BILL ANALYSIS Ó SB 953 Page 1 Date of Hearing: August 3, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 953 (Lara) - As Amended August 1, 2016 ----------------------------------------------------------------- |Policy |Local Government |Vote:|6 - 3 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: Yes SUMMARY: This bill revises the composition of the Central Basin Municipal Water District's (CBMWD) Board of Directors (Board) by specifying a seven-member board of directors comprised of five elected directors and two directors appointed by Los Angeles County Board of Supervisors, and establishes restrictions on the District's use of sole source contracting. FISCAL EFFECT: SB 953 Page 2 On-going costs to the District, likely in the range of $230,000 per year, some of which may be reimbursable by the state General Fund. Actual costs would depend upon a determination by the Commission on State Mandates (Commission) regarding what expenses incurred by CBMWD in implementing the bill are deemed to be subject to state reimbursement. COMMENTS: 1)Purpose. According to the author, "This bill amends state laws governing the CBMWD to implement some of the recommendations made in the audit report published by the Bureau of State Audits last year. Specifically, this bill implements the auditor's recommendation for legislation to change the membership of District's governing board. By requiring the Board of Supervisors to appoint two additional members to District's board, this bill seeks to add some independent participants to the District's policymaking process and make the board more representative and accountable. The changes this bill makes to state law will promote public transparency, sound fiscal management, and improved governance at the District." 2)Central Basin Municipal Water District. Existing law, the Municipal Water District Law of 1911, governs the formation, internal organization, and elections for municipal water districts. That law requires the board of directors of a municipal water district to consist of five members elected by voters in each of five divisions of the district, and requires each board member to be a resident of the division that he or she represents. Existing law requires board members to receive compensation of up to $100 per day, up to six days per month, for attendance at board meetings or other service SB 953 Page 3 rendered as a board member, plus expenses incurred in the performance of official duties. Municipal water districts have the authority to fix rates at which water is sold, as specified, to cover operating expenses, repairs and maintenance, improvements, and principal and interest on debt payments. The 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, investor-owned utilities, and private companies within the district's 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. An audit report issued in December of 2015 by the Bureau of State Audits (BSA) 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 constituted gifts of public funds, and inadequate leadership by the board of directors. Among other issues, the audit report found that: "Poor leadership by the board of directors 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 SB 953 Page 4 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. 1)Related Legislation.3) AB 1794 (Garcia), an urgency measure pending in the Senate Appropriations Committee, also revises the governance structure of the CBMWD by specifying a seven-member board of directors comprised of four elected directors and three directors appointed by water purveyors. The bill would also require the board to establish a technical advisory committee within the CBMWD. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081 SB 953 Page 5