BILL ANALYSIS �
SB 620
Page 1
SENATE THIRD READING
SB 620 (Wright)
As Amended September 11, 2013
Majority vote
SENATE VOTE :31-4
LOCAL GOVERNMENT 9-0
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|Ayes:|Achadjian, Levine, Alejo, | | |
| |Bradford, Gordon, | | |
| |Melendez, Mullin, Rendon, | | |
| |Waldron | | |
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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 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
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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.
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.
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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 or operator of a water-producing facility be
awarded the reasonable attorney's fees and costs relating to a
motion seeking injunctive relief whenever the District or operator
of a water-producing facility prevails on a petition or complaint.
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
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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 fail 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 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
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for the failure of the owner of a water-producing facility to file
certain reports. Additionally, the bill provides that the court
shall direct that the District or operator of a water-producing
facility be awarded the reasonable attorney's fees and costs
relating to a motion seeking injunctive relief whenever the District
or operator of a water-producing facility prevails on a petition or
complaint.
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 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."
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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 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
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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
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
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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.
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: 0002817