Amended in Senate April 8, 2014

Amended in Senate March 10, 2014

Senate Bill No. 936

Introduced by Senator Monning

(Principal coauthor: Senator Cannella)

(Principal coauthors: Assembly Members Alejo and Stone)

February 3, 2014

An act to amend Sections 955.1 and 3440.1 of the Civil Code, to amend Section 9109 of the Commercial Code, to add Section 6537 to the Government Code, to amend Section 1731 of, to add Section 1770 to, and to add Article 5.7 (commencing with Section 849) to Chapter 4 of Part 1 of Division 1 of, the Public Utilities Code, and to add Article 8 (commencing with Section 685) to Chapter 3 of Part 5 of the Monterey Peninsula Water Management District Law (Chapter 527 of the Statutes of 1977), relating to water.

LEGISLATIVE COUNSEL’S DIGEST

SB 936, as amended, Monning. Monterey Peninsula Water Management District: financing orders and water rate relief bonds.

(1) Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including water corporations. Existing law authorizes the commission to fix just and reasonable rates and charges. The existing Monterey Peninsula Water Management District Law establishes the Monterey Peninsula Water Management District and provides for its powers and purposes.

This bill would authorize the commission to issue financing orders to facilitate the recovery, financing, or refinancing of water supply costs, defined to mean reasonable and necessary costs incurred or expected to be incurred by a qualifying water utility, as defined, undertaking water supply activities, as specified. The bill would authorize the Monterey Peninsula Water Management District to issue water rate relief bonds if the commission finds that the bonds will provide savings to water customers on the Monterey Peninsula, as specified.

(2) This bill would make legislative findings and declarations as to the necessity of a special statute for the Monterey Peninsula, the California American Water, and the Monterey Peninsula Water Management District.

(3) Existing law makes any public utility, as defined, and any corporation other than a public utility that violates the Public Utilities Act guilty of a crime.

Because a violation of certain provisions of the bill would be a violation of the act, this bill would impose a state-mandated local program by creating a new crime.

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.

This bill would provide that no reimbursement is required by this act for a specified reason.

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

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

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) Under existing law, the Public Utilities Commission has
regulatory authority over public utilities, including water utilities.
Existing law authorizes the commission to fix just and reasonable
rates and charges.

(b) To address the unique needs for integrated water
management on the Monterey Peninsula, the Legislature adopted
special legislation creating the Monterey Peninsula Water
Management District (Monterey Peninsula Water Management
District Law, as added by Section 118 of Chapter 527 of the
Statutes of 1977, as amended).

(c) California American Water (CAW) is the water utility that
provides water to most of the residents and businesses within the
Monterey Peninsula.

(d) CAW provides water to its customers from the surface water
in the Carmel River and its tributaries, water in the Carmel Valley
Alluvial Aquifer that underlies the Carmel River, and water in the
Seaside Groundwater Basin that includes the Northern and
Southern Coastal Subunits and the Northern and Southern Inland
Subareas.

(e) CAW’s lawful right to obtain water supplies from the Carmel
Valley Alluvial Aquifer was determined by the State Water
Resources Control Board (SWRCB) in SWRCB Order No. WR
95-10, dated July 6, 1995. The SWRCB found that CAW does not
possess the legal right to divert from the Carmel River system the
amount of water historically, and presently, being diverted, and
required CAW to diligently pursue a substitute water supply.
SWRCB Order No. WR 95-10 limited CAW production from the
Carmel River system to 10,308 acre-feet annually (Water Year
2012), and ordered CAW to terminate its unpermitted diversions
from the Carmel River, and in the interim, to maximize its
production from the Seaside Groundwater Basin.

(f) Subsequently, the SWRCB issued a cease and desist order
(CDO) against CAW in October 2009 as Order No. WR 2009-0060.
The CDO prescribed a series of significant cutbacks to CAW’s
production from the Carmel River System from 2010 to December
2016, inclusive. Pursuant to the CDO, CAW’s customers are
subject to a moratorium on water permits for new construction and
remodels, and may be subject to water rationing, fines, or both if
CAW production limits are exceeded.

(g) CAW’s ability to produce water from the Seaside
Groundwater Basin has also been limited by the adjudication of
the Monterey County Superior Court. CAW’s right to groundwater
from Coastal Subareas and the Laguna Seca Subarea of the Seaside
Groundwater Basin, without causing adverse effects such as
seawater intrusion, declining water levels, or land subsidence,
characterized as a “safe yield,” was determined in California
American Water Company v. City of Seaside (2010) (183
Cal.App.4th 471). The 2006 final judgment imposes a series of
pumping reductions designed to limit production of natural basin
water to its safe yield, initially set at 3,000 acre-feet per year.
CAW’s share of the safe yield is reduced proportionately at each
stage.

(h) The need for infrastructure to expand CAW sources of water
has been heightened by the lack of legal water supplies resulting
from the CDO, SWRCB Order WR 95-10, the listing of the
California red-legged frog and the steelhead trout as threatened
species under the federal Endangered Species Act, and the
limitations on water from the Seaside Groundwater Basin
adjudication.

(i) These circumstances create a special and unique need to
augment potable water supplies on the Monterey Peninsula.
Potential infrastructure projects necessary to develop new sources
of supply to resolve the critical water supply shortage within
CAW’s Monterey County District include desalination, aquifer
storage and recovery projects, and the production and use of
recycled water.

(j) It may benefit the customers of CAW to finance the capital
costs associated with the construction and installation of water
infrastructure, plants, and facilities necessary to resolve the critical
water supply shortage through an alternative financing mechanism.

(k) Alternative financing mechanisms exist that can result in
lower costs to customers of CAW as compared to traditional utility
financing mechanisms. To use alternative financing mechanisms,
the Public Utilities Commission must be empowered to issue
financing orders to allow the issuance of bonds secured by water
supply property.

(l) CAW customers may take advantage of additional costs
savings if a public agency assists in the financing of water project
capital costs on a tax-exempt basis. It is necessary for California
to provide express authority for a public agency to issue bonds or
other evidences of indebtedness on this basis.

(m) In confirming the Public Utilities Commission’s authority
to approve water supply property, including a dedicated rate
component to support the issuance of water rate relief bonds, the
Legislature is not ratifying or endorsing any particular outcome
for proceeding A.12-04-019, but rather is authorizing a means by
which the commission may reduce the cost impact on Monterey
Peninsula customers if a water supply project is approved.

SEC. 2.  

Section 955.1 of the Civil Code is amended to read:

955.1.  

