BILL ANALYSIS Ó SB 7 Page 1 Date of Hearing: July 14, 2015 ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE Marc Levine, Chair SB 7 (Wolk) - As Amended July 7, 2015 SENATE VOTE: 28-7 SUBJECT: Housing: water meters: multiunit structures. SUMMARY: Requires, as of January 1, 2017, that individual water meters, also called submeters, be installed on all new multifamily residential units or mixed commercial and multifamily units and requires that landlords bill residents for the increment of water they use. Specifies rights and obligations between landlords and tenants. Specifically, this bill: 1)Creates a new article in the Water Code regarding submetering (submetering article) that requires each water purveyor that sells, leases, rents, furnishes, or delivers water service to a newly constructed multiunit residential structure or newly constructed mixed-use residential and commercial structure for which a water connection is submitted after January 1, 2017 to ensure each individual unit be metered or submetered as a pre-condition to new water service. Prohibits the water purveyor from imposing an additional capacity or connection fee or charge for a submeter that is installed by an owner or his or her agent. SB 7 Page 2 2)Exempts long-term health care facilities, low-income housing, residential care facilities, student dormitories, and time-share properties from the requirement to submeter. 3)Defines low-income housing as a building financed with tax credits, tax-exempt mortgage bonds or other federal, state, or local funds, as specified, and where 90% or more of the units are occupied by lower income households, which is defined as persons and families whose income does not exceed the qualifying limits for housing under Section 8 of the United States Housing Act of 1937 or, under specified circumstances, an equivalent. 4)Allows the Department of Housing and Community Development (HCD) to develop requirements for the installation of water submeters in multiunit residential structures, including specifying when such installation is infeasible and thus exempt, such as potentially with high-rise multifamily buildings and to propose those requirements for adoption by the California Building Standards Commission (CBSC) in the next regularly-scheduled update of the California Building Standards Code that occurs on or after January 1, 2016. 5)Requires HCD to exempt long-term health care facilities, low-income housing, residential care facilities, student dormitories, and time-share properties in any building standards it develops for submetering. Defines low-income housing for the purposes of the exemption section. 6)Renders the submetering article inoperative (and thus superseded) on the date that the CBSC includes submetering requirements in the California Building Standards Code that conform to the submetering article. 7)Adds a new Chapter to the Civil Code regarding "Water Service" with findings that the purpose of this Chapter is to encourage water conservation in multifamily residential buildings while ensuring that practices for water service billing are just, SB 7 Page 3 reasonable, and include appropriate safeguards for both landlords and tenants. 8)Defines "billing agent," "landlord," "property," "purveyor," "rental agreement," "renting," "submeter," "water service," and "water purveyor," for the purpose of the statute. 9)Specifies that properties that use submeters to separately bill tenants for water service must ensure that meters and submeters: a) Conform to state rules and regulations governing devices that weigh and measure; b) Are installed and operated in compliance with specifications for measuring devices; c) Only measure the exclusive water use of that dwelling. d) Are accessible to tenants and can be read by the landlord without entering the dwelling. 10)Requires all plumbing fixtures within each dwelling to conform to all laws regarding water conservation. 11)Specifies water purveyors are not responsible for ensuring compliance with installation, certification, maintenance, and testing of water submeters and associated onsite plumbing. 12)Requires a landlord that intends to charge a tenant separately for water service to provide specified disclosures in writing, in at least 10-point type, prior to executing a rental agreement that include, but are not limited to: information regarding calculation of the tenant's bill; due dates, including any past-due fees that may be charged; and, the tenant's rights regarding meter testing, leak repair, and submeter malfunctions, among other provisions. 13)Provides that the amount of the water bill shall be calculated by multiplying the water volume as determined by the submeter for the billing period by the rate or rates for the volumetric usage that are established by the water SB 7 Page 4 purveyor for residential use (volumetric use charge). 14)Specifies how the monthly bill for water service must be calculated and that it may only include four charges: a) A volumetric use charge based on the tenant's proportional water use. b) The tenant's portion of the fixed charges from the water purveyor divided equally, or by proportion of volumetric use charge, among all property units. c) A billing, administrative, or other fee for the landlord's and billing agent's costs, that is no more than $4.75 or 25% of the amount billed, whichever is less. Beginning January 1, 2018, allows a billing fee percentage increase but limits it to no more than the Consumer Price Index California fiscal year average for the previous year. d) A late charge, as specified. 15)Does not prevent the landlord or the landlord's billing agent from using one bill to cover multiple lawful charges to the same tenant. 16)Requires meters to be read within three days of the same point in each billing cycle and payments to be due at the same point in each billing cycle. Requires that the submeter must be read upon the tenant taking possession, within 5 days of ending the tenancy, or as specified. 17)Allows a tenant to agree to be billed electronically but prohibits a tenant from being compelled to receive electronic bills. Requires the tenant be provided contact information for questions regarding the bill including a local or toll-free phone number and a statement on the bill that the landlord or billing agent is not the water purveyor and the name of the local water purveyor providing water service to the master meter. 