BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1794|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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THIRD READING
Bill No: AB 1794
Author: Cristina Garcia (D), et al.
Amended: 8/15/16 in Senate
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 5-1, 6/22/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Pavley
NOES: Moorlach
NO VOTE RECORDED: Lara
SENATE APPROPRIATIONS COMMITTEE: 5-0, 8/11/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NO VOTE RECORDED: Bates, Nielsen
ASSEMBLY FLOOR: 78-0, 6/2/16 - See last page for vote
SUBJECT: Central Basin Municipal Water District
SOURCE: Author
DIGEST: This bill adds appointed directors to the Central Basin
Municipal Water District's (CBMWD) governing board.
ANALYSIS:
Existing law:
1) Governs, pursuant to the Municipal Water District Law of
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1911, the formation, internal organization, and elections for
municipal water districts.
2) 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.
This bill:
1) Requires that, when the CBWMD directors elected at the
November 6, 2018 election take office, CBWMD's board of
directors must be composed of seven directors as follows:
a) Four directors must be elected by the voters in each
of four divisions established by CBWMD's board pursuant to
specified requirements. Each director must be a resident
of the division from which he or she is elected and the
election must be in accordance with the Uniform District
Election Law.
b) Three directors must be appointed by the water
purveyors of the district, as specified.
2) Requires, until the directors elected at the November 8,
2022 election take office, that CBMWD's board of directors
must be composed of eight directors, with five directors
elected in accordance with the statute establishing the
board's current structure, and three directors appointed by
the water purveyors of the district, as specified.
3) Requires CBWMD to be subject to a specified statute in the
Political Reform Act imposing limits on, and requiring
disclosure of, contributions to public officials.
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4) Establishes the process by which water purveyors must
appoint and select three directors to serve four-year terms
on CBMWD's board and specifies that:
a) One director must be selected by all large water
purveyors, as defined, from the nominees of large water
purveyors. Each large water purveyor must have one vote.
b) One director must be selected by all cities that are
water purveyors of the district from the nominees of
cities. Each city must have one vote.
c) One director must be selected by all of the water
purveyors of the district from any nominee. The vote of
each purveyor must be weighted to reflect the number of
service connections of that water purveyor within the
district.
5) Prohibits the appointment of directors from resulting in any
of the following:
a) The appointment of three directors that are all
employed by or representatives of entities that are all
large water purveyors.
b) The appointment of three directors that are all
employed by or representatives of entities that are all
cities.
c) The appointment of three directors that are all
employed by or representatives of entities that are all
small water purveyors.
6) Requires that if the selection process for directors would
result in a violation of any of these prohibited outcomes,
the first eligible candidate receiving the next highest
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number of votes must be selected.
7) Specifies the manner in which CBMWD must stagger the term
served by appointed directors.
8) Requires that an appointed director's term is terminated if
the appointed director is no longer employed by, or a
representative of, a water purveyor or city, as specified.
This bill specifies the manner in which a vacancy in an
office of appointed director must be filled.
9) Requires that appointed directors must:
a) Live or work within CBMWD's boundaries.
b) Not hold an elected office.
c) Not hold more than 0.5% ownership in a company
regulated by the Public Utilities Commission.
d) Hold more than one consecutive term of office on the
board.
e) Be subject to all applicable conflict-of-interest and
ethics provisions and to recuse himself or herself from
participating in a decision that could have a direct
material benefit on the financial interests of the
director.
10)Requires that an appointed director must be eligible for
specified reimbursement, compensation, and benefits, and
allows an appointed director to waive these sources of
reimbursement and compensation subject to specified
conditions.
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11)Prohibits an appointed director from receiving communication
or car allowances, with a specified exception.
12)Provides that its provisions only become operative if SB 953
(Lara, 2016) is enacted and becomes effective.
Background
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 two
million people living in 24 cities and some unincorporated areas
within the district's approximately 227 square-mile service
area. The five members of CBMWD's board of directors are each
elected by voters residing in one of five divisions within the
district's boundaries.