(a) Except as provided in Sections 954.5 and 955 and
subject to subdivisions (b) and (c), a transfer other than one
intended to create a security interest pursuant to paragraph (1) or
(3) of subdivision (a) of Section 9109 of the Commercial Code,
of any payment intangible, as defined in Section 9102 of the
Commercial Code, and any transfer of accounts, chattel paper,
payment intangibles, or promissory notes excluded from the
coverage of Division 9 of the Commercial Code by paragraph (4)
of subdivision (d) of Section 9109 of the Commercial Code shall
be deemed perfected as against third persons upon there being
executed and delivered to the transferee an assignment thereof in
writing.

(b) As between bona fide assignees of the same right for value
without notice, the assignee first giving notice of the right to the
obligor in writing has priority.

(c) The assignment is not, of itself, notice to the obligor so as
to invalidate any payments made by the obligor to the transferor.

(d) This section does not apply to transfers or assignments of
transition property, as defined in Section 840 of the Public Utilities
Code, transfers or assignments of recovery property, as defined in
Section 848 of the Public Utilities Code, or transfers or assignments
of water supply property, as defined in Section 849 of the Public
Utilities Code.

SEC. 3.  

Section 3440.1 of the Civil Code is amended to read:

3440.1.  

This chapter does not apply to any of the following:

(a) Things in action.

(b) Ships or cargoes if either are at sea or in a foreign port.

(c) The sale of accounts, chattel paper, payment intangibles, or
promissory notes governed by the Uniform Commercial Code,
security interests, and contracts of bottomry or respondentia.

(d) Wines or brandies in the wineries, distilleries, or wine cellars
of the makers or owners of the wines or brandies, or other persons
having possession, care, and control of the wines or brandies, and
the pipes, casks, and tanks in which the wines or brandies are
contained, if the transfers are made in writing and executed and
acknowledged, and if the transfers are recorded in the book of
official records in the office of the county recorder of the county
in which the wines, brandies, pipes, casks, and tanks are situated.

(e) A transfer or assignment made for the benefit of creditors
generally or by an assignee acting under an assignment for the
benefit of creditors generally.

(f) Property exempt from enforcement of a money judgment.

(g) Standing timber.

(h) Subject to the limitations in Section 3440.3, a transfer of
personal property if all of the following conditions are satisfied:

(1) Prior to the date of the intended transfer, the transferor or
the transferee files a financing statement, with respect to the
property transferred, authorized in an authenticated record by the
transferor. The financing statement shall be filed in the office of
the Secretary of State in accordance with Chapter 5 (commencing
with Section 9501) of Division 9 of the Commercial Code, but
may use the terms “transferor” in lieu of “debtor” and “transferee”
in lieu of “secured party.” The provisions of Chapter 5
(commencing with Section 9501) of Division 9 of the Commercial
Code shall apply as appropriate to the financing statement.

(2) The transferor or the transferee publishes a notice of the
intended transfer one time in a newspaper of general circulation
published in the judicial district in which the personal property is
located, if there is one, and if there is none in the judicial district,
then in a newspaper of general circulation in the county embracing
the judicial district. The publication shall be completed not less
than 10 days before the date the transfer occurs. The notice shall
contain the name and address of the transferor and transferee and
a general statement of the character of the personal property
intended to be transferred, and shall indicate the place where the
personal property is located and a date on or after which the transfer
is to be made.

(i) Personal property not located within this state at the time of
the transfer or attachment of the lien if the provisions of this
subdivision are not used for the purpose of evading this chapter.

(j) A transfer of property that (1) is subject to a statute or treaty
of the United States or a statute of this state that provides for the
registration of transfers of title or issuance of certificates of title
and (2) is so far perfected under that statute or treaty that a bona
fide purchaser cannot acquire an interest in the property transferred
that is superior to the interest of the transferee.

(k) A transfer of personal property in connection with a
transaction in which the property is immediately thereafter leased
by the transferor from the transferee provided the transferee
purchased the property for value and in good faith pursuant to
subdivision (c) of Section 10308 of the Commercial Code.

(l) Transition property, as defined in Section 840 of the Public
Utilities Code, recovery property, as defined in Section 848 of the
Public Utilities Code, or water supply property, as defined in
Section 849 of the Public Utilities Code.

(m) A transfer of property by any governmental entity.

SEC. 4.  

Section 9109 of the Commercial Code is amended to
read:

9109.  

(a) Except as otherwise provided in subdivisions (c) and
(d), this division applies to each of the following:

(1) A transaction, regardless of its form, that creates a security
interest in personal property or fixtures by contract.

(2) An agricultural lien.

(3) A sale of accounts, chattel paper, payment intangibles, or
promissory notes.

(4) A consignment.

(5) A security interest arising under Section 2401 or 2505,
subdivision (3) of Section 2711, or subdivision (e) of Section
10508, as provided in Section 9110.

(6) A security interest arising under Section 4210 or 5118.

(b) The application of this division to a security interest in a
secured obligation is not affected by the fact that the obligation is
itself secured by a transaction or interest to which this division
does not apply.

(c) This division does not apply to the extent that either of the
following conditions is satisfied:

(1) A statute, regulation, or treaty of the United States preempts
this division.

(2) The rights of a transferee beneficiary or nominated person
under a letter of credit are independent and superior under Section
5114.

(d) This division does not apply to any of the following:

(1) A landlord’s lien, other than an agricultural lien.

(2) A lien, other than an agricultural lien, given by statute or
other rule of law for services or materials, however Section 9333
applies with respect to priority of the lien.

(3) An assignment of a claim for wages, salary, or other
compensation of an employee.

(4) A sale of accounts, chattel paper, payment intangibles, or
promissory notes as part of a sale of the business out of which they
arose.

(5) An assignment of accounts, chattel paper, payment
intangibles, or promissory notes which is for the purpose of
collection only.

(6) An assignment of a right to payment under a contract to an
assignee that is also obligated to perform under the contract.

(7) An assignment of a single account, payment intangible, or
promissory note to an assignee in full or partial satisfaction of a
preexisting indebtedness.

(8) A loan made by an insurance company pursuant to the
provisions of a policy or contract issued by it and upon the sole
security of the policy or contract.

(9) An assignment of a right represented by a judgment, other
than a judgment taken on a right to payment that was collateral.

(10) A right of recoupment or setoff, provided that both of the
following sections apply:

(A) Section 9340 applies with respect to the effectiveness of
rights of recoupment or setoff against deposit accounts.

