BILL NUMBER: SB 1979 CHAPTERED 09/29/00 CHAPTER 894 FILED WITH SECRETARY OF STATE SEPTEMBER 29, 2000 APPROVED BY GOVERNOR SEPTEMBER 28, 2000 PASSED THE SENATE AUGUST 31, 2000 PASSED THE ASSEMBLY AUGUST 31, 2000 CONFERENCE REPORT NO. 1 PROPOSED IN CONFERENCE AUGUST 28, 2000 AMENDED IN ASSEMBLY JULY 3, 2000 AMENDED IN ASSEMBLY JUNE 19, 2000 AMENDED IN SENATE MAY 9, 2000 AMENDED IN SENATE APRIL 24, 2000 AMENDED IN SENATE MARCH 29, 2000 INTRODUCED BY Senators Escutia and Polanco (Coauthors: Senators Karnette and Solis) (Coauthors: Assembly Members Gallegos, Havice, and Lowenthal) FEBRUARY 25, 2000 An act to amend Sections 60231, 60315, and 60316 of, to add Sections 60230.5 and 60328.1 to, and to add Chapter 5 (commencing with Section 60290) to Part 5 of Division 18 of, the Water Code, relating to water. LEGISLATIVE COUNSEL'S DIGEST SB 1979, Escutia. Water replenishment districts. (1) The Water Replenishment District Act provides for the formation of water replenishment districts and grants specified authority to those districts. This bill would revise provisions regarding the constructing, leasing, purchasing, or contracting for a capital improvement project. The bill would impose requirements regarding district contracts, a reserve for the purchase of water, audited financial statements, and estimated reserve funds. The bill would require the district to apply the estimated yearend balance in excess of a prescribed amount to a replenishment assessment rate reduction or to the purchase of water in the succeeding fiscal year. By imposing additional duties on a water replenishment district, the bill would impose a state-mandated local program. The bill would provide that its provisions shall only become operative if AB 1834 is enacted and becomes effective on or before January 1, 2001. (2) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement, including the creation of a State Mandates Claims Fund to pay the costs of mandates that do not exceed $1,000,000 statewide and other procedures for claims whose statewide costs exceed $1,000,000. This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 60230.5 is added to the Water Code, to read: 60230.5. All expenditures for construction work, materials, equipment and supplies, and professional services, including, but not limited to, legal, legislative, public affairs, public relations, and engineering services, regardless of price shall be made pursuant to contract. All district contracts shall be in writing in a form prescribed by the general manager and approved by the general counsel. At minimum, each contract shall include the relevant scope of work, duration, and terms of payment. SEC. 2. Section 60231 of the Water Code is amended to read: 60231. (a) The powers and duties herein enumerated, except as otherwise expressly provided, shall be exercised and performed by the board of the district. If an existing agency has facilities available and adequate to accomplish any part of the purposes of a district created under this act, the district shall investigate and determine the cost of contracting for the accomplishment of that purpose through that existing agency. Thereupon, the board shall make a finding , by resolution and supported by evidence, whether or not the purpose proposed to be accomplished by the district can be achieved more economically and for the best interests of the area to be benefited by entering into such a contract with an existing agency. If the board finds that such contract is more economical and for the best interests of the area to be benefited, it shall so contract for the accomplishment of said purpose, if such agency so agrees. The purpose of this section is to avoid duplication of similar operations by existing agencies and replenishment districts. (b) Prior to constructing, leasing, purchasing, or contracting for a capital improvement project, a district shall determine the feasibility of such a project by ordering or preparing and reviewing a cost-benefit analysis based upon reasonable assumptions. SEC. 3. Chapter 5 (commencing with Section 60290) is added to Part 5 of Division 18 of the Water Code, to read: CHAPTER 5. DISTRICT RESERVES AND ACCOUNTING 60290. The district may establish an annual reserve fund in an amount not to exceed ten million dollars ($10,000,000) commencing with the 2000-01 fiscal year. The maximum allowable reserve fund may be adjusted annually commencing with 2001-02 fiscal year to reflect percentage increases or decreases in the blended cost of water from district supply sources. A minimum of 80 percent of the reserve shall be for water purchases. 60291. The limitation on the reserve established in Section 60290 does not apply to the unexpended balance of any appropriated funds in a capital improvement project construction account established to pay the cost of a project or projects under construction. 60292. (a) The district shall order, review, and maintain on file an independent, audited financial statement not later than 60 days from the conclusion of the district's fiscal year. The independent audited financial statement shall be prepared by a certified public accountant or a public accountant, licensed by the California Board of Accountancy. The independent audited financial statement shall be consistent with standards provided in the "Standards for Audits of Governmental Organizations, Programs, Activities, and Functions" prepared by the Comptroller General of the United States. The independent audited financial statement shall include all of the following: (1) The balances in all accounts established for the maintenance of the district's funds. (2) A report describing the amount of district funds to be expended for any capital improvement project authorized to be constructed or funded by the district and a detailed description of the capital improvement project. (3) A report detailing the source of funds to be expended on any authorized capital improvement project, and whether the source of funds is the water replenishment assessment levied in accordance with Part 6 (commencing with Section 60300). (4) A report describing the propriety of the district's operating expenses. (5) A summary of independent audited