BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 656|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 656
Author: Cristina Garcia (D), et al.
Amended: 6/22/15 in Senate
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/17/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 68-1, 5/22/15 - See last page for vote
SUBJECT: Joint powers agreements: mutual water companies
SOURCE: Author
DIGEST: This bill allows a mutual water company and a public
agency to form a joint powers authority (JPA) to provide
risk-pooling and insurance for the JPA's members.
ANALYSIS:
Existing law:
1)Allows, pursuant to the Joint Exercise of Powers Act, two or
more public agencies to enter an agreement to jointly exercise
any power held in common by the parties to the agreement.
Each public agency must independently possess the authority to
perform the activity that is to be performed jointly pursuant
to a joint powers agreement. Sometimes an agreement creates a
new, separate government called a joint powers authority.
AB 656
Page 2
2)Includes the power to insure against specified liabilities
among the common powers that public agencies can exercise
jointly through a JPA.
3)Allows a mutual water company to enter into a joint powers
agreement with any public agency for the purpose of jointly
exercising any power common to the contracting parties (AB
2014, Cortese, Chapter 250, Statutes of 1994).
This bill:
1)Allows a mutual water company and a public agency to:
a) Form a JPA for risk-pooling provided that the agreement
must ensure that no participating public agency becomes
responsible for the underlying debts or liabilities of the
joint powers agency, and must indemnify any participating
public agency against those debts and liabilities.
b) Form a JPA to provide insurance by methods specified in
state law.
c) Be coinsured under a master policy and to prorate the
total premium among JPA members.
2)Requires that a JPA established pursuant to this bill's
provisions must solely utilize any revenues it generates
through the insurance provided to its members for its
necessary operating expenses, and to provide technical
support, continuing education, safety engineering, operational
and managerial advisory assistance to its members for the
purpose of reducing risk liabilities and furthering the
technical managerial and financial capacity of those members.
Background
Public water systems that deliver domestic water generally fall
into three categories:
Local agencies (cities and special districts). Local agency
formation commissions (LAFCOs) control the cities and special
districts' boundaries and local officials are responsible to
their voters for their water rates.
AB 656
Page 3
Investor owned public utilities. The California Public
Utilities Commission (PUC) controls the companies' service
areas and their water rates.
Mutual water companies. These private entities, formed under
statutes governing corporations, respond to their
shareholders, usually the landowners who receive water
service. Neither LAFCOs nor the PUC regulate mutual water
companies.
The State Department of Public Health and some county health
departments monitor the quality of drinking water delivered to
most households, regardless of what type of public water system
delivers the water.
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.
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 of 2011). That bill established training requirements
for mutual water companies' 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.
Despite these recent changes to state law, some mutual water
companies continue to struggle with funding shortages, lack of
access to technological expertise, and other operational and
managerial challenges. Although state and local policymakers
recognize the problems associated with some water systems
AB 656
Page 4
operated by mutual water companies, some companies either can't
or won't seek public funding and assistance to help improve
their systems. In response, some mutual water company
stakeholders want to find ways to make better use of the
resources that are currently available to mutual water
companies. They want the Legislature to allow mutual water
companies to become members of a JPA for the purpose of
providing insurance to the JPA's members. Some of the savings
that are realized through the JPA's risk pooling and reinsurance
transactions could then be used to provide capital for water
system improvements and pay for services to build capacity at
struggling mutual water companies.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified7/7/15)
5th Avenue Insurance Services
Amarillo Mutual Water Company
Atascadero Mutual Water Company
Bellflower-Somerset Mutual Water Company
Big Rock Mutual Water Company
Bleich Flat Mutual Water Company
California Association of Mutual Water Companies
California Domestic Water Company
California State Firefighters' Association
Canyon Crest Mutual Benefit Water Company
Covina Irrigating Company
DiBuduo & DeFendis Insurance Brokers, LLC
Flanigan-Leavitt Insurance Agency
Fluetsch & Busby Insurance
Glenhaven Mutual Water Company
Green Acres Mutual Water Company
Green Valley Mutual Water Company
Inland Counties Insurance Services
Insurance Solutions from A to Z
InterWest Insurance Services
Lakeview Mutual Water Company
Lincoln Avenue Water Company
Llano Mutual Water Company
Maywood Mutual Water Company #1
AB 656
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Maywood Mutual Water Company #2
Midway City Mutual
Montebello Land & Water Company
Murphy Slough Association
Oildale Mutual Water Company
Raineri Mutual Water Company
Rancho Pauma Mutual Water Company
Reed Ditch Company
Rocky Comfort Mutual Water Company
Rowland Water District
Rubio Cańon Land and Water Association
San Antonio Water Company
San Gabriel Valley Water Association
Shaver Lake Point #2 Mutual Water Company
South Mesa Water Company
Strawberry Tract Mutual Water Company
Sundale Mutual Water Company
SunnySlope Water
The Farm Mutual Water Company
Tucker Acres Water Company
Valencia Heights Water Company
Valley Ag Water Coalition
Valley Water Company
Vinsa Insurance Associates
Walnut Valley Water District
Windflower Point Mutual Water Company
Wutchumna Water Company
OPPOSITION: (Verified7/7/15)
None received
ASSEMBLY FLOOR: 68-1, 5/22/15
AYES: Achadjian, Travis Allen, Baker, Bigelow, Bloom, Bonilla,
Bonta, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez,
Chiu, Chu, Cooley, Dababneh, Dahle, Daly, Dodd, Eggman,
Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández,
Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine,
Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty,
Medina, Melendez, Mullin, Nazarian, Obernolte, Perea, Quirk,
AB 656
Page 6
Rendon, Rodriguez, Salas, Santiago, Steinorth, Mark Stone,
Thurmond, Ting, Wagner, Wilk, Williams, Wood, Atkins
NOES: Harper
NO VOTE RECORDED: Alejo, Brough, Cooper, Beth Gaines,
Gallagher, O'Donnell, Olsen, Patterson, Ridley-Thomas,
Waldron, Weber
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
7/7/15 17:16:13
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