(B) Section 9404 applies with respect to defenses or claims of
an account debtor.

(11) The creation or transfer of an interest in or lien on real
property, including a lease or rents thereunder, except to the extent
that provision is made for each of the following:

(A) Liens on real property pursuant to Sections 9203 and 9308.

(B) Fixtures pursuant to Section 9334.

(C) Fixture filings pursuant to Sections 9501, 9502, 9512, 9516,
and 9519.

(D) Security agreements covering personal and real property
pursuant to Section 9604.

(12) An assignment of a claim arising in tort, other than a
commercial tort claim, however Sections 9315 and 9322 apply
with respect to proceeds and priorities in proceeds.

(13) An assignment of a deposit account in a consumer
transaction, however Sections 9315 and 9322 apply with respect
to proceeds and priorities in proceeds.

(14) A security interest created by the assignment of the benefits
of a public construction contract under the Improvement Act of
1911 (Division 7 (commencing with Section 5000) of the Streets
and Highways Code).

(15) Transition property, as defined in Section 840 of the Public
Utilities Code, except to the extent that the provisions of this
division are referred to in Article 5.5 (commencing with Section
840) of Chapter 4 of Part 1 of Division 1 of the Public Utilities
Code, recovery property, as defined in Section 848 of the Public
Utilities Code, except to the extent that the provisions of this
division are referred to in Article 5.6 (commencing with Section
848) of Chapter 4 of Part 1 of Division 1 of the Public Utilities
Code, and water supply property, as defined in Section 849 of the
Public Utilities Code, except to the extent that the provisions of
this division are referred to in Article 5.7 (commencing with
Section 849) of Chapter 4 of Part 1 of Division 1 of the Public
Utilities Code.

(16) A claim or right of an employee or employee’s dependents
to receive workers’ compensation under Division 1 (commencing
with Section 50) or Division 4 (commencing with Section 3200)
of the Labor Code.

(17) A transfer by a government or governmental unit.

SEC. 5.  

Section 6537 is added to the Government Code, to
read:

6537.  

(a) The Legislature finds that it is in the best interest of
the communities on the Monterey Peninsula that any joint exercise
of powers authority formed under this article to which the Monterey
Peninsula Water Management District and one or more other public
agencies are members is authorized to issue water rate relief bonds,
hereafter “agency bonds,” the proceeds of which will be used to
purchase water rate relief bonds that are authorized to be issued
by an affiliate of a qualifying water utility in a financing order
issued pursuant to Article 5.7 (commencing with Section 849) of
Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to
fund any necessary reserves and to pay the costs of issuance of the
agency bonds. The agency bonds may be issued only if the
commission finds in a financing order that the issuance, due to the
availability of a federal or state income tax exemption, will provide
savings to water customers on the Monterey Peninsula.

(b) Notwithstanding any other provision of law, the joint powers
agency may issue bonds pursuant to Article 2 (commencing with
Section 6540) or Article 4 (commencing with Section 6584). If
the agency issues bonds under this section, the agency,
notwithstanding Article 5 (commencing with Section 53760) of
Chapter 4 of Part 1 of Division 2 of Title 5, shall not be eligible
to file for bankruptcy pursuant to Chapter 9 (commencing with
Section 901) of Title 11 of the United States Code as long as the
bonds and any related financing costs are outstanding and unpaid
and shall remain ineligible for a period of one year and one day
after repayment of the bonds and any related financing costs.

SEC. 6.  

Article 5.7 (commencing with Section 849) is added
to Chapter 4 of Part 1 of Division 1 of the Public Utilities Code,
to read:

 

Article 5.7.  Monterey Peninsula Water Supply Securitization
Act

 

849.  

For purposes of this article, the following definitions shall
apply:

(a) “Ancillary agreement” means a bond insurance policy, letter
of credit, reserve account, surety bond, swap arrangement, hedging
arrangement, liquidity or credit support arrangement, or other
similar agreement or arrangement entered into in connection with
the issuance of water rate relief bonds that is designed to promote
the credit quality and marketability of the bonds or to mitigate the
risk of an increase in interest rates.

(b) “Customer” means an individual, governmental body, trust,
business entity, or nonprofit organization that is a customer of the
qualifying water utility, has responsibility for a service address
provided water service by the utility, or consumes water that has
been transmitted or distributed by means of distribution facilities.

(c) “District” means the Monterey Peninsula Water Management
District, or its successor or assignee.

(d) “Financing costs” means the costs to issue, service, repay,
or refinance water rate relief bonds, whether incurred or paid upon
issuance of the bonds or over the life of the bonds, and approved
for recovery by the commission in a financing order. “Financing
costs” may include any of the following:

(1) Principal, interest, and redemption premiums that are payable
on water rate relief bonds.

(2) A payment required under an ancillary agreement and an
amount required to fund or replenish a reserve account or other
account established under an indenture, ancillary agreement, or
other financing document relating to the water rate relief bonds.

(3) Costs of retiring or funding an existing debt and equity
security of a qualifying water utility in connection with the issuance
of water rate relief bonds to the extent the securities were issued
for the purpose of financing water supply costs.

(4) Costs incurred by, on behalf of, or allocated to, a qualifying
water utility to obtain modifications of, or amendments to, an
indenture, financing agreement, security agreement, or similar
agreement or instrument relating to an existing secured or
unsecured obligation of a qualifying water utility or an affiliate of
a qualifying water utility, or any costs incurred by or allocated to
a qualifying water utility to obtain the consent, release, waiver, or
approval from the holder of the obligation, that are necessary to
be incurred to permit a qualifying water utility to issue or cause
the issuance of water rate relief bonds.

(5) Taxes, franchise fees, or license fees imposed on water
supply charges.

(6) Costs related to issuing and servicing water rate relief bonds
or the application for a financing order, including, without
limitation, servicing fees and expenses, trustee fees and expenses,
legal fees and expenses, accounting fees, administrative fees,
underwriting and placement fees, financial advisory fees,
capitalized interest, rating agency fees, and any other related costs
that are approved for recovery in the financing order, including
costs incurred by a public financing entity.

(7) Other costs authorized by a financing order.

(e) “Financing entity” means either or both of the following:

(1) The qualifying water utility, or its subsidiary or affiliate,
that is authorized by the commission to issue water rate relief
bonds, or acquire water supply property, or both, pursuant to a
financing order.

(2) A public financing entity authorized to issue water rate relief
bonds pursuant to a financing order.

