BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1794


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          Date of Hearing:  April 27, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          1794 (Cristina Garcia) - As Amended April 11, 2016


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          Urgency:  Yes State Mandated Local Program:  YesReimbursable:   
          Yes


          SUMMARY:


          This bill revises the governance structure of the Central Basin  
          Municipal Water District (CBMWD) by specifying a seven-member  
          board of directors comprised of four elected directors and three  








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          directors appointed by water purveyors.  The bill provides for  
          an interim board structure until the permanent board, elected at  
          the November 6, 2018 election, takes office. The bill also  
          requires the board to establish a technical advisory committee  
          within the CBMWD.


           FISCAL EFFECT:


          1)One-time costs to the District in the range of $200,000 to  
            establish the technical advisory committee and implement other  
            requirements in the bill.



          2)On-going costs to the District, likely in the range of  
            $350,000 per year, some of which may be reimbursable by the  
            state General Fund.  Actual costs would depend upon a  
            determination by the Commission on State Mandates (Commission)  
            regarding what expenses incurred by CBMWD in implementing the  
            bill are deemed to be subject to state reimbursement.  



          COMMENTS:


          1)Purpose. According to the author, "In the last decade, [the  
            District] has lost credibility with the communities it serves,  
            as it battled other water agencies in its region and its  
            directors' actions were questioned.  An auditor report from  
            2015 highlights the problems of leadership and ethics within  
            the Board that governs the District.  While Central Basin has  
            responsibilities to respond to the auditor report over the  
            next year, permanent changes in governance are needed for real  
            long-term reform.  One of the biggest conclusions of the  
            auditor is that the change in governance needs [to] make the  
            Central Basin . . . more accountable to its direct customers,  








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            the purveyors of the [District]."  This bill implements  
            changes to the District's governance structure recommended by  
            the audit.



          2)Central Basin Municipal Water District.  Existing law, the  
            Municipal Water District Law of 1911, governs the formation,  
            internal organization, and elections for municipal water  
            districts.  That law requires the board of directors of a  
            municipal water district to consist of five members elected by  
            voters in each of five divisions of the district, and requires  
            each board member to be a resident of the division that he or  
            she represents.  Existing law requires board members to  
            receive compensation of up to $100 per day, up to six days per  
            month, for attendance at board meetings or other service  
            rendered as a board member, plus expenses incurred in the  
            performance of official duties.  Municipal water districts  
            have the authority to fix rates at which water is sold, as  
            specified, to cover operating expenses, repairs and  
            maintenance, improvements, and principal and interest on debt  
            payments. 


            The CBMWD was established by voters in 1952 to help mitigate  
            groundwater overpumping in southeast Los Angeles County. CBMWD  
            purchases imported water from the Metropolitan Water District  
            of Southern California for sale to retail water suppliers,  
            including cities, other water districts, mutual water  
            companies, investor-owned utilities, and private companies  
            within the district's boundaries.  Those water retailers in  
            turn provide water to residents and businesses within their  
            respective service areas. CBMWD serves a population of more  
            than 2 million people living in 24 cities and some  
            unincorporated areas within the district's approximately 227  
            square mile service area.  

            An audit report issued in December of 2015 by the Bureau of  
            State Audits (BSA) identified numerous concerns with various  








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            aspects of CBMWD's operations, including deficiencies in the  
            district's contracting practices, a pattern of expenditures  
            that may have constituted gifts of public funds, and  
            inadequate leadership by the board of directors.  Among other  
            issues, the audit report found that:


                 "Poor leadership by the board of directors has impeded  
                 CBMWD's ability to effectively meet its responsibilities.  
                  In support of this finding, the audit report cited the  
                 board's failure to provide stability in the district's  
                 general manager position, lack of essential policies  
                 necessary to safeguard the district's long-term financial  
                 viability, inability to maintain the district's insurance  
                 coverage, and failure to disclose the district's  
                 establishment of a legal trust fund and transfers of  
                 money into the trust fund."

            All but one of the more than two dozen recommendations  
            contained in the audit report are the CBMWD's responsibility  
            to implement.  However, one recommendation in the audit report  
            is directed to the Legislature.  Specifically, the audit  
            report suggests a change in state law that would preserve the  
            district as an independent entity but modify the district's  
            governance structure to ensure that the district remains  
            accountable to those it serves.

          3)Related Legislation.  SB 953 (Lara), pending on the Suspense  
            file in the Senate Appropriations Committee, would add two  
            appointed members to the Central Basin Municipal Water  
            District's (CBMWD's) board of directors, prohibit the use of  
            district funds for board members to conduct community  
            outreach, and make specified changes to CBMWD's contracting  
            practices.













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          Analysis Prepared by:Jennifer Swenson / APPR. / (916)  
          319-2081