Amended in Assembly June 20, 2016

Amended in Senate May 23, 2016

Amended in Senate May 4, 2016

Amended in Senate April 14, 2016

Amended in Senate March 28, 2016

Senate Bill No. 1233

Introduced by Senator McGuire

(Coauthors: Senators Hertzberg and Wolk)

(Coauthors: Assembly Members Levine and Wood)

February 18, 2016

An act to add Section 6588.8 to, and to repeal and amend Section 6586.7 of, the Government Code, relating to water.

LEGISLATIVE COUNSEL’S DIGEST

SB 1233, as amended, McGuire. Joint powers authorities: Water Bill Savings Act.

Existing law, the Marks-Roos Local Bond Pooling Act of 1985, authorizes joint powers authorities, among other powers, to issue bonds and loan the proceeds to local agencies to finance specified types of projects and programs.

This bill would enact the Water Bill Savings Act, which would authorize a joint powers authority to provide funding for a customer of a local agency or its publicly owned utility to acquire, install, or repair a water efficiency improvement on the customer’s property served by the local agency or its publicly owned utility. The bill would require the customer to repay the authority through an efficiency charge on the customer’s water bill to be established and collected by the local agency or its publicly owned utility on behalf of the authority pursuant to a servicing agreement. The bill would authorize the authority to issue bonds to fund the program. The bill would also make technical changes.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) Water conservation efforts are indispensable to combating
the current and continuing drought conditions faced by the state
and advancing the state’s greenhouse gas emission reduction goals.

(b) The up-front cost of acquiring, installing, and repairing water
efficiency improvements is often prohibitive and may prevent
customers from using them on residential, commercial, industrial,
agricultural, or other real property.

(c) Increasing customer water efficiency is a core component
of the provision of water utility service.

(d) The conservation to be accomplished by efficiency
improvements is a core component of water utility service and
makes existing water supplies available for all water customers
by displacing demand for those supplies. Accordingly, a pledge
pursuant to paragraph (5) of subdivision (f) of Section 6588.8 of
the Government Code of water enterprise revenue as security for
bonds an authority has secured with a pledge of, and intends to
pay from, efficiency charges is an appropriate use of water
enterprise revenues as explained in Capistrano Taxpayers
Association, Inc. v. City of San Juan Capistrano (2015) 235
Cal.App.4th 1493, 1501-1504.

SEC. 2.  

(a) It is the intent of the Legislature to make water
efficiency improvements more affordable and promote the
acquisition, installation, and repair of those improvements by
allowing local agencies to establish a mechanism by which they
may help their water customers to acquire, install, and repair water
efficiency improvements on privately owned customer properties.

(b) It is the intent of the Legislature that this act authorize the
development of a program to be established by a joint powers
authority that would provide a water customer with an alternative
and voluntary means to acquire, install, or repair water efficiency
improvements. It is further the intent of the Legislature that the
cost of this voluntarily acquired, installed, or repaired water
efficiency improvement be repaid through an efficiency charge
added to the water bill associated with the publicly owned utility’s
water meter at the customer property upon which the water
efficiency improvement is located.

SEC. 3.  

Section 6586.7 of the Government Code, as added by
Section 4 of Chapter 723 of the Statutes of 2000, is repealed.

SEC. 4.  

Section 6586.7 of the Government Code, as added by
Section 1 of Chapter 724 of the Statutes of 2000, is amended to
read:

6586.7.  

(a) A copy of the resolution adopted by an authority
authorizing bonds or any issuance of bonds, or accepting the benefit
of any bonds or proceeds of bonds, except bonds issued or
authorized pursuant to Article 1 (commencing with Section 6500),
or bonds issued for the purposes specified in subdivision (c) of
Section 6586.5, shall be sent by certified mail to the Attorney
General and the California Debt and Investment Advisory
Commission not later than five days after adoption by the authority.

(b) This section does not apply to bonds:

(1) Specified in subdivision (c) of Section 6586.5.

(2) Issued pursuant to the Community Redevelopment Law
(Part 1 (commencing with Section 33000) of Division 24 of the
Health and Safety Code).

(3) To finance transportation facilities and vehicles.