(f) “Financing order” means an order of the commission adopted
in accordance with this article, which shall include, without
limitation, a procedure to require the expeditious approval by the
commission of periodic adjustments to water supply charges to
ensure the full and timely recovery of all water supply costs and
all financing costs authorized for recovery under the financing
order.

(g) “Qualifying water utility” means California American Water,
or any successor public utility described in Section 2701 of the
Public Utilities Code that is engaged in the delivery of water to
customers on the Monterey Peninsula.

(h) “Public financing entity” means any of the following:

(1) The district.

(2) A joint exercise of powers authority in which the district is
a member.

(3) A public agency that is authorized to issue water rate relief
bonds, or acquire water supply property, or both.

(i) “Service territory” means the geographical area within or
surrounding the Monterey Peninsula that the qualifying water
utility provides water service to in accordance with its certificate
of public convenience and necessity and within which water supply
charges may be imposed and collected as further described in the
financing order.

(j) “Water rate relief bonds” means bonds, notes, certificates of
participation or beneficial interest, or other evidences of
indebtedness or ownership, issued pursuant to an executed
indenture or other agreement of a financing entity, the proceeds
of which are used, directly or indirectly, to provide, recover,
finance, or refinance water supply costs and financing costs, and
that are directly or indirectly secured by, or payable from, water
supply property. Water rate relief bonds may be issued
simultaneously by two financing entities. begin insert Water rate relief bonds
may be issued for a term not to exceed 30 years. end insert

(k) “Water supply activity” means an activity or activities by
or on behalf of a qualifying water utility in connection with the
acquisition and construction of infrastructure, plants, including,
without limitation, desalination facilities, pipelines, and other
facilities, to develop new sources of supply.

(l) “Water supply charges” means those nonbypassable rates
and other charges, including, but not limited to, distribution,
connection, disconnection, and termination rates and charges, that
are authorized by the commission in a financing order to recover
water supply costs and all financing costs specified in a financing
order.

(m) “Water supply costs” means any reasonable and necessary
costs, including capitalized interest costs relating to regulatory
assets and capitalized costs associated with permitting, design, and
engineering work, approved in a financing order, incurred or
expected to be incurred by a qualifying water utility in undertaking
water supply activities. Water supply costs include preliminary
expenses and investments associated with water supply activities
that are incurred prior to the issuance of a financing order and that
are to be reimbursed from the proceeds of water rate relief bonds.

(n) (1) “Water supply property” means the property right created
pursuant to this article, including, without limitation, the right,
title, and interest of the qualifying water utility or its transferee in
all of the following:

(A) In and to the water supply charges established pursuant to
a financing order, including all rights to obtain adjustments to the
water supply charges in accordance with Section 849.1 and the
financing order.

(B) To be paid the amount that is determined in a financing
order to be the amount that the qualifying water utility or its
transferee is lawfully entitled to receive pursuant to the provisions
of this article and the proceeds thereof, and in and to all revenues,
collections, claims, payments, money, or proceeds of or arising
from the water supply charges that are the subject of a financing
order.

(2) “Water supply property” shall constitute a current property
right notwithstanding the fact that the value of the property right
will depend on customers using water or, in those instances where
customers are customers of the qualifying water utility, the
qualifying water utility performing certain services.

849.1.  

(a) (1) The commission may issue financing orders in
accordance with this article to facilitate the recovery, financing,
or refinancing of water supply costs. A financing order may be
adopted only upon the application of the qualifying water utility
and shall become effective in accordance with its terms.

(2) Commencing January 1, 2015, the qualifying water utility
may apply to the commission for a determination that some or all
of the qualifying water utility’s water supply costs may be
recovered through water supply charges, which would be water
supply property under this article.

(3) The qualifying water utility may request this determination
by the commission in a separate proceeding or in an existing
proceeding, or both. A public financing entity that proposes to
issue water rate relief bonds pursuant to Article 8 of Chapter 3 of
Part 5 of the Monterey Peninsula Water Management District Law,
as added by Chapter 527 of the Statutes of 1977, or Section 6537
of the Government Code, shall provide information as requested
by the commission in connection with the application and
proceeding.

(4) In its application the qualifying water utility shall specify
how customers may benefit from reduced rates on a present value
basis through the issuance of water rate relief bonds as compared
to the use of traditional utility financing mechanisms. If a public
financing entity proposes to issue water rate relief bonds, it shall
provide evidence to the commission that the issuance of water rate
relief bonds by the public financing entity, due to the availability
of a federal or state income tax exemption, will provide savings
to water customers on the Monterey Peninsula.

(5) The commission shall establish procedures for the
expeditious processing of financing order applications, including
the approval or disapproval of the qualifying water utility’s
application, within 120 days of the application submission.

(6) The commission shall not refuse to allow the recovery of
any costs associated with the performance of water supply activities
by a qualifying water utility solely because the qualifying water
utility has elected or may elect to finance the performance of those
activities through a financing mechanism other than the issuance
of water rate relief bonds as long as that alternative financing
mechanism is reasonable and prudent.

(b) The commission shall authorize the imposition and collection
of water supply charges in one or more financing orders if the
commission determines, as part of its findings in connection with
the financing order, that the imposition and collection of the water
supply charges, and the issuance of water rate relief bonds payable
from those charges, would reduce the rates on a present value basis
that customers within the qualifying water utility’s service territory
would pay as compared to the use of traditional utility financing
begin delete mechanisms end delete begin insert mechanisms, which shall be calculated using the
qualifying water utility’s corporate debt and equity in the ratio
approved by the commission at the time of the issuance of the
financing order. The commission’s determination shall consider
all customer payments including rates, surcharges, taxes, water
supply charges, and any other payments made by customers for
water supply activities end insert . Water supply charges shall only be imposed
on existing and future customers in the service territory as
determined in the financing order. Customers within the service
territory shall continue to pay water supply charges until the water
rate relief bonds and all financing costs are paid in full by the
financing entity. Once the water rate relief bonds and all financing
costs have been paid in full, the payment by customers of water
supply charges shall be terminated.

(c) The commission shall establish in a financing order an
effective mechanism that ensures recovery of water supply costs
and financing costs through water supply charges will be
nonbypassable and will be recovered from existing and future
customers in the service territory.

(d) A financing order may specify how amounts collected from
a customer shall be allocated between water supply charges and
other charges of the qualifying water utility.

