BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  August 3, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 953  
          (Lara) - As Amended  August 1, 2016


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          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:










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          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  








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            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  








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               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













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