Amended in Assembly June 16, 2016

Amended in Assembly May 17, 2016

Amended in Assembly July 7, 2015

Amended in Senate April 16, 2015

Senate Bill No. 552

Introduced by Senator Wolk

February 26, 2015

An act to amend Sections 116681 and 116682 of, and to add Section 116686 to, the Health and Safety Code, relating to water.

LEGISLATIVE COUNSEL’S DIGEST

SB 552, as amended, Wolk. Public water systems: disadvantaged communities: consolidation or extension of service: administrative and managerial services.

Existing law, the California Safe Drinking Water Act, provides for the operation of public water begin delete systems, end delete begin insert systems end insert and imposes on the State Water Resources Control Board various responsibilities and duties. The act authorizes the state board to order consolidation with a receiving water system where a public water system, or a state small water system within a disadvantaged community, consistently fails to provide an adequate supply of safe drinking water. The act authorizes the state board to order the extension of service to an area that does not have access to an adequate supply of safe drinking water so long as the extension of service is an interim extension of service in preparation for consolidation. Existing law, for these purposes, defines “disadvantaged community” to mean a disadvantaged community that is in an unincorporated area or is served by a mutual water company.

begin insert This bill would authorize the state board to order consolidation where a public water system or a state small water system is serving, rather than within, a disadvantaged community, and would limit the authority of the state board to order consolidation or extension of service to provide that authority only with regard to a disadvantaged community. end insert This bill would make a community disadvantaged for these purposes if the community is in a mobilehome park even if it is not in an unincorporated area or served by a mutual water company. begin delete The bill would limit the authority of the state board to order consolidation or extension of service to provide that authority only with regard to a disadvantaged community. end delete

The act requires the state board, before ordering consolidation or extension of service, to hold at least one initial public meeting, as specified, and to obtain written consent from any domestic well owner for consolidation or extension of service. The act provides that any affected resident within the consolidation or extended service area who does not provide written consent is ineligible, until consent is provided, for any future water-related grant funding from the state, except as specified.

This bill would provide that an initial public meeting is not required for a potentially subsumed area that is served only by domestic wells. The bill would apply to the domestic well owner, instead of to an affected resident, within the consolidation or extended service area the written consent requirement for eligibility for water-related grant funding.

The act requires the state board, upon ordering the consolidation or extension of service, to adequately compensate the owners of a privately owned subsumed water system for the fair market value of the system as determined by the Public Utilities Commission for water corporations subject to the commission’s jurisdiction or the state board for all other systems. The act prohibits a consolidated water system from increasing charges on existing customers of the receiving water system solely as a consequence of the consolidation or extension of service unless the customer receives a corresponding benefit.

This bill would instead authorize the Public Utilities Commission or the state board to determine the fair market value of a subsumed water system, without regard to whether the system is a water corporation subject to the commission’s jurisdiction. The bill would prohibit fees or charges imposed on a customer of a subsumed water system from exceeding the cost of consolidating the water system or the cost of extension of service to the area.

The act exempts the consolidation or extension of service pursuant to these provisions from the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, which governs the procedures for the formation and change of organization of cities and special districts.

This bill would instead exempt an action taken by the state board pursuant to these provisions from the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000.

This bill would authorize the state board, for the purpose of providing affordable, safe drinking water to disadvantaged communities and preventing fraud, waste, and abuse, to contract with an administrator to provide administrative and managerial services to a designated water system and to order the designated public water system to accept those services. The bill would define designated water system as a public water system that serves a disadvantaged community and that the state board finds consistently fails to provide an adequate and affordable supply of safe drinking water. The bill would require the state board to provide a public water system with notice, as specified, before determining that the public water system is a designated public water system. The bill would authorize the administrator of a designated public water system to expend available moneys for capital infrastructure improvements that the designated public water system needs to provide an adequate and affordable supply of safe drinking water, to set and collect user water rates and fees, and to expend available moneys for the operation and maintenance costs of the designated public water system.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 116681 of the Health and Safety Code
is amended to read:

116681.  

Except as provided in paragraph (2) of subdivision
(g) of Section 116686, the following definitions shall apply to this
section and Sections 116682, 116684, and 116686:

(a) “Adequate supply” means sufficient water to meet residents’
health and safety needs.

(b) “Affected residence” means a residence within a
disadvantaged community that is reliant on a water supply that is
either inadequate or unsafe.

(c) “Consistently fails” means a failure to provide an adequate
supply of safe drinking water.

(d) “Consolidated water system” means the public water system
resulting from the consolidation of a public water system with
another public water system, state small water system, or affected
residences not served by a public water system.

