BILL ANALYSIS Ķ
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1077 |Hearing |6/17/15 |
| | |Date: | |
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|Author: |Holden |Tax Levy: |No |
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|Version: |5/18/15 |Fiscal: |No |
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|Consultant|Favorini-Csorba |
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MUTUAL WATER COMPANIES: OPEN MEETINGS
Amends the Mutual Water Company Open Meetings Act to allow
mutual water companies to use teleconferencing as a means to
allow eligible persons to access board meetings.
Background and Existing Law
Public water systems that deliver domestic water generally fall
into three categories: local agencies (such as cities and
special districts), investor-owned public utilities, and mutual
water companies-corporations that exist for the purpose of
providing water to their shareholders, which are usually
landowners that receive water service.
Nearly all Californians get their domestic water from local
agencies (about 80 percent) or investor-owned public utilities
(16 percent). However, about 1.3 million Californians (3
percent) receive their water from one of about 1,200 mutual
water companies in the state. These companies can range in size
from as small as 15 connections (households)--often in rural
areas-to thousands of connections in urban areas.
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
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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 what is essentially a customer-owned
water provider to serve their properties.
Governance of a mutual water company is generally limited to
shareholders, or members, of the company. While the details of
any particular company's governing structure are determined by
its articles and bylaws, most mutual water companies allow only
shareholders and members to vote on organizational matters and
serve on the company's governing board.
The State Department of Public Health and some county health
departments regulate the quality of drinking water delivered by
all public water systems. However, other aspects of public
water systems' operations-including their boundaries and
rates-are regulated differently depending on the type of water
system, as follows:
Local Agency Formation Commissions (LAFCOs) control the
cities and special districts' boundaries and local
officials are responsible to their voters for their water
rates.
The California Public Utilities Commission (PUC)
controls investor-owned utilities' service areas and their
water rates.
Shareholders control the actions of mutual water
companies. Neither LAFCOs nor the PUC regulate mutual
water companies.
Furthermore, local agencies are subject to stringent
requirements to hold open, public meetings when making
decisions. The Ralph M. Brown Act, first enacted by the
Legislature in 1953, is the set of state laws which guarantees
the public's right to attend and participate in local
legislative bodies' meetings. The Brown Act establishes
procedures to ensure public access to information maintained by
local agencies and that the decisions made by public agencies
are done in an open and transparent fashion to retain public
control over those agencies.
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As private corporations, mutual water companies are not subject
to the Brown Act. Instead, state law gives mutual water
companies broad authority to specify in their articles and
bylaws how their meetings are conducted, and who may attend.
But because, some mutual water companies operate public water
systems that provide water to consumers who are not
shareholders, the Legislature passed AB 240 (Rendon, 2013) to
increase transparency requirements. AB 240 established the
Mutual Water Company Open Meeting Act (the Act), which imposes
requirements on the meetings of the board of directors of mutual
water companies that operate a public water system. Among other
requirements, the Act:
Defines "eligible person" to mean any of the following:
o A shareholder or member of the mutual water
company;
o A commercial or residential renter to which
the company provides drinking water;
o An elected official of a city or county who
represents people who receive drinking water directly
from the company;
o Any other person deemed eligible by the
company's articles or bylaws.
Allows an eligible person, upon 24 hours advance written
notice, to attend meetings in person;
Requires an eligible person-without giving 24 hours'
notice to the board-to be able to attend a meeting that is
held via teleconference, and requires the notice for the
meeting to specify where an eligible person may hear the
teleconference meeting;
Requires eligible persons to be notified at least four
days prior to a meeting;
Requires the Board to permit any eligible person to
speak at any meeting, within reasonable time limits;
Provides, with limited exceptions, that a mutual water
company Board may not discuss or take action on any item at
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a meeting unless the item was placed on the agenda included
in the meeting notice that was posted and distributed
pursuant to the Act;
The Act includes two exceptions to the open meeting requirements
above. First, the Act allows the board of a mutual water
company to meet in a closed "executive session" to consider
certain specified matters, including litigation, discipline of a
member, contracting with third parties, or personnel matters.
Eligible people are not entitled to attend executive sessions
unless otherwise allow by the articles or bylaws of the mutual
water company. These closed sessions may occur at a meeting of
the board that is otherwise open to eligible people or at a
meeting that is solely in executive session. Only two days'
notice is required for meetings solely in executive session. Any
matter discussed in executive session must be generally noted in
the minutes of the immediately following meeting that is open to
eligible persons. Second, the Act further allows the Board to
hold an emergency meeting without being required to give notice
if there are circumstances that could not have been reasonably
foreseen and that require immediate action.
AB 240 expanded the ability of Californians who are served by
mutual water companies to attend board meetings. However, due
to their small size and often-remote location, many mutual water
companies struggle to accommodate all interested parties. Thus,
despite these recent changes to state law, some residents served
by mutual water companies-but who are not shareholders or
members-are concerned that they are not being provided adequate
access to the meetings of mutual water companies' boards.