(4) To finance a facility that is located within the boundaries of
an authority, provided that the authority that issues those bonds
consists of any of the following:

(A) Local agencies with overlapping boundaries.

(B) A county and a local agency or local agencies located
entirely within that county.

(C) A city and a local agency or local agencies located entirely
within that city.

(5) To finance a facility for which an authority has received an
allocation from the California Debt Limit Allocation Committee.

(6) Of an authority that consists of no less than 100 local
agencies and the agreement that established that authority requires
the governing body of the local agency that is a member of the
authority in whose jurisdiction the facility will be located to
approve the facility and the issuance of the bonds.

(7) Issued pursuant to Section 6588.8.

SEC. 5.  

Section 6588.8 is added to the Government Code, to
read:

6588.8.  

(a) This section shall be known and may be cited as
the Water Bill Savings Act.

(b) For purposes of this section, the following terms have the
following meanings:

(1) “Customer” means a person or entity that purchases water
from a local agency or its publicly owned utility and is billed for
the water by the local agency or its publicly owned utility.

(2) “Customer property” means residential, commercial,
industrial, agricultural, or other real property owned, leased, or
licensed for occupancy by the customer.

(3) “Efficiency charge” means a charge on a customer’s water
bill that is paid by the customer directly to the local agency or its
publicly owned utility in order to pay for an efficiency
improvement pursuant to this section.

(4) “Efficiency improvement” means a water efficiency
improvement, as defined by the authority. An efficiency
improvement shall not include living vegetation.

(5) “Financing costs” mean all of the following:

(A) An interest and redemption premium payable on a bond.

(B) The cost of retiring the principal of a bond, whether at
maturity, including acceleration of maturity upon an event of
default, or upon redemption, including sinking fund redemption.

(C) A cost related to issuing or servicing bonds, including, but
not limited to, a servicing fee, trustee fee, legal fee, administrative
fee, bond counsel fee, bond placement or underwriting fee,
remarketing fee, broker dealer fee, independent manager fee,
municipal adviser fee, accounting report fee, engineering report
fee, rating agency fee, and payment made under an interest rate
swap agreement.

(D) A payment or expense associated with a bond insurance
policy, financial guaranty, or a contract, agreement, or other credit
enhancement for bonds or a contract, agreement, or other financial
agreement entered into in connection with a bond.

(E) The funding of one or more reserve accounts related to a
bond.

(6) “Local agency” means a “local government” as defined in
subdivision (b) of Section 1 of Article XIII C of the California
Constitution.

(7) “Publicly owned utility” means a utility furnishing water
service to customers that is owned and operated by a local agency
or a department or other subdivision of a local agency and includes
any successor to the powers and functions of the department or
other subdivision.

(8) “Servicing agreement” means an agreement between a local
agency or its publicly owned utility and the authority for the
collection of the efficiency charge, pursuant to which the local
agency or its publicly owned utility acts as a servicing agent for
purposes of collecting the efficiency charge for the authority.

(c) (1) Notwithstanding any other law, if the requirements of
paragraphs (2) and (3) are met, an authority may provide funding
for a customer of a local agency or its publicly owned utility to
acquire, install, or repair an efficiency improvement on a customer
property served by the local agency or its publicly owned utility.

(2) (A) The authority, by resolution, establishes or extends a
program to provide funding for a customer of a local agency or its
publicly owned utility to acquire, install, or repair an efficiency
improvement on a customer property served by the local agency
or its publicly owned utility. The resolution shall do all of the
following:

(i) State the intent of the authority to operate the program.

(ii) Define the geographical scope of the operation of the
program as an area that is limited to only the territories within
which retail water service is provided by those local agencies that
have expressly requested the authority to provide funding for the
local agency’s customers through the program, in accordance with
the requirements of paragraph (3).

(iii) Approve a standardized servicing agreement.

(iv) Authorize one or more designated officials of the authority
to execute and deliver the servicing agreement on behalf of the
authority.

(B) The authority acknowledges receipt of the resolution
described in subparagraph (C) of paragraph (3).

(C) The authority may determine that all proceedings were valid
and in conformity with the requirements of this paragraph and that
finding shall be final and conclusive.