(e) (1) Notwithstanding Section 455.5 or 1708, or any other
provision of law, and except as otherwise provided in this
subdivision with respect to adjustment of water supply charges
pursuant to subdivision (g), water supply property that has been
made the basis for the issuance of water rate relief bonds, the
financing order, and the water supply charges shall be irrevocable.
The commission shall not, either by rescinding, altering, or
amending the financing order or otherwise, revalue or revise for
ratemaking purposes the water supply costs or the financing costs,
determine that the water supply charges are unjust or unreasonable,
or in any way reduce or impair the value of water supply property
either directly or indirectly by taking water supply charges into
account when setting other rates for the qualifying water utility.
The amount of revenues arising shall not be subject to reduction,
impairment, postponement, or termination.

(2) The State of California does hereby pledge and agree with
the qualifying water utility, owners of water supply property, the
financing entities, and owners of water rate relief bonds that the
state shall neither limit nor alter, except as otherwise provided
with respect to adjustment of water supply charges pursuant to
subdivision (g), the water supply charges, water supply property,
financing orders, or any rights under a financing order until the
water rate relief bonds, together with the interest on the bonds,
and all related financing costs are fully paid and discharged, or,
in the alternative, have been refinanced through an additional issue
of water rate relief bonds, provided nothing contained in this
section shall preclude the limitation or alteration if and when
adequate provision shall be made by law for the protection of the
qualifying water utility, financing entities, and owners. The
financing entity is authorized to include this pledge and undertaking
for the state in the water rate relief bonds. Notwithstanding any
other provision of this section, the commission shall approve
adjustments to the water supply charges as may be necessary to
ensure timely payment of all water supply costs and all financing
costs that are the subject of the financing order.

(f) (1) Neither financing orders nor water rate relief bonds issued
under this article shall constitute a debt or liability of the state or
of any political subdivision of the state except a public financing
entity, nor shall they constitute a pledge of the full faith and credit
of the state or any of its political subdivisions, but are payable
solely from the funds provided therefor under this article and shall
be consistent with Sections 1 and 18 of Article XVI of the
California Constitution. This subdivision shall not preclude bond
guarantees or enhancements pursuant to this article or pursuant to
Article 8 of Chapter 3 of Part 5 of the Monterey Peninsula Water
Management District Law, as added by Chapter 527 of the Statutes
of 1977, or Section 6537 of the Government Code. A water rate
relief bond shall contain on the face of the bond a statement to the
following effect: “Neither the full faith and credit nor the taxing
power of the State of California is pledged to the payment of the
principal of, or interest on, this bond.”

(2) The issuance of water rate relief bonds under this article
shall not directly, indirectly, or contingently obligate the state or
any political subdivision of the state to levy or to pledge any form
of taxation therefor or to make any appropriation for their payment.
Nothing in this paragraph shall prevent or be construed to prevent
a public financing entity from pledging water supply property, or
payments made on water rate relief bonds, together with any
reserves or overcollateralization amounts approved in a financing
order, to the payment of the water rate relief bonds.

(g) The commission shall, in any financing order, provide for
a procedure for the expeditious approval by the commission of
periodic adjustments to the water supply charges that are the subject
of the financing order to ensure the full and timely recovery of all
water supply costs and all financing costs authorized for recovery
under the financing order. The procedure shall require the
commission to determine whether adjustments are required on
each anniversary of the issuance of the financing order, and at
additional intervals, as may be provided for in the financing order,
and shall require for the adjustments, if required, to be approved
within 30 days of each anniversary of the issuance of the financing
order, or of each additional interval provided for in the financing
order.

(h) Water supply charges are water supply property when, and
to the extent that, a financing order authorizing the water supply
charges has become effective in accordance with this article, and
the water supply property shall thereafter continuously exist as
property for all purposes with all of the rights and privileges of
this article for the period and to the extent provided in the financing
order, but in any event until the water rate relief bonds, including
all principal, premium, if any, and interest with respect to the bonds
and all other financing costs are paid in full. A financing order
may provide that the creation of water supply property shall be
simultaneous with the sale of the water supply property to a
transferee or assignee as provided in the application and the pledge
of the water supply property to secure water rate relief bonds.

(i) Any surplus water supply charges in excess of the necessary
amounts to pay the principal premium, if any, and interest on the
water rate relief bonds and all other financing costs shall be credited
to customers through the adjustment mechanism described in
subdivision (g) or used to prepay or defease water rate relief bonds,
so long as this would not result in a recharacterization of the tax,
accounting, and other intended characteristics of the financing,
including, but not limited to, the following:

(1) Avoiding the recognition of debt on the qualifying water
utility’s balance sheet for financial accounting and regulatory
purposes.

(2) Treating the water rate relief bonds as debt of the qualifying
water utility or its affiliates for federal income tax purposes.

(3) Treating the transfer of the water supply property by the
qualifying water utility as a true sale for bankruptcy purposes.

(4) Avoiding any adverse impact of the financing on the
qualifying water utility’s credit rating.

849.2.  

(a) A qualifying water utility for which a financing
order has been issued shall cause the proceeds of any water rate
relief bonds issued pursuant to a financing order to be placed in a
separate account. A qualifying water utility may use the proceeds
of the issuance of water rate relief bonds for paying water supply
costs and financing costs and for no other purpose.

(b) A financing order may require the qualifying utility to file
with the commission a periodic report showing the receipt and
disbursement of proceeds of water rate relief bonds. A financing
order may authorize the staff of the commission to review and
audit the books and records of the qualifying water utility relating
to the receipt and disbursement of proceeds of water rate relief
bonds. The provisions of this subdivision shall not be construed
to limit the authority of the commission to investigate the practices
of the qualifying utility or to audit the books and records of the
qualifying water utility.

(c) A qualifying water utility for which a financing order has
been issued shall annually provide to its customers a concise
explanation of the water supply charges approved in a financing
order, as modified by subsequent issuances of water rate relief
bonds authorized under a financing order, if any, and by application
of the adjustment mechanism as provided in the financing order.
These explanations may be made by bill inserts, Internet Web site
information, or other appropriate means. If water rate relief bonds
are issued by a public financing entity, the public financing entity,
or its trustee or representative, shall provide the information to the
qualifying water utility as reasonably requested in order to comply
with its obligations under this section.

(d) The failure of a qualifying water utility to apply the proceeds
of water rate relief bonds in a reasonable, prudent, and appropriate
manner or otherwise comply with any provision of this section
shall not invalidate, impair, or affect any financing order, water
supply property, water supply charges, or water rate relief bonds.

849.3.  