(e) “Consolidation” means joining two or more public water
systems, state small water systems, or affected residences not
served by a public water system, into a single public water system.

(f) “Disadvantaged community” means a disadvantaged
community, as defined in Section 79505.5 of the Water Code, that
is in an unincorporated area, is in a mobilehome park, or is served
by a mutual water company.

(g) “Extension of service” means the provision of service
through any physical or operational infrastructure arrangement
other than consolidation.

(h) “Receiving water system” means the public water system
that provides service to a subsumed water system through
consolidation or extension of service.

(i) “Safe drinking water” means water that meets all primary
and secondary drinking water standards.

(j) “Subsumed water system” means the public water system,
state small water system, or affected residences not served by a
public water system consolidated into or receiving service from
the receiving water system.

SEC. 2.  

Section 116682 of the Health and Safety Code is
amended to read:

116682.  

(a) Where a public water system or a state small water
system, begin delete within end delete begin insert serving end insert a disadvantaged community, consistently
fails to provide an adequate supply of safe drinking water, the state
board may order consolidation with a receiving water system as
provided in this section and Section 116684. The consolidation
may be physical or operational. The state board may also order
the extension of service to an area within a disadvantaged
community that does not have access to an adequate supply of safe
drinking water so long as the extension of service is an interim
extension of service in preparation for consolidation. The state
board may set timelines and performance measures to facilitate
completion of consolidation.

(b) Before ordering consolidation or extension of service as
provided in this section, the state board shall do all of the
following:

(1) Encourage voluntary consolidation or extension of service.

(2) Consider other enforcement remedies specified in this article.

(3) Consult with, and fully consider input from, the relevant
local agency formation commission regarding the provision of
water service in the affected area, the recommendations for
improving service in a municipal service review, and any other
relevant information.

(4) Consult with, and fully consider input from, the Public
Utilities Commission when the consolidation would involve a
water corporation subject to the commission’s jurisdiction.

(5) Consult with, and fully consider input from, the local
government with land use planning authority over the affected
area, particularly regarding any information in the general plan
required by Section 65302.10 of the Government Code.

(6) Notify the potentially receiving water system and the
potentially subsumed water system, if any, and establish a
reasonable deadline of no less than six months, unless a shorter
period is justified, for the potentially receiving water system and
the potentially subsumed water system, if any, to negotiate
consolidation or another means of providing an adequate supply
of safe drinking water.

(A) During this period, the state board shall provide technical
assistance and work with the potentially receiving water system
and the potentially subsumed water system to develop a financing
package that benefits both the receiving water system and the
subsumed water system.

(B) Upon a showing of good cause, the deadline may be
extended by the state board at the request of the potentially
receiving water system, potentially subsumed water system, or the
local agency formation commission with jurisdiction over the
potentially subsumed water system.

(7) Obtain written consent from any domestic well owner for
consolidation or extension of service. Any domestic well owner
within the consolidation or extended service area who does not
provide written consent shall be ineligible, until the consent is
provided, for any future water-related grant funding from the state
other than funding to mitigate a well failure, disaster, or other
emergency.

(8) (A) Hold at least one public meeting at the initiation of this
process in a place as close as feasible to the affected areas. The
state board shall make reasonable efforts to provide a 30-day notice
of the meeting to the ratepayers, renters, and property owners to
receive water service through service extension or in the area of
the subsumed water system and all affected local government
agencies and drinking water service providers. The meeting shall
provide representatives of the potentially subsumed water system,
affected ratepayers, renters, property owners, and the potentially
receiving water system an opportunity to present testimony. The
meeting shall provide an opportunity for public comment.

(B) An initial public meeting shall not be required for a
potentially subsumed area that is served only by domestic wells.

(c) Upon expiration of the deadline set by the state board
pursuant to paragraph (6) of subdivision (b), the state board shall
do the following:

(1) Consult with the potentially receiving water system and the
potentially subsumed water system, if any.

(2) Conduct a public hearing, in a location as close as feasible
to the affected communities.

(A) The state board shall make reasonable efforts to provide a
30-day notice of the hearing to the ratepayers, renters, and property
owners to receive water service through service extension or in
the area of the subsumed water system and to all affected local
government agencies and drinking water service providers.

(B) The hearing shall provide representatives of the potentially
subsumed water system, affected ratepayers, renters, property
owners, and the potentially receiving water system an opportunity
to present testimony.

(C) The hearing shall provide an opportunity for public
comment.

(d) Before ordering consolidation or extension of service, the
state board shall find all of the following:

(1) The potentially subsumed water system has consistently
failed to provide an adequate supply of safe drinking water.

(2) All reasonable efforts to negotiate consolidation or extension
of service were made.

