BILL ANALYSIS Ó AB 1077 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1077 (Holden) As Amended August 31, 2015 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | 75-0 |(May 22, 2015) |SENATE: | 40-0 |(September 2, | | | | | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: L. GOV. SUMMARY: Makes a number of changes to the Mutual Water Company Open Meeting Act. The Senate amendments are technical and clarifying. AS PASSED BY THE ASSEMBLY, this bill: 1)Revised and recast the Mutual Water Company Open Meeting Act (Act) as follows: AB 1077 Page 2 a) Required a Board of Directors (Board) of a mutual water company to allow an eligible person to personally attend a meeting of the Board, if the eligible person gave the Board at least 24 hours advance written notice of his or her intent to personally attend the meeting; b) Allowed the Board to use teleconferencing for the benefit of any eligible person denied attendance at a meeting of the Board for failure to provide the notice specified above, or because the number of eligible persons having already provided notice of attendance exceeds the room capacity of the place of the meeting described in the notice of the meeting; c) Required a teleconferenced meeting or proceeding to comply with the Act and all other applicable provisions of law relating to a specific type of meeting or proceeding conducted by a mutual water company; d) Required, if the Board uses teleconferencing, the Board to provide to an eligible person attending a meeting by teleconference, before the meeting begins, an electronic copy or photocopy of all documents not related to an executive session to be discussed at the meeting; e) Prohibited a mutual water company Board from prohibiting an eligible person from attending a meeting of the Board either in person or by technology, as specified; f) Defined "teleconference" to mean, to the extent it is technologically feasible, any electronic means, that includes either audio or video or both, that allows an eligible person to hear a meeting and verbally interact with the Board, including, but not limited to, a telephone, cellular telephone with speaker phone technology, or computer, or a device using internet-based video or audio conference technology; AB 1077 Page 3 g) Required a Board to only meet in executive session during a meeting, and makes conforming changes; h) Specified that a Board may prohibit an eligible person from attending an executive session to consider pending or potential litigation, or matters relating to the potential acquisition of real property or water rights; i) Specified that an eligible person shall be entitled to attend a teleconferenced meeting with or without fulfilling the notice requirements specified in a) above; and, j) Specified that a Board shall not discuss or take action on any item at a nonemergency meeting unless the item was placed on the agenda included in the notice of the meeting that was posted and distributed pursuant to the Act. 2)Made additional clarifying and technical changes. 3)Made a number of findings and declarations regarding mutual water companies. FISCAL EFFECT: None COMMENTS: 1)Bill Summary. This bill makes numerous changes to the Act, the major provisions of which are as follows: a) Allows a mutual water company Board to use teleconferencing to provide any eligible person access to a AB 1077 Page 4 Board meeting who otherwise would be denied attendance in person because the person failed to provide 24 hours advance written notice, or because the number of eligible persons who provided notice of attendance exceeds the room capacity of the meeting; b) Requires a Board to provide an eligible person attending a meeting by teleconference an electronic copy or photocopy of all documents to be discussed at the meeting (excluding documents related to an executive session) before the meeting begins; c) Requires a Board to meet in executive session only during a meeting (removes the ability of a Board to meet in executive session only, separate from of a meeting that eligible persons may attend); d) 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; and, e) Specifies that an eligible person shall be allowed to access a Board meeting via teleconference with or without fulfilling the 24-hour notice requirements of the Act. This bill is sponsored by the author. 2)Author's Statement. According to the author, "The existing Mutual Water Company Open Meetings Act permits water company shareholders and their tenants to attend meetings after providing notice. However, in the two years since the passage of AB 240 some water companies have struggled to comply with the Act. Greater interest in attending these public meetings has burdened mutual water companies small staffs, exceeded the capacity of some meeting facilities, and, in some cases, the AB 1077 Page 5 water company's service territory is too large and remote for all shareholders to conveniently attend meetings. "Assembly Bill 1077 will provide mutual water companies the ability to use teleconferencing tools, currently provided to local agencies, to provide better access to meetings. Whether a meeting is inaccessible to a shareholder because of distance or capacity of the mutual water companies facilities, teleconferencing will enable all shareholders to have their voice heard and provide enhanced opportunities for consumer participation in these companies operations." 3)Background. Public water systems that deliver domestic water generally fall into three categories: a) 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; b) Investor-owned public utilities. The California Public Utilities Commission (PUC) controls the companies' service areas and their water rates; or, c) 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 the type of public water system that delivers the water. AB 1077 Page 6 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. 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. 4)Recent Legislative History. In response to concerns 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. AB 54 established training requirements for mutual water company's board members regarding the duties of 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. More recently, AB 240 (Rendon), Chapter 633, Statutes of 2013, increased transparency requirements for mutual water companies by establishing the Act. AB 240 also allowed mutual water companies to impose liens to collect unpaid charges. While the requirements of AB 240 opened the meetings of mutual water companies to "eligible persons," these requirements are far more limited than the requirements of the Brown Act. 5)Related Legislation. AB 656 (Cristina Garcia) of the current AB 1077 Page 7 legislative session, allows a mutual water company and a public agency to form a joint powers authority (JPA) for the purpose of risk-pooling, as specified. AB 617 (Perea) of the current legislative session, pending in the Senate, modifies portions of last year's Sustainable Groundwater Management Act, including, among other things, provisions that allow mutual water companies to join Groundwater Sustainability Agencies formed by one or more public agencies pursuant to a JPA, and to exercise all of the Groundwater Sustainability Agencies powers provided by the Sustainable Groundwater Management Act. 6)Arguments in Support. Sierra Club California, in support, states, "Despite the Open Meeting Act, mutual water companies are continuing to find ways to prevent citizens from attending meetings. To counter this, AB 1077 expands the open meeting requirements for mutual water companies in simple ways, like webcasts. This is a non-burdensome way to ensure that people can see the discussions surrounding items such as the rates they pay for water." 7)Arguments in Opposition. Rubio Canon Mutual Water Company, in opposition, states, "(AB 1077) imposes on privately-held companies requirements that no other private corporations in California must face (to with: potentially allowing non-shareholders and non-eligible persons to remotely attend private Board meetings)... and will burden small water companies with more regulation, expense and legal exposure for no apparent reason." Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0001906 AB 1077 Page 8