BILL ANALYSIS Ó AB 656 Page 1 Date of Hearing: May 20, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 656 (Cristina Garcia) - As Amended May 4, 2015 ----------------------------------------------------------------- |Policy |Local Government |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill allows a mutual water company and a public agency to enter into a joint powers agreement for the provision of insurance and risk-pooling, technical support, continuing education, safety engineering, and operational and managerial AB 656 Page 2 advisory assistance for the purpose of reducing risk liabilities. FISCAL EFFECT: No state costs. Costs to local agencies to form JPAs are not reimbursable. COMMENTS: 1)Purpose. According to the author, "The vast majority of mutual water companies in California are small, with many serving less than 3,000 connections and/or less than 3,000 residents. Many mutual water companies serve 'economically disadvantaged' areas and do not have access to low cost insurance and other services, such as those available to special districts under ACWA-JPIA or other joint powers agency insurance programs. Today, mutual water companies must purchase higher cost insurance in the open market, and many are not provided the opportunity to easily obtain other services that could assist them in building operational and managerial capacity." 2)Background. JPAs were originally created to allow multiple local governments in a region to pool resources to meet common needs. The Act authorizes federal, state and local agencies to create and use a joint powers agreement, which is a legal document that allows the contracting parties to exercise powers that are common to all of the contracting parties. Joint powers agreements are an attractive tool for local governments because they facilitate more efficient service provision through collaboration, and they allow local entities to issue bonds without voter ratification. Public officials have created about 700 JPAs statewide. There are a few, limited instances in JPA law allowing non-governmental AB 656 Page 3 entities (private hospitals or tribes) to join a JPA with a public agency partner. Mutual water companies are private entities, formed under statutes governing corporations. They respond to their shareholders, usually the landowners who receive water service. Unlike local water districts and investor-owned public utilities, neither LAFCOs nor the PUC regulate mutual water companies. Existing law allows a mutual water company to enter into a JPA with any public agency for the purpose of jointly exercising any power common to the contracting parties. Existing law allows two or more local public entities, by a JPA, to provide insurance coverage or self-insurance, or to obtain insurance coverage by means of a reciprocal or inter-insurance exchange (risk-pooling). This bill seeks to allow mutual water companies to partner with a local agency for this purpose. 3)Related Legislation. a) AB 1077 (Holden), pending on the Assembly Floor, makes a number of changes to the Mutual Water Company Open Meeting Act. b) AB 617 (Perea), pending in this Committee, modifies portions of last year's Sustainable Groundwater Management Act (SGMA), including, among other things, provisions that allow mutual water companies to join Groundwater Sustainability Agencies (GSA) formed by one or more public agencies pursuant to a JPA, and to exercise all of the GSA AB 656 Page 4 powers provided by SGMA. c) AB 1260 (Thurmond), pending in this Committee, would authorize the University of California and the City of Richmond, and any other public agency to enter into a JPA for purposes of collaboration on the development of a Berkeley Global Campus at Richmond Bay, located in the City of Richmond. 1)Prior Legislation. AB 2046 (Gomez) of 2014 would have authorized a JPA to issue bonds and enter into loan agreements for the financing or refinancing of a private project located outside of the state under specified conditions, until January 1, 2021. This bill was held on the Senate Appropriations Committee's Suspense File. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081