BILL ANALYSIS Ó
SB 953
Page 1
SENATE THIRD READING
SB
953 (Lara)
As Amended August 15, 2016
Majority vote
SENATE VOTE: 26-11
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Local |6-3 |Eggman, Alejo, |Waldron, Beth |
|Government | |Bonilla, Chiu, |Gaines, Linder |
| | |Cooley, Gordon | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |14-6 |Gonzalez, Bloom, |Bigelow, Chang, |
| | |Bonilla, Bonta, |Gallagher, Jones, |
| | |Calderon, Daly, |Obernolte, Wagner |
| | |Eggman, Eduardo | |
| | |Garcia, Holden, | |
| | |Quirk, Santiago, | |
| | |Weber, Wood, McCarty | |
| | | | |
| | | | |
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SB 953
Page 2
SUMMARY: Establishes restrictions on the Central Basin
Municipal Water District's (District) use of sole source
contracting. Specifically, this bill:
1)Prohibits the District from using sole source contracts,
unless one of the following conditions is met:
a) The contract is limited to an emergency circumstance;
or,
b) The circumstances are that only one vendor can meet the
District's needs.
2)Requires the District, before executing a sole source
contract, to provide written justification demonstrating the
reasons for not competitively bidding the services. Requires
the justification to include all of the following information:
a) The background of the purchase;
b) A description of the vendor's uniqueness;
c) An explanation of the consequences of not purchasing
from the vendor;
d) Market research to substantiate a lack of competition;
and,
e) An analysis of pricing and alternatives.
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3)Requires the District to rebid a contract if the District
significantly changes the scope of work of the contract.
Provides that significant changes include, but are not limited
to, changes to the nature of the services or work products.
4)Requires the District's general manager to submit a quarterly
report to the District's Board of Directors (Board) detailing
all of the District's contracts, contract amendments, and
contract and amendment dollar amounts.
5)Prohibits any ordinance, motion, or resolution relating to
ethics, compensation, or benefits of the members of the
District's Board to be passed or become effective without the
affirmative votes of two-thirds of the members of the Board.
6)Provides that the enactment of this bill is contingent upon
the enactment of AB 1794 (Garcia) of the current legislative
session.
7)Finds and declares that a special law is necessary because of
the unique circumstances with the District, as described in
the California State Auditor's December 3, 2015 report.
8)Provides that, if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement to local agencies and school districts for those
costs shall be made, pursuant to current law governing state
mandated local costs.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, there are minor costs to the District.
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COMMENTS:
1)Bill Summary. Under this bill, the District may only use sole
source contracts if the contract is limited to an emergency
circumstance or in a circumstance where is there only one
vendor that can meet the District's needs. This bill also
establishes requirements that the District must fulfill to
provide specified written justification and reporting on
contracts and costs. This bill also prohibits the Board from
adopting any ordinance, motion or resolution, relating to the
ethics, compensation, or benefits of Board members without a
two-thirds vote of the Board.
2)Central Basin Municipal Water District. The District was
formed in 1952 by the voters, pursuant to the Municipal Water
District Act of 1911, to help mitigate the overpumping of
groundwater in southeast Los Angeles County. The District is
a member agency of the Metropolitan Water District of Southern
California (Metropolitan), where it purchases imported water
from Metropolitan to whole to 40 retail water agencies and one
wholesaler that includes cities, water districts, mutual water
companies, investor-owned utilities, and private companies. A
smaller source of the District's incoming revenue is from the
sale of recycled water for municipal, commercial, and
industrial use. The District serves nearly 2 million people
in 24 cities in southeast Los Angeles County and in some
unincorporated areas of the County.
3)Audit Findings. The District has been under increased
scrutiny as news reports have highlighted the District's
misuse of public funds, inappropriate contracting and
employment practices, and several lawsuits. In December 2015,
the Bureau of State Audits (BSA) issued a report that
identified several key findings:
SB 953
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a) The Board has failed to provide the leadership necessary
for the District to fulfill its responsibilities;
b) There are a lack of policies to safeguard the District's
long-term financial viability;
c) The District's debt coverage ratio is insufficient and
the District's credit rating has been downgraded several
times;
d) The Board's actions caused the District to lose its
insurance coverage;
e) The Board violated state law in 2010, when it approved
the establishment of a legal trust fund without adequate
public disclosure;
f) The District frequently inappropriately avoided its
competitive bidding processes, while awarding contracts to
vendors;
g) The District spent thousands of dollars on purposes
unrelated to its underlying authority; and,
h) The District failed to follow its policies for hiring
employees and failed to ensure stability in its key
executive management position.
To address these findings, the audit made numerous
recommendations, most of which do not require legislation.
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Additionally, the audit included an addendum report from the
District, which includes actions to put in place many of the
recommendations contained in the audit.
The audit only includes one recommendation that requires
legislation: "To ensure the efficient and effective delivery
of imported and recycled water in southeastern Los Angeles
County, the Legislature should pass special legislation to
preserve the district as an independent entity but modify the
District's governance structure. In doing so, the Legislature
should consider a governance structure that ensures the
District remains accountable to those it serves, for example,
by changing the District's board from one elected by the
public at large to one appointed by the District's customers."
4)Related Legislation and Contingent Enactment. AB 1794
(Garcia), pending in the Senate, establishes a governance
structure for the District. This bill and AB 1794 (Garcia)
contain language that requires contingent enactment.
5)Policy Consideration. According to the BSA report, "Given the
concerns we raise in this report, a dissolution or
restructuring may become necessary in the future. Should the
board not succeed in maintaining a stable leadership team,
should the district experience additional lawsuits, or should
it lose its insurance coverage again, it will risk not being
able to operate effectively as an independent entity.
However, because of the recent progress, a complete
dissolution may be premature at this time." The Legislature
may wish to consider if the internal changes made by the
District, combined with proposed changes in this bill, will be
enough to address the multitude of issues identified by the
audit.
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Analysis Prepared by:
Misa Lennox / L. GOV. / (916) 319-3958 FN:
0004193