(a) Financing entities may issue water rate relief bonds
upon approval by the commission in the financing order. begin insert A
financing entity issuing water rate relief bonds shall include in its
preliminary notice and final report for the water rate relief bonds
submitted to the California Debt and Advisory Commission
pursuant to Section 8855 of the Government Code, a statement
that the water rate relief bonds are being issued pursuant to this
section. A financing entity issuing water rate relief bonds shall
include in its final report for the water rate relief bonds submitted
to the California Debt and Investment Advisory Commission
pursuant to Section 8855 of the Government Code, the savings
realized by issuing the water rate relief bonds rather than using
traditional utility financing mechanisms. end insert Water rate relief bonds
shall be nonrecourse to the credit or any assets of the qualifying
water utility, other than the water supply property as specified in
the financing order.

(b) A qualifying water utility may sell and assign all or portions
of its interest in water supply property to an affiliate. A qualifying
water utility or its affiliates may sell or assign their interests to one
or more financing entities authorized under this article that make
that property the basis for issuance of water rate relief bonds to
the extent approved in the financing order. A qualifying water
utility, its affiliates, or financing entities may pledge and assign
water supply property as collateral, directly or indirectly, to the
extent approved in the financing order providing for a security
interest in the water supply property, in the manner set forth in
Section 849.4. In addition, water supply property may be sold or
assigned by either of the following:

(1) The financing entity or a trustee for the holders of water rate
relief bonds or the holder of an ancillary agreement in connection
with the exercise of remedies upon a default.

(2) A person acquiring the water supply property after a sale or
assignment made pursuant to this article.

(c) To the extent that any interest in water supply property is
sold, assigned, or pledged as collateral, the commission shall
authorize the qualifying water utility to contract with the financing
entity or entities that it will continue to operate its system to
provide service to its customers, will collect water supply charges
for the benefit and account of the financing entities and their
pledgees, and will account for and remit these amounts to or for
the account of the financing entities and their pledgees. Contracting
with a financing entity in accordance with that authorization shall
not impair or negate the characterization of the sale, assignment,
or pledge as an absolute transfer, a true sale, or security interest,
as applicable.

(d) Water supply property that is specified in a financing order
shall constitute an existing, present property right, notwithstanding
the fact that the imposition and collection of water supply charges
depend on the qualifying water utility continuing to provide water
service or continuing to perform its servicing functions relating to
the collection of water supply charges or on the level of future
water consumption. Water supply property shall exist whether or
not the water supply charges have been billed, have accrued, or
have been collected and notwithstanding the fact that the value for
a security interest in the water supply property, or amount of the
water supply property, is dependent on the future provision of
service to customers by the qualifying water utility. All water
supply property specified in a financing order shall continue to
exist until the water supply bonds issued pursuant to a financing
order and all other financing costs are paid in full.

(e) If a qualifying water utility defaults on any required payment
of water supply charge revenues, a court, upon application by an
interested party and without limiting any other remedies available
to the applying party, shall order the sequestration and payment
of the water supply charges, and the proceeds of the water supply
charges, for the benefit of bondholders, any assignee and financing
entities or their pledgees, and the counterparties to any ancillary
agreement. The order shall remain in full force and effect
notwithstanding bankruptcy, reorganization, or other insolvency
proceedings with respect to the qualifying water utility or any
affiliate of the qualifying water utility.

(f) Water supply property, water supply charges, and the
interests of an assignee, bondholder or financing entity, or any
pledgee in water supply property and water supply charges are not
subject to setoff, counterclaim, surcharge, or defense by the
qualifying utility or any other person or in connection with the
bankruptcy, reorganization, or other insolvency proceeding of the
qualifying water utility, any affiliate of the qualifying water utility,
or any other entity.

(g) Notwithstanding Section 1708 or any other provision of law,
any requirement under this article, or a financing order that the
commission take action with respect to the subject matter of a
financing order, shall be binding upon the commission, as it may
be constituted from time to time, and any successor agency exerting
functions similar to the commission. The commission shall not
have authority to rescind, alter, or amend that requirement in a
financing order. The approval by the commission in a financing
order of the issuance by the qualifying water utility or a financing
entity of water rate relief bonds shall include the approvals, if any,
required by Article 5 (commencing with Section 816) and Section
701.5. Section 701.5 shall not be construed to prohibit the issuance
of water rate relief bonds upon the terms and conditions approved
by the commission in a financing order. Section 851 is not
applicable to the transfer or pledge of water supply property, the
issuance of water rate relief bonds, or related transactions approved
in a financing order.

849.4.  

(a) A security interest in water supply property is valid,
is enforceable against the pledgor and third parties, is subject to
the rights of any third party holding a security interest in the water
supply property perfected in the manner described in this section,
and attaches when all of the following occur:

(1) The commission has issued the financing order authorizing
the water supply charges included in the water supply property.

(2) Value has been given by the pledgees of the water supply
property.

(3) The pledgor has signed a security agreement that includes
an indenture or financing agreement relating to the issuance of the
water rater relief bonds covering the water supply property.

(b) A valid and enforceable security interest in water supply
property is perfected when it has attached and when a financing
statement has been filed in accordance with Chapter 5
(commencing with Section 9501) of Division 9 of the Commercial
Code, naming the pledgor of the water supply property as “debtor”
and identifying the water supply property. Any description of the
water supply property shall be sufficient if it refers to the financing
order creating the water supply property. A copy of the financing
statement shall be filed with the commission by the qualifying
water utility that is the pledgor or transferor of the water supply
property, and the commission may require the qualifying water
utility to make other filings with respect to the security interest in
accordance with procedures it may establish, provided that the
filings do not affect the perfection of the security interest.

(c) A perfected security interest in water supply property is a
continuously perfected security interest in all revenues and
proceeds arising with respect to the water supply property, whether
or not the revenues or proceeds have accrued. Conflicting security
interests shall rank according to priority in time of perfection.
Water supply property shall constitute property for all purposes,
including for contracts securing water rate relief bonds, whether
or not the revenues and proceeds arising with respect to the water
supply property have accrued.

(d) Subject to the terms of the security agreement covering the
water supply property and the rights of any third party holding a
security interest in the water supply property perfected in the
manner described in this section, the validity and relative priority
of a security interest created under this section is not defeated or
adversely affected by the commingling of revenues arising with
respect to the water supply property with other funds of the
qualifying water utility that is the pledgor or transferor of the water
supply property, or by any security interest in a deposit account
of that qualifying water utility perfected under Division 9
(commencing with Section 9101) of the Commercial Code into
which the revenues are deposited. Subject to the terms of the
security agreement, upon compliance with the requirements of
subdivision (b) of Section 9312 of the Commercial Code, the
pledgees of the water supply property shall have a perfected
security interest in all cash and deposit accounts of the qualifying
water utility in which revenues arising with respect to the water
supply property have been commingled with other funds, but the
perfected security interest shall be limited to an amount not greater
than the amount of the revenues with respect to the water supply
property received by the qualifying water utility within 12 months
before either of the following:

(1) A default under the security agreement.

