
used for water purchases.
4)Requires, should any operator of a water-producing facility
knowingly fail to register his water-producing facility or
knowingly fail to file the groundwater production statement,
or knowingly file to file and furnish any other reports or
statements required by resolution of the board, as specified,
the operator to, in addition to interest due, be liable to the
district for a penalty of $150.
5)Authorizes the superior court of the county in which the major
portion of the water replenishment district lies to issue a
temporary restraining order upon the filing by the district
with the court of a verified petition or complaint setting
forth that the defendant is the operator of a water-producing
facility that has not been registered with the district or
that the defendant is delinquent in the payment of a
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replenishment assessment, as specified.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill is a state mandated program. However, no
reimbursement is required because the sponsor of the legislation
is the entity subject to the mandate.
COMMENTS : This bill repeals a limitation on the expenditure of
the Water Replenishment District of Southern California's
(District) annual reserve fund for a five-year period and
requires the District to establish a budget advisory committee
for purposes of reviewing a replenishment assessment and the
District's annual operating budget. The District would then be
required to consult with that advisory committee and would be
required to maintain records regarding the recommendations of
the budget advisory committee and the final decisions made by
the board of the District. Provisions related the budget
advisory committee become inoperative on June 30, 2019, and are
repealed as of January 1, 2020.
Provisions in the bill also increase the penalty that may be
imposed for the failure of the owner of a water-producing
facility to file certain reports. Additionally, the bill
authorizes a court of law to award attorney's fees and costs to
a prevailing party in the case when the District files a motion
for injunctive relief when the owner fails to file reports or
pay its water replenishment assessment bill. The bill exempts
specified pending litigation from the provisions of the bill
that increase the penalty and award attorney's fees. This bill
is sponsored by the Water Replenishment District of Southern
California.
The Water Replenishment District of Southern California, which
was established by voters in Los Angeles County in 1959, is the
state's only water replenishment district. The District was
established while the Los Angeles County court proceeded through
adjudication of groundwater rights in the Central Basin and West
Coast Basin aquifers. The main function of the District is to
recharge water into groundwater basins for later withdrawal by
water purveyors, and the District has certain legal authorities
to accomplish this purpose. The District earns revenue by
charging water replenishment assessments to the agencies,
utilities, and companies that pump groundwater. The District
also gets property tax revenues from its share of the 1%
property tax rate. Funds are used to buy surface water that
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then percolates into the groundwater basin.
In December of 1999, the Bureau of State Audits (BSA) issued a
report that discussed the weak policies and poor planning by the
District which BSA noted had led to excessive water rates and
questionable expenses.
According to the BSA Summary document contained in the report,
"Every year the district overestimates the amount it needs to
collect to pay for the water it buys to replenish the
groundwater in these two basins. Over the past 10 years, the
district has purchased considerably less water than it has
estimated it would need. Also, the district has not
sufficiently taken into consideration its unused cash balance
when estimating how much money it will need to collect through
the assessment in a given year. As a result, by June 30, 1998,
the district had accumulated $67 million in its unreserved fund
balances. Thus, not only have the annual assessments been too
high, but the district also is maintaining more than it needs in
its cash reserves."
The 1999 BSA report also concluded that the District had failed
to maintain sufficient controls over its administrative
functions and spending, and made a number of recommendations.
On the heels of that report came two bills, SB 1979 (Escutia),
Chapter 894, Statutes of 2000, and AB 1834 (Havice), Chapter
888, Statutes of 2000. SB 1979 contained a number of changes
including the following - the bill required the District to
enter into contracts for construction work materials, supplies,
and equipment for professional services; required the District
to prepare and review a cost-benefit analysis prior to
constructing, leasing, purchasing, or contracting for a capital
improvement project; prohibited the District from establishing a
reserve of more than $10 million, starting with the 2000-01
fiscal year, 80% of which is to be used to purchase water;
required the District to order, review, and have in possession
an independent audited financial statement; required the audit
to contain certain things including the balances in all accounts
for the District's funds; required the District to submit the
audit to the Governor and the Legislature; and, required the
District to apply the estimated fiscal year-end balance of the
reserve in excess of the $10 million limit to a reduction in the
water assessment or to the purchase of water in the following
fiscal year. The other bill, AB 1834, found and declared that
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reforms to the District needed to be enacted to implement the
recommendations set forth in the 1998 BSA report, and stated the
Legislature's intent to review and reform the District's
governance structure.