An audit report issued in December of 2015 by the Bureau of
State Audits identified numerous concerns with various 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. Specifically, the audit report found
that:
CBMWD often inappropriately circumvented its competitive
bidding processes when it awarded contracts to vendors during
the period that was audited. In support of this finding, the
audit report noted that the district did not use competitive
bidding for 13 of the 20 contracts reviewed by auditors and
did not adequately justify why it failed to competitively bid
for 11 of those 13 sole source contracts.
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CBMWD spent thousands of dollars of district money on purposes
unrelated to its underlying authority, some of which likely
constitute gifts of public funds. For example, the audit
report noted that CBMWD provided thousands of dollars in
community outreach funds to each board member annually, which
various board members had the district donate on their behalf
to golf tournaments, a legislator's breakfast panel, religious
organizations, high school sports programs, pageants, and car
shows.
The board of director's poor leadership 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.
Comments
Purpose of the bill. This bill implements a recommendation made
in the audit report published by the Bureau of State Audits last
year to improve CBMWD's governance. Specifically, this bill
implements the auditor's recommendation for legislation to
change the membership of CBMWD's governing board. By requiring
the board to include three additional appointed members and
establishing an independent technical oversight committee, this
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bill adds independent participants to the CBMWD's policymaking
process, allows CBMWD's board to draw upon more technical
expertise, and makes the board more representative and
accountable to a broader range of stakeholders. By requiring
the technical oversight committee to approve changes to CBMD's
ethics, compensation, and benefits policies, this bill makes it
less likely that the District will continue some of the
compensation and spending practices that were criticized in last
year's audit report. The changes this bill makes to state law
will promote public transparency, sound fiscal management, and
improved governance at CBMWD, benefitting the more than two
million people served by the District.
Finding the right balance. This bill adds three new appointed
members to CBMWD's governing board, representing different
categories of water purveyors served by the District. By making
water purveyors responsible for appointing the three new
district board members, this bill ensures that the appointees
will bring some independent perspectives and technical expertise
to CBMWD's board. However, because some water purveyors are
private companies or investor-owned utilities, this bill gives
those purveyors, and the investors who hold them accountable, an
expanded role in the governance of a public agency. This bill
also reduces the number of board seats held by directors who are
elected by voters who reside within the District, which has the
effect of diluting voters' representation on CBMWD's board.
While the water purveyors are most directly affected by CBMWD's
actions, all water consumers within the district's service area
have an interest in ensuring that the District is well-managed
and performing its intended purpose. It is unclear whether this
bill strikes the right balance between adding new perspectives
to CBMWD's governance without unnecessarily diluting its
responsiveness to district voters.
Mandate. The California Constitution requires the state to
reimburse local governments for the costs of new or expanded
state mandated local programs. Because this bill imposes
additional duties on CBMWD, Legislative Counsel says that it
imposes a new state mandate. This bill requires the state to
reimburse local agencies if the Commission on State Mandates
determines that the bill imposes a reimbursable mandate.
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee, this bill
creates unknown local costs, some of which may be reimbursable
by the state General Fund. Potentially reimbursable costs may
be in the hundreds of thousands annually. Actual costs would
depend upon a determination by the Commission on State Mandates
regarding what expenses incurred by CBMWD in implementing the
bill are deemed to be subject to state reimbursement.
SUPPORT: (Verified8/11/16)
California Association of Mutual Water Companies
California Domestic Water Company
California Water Association
Central Basin Municipal Water District
Central Basin Water Association
City of Bellflower
City of Lakewood
City of Norwalk
City of Paramount
Pico Water District
Maywood Mutual Water Company
Midland Park Water Trust
Montebello Land and Water Company
Rubio Cańon Land and Water Association
South Mesa Water Company
OPPOSITION: (Verified8/11/16)
None received
ASSEMBLY FLOOR: 78-0, 6/2/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos,
Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh,
Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina
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Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Bigelow, Beth Gaines
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
8/15/16 20:33:23
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