(2) The institution of insolvency proceedings by or against the
qualifying water utility, less payments from the revenues to the
pledgees during that 12-month period.

(e) If a default occurs under the security agreement covering
the water supply property, the pledgees of the water supply
property, subject to the terms of the security agreement, shall have
all rights and remedies of a secured party upon default under
Division 9 (commencing with Section 9101) of the Commercial
Code, and shall be entitled to foreclose or otherwise enforce their
security interest in the water supply property, subject to the rights
of any third party holding a prior security interest in the water
supply property perfected in the manner provided in this section.
In addition, the commission may require, in the financing order
creating the water supply property, that in the event of default by
the qualifying water utility in payment of revenues arising with
respect to the water supply property, the commission and any
successor to the commission, upon the application by the pledgees
or transferees, including transferees under Section 849.5, of the
water supply property, and without limiting any other remedies
available to the pledgees or transferees by reason of the default,
shall order the sequestration and payment to the pledgees or
transferees of revenues arising with respect to the water supply
property. Any order shall remain in full force and effect
notwithstanding bankruptcy, reorganization, or other insolvency
proceedings with respect to the debtor, pledgor, or transferor of
the water supply property. Any surplus in excess of amounts
necessary to pay principal, premium, if any, interest on the water
rate relief bonds, and other financing costs arising under the
security agreement, shall be remitted to the debtor or to the pledgor
or transferor.

(f) Sections 9204 and 9205 of the Commercial Code shall apply
to a pledge of water supply property by a qualifying water utility,
an affiliate of a qualifying water utility, or a financing entity, other
than a public financing entity.

(g) (1) This section sets forth the terms by which a consensual
security interest shall be created and perfected in the water supply
property. Unless otherwise ordered by the commission with respect
to any series of water rate relief bonds on or prior to the issuance
of the series, there shall exist a statutory lien as provided in this
subdivision.

(2) Upon the effective date of the financing order, there shall
exist a first priority lien on all water supply property then existing
or thereafter arising pursuant to the terms of the financing order.
This lien shall automatically arise pursuant to this section without
any action on the part of the qualifying water utility, any affiliate
of the qualifying water utility, the issuing entity, or any other
person. This lien shall secure all obligations, then existing and
subsequently arising, to the holders of the water rate relief bonds
issued pursuant to the financing order, the trustee or representative
for the holders, and any other entity specified in the financing
order. The persons for whose benefit this lien is established shall,
upon occurrence of any defaults specified in the financing order,
have all rights and remedies of a secured party upon default under
Chapter 1 (commencing with Section 9101) of Division 9 of the
Commercial Code, and shall be entitled to foreclose or otherwise
enforce this statutory lien in the water supply property. This lien
shall attach to the water supply property regardless of who shall
own, or shall subsequently be determined to own, the water supply
property, including any qualifying water utility, affiliate of the
qualifying water utility, financing entity, or any other person. This
lien shall be valid, perfected, and enforceable against the owner
of the water supply property and all third parties upon the
effectiveness of the financing order without any further public
notice, provided, however, that any person may, but shall not be
required to, file a financing statement in accordance with
subdivision (b). These financing statements may be protective
filings and shall not be evidence of the ownership of the water
supply property.

(h) Notwithstanding any other provision of law, Section 5451
of the Government Code shall apply to any pledge by the public
financing entity of water supply property or other security for any
water rate relief bonds issued by a public financing entity.

849.5.  

(a) A sale, assignment, or transfer of water supply
property by a qualifying water utility to an affiliate or to a financing
entity, or by an affiliate of a qualifying water utility or a financing
entity to another financing entity, which the parties, in the
governing documentation, have expressly stated to be a sale or
other absolute transfer, in a transaction approved in a financing
order, shall be treated as an absolute transfer of all of the
transferor’s right, title, and interest, as in a true sale, and not as a
pledge or other financing order of the water supply property, other
than for federal and state income and franchise tax purposes.

(b) The characterization of the sale, assignment, or transfer as
an absolute transfer and true sale and the corresponding
characterization of the property interest of the purchaser shall not
be affected or impaired by, among other things, the occurrence of
any of the following:

(1) Commingling of water supply revenues with other amounts.

(2) The retention by the seller of either of the following:

(A) A partial or residual interest, including an equity interest,
in the water supply property, whether direct or indirect, subordinate
or otherwise.

(B) The right to recover costs associated with taxes, franchise
fees, or license fees imposed on the collection of water supply
revenues.

(3) Any recourse that the purchaser may have against the seller.

(4) Any indemnification rights, obligations, or repurchase rights
made or provided by the seller.

(5) The obligation of the seller to collect water supply revenues
on behalf of an assignee.

(6) The treatment of the sale, assignment, or transfer for tax,
financial reporting, or other purposes.

(7) Any adjustment of the water supply charges as provided in
the financing order.

(c) A sale, assignment, or transfer of water supply property shall
be deemed perfected against third persons when both of the
following occur:

(1) The commission issues the financing order authorizing the
water supply charges included in the water supply property.

(2) An assignment of the water supply property in writing has
been executed and delivered to the transferee.

(d) As between bona fide assignees of the same right for value
without notice, the assignee first filing a financing statement in
accordance with Chapter 5 (commencing with Section 9501) of
Division 9 of the Commercial Code naming the assignor of the
water supply property as debtor and identifying the water supply
property has priority. Any description of the water supply property
shall be sufficient if it refers to the financing order creating the
water supply property. A copy of the financing statement shall be
filed by the assignee with the commission, and the commission
may require the assignor or the assignee to make other filings with
respect to the transfer in accordance with procedures it may
establish, but these filings shall not affect the perfection of the
transfer.

849.6.  

A successor to the qualified water utility, whether
pursuant to bankruptcy, reorganization, or other insolvency
proceeding, or pursuant to merger, sale, or transfer, by operation
of law, or otherwise, shall perform and satisfy all obligations of
the qualifying water utility pursuant to this article in the same
manner and to the same extent as the qualified water utility,
including, but not limited to, collecting and paying to the holders
of water rate relief bonds or any financing entities or their pledgees
revenues arising with respect to the water supply property sold to
the applicable financing entity or pledged to secure water rate relief
bonds.

