BILL ANALYSIS                                                                                                                                                                                                    Ó



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          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.








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          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,  








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            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  








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            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  








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            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  








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            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  








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            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."









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            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  








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            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.  










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            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:










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             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 service  divided 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:










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               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









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          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