BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 54|
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THIRD READING
Bill No: AB 54
Author: Solorio (D)
Amended: 8/24/11 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 establishes new requirements for
organizing and operating corporations for the domestic
sale, distribution, supply and delivery of water (mutual
water companies), as specified.
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Senate Floor Amendments of 8/24/11 make language consistent
with existing statute and to clarify how the Department of
Public Health considers applications for funding under the
Safe Drinking Water State Revolving Fund (SDWSRF) when
project proponents have used their own resources to get
started on resolving water quality problems under the
SDWSRF.
ANALYSIS :
Existing Law
Public water systems that deliver domestic water fall into
three categories:
1. 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.
2. Investor owned public utilities . The California Public
Utilities Commission (PUC) controls the companies'
service areas and their water rates.
3. 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.
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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
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 repairs and replacements to its
water productions, transmission and distribution
facilities at a level sufficient for continuous
operation of facilities in compliance with the
federal Safe Drinking Water Act.
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
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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
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. Provides that in considering an application for funding
a project, the DPH shall not be prejudiced by the
applicant initiating the project prior to the DPH
approving the application for funding. Provides that
project costs or construction costs that are otherwise
eligible for funding shall not be ineligible because the
costs were incurred by the applicant during certain time
periods.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
The Senate Appropriations Committee analysis indicates this
bill requires DPH to establish guidelines related to
implementation of a letter of no prejudice 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
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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
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
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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. 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
DLW:kc 8/25/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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