18)Does not allow a landlord to pass through water charges or penalties that are imposed by a water purveyor on a landlord SB 7 Page 5 unless they are related to tenant's documented conduct. 19)Requires a landlord to make available, within 7 days from a tenant's written request: a) Information relating to the submeters inspection, testing, and verification unless that information is unavailable, in which case the landlord shall disclose it is unavailable. b) The data used to calculate the bill, as specified. c) The location of the submeter. 20)Provides that if a water system in a dwelling unit does not function properly, including plumbing leaks that allow unnecessary water consumption or a malfunction submeter, the landlord should investigate and, if warranted, repair the condition. Prohibits a tenant from removing water fixtures or water conservation devices installed by the landlord. 21)Requires a landlord who is notified of leaks or other conditions causing water consumption or a submeter reading indicating constant or abnormal water usage to repair the condition within 14 days or be: a) Restricted to charging the tenant, for the period after the 14 days, $15 for the month's water use, or actual usage, whichever is less; or, b) Allowed, at the landlord's option, to charge a maximum of 50 cents per day for those days between the two meter readings, or actual usage, whichever is less, if there are meter readings for both before and after the repair; and, c) Prohibited from charging for volumetric water usage if the condition is unrectified for 6 months after the investigation. 22)Allows the landlord, consistent with current laws governing landlord entry, to access the tenant's unit for purposes of installing, reading, repairing, testing and maintaining a submeter or repairing or testing a water fixture the tenant SB 7 Page 6 reports is in need of repair. 23)Provides that if a monthly submeter reading is unavailable, the landlord shall advise the tenant and bill at a rate equal to 75% of the tenant's average monthly use based on the three prior months. If billing for the three prior months is unavailable, the use charge for days that data is unavailable shall be 50 cents. If readings remain unavailable for six months, the volumetric use charge shall be zero. 24)Allows a landlord to impose a late fee of up to $7 for bills overdue by 25 days and a late fee of up to $10 in each subsequent bill if an amount remains unpaid. Requires partial payments to be credited against the bill outstanding the longest. 25)Allows a landlord, under specified circumstances, to deduct from the security deposit late bills or bills of tenants who have vacated. Allows a bill that is 30 days overdue to constitute a material breach of the lease that gives the landlord the right to terminate the tenancy. 26)Specifies that water service charges do not constitute rent and that a landlord is prohibited from shutting off water to a dwelling unit except as needed for repairs, replacements of equipment, or maintenance. 27)Does not preclude or preempt ordinances or regulations adopted prior to January 1, 2013, that govern the approval, installation, maintenance, reading, billing, or testing of submeters and onsite plumbing. 28)Prohibits the waiver of any of the provisions established under this chapter and makes any purported waiver void. EXISTING LAW: 1)Requires water service on all new residential housing to be SB 7 Page 7 metered. 2)Provides that each water corporation with 500 or more service connections that is not already subject to water metering requirements under the existing Water Measurement Law must install a water meter on each new service connection and must retrofit each unmetered service connection by January 1, 2025. 3)Authorizes the CBSC to approve and adopt building standards. Every three years a building standards rulemaking is undertaken to revise and update the California Building Standards Code (Title 24 of the California Code of Regulations). 4)Requires that California achieve a 20% statewide per capita reduction in urban water use by 2020, as compared to October 2009 levels. FISCAL EFFECT: Unknown. Senate Appropriations Committee analyzed the bill prior to its amended form. COMMENTS: The purpose of this bill is to promote water conservation by making tenants in multiunit buildings aware of, and billed in accordance with, their water usage. 1)Author's statement: The author states that "California's water supply is under intense pressure from climate change, increasing population and development. The financial demands from communities around the state for additional water and wastewater infrastructure currently exceed the available state and federal budgetary resources. Thus, it is essential that all California communities use existing water supplies as efficiently as possible." The author adds that "water metering and volumetric pricing are paramount to giving Californians an accurate price signal about their water use." SB 7 Page 8 The author states that "California's population is 38 million people and growing. Currently, 46% live in multi-family housing. Of the State's 15.6 million apartment residents, fewer than 20% (3.1 million) are billed for their water use. In other words, for 80% of California's apartment renters, or 12.5 million Californians, there is no correlation between water usage and cost." 2)Background: For most multiple dwelling housing units, such as apartments, water agencies do not provide meters to individual units. Instead, there are master meters for a group of dwelling units. The cost of water use to the multiple dwelling units is included with the cost of rent, charged as a flat fee, or allocated some way among the residents connected to the master meter. A common way is to divide the master meter bill by the number of units in the complex or to divide it based on an occupant factor, square footage factor, or a combination of both. Residents in such dwelling units will not know how much water they use - or could save - unless their units are submetered. As the Pacific Institute highlighted in the report Waste Not, Want Not: The Potential for Urban Water Conservation in California, water