(3) The legislative body of the local agency requests the
authority to provide funding for its customers through a program
established by the authority pursuant to this section by doing all
of the following:

(A) The legislative body adopts a resolution declaring its
intention to request the authority to establish or extend a program
to a customer represented by the legislative body, calling for a
public hearing that shall be held at least 30 days later and directing
the clerk or secretary of the legislative body to publish a notice of
the hearing at least five days before the hearing in a newspaper of
general circulation in the boundaries of the local agency. If the
local agency wishes to pledge its water enterprise revenue as
security for the payment of the principal of, and interest and
redemption premium on, bonds issued by the authority in the event
that efficiency charges are insufficient for those purposes pursuant
to paragraph (5) of subdivision (f), the legislative body shall declare
that intention in the resolution.

(B) The legislative body conducts the noticed public hearing
and, after considering the testimony of any interested person,
concludes that the program and the proposed pledge of water
enterprise revenue, if applicable, would provide significant public
benefits in accordance with the criteria specified in Section 6586.

(C) The legislative body adopts a resolution that does all of the
following:

(i) Authorizes the authority to establish or extend a program
pursuant to this section within the boundaries of the local agency.

(ii) Declares that the operation of the program by the authority
in the local agency’s geographic boundaries would provide
significant public benefits in accordance with the criteria specified
in Section 6586.

(iii) Approves the standardized servicing agreement and
authorizes one or more designated officials of the local agency to
execute and deliver the servicing agreement with the authority.

(iv) If applicable, approves the pledge of water enterprise
revenue as security for the payment of the principal of, and interest
and redemption premium on, bonds issued by the authority in the
event that efficiency charges are insufficient for those purposes.

(v) If applicable, authorizes execution and delivery of one or
more pledge agreements to evidence a pledge.

(vi) In the resolution, the legislative body may determine that
all proceedings were valid and in conformity with the requirements
of this section and that finding shall be final and conclusive.

(d) (1) A customer shall repay the authority through an
efficiency charge on the customer’s water bill that is established
and collected by the local agency or its publicly owned utility upon
verification that the efficiency improvement has been installed.
The duty to pay the efficiency charge shall arise from and be
evidenced by a written agreement executed at the time of
installation of the efficiency improvement among the customer;
the property owner of record, if different than the customer; the
authority; and the local agency or its publicly owned utility.

(2) The written agreement shall include all of the following:

(A) An agreement by the customer to pay an efficiency charge
for the period and in the amount specified in the agreement unless
the efficiency charge is prepaid in the manner set forth in the
agreement. The period designated for repayment shall not exceed
the estimated useful life of the funded efficiency improvements.

(B) A description of the financial calculation, formula, or other
method that the authority used to determine the efficiency charge.
The efficiency charge may include a component for reasonable
administrative expenses incurred by the local agency or its publicly
owned utility and the authority in connection with the program
and the funding.

(C) A description of the efficiency improvement funded with
the efficiency charge. A determination in the agreement that an
improvement is an efficiency improvement shall be final and
conclusive.

(D) A representation by the customer that the customer intends
to acquire, install, or repair and use the efficiency improvement
on the customer’s property for the useful life of the efficiency
improvement. Any failure of the efficiency improvement by
damage, removal, or other fault of the customer during the useful
life of the efficiency improvement shall not affect the customer’s
obligation to pay the efficiency charge as set forth in the agreement.

(E) Any failure of the efficiency improvement not involving
damage, removal, or other fault of the customer shall result in the
efficiency charge being suspended until the efficiency improvement
is repaired and returned to service. The authority’s decision on the
reasons for failure of the efficiency improvement and its repair
and return to service shall be final and conclusive.

(3) The timely and complete payment of an efficiency charge
by a customer that has agreed to pay an efficiency charge may be
a condition of receiving water service from the local agency or its
publicly owned utility, and a local agency and its publicly owned
utility are authorized to use their established collection policies
and all rights and remedies provided by law to enforce payment
and collection of the efficiency charge. A person liable for an
efficiency charge shall not be entitled or authorized to withhold
payment, in whole or in part, of the efficiency charge for any
reason.

