BILL ANALYSIS Ó SB 552 Page 1 Date of Hearing: June 28, 2016 ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE Marc Levine, Chair SB 552 (Wolk) - As Amended June 16, 2016 SENATE VOTE: 31-5 SUBJECT: Public water systems: disadvantaged communities: consolidation or extension of service: administrative and managerial services SUMMARY: Authorizes the State Water Resources Control Board (SWRCB) to contract with an administrator to provide administrative and managerial services to a designated public water system, as defined, to assist with the provision of an adequate and affordable supply of safe drinking water. Specifically, this bill: 1)Updates and clarifies several provisions of law on water system consolidation. 2)Authorizes the SWRCB, in order to provide affordable, safe drinking water to disadvantaged communities and to prevent fraud, waste, and abuse, to do both of the following: SB 552 Page 2 a) Contract with an administrator, as specified, 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, and 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 Water Board. 3)Defines "administrator" as a person that the State Water Board has determined is competent to perform the administrative and managerial services of a public water system, as specified. Authorizes the State Water Board, in determining competency, to consider demonstrated experience in managing and operating a public water system. 4)Authorizes an administrator to expend moneys for infrastructure, operation and maintenance, and to set and collect water user rates and fees. 5)Defines "designated public water system" as a public water system that serves a disadvantaged community and that the SWRCB finds consistently fails to provide an adequate and affordable supply of safe drinking water. SB 552 Page 3 6)Requires the SWRCB to meet specified critera, before it determines that a public water system is a designated public water system. 7)Requires the State Water Board to make financial assistance available to an administrator for a designated public water system, as appropriate and to the extent that funding is available. EXISTING LAW: 1)Establishes a state policy that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes. 2)Establishes the federal Safe Drinking Water Act (SDWA) and sets standards for drinking water quality. 3)Requires the SWRCB to regulate drinking water and to enforce the federal SDWA. 4)Requires the SWRCB, in administering the SDWA programs to fund improvements and expansions of small community water systems, to encourage the consolidation of small community water systems that serve disadvantaged communities, and prioritize funding for construction projects that involve the physical restructuring of two or more community water systems, at least one of which is a small community water system that serves a disadvantaged community, into a single, consolidated system. 5)Authorizes the SWRCB, where a public water system or a state SB 552 Page 4 small water system within a disadvantaged community, consistently fails to provide an adequate supply of safe drinking water, to order consolidation with a receiving water system. 6)Limits the liability of a consolidated water system, wholesaler, or any other agency in the chain of distribution that delivers water to a consolidated water system, as specified. FISCAL EFFECT: Unknown. COMMENTS: Authorizes the SWRCB to contract with an administrator to provide administrative and managerial services to a designated public water system, as defined, to assist with the provision of an adequate and affordable supply of safe drinking water. 1)Author's Statement: California is the 6th largest economy of the world, it is unconscionable that so many Californians - most especially people living in disadvantaged communities - are living in Third World conditions without water. California took a bold step last year by authorizing the State Board to consolidate water systems that fail to deliver drinkable water - and SB 552 is a tool that the State Water Board may use to be more efficient. A third party administrator will bring stability to the water system and the community, and long-term sustainability to the water supply for disadvantaged communities. 2)Background: California has a challenge providing safe drinking water to all of its residents. The SWRCB is responsible for the state's drinking water program and estimates that 500 communities rely on public water systems that do not meet drinking water standards. We do not know exactly how many Californians lack access to safe drinking water on a daily basis, but it is on the order of millions of SB 552 Page 5 people. Drinking water contamination disproportionally affects disadvantaged communities that rely on groundwater as their drinking water source. Many small communities do not have the technical, managerial, or financial capability to operate what can be complex drinking water systems. For many years through various means, but primarily through financial incentive or prioritization, the state has encouraged voluntary consolidation of public water systems. SB 88 (Committee on Budget), Chapter 27, Statues of 2015, for the first time, authorized the SWRCB to require certain water systems that consistently fail to provide safe drinking water, to consolidate with, or receive an extension of service from, another public water system. The SB 88 provisions that authorized public water system consolidation was largely built off of recommendations in the Governor's "Resilient, Affordable, Safe Drinking Water for Disadvantaged Communities Framework", which was released May 2015. The framework specifically laid out three steps to ensure every Californian has access to an adequate supply of safe water for daily needs. The first two steps to improve technical, managerial, and financial capacity and to implement consolidation if improvements are not effective were part of SB 88. The third step of contracting with a third party to manage the system to allow for it to be brought up to a sustainable condition was not included and is embodied in this bill. Additional approach to correct drinking water system failures: This bill creates an additional tool for addressing lack of safe drinking water by authorizing the SWRCB to identify public water systems that are consistently unable to provide sufficient safe drinking water and to contract with a competent administrator. The SWRCB notes that the use of a contracted entity, would provide technical and managerial SB 552 Page 6 capacity, economies of scale, and other efficiencies. 3)Prior and Related Legislation: a) SB 1263 (Wiekowski), would enhance the process for evaluation of the creation of a new drinking water system. To be heard in this committee on June 28, 2016. b) SB 88 (Committee on Budget), Chapter 27, Statues of 2015, authorizes the SWRCB to order water system consolidation or extension of services. 1)Supporting and Support If Amended Arguments: This bill will grant the SWRCB the authority to order a water system which is consistently failing to provide safe drinking water to accept a contract administrator. This is an important tool for the SWRCB to have. There are many systems which may not be candidates for physical consolidation but could begin providing safe drinking water to their customers with new management. While this could be an important and effective tool there should be more clarity provided to available funding, a public process, an affordability analysis, and a long-term sustainability plan when an administrator is used. 2)Opposing Arguments: This bill does not specify what entity would be responsible for costs associated with the required administrative and managerial services in the bill. There is a lack of specificity in the bill relating to funding of the required administrative services and whether the administrator would be subject to Proposition 218. This bill does specify that customers of a subsumed water system may not be charged an additional fee beyond the costs of the consolidation itself. As the current structure of the bill offers no funding for the predictable increase in operation, SB 552 Page 7 maintenance, and administrative expenses, this bill would place an undue burden on the receiving water system. Safe drinking water is a right of every Californian, but it is a cost that should not be paid in full by public water agencies. REGISTERED SUPPORT / OPPOSITION: Support California Catholic Conference of Bishops Clean Water Action (if amended) Community Water Center (if amended) RCAC (if amended) Self-Help Enterprises (if amended) Opposition Association of California Water Agencies California Municipal Utilities Association SB 552 Page 8 Regional Water Authority Analysis Prepared by:Ryan Ojakian / W., P., & W. / (916) 319-2096