conservation is the largest, least expensive, and most environmentally sound source of water to meet California's future needs. The installation of water meters on multiunit residential and mixed use commercial buildings has been shown to encourage increased conservation by making homeowners, business owners, or renters aware of the amount of water they are utilizing. Conceptually, this legislation is similar to a draft ordinance requiring submetering that was adopted by the City of San Diego on April 5, 2010. San Diego adopted its ordinance after a report from the City of San Diego Office of the Independent Budget Analyst found that multifamily units comprised 44% of the total housing in San Diego, the trend was increasing, and SB 7 Page 9 multifamily properties achieved a 15% to 39% water savings when submetered. This bill would require installation of water submeters in all newly constructed multi-residential dwellings, for which an application for water connect is received, after January 1, 2017. This bill is prospective and does not require an owner of an existing multifamily dwelling to install submeters, retrofit existing submeters, or use existing submeters that are currently unused. 3)Double-referred: This bill was heard in Assembly Housing and Community Development prior to being substantially amended. 4)Prior and related legislation: SB 750 (Wolk) of 2013 was substantially similar to this bill but did not include the flexibility for HCD to propose submetering requirements in an update to the California Building Standards Code. On May 18, 2015, the California Department of Finance posted language very similar to SB 750 as trailer bill proposal number 826 to the Natural Resources and Capital Outlay area of the Governor's 2015-16 Budget. The Governor's office grouped the submetering requirement with other proposals addressing drought but ultimately left the language out of the budget so that it could continue to be vetted through this bill. AB 19 (Fong) of 2011 was also substantially similar to SB 750 but did not include administrative fee provisions. SB 7 Page 10 Two other previous attempts to introduce submetering, AB 1975 (Fong) of 2010 and AB 1173 (Keene) of 2007, failed because of, among other concerns, potential impacts to low income tenants. 5)Supporting arguments: Supporters note that "California is in its fourth year of drought, which reminds us that the best and most cost-effective drought response method is conservation" but that "water conservation is made difficult by the fact that many Californians do not have access to necessary information on their own water use." Supporters state that this bill will "help apartment dwellers track their water use, and because people will pay their water bills directly (rather than through their rent as is the common practice), they will have an incentive to reduce wasteful practices. People living in multiunit housing will be a critical part of the pictures as California suppliers strive to reduce water use by 20 percent by 2020. This bill will give residents the tool they need to make changes." 6)Opposing arguments: Opponents state that this bill will "set a precedent for the allowance of meter installation beyond the master meter by unskilled, untrained and possibly negligent individuals for what would appear to be an attempt to simply pass water accountability on to individual residents of an apartment dwelling without any controls." Opponents seek amendments that would require that submeters "be installed by the water purveyor or other entity responsible for installing the master water meter for the service connection" and to allow the cost of the installation to be imposed on the water user by the water purveyor. 7)Suggested Committee amendments: Committee staff suggests the following amendments as technical cleanup to the bill: SB 7 Page 11 a) Civil Code section 1954.204(e)(2), page 6, lines 22-23, requires the tenant to be advised that any fixed fees for water service will be divided equally among all units. However, section 1954.205(a)(2), page 7, lines 18-28, allows two methods for dividing a fixed fee, either equally, or based on the tenant's proportionally water use. To correct the inconsistency the Committee staff recommends revising Section 1954.204(e)(2), lines 22-23, as follows: (2) Payment of a portion of the fixed fee charged by the purveyors for water servicedivided equally among all the units at the property. b) Civil Code section 1954.205(a)(3), page 7, line 36, allows fees to be increased commensurate with the "California fiscal year average." Committee staff suggests clarifying that the fiscal year average is a Consumer Price Index, as follows: Beginning January 1, 2018, the maximum fee authorized by this paragraph may be adjusted each calendar year by the landlord, no higher than a commensurate increase in the Consumer Price Index California fiscal year average for the previous fiscal year, for all urban consumers, as determined by the Department of Finance. c) Water Code Section 537.2(a), page 15, lines 25-29, states that it does not preclude or preempt a submeter ordinance or regulation, as specified, if it was adopted prior to January 1, 2013. However, the words "or regulation" are accidentally omitted from line 28 and should be corrected as follows: SB 7 Page 12 537.2. (a) This article does not preclude or preempt an ordinance or regulation that regulates the approval of submeter types or the installation, maintenance, reading, billing, or testing of submeters and associated onsite plumbing if the ordinance or regulation was adopted prior to January 1, 2013. Committee staff is not suggesting an amendment that would mandate submeters on private property be installed by the water purveyor because multiple water purveyors have contacted the Committee staff in opposition to any such amendments. REGISTERED SUPPORT / OPPOSITION: Support California Association of Realtors California Building Industry Association California Rural Legal Assistance Foundation Sierra Club California Sonoma County Water Agency United States Green Building Council of California SB 7 Page 13 Western Center on Law and Policy Opposition California State Pipe Trades Council Coalition of California Utility Employees Analysis Prepared by:Tina Leahy / W., P., & W. / (916) 319-2096