BILL ANALYSIS �
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THIRD READING
Bill No: AB 54
Author: Solorio (D)
Amended: 8/22/11 in Senate
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 7-0, 6/27/11
AYES: Simitian, Strickland, Blakeslee, Hancock, Kehoe,
Lowenthal, Pavley
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 7/6/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe,
La Malfa, Liu
SENATE APPROPRIATIONS COMMITTEE : 8-0, 8/15/11
AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley,
Price, Steinberg
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR : 77-0, 6/2/11 - See last page for vote
SUBJECT : Drinking water: mutual water companies
SOURCE : Author
DIGEST : This bill places new requirements on mutual
water companies and authorize the operator of a public
water system to enter into a letter of no prejudice
agreement with the Department of Public Health for
reimbursement of eligible project expenditures on safe
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drinking water projects.
ANALYSIS : Existing law:
Public water systems that deliver domestic water fall into
three categories:
Local agencies (cities and special districts) . Local
agency formation commissions (LAFCOs) control the cities
and special districts' boundaries and local officials are
responsible to their voters for their water rates.
Investor owned public utilities . The California Public
Utilities Commission (PUC) controls the companies' service
areas and their water rates.
Mutual water companies . These non-profit mutual benefit
corporations respond to their shareholders, usually the
landowners who receive water service. Neither LAFCOs nor
the PUC regulate mutual water companies.
The Department of Public Health (DPH) and some county
health departments monitor the quality of drinking water
delivered to most households.
Because there is less oversight for mutual water companies
than for local agencies and investor owned utilities,
legislators worry that they may overlap the service areas
of other public water systems. Some may lack enough
capital to pay for needed water quality improvements and
the managerial capacity to operate successful public water
systems.
This bill:
1. Makes legislative findings about drinking water quality.
2. Establishes new requirements for organizing and
operating mutual water companies to:
A. Specify that any corporation organized for or
engaged in the business of selling, distributing,
supplying, or delivering water for irrigation
purposes or for domestic use must be known as a
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mutual water company.
B. Require each mutual water company operating as a
public water system to, no later than December 31,
2012, submit to the Secretary of State and the LAFCO
a map depicting the boundaries of the property that
the corporation serves.
C. Require a mutual water company operates a public
water system, if the LAFCO or a county department
requests information, to, within 45 days of the
request, provide all reasonably available,
nonconfidential information and explain, in writing,
why any requested information is not reasonably
available.
D. Require all construction on public water systems
operated by a mutual water company to be designed and
constructed to comply with the applicable California
Waterworks standards.
E. Require a mutual water company that operates a
public water system to maintain a financial reserve
fund to be used for specified activities.
F. Authorize the LAFCO to approve with or without
amendment, wholly, partially, or conditionally or
disapprove the annexation of territory served by a
mutual water company operate a public water system,
to a city or special district.
G. Authorize the LAFCO, in conducting a service
review, to include a review of whether the agencies
under review, including any public water system, are
in compliance with California Safe Drinking Water Act
(SDWA).
H. Authorize the LAFCO to request information, as
part of a service review, from identified public or
private entities that provide wholesale or retail
supply of drinking water, including mutual water
companies and private utilities.
I. Require each board member of a mutual water
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company operated as a public water system to, within
six months of taking office, complete a four-hour
course, as specified.
J. Authorize fines pursuant to the SDWA to be imposed
on directors of a mutual water company if the mutual
water company has received notice of a violation as
specified.
3. Authorizes a public water system that is a lead
applicant for a project that may be funded by the Safe
Drinking Water State Revolving Fund (SDWSRF) to apply to
the DPH for a LNOP for the project or a component of the
project, and:
A. Authorizes DPH to approve the LNOP for one or more
projects or project components that DPH has
determined to be eligible for federal or state
funding pursuant to established funding priorities
and has issued an invitation to apply for funding
from the SDWRF.
B. Requires the LNOP to reference the project or
component thereof and the maximum amount of bond
funding that may be allocated for that project or
project component.
C. Requires expenditures for the costs, up to the
amount set forth in the LNOP, of a project or project
component for which a LNOP has been issued to be
eligible for reimbursement from the SDWRF if
specified criteria are met.
D. Authorizes DPH and the public water system to
enter into an agreement or agreements governing
reimbursement of expended costs.
E. Defines "letter of no prejudice" as an agreement
between a public water system and DPH that makes the
public water system eligible for future
reimbursement, as specified.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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The Senate Appropriation Committee analysis indicates this
bill requires DPH to establish guidelines related to
implementation of an LNOP process. DPH would incur costs
to draft agreements with public water system applicants
specifying the terms and conditions for future
reimbursement from the SDWSRF, and to review completed
projects to determine expenditures incurred by a local
agency are eligible for reimbursement. DPH indicates that
one-time costs to adopt guidelines would be minor. The
Committee's staff estimates that ongoing administrative
costs could be up to $50,000 annually and notes that there
are no state costs associated with provisions of this bill
that place new requirements on mutual water companies and
provide new authority to LAFCOs with respect to mutual
water company service areas.
SUPPORT : (Verified 8/18/11)
Association of California Water Agencies
California Association of Local Agency Formation
Commissions
California Special Districts Association
City of Santa Ana
Food and Water Watch
Mountain Counties Water Resources Association
Orange County Local Agency Formation Commission
Planning and Conservation League
San Mateo Local Agency Formation Commission
Tuolumne Utilities District
ARGUMENTS IN SUPPORT : According to the author, "As
California has grown and communities have merged into
metropolitan areas, some drinking water systems have not
been able to keep pace. Infrastructure, built long ago,
has deteriorated. Many water sources have become
contaminated. The economic base of some communities has
declined or stagnated, leading to less investment in water
infrastructure for basic maintenance and modernization."
The state provides funding to public water systems to
improve drinking water quality through the Safe Drinking
Water Revolving Fund, but demand far exceeds the available
funding. According to the United States Environmental
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Protection Agency's Drinking Water Infrastructure Needs
Survey and Assessment, which was performed in 2007, the DPH
estimates that the 20-year drinking water infrastructure
need for California is $39 billion. Funding for such
projects, however, for 1997-2008, totaled only $1.2
billion.
Smaller public water systems, particularly those operated
by "mutual water companies," often lack the funding to
improve their systems and eliminate contamination. They
rely on state funding and cooperation by larger,
neighboring water systems to improve their systems, but
sometimes suffer years of contaminated water.
This bill facilitates state and local funding for clean
water projects and levels the playing field between public
water agencies and mutual water companies. It authorizes
"letters of no prejudice" which would allow local agencies,
with their own resources to get started on resolving water
quality problems before the State finalizes a loan or grant
from the SDWSRF. This bill also allows mutual water
companies to be considered by "local agency formation
commissions" and requires mutual water companies operating
public water systems to follow some of the same rules as
public agencies.
ASSEMBLY FLOOR : 77-0, 6/2/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Harkey, Hayashi, Roger Hern�ndez,
Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight,
Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza,
Miller, Mitchell, Monning, Morrell, Nestande, Nielsen,
Norby, Olsen, Pan, Perea, V. Manuel P�rez, Portantino,
Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Gorell, Hall, Wieckowski
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DLW:kc 8/22/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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