(4) A customer’s obligation to pay the efficiency charge shall
remain associated with the meter at the customer property on which
the efficiency improvement is located until the efficiency charge
related to the efficiency improvement has been repaid in full or
the efficiency charge has been transferred to a subsequent customer
who receives water service at a property with installed efficiency
measures for the remainder of the obligation. Notwithstanding any
other provision of this section, the efficiency charge shall not
transfer to a subsequent customer and shall remain an obligation
of the previous customer if the efficiency improvements were
removed or damaged, and not restored to service, by the previous
customer. A local agency or its publicly owned utility shall record,
no later than 10 days after funding an efficiency improvement, a
notice of the efficiency charge in the records of the county recorder
of the county in which the customer’s property is located. The
notice shall include the real property address and assessors’ parcel
number of the begin delete real property end delete begin insert meter end insert affected by the efficiency charge.
The notice shall be prominently titled “NOTICE OF EFFICIENCY
CHARGE” in uppercase, 14-point bold type in the heading, and
shall provide contact information for the person or entity authorized
to provide a prompt and accurate written statement of the
outstanding charges and payoff amounts related to the efficiency
charge for which the notice of efficiency charge was recorded.
The recordation of the notice of efficiency charge shall be
considered sufficient notice to a subsequent customer at a property
with installed efficiency measures of the customer’s obligation to
pay the efficiency charge for installed measures.

(5)  begin insert (A) end insert begin insert   end insert Within 10 days of full repayment of the outstanding
charges related to the recorded notice of the efficiency charge, the
entity responsible for the collection and servicing of the charge
shall record a notice of the full repayment begin insert and removal end insert of the
efficiency charge in the records of the county recorder of the county
in which the customer’s property is located. The notice of the full
repayment begin insert and removal end insert of the efficiency charge shall include a
reference to the recorded notice of the efficiency charge.

begin insert

(B) Within 10 days of a decision by the authority not to repair
and return to service a failed efficiency improvement when failure
did not involve damage, removal, or other fault of the customer,
the entity responsible for the collection and servicing of the charge
shall record a notice of removal of the efficiency charge in the
records of the county recorder of the county in which the
customer’s property is located. The notice of the removal of the
efficiency charge shall include a reference to the recorded notice
of the efficiency charge.

end insert

(6) Because the efficiency charge is a voluntary charge that will
be made pursuant to a written agreement between the customer,
the property owner of record if this is different than the customer,
the authority, and the local agency or its publicly owned utility,
the Legislature finds and declares that voluntary efficiency charges
under this section are not taxes, assessments, fees, or charges for
the purposes of Articles XIII C and XIII D of the California
Constitution and therefore the provisions of Articles XIII C and
XIII D and Article 4.6 (commencing with Section 53750) of
Chapter 4 of Part 1 of Division 2 of Title 5 are not applicable to
voluntary efficiency charges levied pursuant to this section.
Furthermore, a program established pursuant to this section
provides a “water” service, as defined in subdivision (m) of Section
53750.

(e) (1) The authority and a local agency or its publicly owned
utility shall enter into a servicing agreement for the collection of
one or more efficiency charges and the local agency or its publicly
owned utility shall act as a servicing agent for purposes of
collecting the efficiency charge.

(2) The authority, local agency, or utility responsible for the
collection of the efficiency charges shall ensure that the contact
information in the notice of efficiency charge recorded in the
records of the county recorder pursuant to this section is accurate
so that interested parties may request and promptly receive a
written and accurate payoff amount or verification of the
outstanding charges associated with the recorded notice of
efficiency charge.

(3) In the event that the servicing agent or entity responsible
for the collection of the efficiency charge changes, a new notice
of efficiency charge shall be recorded within 10 days.

(4) Any party requesting written payoff or amount verification
of outstanding charges from the authority, local agency, or utility
identified as the contact on the recorded notice of efficiency charge
may rely upon the written payoff amount or verification as being
accurate for 45 days from the receipt of this written information.
If the authority, local agency, or utility provides a written
amendment to the written payoff amount or verification, any party
may rely on the written amendment for 45 days from receipt of
the written amendment.

