BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 953| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 953 Author: Lara (D), et al. Amended: 8/15/16 Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 5-1, 4/6/16 AYES: Hertzberg, Beall, Hernandez, Lara, Pavley NOES: Moorlach NO VOTE RECORDED: Nguyen SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NOES: Bates, Nielsen SENATE FLOOR: 26-11, 5/31/16 AYES: Allen, Beall, Block, De León, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Nguyen, Pan, Pavley, Roth, Wieckowski, Wolk NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Huff, Moorlach, Morrell, Nielsen, Stone, Vidak NO VOTE RECORDED: Cannella, Galgiani, Runner ASSEMBLY FLOOR: 78-0, 8/18/16 - See last page for vote SUBJECT: Central Basin Municipal Water District SOURCE: Author DIGEST: This bill imposes restrictions on the Central Basin Municipal Water Districts (CBMWDs) contracting practices and requires a super-majority vote of the board to take specified actions relating to ethics, compensation, and benefits. SB 953 Page 2 Assembly Amendments delete language that expanded the size of CBMWD's board and prohibited board members from using district funds for outreach purposes; and add language requiring a two-thirds vote of CBMWD's board to approve an ordinance, motion, or resolution relating to the ethics, compensation, or benefits of CBMWD's board members. ANALYSIS: Existing law: 1)Governs, pursuant to the Municipal Water District Law of 1911, the formation, internal organization, and elections for municipal water districts. 2)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. 3)Requires municipal water district 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 rendered as a board member, plus expenses incurred in the performance of official duties. This bill: SB 953 Page 3 1)Prohibits CBMWD from using sole source contracts unless one of the following conditions is met: a) The contract is limited to an emergency circumstance. b) The circumstances are that only one vendor can meet the district's needs. 2)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. 3)Requires CBMWD to rebid a contract if the district significantly changes the scope of work of the contract. This bill defines "significant changes" to include changes to the nature of the services or work products. 4)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. 5)Prohibits any ordinance, motion, or resolution relating to the ethics, compensation, or benefits of the members of the CBMWD board of directors from passing or becoming effective without the affirmative votes of two-thirds of the members of the board. SB 953 Page 4 Background The CBMWD was established by voters in 1952 to help mitigate groundwater over pumping 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 two 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 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. SB 953 Page 5 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, some public officials want the Legislature to change the district's governing statute to ensure that the district remains accountable to those it serves. Comments SB 953 Page 6 Purpose of the bill. This bill 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. The changes this bill makes to state law will promote public transparency, sound fiscal management, and improved governance at the CBMWD. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Assembly Appropriations Committee, ongoing 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 regarding what expenses incurred by CBMWD in implementing the bill are deemed to be subject to state reimbursement. SUPPORT: (Verified8/18/16) Central Basin Municipal Water District Central Basin Water Association City of Huntington Park City of Lakewood City of Lynwood City of Maywood City of Montebello City of Paramount City of Signal Hill City of South Gate City of Vernon Gateway Water Management Authority Huntington Park City Council Member Karina Macias OPPOSITION: (Verified8/18/16) SB 953 Page 7 None received ASSEMBLY FLOOR: 78-0, 8/18/16 AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon NO VOTE RECORDED: Roger Hernández, Kim Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119 8/24/16 18:31:55 **** END ****