(3) Consolidation of the receiving water system and subsumed
water system or extension of service is appropriate and technically
and economically feasible.

(4) There is no pending local agency formation commission
process that is likely to resolve the problem in a reasonable amount
of time.

(5) Concerns regarding water rights and water contracts of the
subsumed and receiving water systems have been adequately
addressed.

(6) Consolidation or extension of service is the most effective
and cost-effective means to provide an adequate supply of safe
drinking water.

(7) The capacity of the proposed interconnection needed to
accomplish the consolidation is limited to serving the current
customers of the subsumed water system.

(e) Upon ordering consolidation or extension of service, the
state board shall do all of the following:

(1) As necessary and appropriate, make funds available, upon
appropriation by the Legislature, to the receiving water system for
the costs of completing the consolidation or extension of service,
including, but not limited to, replacing any capacity lost as a result
of the consolidation or extension of service, providing additional
capacity needed as a result of the consolidation or extension of
service, and legal fees. Funding pursuant to this paragraph is
available for the general purpose of providing financial assistance
for the infrastructure needed for the consolidation or extension of
service and does not need to be specific to each individual
consolidation project. The state board shall provide appropriate
financial assistance for the infrastructure needed for the
consolidation or extension of service. The state board’s existing
financial assistance guidelines and policies shall be the basis for
the financial assistance.

(2) Ensure payment of standard local agency formation
commission fees caused by state board-ordered consolidation or
extension of service.

(3) Adequately compensate the owners of a privately owned
subsumed water system for the fair market value of the system as
determined by the Public Utilities Commission or the state board.

(4) Coordinate with the appropriate local agency formation
commission and other relevant local agencies to facilitate the
change of organization or reorganization.

(f) (1) For the purposes of this section, the consolidated water
system shall not increase charges on existing customers of the
receiving water system solely as a consequence of the consolidation
or extension of service unless the customers receive a
corresponding benefit.

(2) For purposes of this section, fees or charges imposed on a
customer of a subsumed water system shall not exceed the cost of
consolidating the water system with a receiving system or the
extension of service to the area.

(g) Division 3 (commencing with Section 56000) of Title 5 of
the Government Code shall not apply to an action taken by the
state board pursuant to this section.

SEC. 3.  

Section 116686 is added to the Health and Safety Code,
to read:

116686.  

(a) (1) To provide affordable, safe drinking water to
disadvantaged communities and to prevent fraud, waste, and abuse,
the state board may do both of the following:

(A) Contract with an administrator to provide administrative
and managerial services to a designated public water system to
assist the designated public water system with the provision of an
adequate and affordable supply of safe drinking water.

(i) To fulfill the requirements of this section, the state board
may contract with more than one administrator, but only one
administrator may be assigned to provide services to a given
designated public water system.

(ii) An administrator may provide administrative and managerial
services to more than one designated public water system.

(B) Order the designated public water system to accept
administrative and managerial services, including full management
and control, from an administrator selected by the state board.

(2) In performing its duties pursuant to paragraph (1), the state
board may use criteria from the policy handbook adopted pursuant
to Section 116760.43.

(b) Before the state board determines that a public water system
is a designated public water system, the state board shall provide
the public water system with notice and an opportunity to show
either of the following:

(1) That the public water system has not consistently failed to
provide an adequate and affordable supply of safe drinking water.

(2) That the public water system has taken steps to timely
address its failure to provide an adequate and affordable supply
of safe drinking water.

(c) The state board shall make financial assistance available to
an administrator for a designated public water system, as
appropriate and to the extent that funding is available.

(d) An administrator may do any of the following:

(1) Expend available moneys for capital infrastructure
improvements that the designated public water system needs to
provide an adequate and affordable supply of safe drinking water.

(2) Set and collect user water rates and fees.

(3) Expend available moneys for operation and maintenance
costs of the designated public water system.

(e) A designated public water system shall not be responsible
for any costs associated with an administrator.

(f) Administrative and managerial contracts pursuant to this
section shall be exempt from Chapter 2 (commencing with Section
10290) of Part 2 of Division 2 of the Public Contract Code and
may be awarded on a noncompetitive bid basis as necessary to
implement the purposes of this section.

(g) For purposes of this section, the following terms have the
following meanings:

(1) “Administrator” means a person that the state board has
determined is competent to perform the administrative and
managerial services of a public water system, as described in
subdivision (d). In determining competency, the state board may
consider demonstrated experience in managing and operating a
public water system.

(2) “Designated public water system” means a public water
system that serves a disadvantaged community, as defined in
Section 79505.5 of the Water Code, and that the state board finds
consistently fails to provide an adequate and affordable supply of
safe drinking water.