(5) Moneys collected as an efficiency charge by the local agency
or its publicly owned utility, acting as a servicing agent on behalf
of the authority, shall be held in trust for the exclusive benefit of
the persons entitled to the financing costs to be paid, directly or
indirectly, from the efficiency charge and shall not lose their
character as revenues of the authority because the local agency or
its publicly owned utility possesses them.

(6) In the servicing agreement, the local agency or its publicly
owned utility shall contract with the authority that the local agency
or its publicly owned utility will continue to operate its publicly
owned utility system to provide service to its customers, will, as
servicer, collect the efficiency charge for the benefit and account
of the authority and, if applicable, the beneficiaries of the pledge
of the efficiency charge, and will account for and remit these
amounts to, or for the account of, the authority.

(7) The servicing agreement shall provide that the obligation to
pay the efficiency charge shall remain associated with the meter
at the customer property on which the efficiency improvement is
located until the authority is fully repaid. When the property is not
owner occupied, the servicing agreement shall provide that the
obligation to pay the efficiency charge appear in the terms through
which the customer leases or licenses the property for occupancy.

(8) In the servicing agreement, the local agency or its publicly
owned utility may agree that the timely and complete payment of
all efficiency charges by a customer that has agreed to pay an
efficiency charge shall be a condition of receiving service from
the publicly owned utility, and the local agency or its publicly
owned utility shall use their established collection policies and all
rights and remedies provided by law to enforce payment and
collection of the efficiency charge.

(9) In the servicing agreement, the local agency or its publicly
owned utility shall agree that in the event of default by the local
agency or its publicly owned utility in payment of revenues arising
with respect to the efficiency charge, the authority, upon the
application by the beneficiaries of the authority’s pledge described
in this section, and without limiting any other remedies available
to the beneficiaries by reason of the default, shall order the
sequestration and payment to the beneficiaries of revenues arising
with respect to the efficiency charge.

(f) (1) The authority may issue one or more bonds for the
purpose of providing funds for the acquisition, installation, and
repair of an efficiency improvement on customer property pursuant
to this section.

(2) An authority issuing a bond shall include in its preliminary
notice and final report for the bonds submitted to the California
Debt and Investment Advisory Commission pursuant to Section
8855 a statement that the bond is being issued pursuant to this
section.

(3) An authority that issues a bond pursuant to this section shall
establish a debt service reserve fund for the bond to the extent
required by the purchaser of the bond.

(4) (A) The authority may, pursuant to Section 5451, pledge
one or more efficiency charges as security for the bonds issued
pursuant to this section. Revenue from an efficiency charge shall
be deemed special revenue of the authority and shall not constitute
revenue of the local agency or its publicly owned utility for any
purpose, including without limitation any dedication, commitment,
or pledge of revenue, receipts, or other income that the local agency
or its publicly owned utility has made or will make for the security
of any of its obligations.

(B) The validity and relative priority of a pledge created or
authorized under this section is not defeated or adversely affected
by the commingling of efficiency charge revenue with other
moneys collected by a local agency or its publicly owned utility.

(5) A local agency may pledge water enterprise revenue as
security for the payment of the principal of, and interest and
redemption premium on, bonds issued by the authority if efficiency
charges are insufficient for that purpose, and may execute one or
more pledge agreements pursuant to Section 5451 for the benefit
of the authority or for the exclusive benefit of the persons entitled
to the financing costs to be paid from the efficiency charges.

(6) A local agency that pledges water enterprise revenues as
security for the payment of the principal of, and interest and
redemption premium on, a bond issued by the authority shall
establish a debt service reserve fund for the bond to the extent
required by the purchaser of the bond.

(g) If a local agency for which bonds have been issued and
remain outstanding ceases to operate a water utility, either directly
or through its publicly owned utility, references in this section to
the local agency or to its publicly owned utility shall be deemed
to refer to the entity providing water utility services in lieu of the
local agency and that entity shall assume and perform all
obligations of the local agency or its publicly owned utility required
by this section and the servicing agreement with the authority while
the bonds remain outstanding.

(h) If the local agency, its publicly owned utility, and the
authority have complied with the procedures set forth in this
section, they shall not be required to comply with Section 6586.5.