financial statement exceptions and management improvement recommendations. (6) A description of correction or plan of correction shall be incorporated in the independent audited financial statement, describing the specific actions that are planned to be taken, or that have been taken, to correct the problem identified by the auditor. The descriptions of specific actions to be taken or that have been taken shall not solely consist of general comments such as "will implement," "accepted the recommendation," or "will discuss at a later date." (b) Copies of the independent audited financial statements shall be submitted to the Governor, the Legislature, and the State Auditor on or before November 1 of each year. SEC. 4. Section 60315 of the Water Code is amended to read: 60315. Upon completing the hearing, but no later than the second Tuesday in May, the board shall, by resolution, find all of the following: (a) The annual overdraft for the preceding water year. (b) The estimated annual overdraft for the current water year. (c) The estimated annual overdraft for the ensuing water year. (d) The accumulated overdraft as of the last day of the preceding water year. (e) The estimated accumulated overdraft as of the last day of the current water year. (f) The total production of groundwater from the groundwater supplies within the district during the preceding water year. (g) The estimated total production of groundwater from the groundwater supplies within the district for the current water year. (h) The estimated total production of groundwater from the groundwater supplies within the district for the ensuing water year. (i) The changes during the preceding water year in the pressure levels or piezometric heights of the groundwater contained within pressure-level areas of the district, and the effects thereof upon the groundwater supplies within the district. (j) The estimated changes during the current water year in the pressure levels or piezometric heights of the groundwater contained within pressure-level areas of the district, and the estimated effects thereof upon the groundwater supplies within the district. (k) The quantity of water that should be purchased for the replenishment of the groundwater supplies of the district during the ensuing water year. (l) The source and estimated cost of water available for the replenishment. (m) The estimated costs of replenishing the groundwater supplies with the water so purchased. (n) The estimated costs of purchasing, in water years succeeding the ensuing water year, that portion of the quantity of water which should be purchased for the replenishment of the groundwater supplies of the district during the ensuing water year, but which is estimated to be unavailable for purchase during the ensuing water year; estimated costs shall be based on the estimated price of water for replenishment purposes during the ensuing water year. (o) The estimated rate of the replenishment assessment required to be levied upon the production of groundwater from the groundwater supplies within the district during the ensuing fiscal year for the purposes of accomplishing the replenishment and providing a reserve fund to purchase in future years, when available, that portion of the quantity of water which should be purchased for the replenishment of the groundwater supplies of the district during the ensuing water year, but which is estimated to be unavailable for purchase during that ensuing water year. (p) Whether any contaminants should be removed from groundwater supplies during the ensuing fiscal year, and whether any other actions under Section 60224 should be undertaken during the ensuing fiscal year, the estimated costs thereof, and the estimated additional rate of replenishment assessment required to be levied upon the production of groundwater from the groundwater supplies within the district during the ensuing fiscal year for those purposes. (q) Whether any program for removal of contaminants or other actions under Section 60224 should be a multiyear program or is a continuation of a previously authorized multiyear program. (r) The amount, if any, by which the estimated reserve funds on hand at the end of the current fiscal year will exceed the annual reserve fund limit determined pursuant to Section 60290. SEC. 5. Section 60316 of the Water Code is amended to read: 60316. Based on the findings pursuant to Section 60315, the board shall, by resolution, determine all of the following: (a) What portion, if any, of the estimated cost of purchasing water for replenishment for the ensuing fiscal year shall be paid for by a replenishment assessment. (b) What portion, not exceeding 25 percent of the above portion, of the estimated cost of purchasing in the future that quantity of water which should be purchased during the ensuing water year, but which is estimated to be unavailable during that year, shall be raised by a replenishment assessment. (c) What portion of the estimated costs of removing contaminants from groundwater supplies and of taking other actions under Section 60224 during the ensuing fiscal year shall be paid for by a replenishment assessment. (d) What portion, if any, of the cost of a capital improvement project for replenishment purposes shall be paid for by a replenishment assessment. (e) What portion, if any, of the cost of a capital improvement project undertaken pursuant to Section 60224 shall be paid for by a replenishment assessment. SEC. 6. Section 60328.1 is added to the Water Code, to read: 60328.1. The district shall apply the estimated fiscal yearend balance in excess of the amount permitted in Section 60290 to a replenishment assessment rate reduction or to the purchase of water in the succeeding fiscal year. SEC. 7. Notwithstanding Section 17610 of the Government Code, if the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code. If the statewide cost of the claim for reimbursement does not exceed one million dollars ($1,000,000), reimbursement shall be made from the State Mandates Claims Fund. enacted and SEC. 8. This act shall only become operative if Assembly Bill 1834 of the 1999-2000 Regular Session is enacted and becomes effective on or before January 1, 2001.