BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 953 |Hearing |4/6/16 |
| | |Date: | |
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|Author: |Lara |Tax Levy: |No |
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|Version: |2/4/16 |Fiscal: |Yes |
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|Consultant|Weinberger |
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Central Basin Municipal Water District
Changes the membership of the Central Basin Municipal Water
District's board of directors and imposes restrictions on the
district's use of sole source contracts.
Background
The Central Basin Municipal Water District (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, investorowned
utilities, and private companies within the districts
boundaries. Those water retailers in turn provide water to
residents and businesses within their respective service areas.
CBMWD serves a population of more than 2 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
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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.
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.
Proposed Law
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Senate Bill 953 expands the membership of CBMWD's board of
directors from five to seven members. Five members of the board
must be elected to four year terms pursuant to specified
provisions of current state law. Two additional members of the
governing board must be appointed to four year terms by the
board of supervisors of the County of Los Angeles in a public
meeting. The board of supervisors must consider any nominations
of candidates for appointment made by a water retailer that
purchases water from the district, if any, and may also consider
other qualified candidates for appointment. Each member of the
board of directors appointed by the board of supervisors must
possess the following qualifications:
Residence within the boundaries of the district.
Knowledge of the water industry and familiarity with the
role and responsibilities of a municipal water district.
SB 953 specifies the manner in which the board of supervisors
must appoint a member to fill a vacancy if a member of CBMWD's
board of directors appointed by the board of supervisors is
unable to serve for the duration of his or her term.
Senate Bill 953 prohibits CBMWD from using sole source contracts
unless one of the following conditions is met:
The contract is limited to an emergency circumstance.
The circumstances are that only one vendor can meet the
district's needs.
SB 953 requires that CBMWD, before executing a sole source
contract, must provide written justification, which must include
specified information, demonstrating the reasons for not
competitively bidding the services.
SB 953 requires CBMWD to rebid a contract if the district
significantly changes the scope of work of the contract. The
bill defines "significant changes" to include changes to the
nature of the services or work products.
SB 953 requires CBMWD's general manager to submit a quarterly
report to the district's board detailing all of the district's
contracts, contract amendments, and contract and amendment
dollar amounts.
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SB 953 prohibits CBMWD from providing any member of its board of
directors with district funds to conduct community outreach
activities.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . SB 953 amends state laws governing the
CBMWD to implement some of the recommendation made in the audit
report published by the Bureau of State Audits last year.
Specifically, the bill implements the auditor's recommendation
for legislation to change the membership of CBMWD's governing
board. By requiring the Los Angeles County Board of Supervisors
to appoint two additional members to CBMWD's board, SB 953 seeks
to add some independent participants to the CBMWD's policymaking
process and make the board more representative and accountable.
The changes SB 953 makes to state law will promote public
transparency, sound fiscal management, and improved governance
at the Central Basin Municipal Water District.
2. Independence vs. responsiveness . SB 953 adds two new members
to CBMWD's governing board and specifies relatively broad
qualifications that the appointees must fulfill. By making the
Los Angeles County Board of Supervisors responsible for
appointing the two new district board members, the bill ensures
that the appointees will bring some independent perspectives to
CBMWD's board. However, placing the appointments in the hands
of some county supervisors who don't represent any of the area
within CBMWD's boundaries raises questions about whether the
appointees will be sufficiently responsive to water purveyors
and consumers within the district. To help to achieve a balance
between independence and responsiveness, the bill could require
appointees to meet more specific and rigorous qualifications
that will ensure that they possess sufficient expertise and
familiarity with CBMWD's important responsibilities in the
communities that it serves. For example, the bill could require
that appointees have at least five years of prior service with a
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retail water provider as either an elected official or manager.
3. Not just governance . SB 953 goes beyond the auditor's
recommendation that state law should change the CBMWD's
governance structure to enact several other requirements
relating to CBMWD's contracting procedures and a prohibition on
board members spending outreach funds. These other provisions
reflect audit recommendations that last year's audit report
identified as being the district's responsibility to implement.
District officials note that they have already implemented
approximately two-thirds of the recommendations made in the
audit report. Among the many recommendations that have already
been adopted, the district has improved contract management by
adopting stronger procurement policies and has eliminated board
director outreach funds. Although some of SB 953's provisions
may not have been suggested as statutory changes by the auditor
and may require CBMWD to take actions that it is already in the
process of implementing, placing those requirements in state law
will provide the public with greater confidence that a future
CBMWD governing board could not undo some of the progress that
the district has made since the audit's completion.
4. Special legislation . The California Constitution prohibits
special legislation when a general law can apply (Article IV,
§16). SB 953 contains findings and declarations explaining the
need for legislation that applies only to CBMWD.
5. Mandate . The California Constitution requires the state to
reimburse local governments for the costs of new or expanded
state mandated local programs. Because SB 953 imposes new
reporting requirements and other additional duties on CBMWD
officials, Legislative Counsel says that it imposes a new state
mandate. SB 953 requires the state to reimburse local agencies
if the Commission on State Mandates determines that the bill
imposes a reimbursable mandate.
6. Related legislation . AB 1794 (Garcia) would alter the
membership of CBMWD's board of directors to include seven
members, comprised of four directors elected by voters and three
directors appointed by water purveyors. The bill would also
require CBMWD to establish a technical advisory committee. AB
1794 is scheduled to be considered by the Assembly Local
Government Committee at its April 6, 2016 hearing.
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Support and
Opposition (3/31/16)
Support : Central Basin Water Association; Cities of Maywood,
Lynwood, Montebello, Signal Hill, South Gate, and Vernon.
Opposition : Unknown.
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