Proposed Law
Assembly Bill 1077 revises portions of the Mutual Water Company
Open Meetings Act to improve the access of eligible people to
mutual water company board meetings in several ways. First, AB
1077 specifically requires a mutual water company's board to
allow an eligible person to attend a meeting in person if the
person has given at least 24 hours' notice of their intent to
personally attend the meeting.
Second, AB 1077 allows the board to use teleconferencing for the
benefit of any eligible person who has been denied access to a
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meeting because either: (1) the eligible person did not give at
least 24 hours' notice of their intent to attend in person, or
(2) the number of eligible persons who have given notice to
attend in person exceeds the capacity of the meeting room that
was listed in the meeting notice. The bill defines
teleconferencing to include any electronic means that allows an
eligible person to hear and interact with the board, such as a
cell phone with a speakerphone or audio or video conferencing
over the internet. If the board uses teleconferencing, it must
provide the meeting materials to the eligible person either
electronically or physically before the meeting begins. AB 1077
also provides that a board cannot prohibit a person from
attending the meeting either in person or by technology.
Third, AB 1077 makes several changes to the provisions allowing
for executive sessions. Specifically, it:
Prohibits a board from meeting solely in an executive
session and makes conforming changes to other provisions;
Specifies that a board may prohibit an eligible person
from attending an executive session where matters relating
to the potential acquisition, of real property or water
rights will be discussed (in addition to the circumstances
allowed under current law);
Specifies that, when a board meets in executive session
to consider litigation, the litigation must be pending or
potential;
Requires the board to meet in executive session if
requested by a member subject to discipline, and allows the
member to attend such a session.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill. AB 1077 safeguards the ability of
Californians served by mutual water companies to provide input
on decisions that affect their water service. AB 1077 modestly
expands on the requirements established by the Mutual Water
Company Open Meetings Act by enabling mutual water companies to
use teleconferencing, to ensure that eligible people are able to
attend meetings of the board. By making the use of
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teleconferencing permissive rather than prescriptive, AB 1077
strikes a balance between ensuring that people served by mutual
water companies have access to meetings without imposing
burdensome requirements on small mutual water companies that
don't have large meeting rooms or large budgets to procure
additional space. In addition, the teleconferencing provision
is flexible enough to allow for measures as simple as a
speakerphone, to provide access to meetings that people would
otherwise be excluded from those meetings. These changes
further the intent of the Mutual Water Company Open Meetings
Act, to promote better engagement between shareholders,
customers, and board members.
2. Increased Burden on Private Companies . Opponents of the bill
argue that AB 1077 imposes a number of burdensome requirements
on mutual water companies that other private companies do not
have to meet. For example, the teleconferencing provisions of
AB 1077 potentially allow people who are not eligible to
remotely attend private board meetings. In addition, it could
require great expense to provide technology that provides for
interaction with customers, which goes beyond the interaction
that even public agencies are required to provide. Finally, AB
1077 sets up mutual water companies, to violate the requirement
to provide meeting materials to eligible persons that attend the
meeting via teleconference by only giving the companies 24 hours
to send out the materials.
3. It isn't easy being Brown . The Brown Act includes many
requirements intended to provide for open, responsive service
provision by local government that have been accumulated over
decades of experience. For example, the Brown Act requires
local agencies' legislative bodies to report the votes of
individual officials for closed meetings and meetings conducted
by teleconference. These provisions enable the public to be
aware of how individual boards members vote when the vote is not
taken in the public's presence. While the requirements of AB
240 opened the meetings of mutual water companies to "eligible
persons," its requirements are far more limited than the
requirements of the Brown Act. Given that water service is a
fundamental necessity and that customers of other types of
public water systems have broad access to meetings and other
avenues to affect the governance of their water provider (such
as the ability to formally protest and forestall rate
increases), the Committee may wish to consider amendments that
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go further than the changes AB 1077. Such amendments could
include either:
Inserting cross references to the Brown Act that ensure
that all of the requirements that apply to local agencies
also apply to mutual water companies that operate a public
water system, or;
Inserting the Brown Act requirements applicable to
teleconferencing into the Mutual Water Company Open
Meetings Act.
4. Let's be clear . Some provisions of AB 1077 are ambiguous.
Specifically, it is not clear what the meaning of allowing
teleconferencing to be used "for the benefit of" eligible
persons that otherwise could be barred from attending meetings.
In addition, the prohibition on preventing an eligible person
attending "by technology in compliance with this paragraph" is
also unclear. The Committee may wish to consider the following
clarifying amendments in order to make clear that
teleconferencing should only be used to improve, the ability of
eligible persons to attend a meeting, and that all eligible
people must be allowed to attend meetings either in person or by
teleconference.
On page 3, line 27, strike out "for the benefit of any
eligible person" and insert "to provide any eligible person
access to the meeting that otherwise would be"
On page 4, lines 4 and 5, strike out "technology in
compliance with this paragraph" and insert "teleconference
except as provided by section 14305(b) (2)".
Assembly Actions
Assembly Local Government Committee: 9-0
Assembly Floor: 75-5
Support and
Opposition (6/11/15)
Support : Sierra Club California.
Opposition : Rubio Caņon Land and Water Association.
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