BSA followed up in June of 2004 and found that the District had
not yet fully addressed all of BSA's concerns. According to the
BSA Summary highlights from June 2004, the review revealed that
the District "adopted a reserve-funds policy that calls for
increasing its reserve funds, but since adopting the policy, the
District allowed its reserve funds to further deplete, and
likely overstated its reserve-funds targets by using some
faulting assumptions in calculating them," among other issues.
In the years that followed, several cities and the Central Basin
Municipal Water District challenged the District on its legal
authority and finances. One key dispute was control of the
storage space in the aquifers, which led to the Court of
Appeals, in January 2012, confirming the Superior Court's
authority to determine which agency controlled the storage while
noting that the Legislature has not specifically assigned that
authority. Last year, SB 1386 (Lowenthal), Chapter 215,
Statutes of 2012, eliminated the authority of the Central Basin
Municipal Water District to manage groundwater, in favor of the
District. While this dispute proceeded, litigation over the
District's authority to increase replenishment assessments also
continued.
According to the sponsor, "no other local agency has a statutory
limitation on its annual reserve fund, let alone a restriction
as to the manner in which such funds can be expended. [The
District] seeks the repeal of the 80% requirement for several
reasons. First, the restriction unnecessarily limits the
ability of the District to rely on the annual reserve fund?to
meet unexpected costs not included in the annual budget.
Second, [the District] today is vastly different from fifteen
years ago. Less is spent today on purchasing replenishment
water and more is spent on operations unrelated to water
purchases. Finally, while one cannot predict the future, should
the present refusal by at least six groundwater producers to pay
their replenishment assessments continue, [the District] would
be forced to dip into its annual reserve fund to pay for
operations."
The District notes that "the 80% restriction would impede the
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District's ability to maintain the groundwater monitoring
program, water quality testing, debt service payments, capital
projects and litigation costs, among others." This bill would
remove the 80% requirement for five fiscal years. The bill also
states the intent of the Legislature that the removal of the 80%
requirement will provide the District with the ability to
determine the appropriate use of moneys held in its annual
reserve fund, and that public records that are kept by the
District of expenditures from the annual reserve fund shall help
the Legislature determine whether the flexibility should be
permanently extended beyond the 2019-20 fiscal year.
According to the sponsor, "the 1955 Water Replenishment District
Act authorized the imposition of a penalty for the failure of a
groundwater producer to submit certain reports. Under the
original Act, [the District] could impose a penalty of up to 10%
of the assessment for failure to file reports in a timely
manner. The penalty was last increased in 1961 - to $150 for
failure to file reports."
This bill would increase the penalty for failure to file reports
to $1,000, which the sponsor argues is "less than the rate of
inflation as applied to the 1961 statutory amount?.it is clear,
more than 50 years later, that the penalty is not sufficient to
provide the proper incentive for a groundwater producer to
timely file specified reports and statements." This bill also
would delay the application of the increase in the amount of
that penalty to an operator of a water-producing facility that
is a party to certain litigation cases filed before July 1,
2013, until after the litigation is settled or all legal
remedies are exhausted.
Current law allows the District to file a petition or complaint
in Superior Court seeking a temporary restraining order and
injunctive relief against an operator of a water-producing
facility which has not been registered with the district or who
is delinquent in paying a replenishment assessment. Unlike some
other public agencies, the District can only collect unpaid
replenishment assessments through a court action. In recent
years, several groundwater pumpers have withheld payments of
their replenishment assessments, requiring the District to pay
attorney's fees to file a court action to collect those unpaid
assessments.
This bill requires the court to direct that the District be
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awarded the reasonable attorney's fees and costs of seeking
injunctive relief whenever the District prevails on a petition
or complaint. Additionally, this bill would delay the
application of those provisions to an operator of a
water-producing facility that is a party to litigation filed
before July 1, 2013, similar to the provisions that would apply
to increasing the penalty from $150 to $1,000.
The sponsor notes that this bill "does not interfere with
pending litigation, in which plaintiffs assert that the District
replenishment assessment is a property-related fee or charge for
purposes of Proposition 218."
Support arguments: Supporters argue that this bill will help
protect the stability of the District's groundwater supply in
order to ensure that the residents of south Los Angeles County
have reliable, affordable water.
Opposition arguments: None on file.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0001955