SEC. 7.  

Section 1731 of the Public Utilities Code is amended
to read:

1731.  

(a) The commission shall set an effective date when
issuing an order or decision. The commission may set the effective
date of an order or decision prior to the date of issuance of the
order or decision.

(b) (1) After an order or decision has been made by the
commission, a party to the action or proceeding, or a stockholder,
bondholder, or other party pecuniarily interested in the public
utility affected may apply for a rehearing in respect to matters
determined in the action or proceeding and specified in the
application for rehearing. The commission may grant and hold a
rehearing on those matters, if in its judgment sufficient reason is
made to appear. A cause of action arising out of any order or
decision of the commission shall not accrue in any court to any
corporation or person unless the corporation or person has filed
an application to the commission for a rehearing within 30 days
after the date of issuance or within 10 days after the date of
issuance in the case of an order issued pursuant to either Article
5 (commencing with Section 816) or Article 6 (commencing with
Section 851) of Chapter 4 relating to security transactions and the
transfer or encumbrance of utility property.

(2) The commission shall notify the parties of the issuance of
an order or decision by either mail or electronic transmission.
Notification of the parties may be accomplished by one of the
following methods:

(A) Mailing the order or decision to the parties to the action or
proceeding.

(B) If a party to an action or proceeding consents in advance to
receive notice of any order or decision related to the action or
proceeding by electronic mail address, notification of the party
may be accomplished by transmitting an electronic copy of the
official version of the order or decision to the party if the party
has provided an electronic mail address to the commission.

(C) If a party to an action or proceeding consents in advance to
receive notice of any order or decision related to the action or
proceeding by electronic mail address, notification of the party
may be accomplished by transmitting a link to an Internet Web
site where the official version of the order or decision is readily
available to the party if the party has provided an electronic mail
address to the commission.

(3) For the purposes of this article, “date of issuance” means
the mailing or electronic transmission date that is stamped on the
official version of the order or decision

(c) A cause of action arising out of an order or decision of the
commission construing, applying, or implementing the provisions
of Chapter 4 of the Statutes of the 2001-02 First Extraordinary
Session that (1) relates to the determination or implementation of
the department’s revenue requirements, or the establishment or
implementation of bond or power charges necessary to recover
those revenue requirements, or (2) in the sole determination of the
Department of Water Resources, the expedited review of order or
decision of the commission is necessary or desirable, for the
maintenance of any credit ratings on any bonds or notes of the
department issued pursuant to Division 27 (commencing with
Section 80000) of the Water Code or for the department to meet
its obligations with respect to any bonds or notes pursuant to that
division, shall not accrue in any court to any corporation or person
unless the corporation or person has filed an application with the
commission for a rehearing within 10 days after the date of
issuance of the order or decision. The Department of Water
Resources shall notify the commission of any determination
pursuant to paragraph (2) of this subdivision prior to the issuance
by the commission of any order or decision construing, applying,
or implementing the provisions of Chapter 4 of the Statutes of the
2001-02 First Extraordinary Session. The commission shall issue
its decision and order on rehearing within 20 days after the filing
of the application.

(d) A cause of action arising out of an order or decision of the
commission construing, applying, or implementing the provisions
of Article 5.7 (commencing with Section 849) of Chapter 4 shall
not accrue in any court to any entity or person unless the entity or
person has filed an application to the commission for a rehearing
within 10 days after the date of issuance of the order or decision.
The commission shall issue its decision and order on rehearing
within 20 days after the filing of that application.

SEC. 8.  

Section 1770 is added to the Public Utilities Code, to
read:

1770.  

The following procedures shall apply to the judicial
review of an order or decision of the commission in interpreting,
implementing, or applying the provisions of Article 5.7
(commencing with Section 849) of Chapter 4 of Part 1 of Division
1:

(a) Within 30 days after the commission issues its order or
decision denying the application for a rehearing or, if the
application is granted, within 30 days after the commission issues
its decision on rehearing, an aggrieved party may petition for a
writ of review in the California Supreme Court for the purpose of
determining the lawfulness of the original order or decision or of
the order or decision on the rehearing. If the writ is issued, it shall
be made returnable at a time and place specified by court order
and shall direct the commission to certify its record in the case to
the court within the time specified. No order of the commission
interpreting, implementing, or applying the provisions of Article
5.7 (commencing with Section 849) of Chapter 4 of Part 1 of
Division 1 shall be subject to review in a court of appeals.

(b) The petition for review shall be served upon the executive
director of the commission either personally or by service at the
office of the commission.

(c) For purposes of this section, the issuance of a decision or
the granting of an application shall be construed to have occurred
on the date when the commission mails the decision or grant to
the parties of the action or proceeding.

(d) To the extent that the provisions do not conflict, provisions
in this article shall apply to actions under this section.

SEC. 9.  

Article 8 (commencing with Section 685) is added to
Chapter 3 of Part 5 of the Monterey Peninsula Water Management
District Law (Chapter 527 of the Statutes of 1977), to read:

 

Article 8.  Tax Exempt Water Relief Reduction Bonds

 

685.  

(a) The district may issue water rate relief bonds for the
purpose of purchasing water rate relief bonds issued by another
financing entity pursuant to a financing order authorized pursuant
to Article 5.7 (commencing with Section 849) of Chapter 4 of Part
1 of Division 1 of the Public Utilities Code, to fund any necessary
reserves and to pay the costs of issuance of the water rate relief
bonds. These bonds may be issued only if the commission finds
in the financing order that the issuance, due to the availability of
a federal or state income tax exemption, will provide savings to
water customers on the Monterey Peninsula. These bonds issued
by the district, or “district bonds,” shall be denominated “Monterey
Peninsula Water Management District Water Rate Relief Bonds.”
These bonds shall have designations, details, and terms, be payable
at times and places, and be sold in a manner as determined by the
board. The resolution shall authorize the district to enter into a
trust agreement or similar security agreement to secure payment
of the district bonds.

(b) The district bonds shall be special limited obligations of the
district, and shall be payable solely from payments made on the
water rate relief bonds purchased with the proceeds of the district
bonds and any reserve funded from the proceeds of the district
bonds. The bonds shall not be payable from any other funds or
assets of the district, and neither the full faith and credit nor taxing
power of the district shall be pledged to or exercised for the
payment of the bonds.

686.  

If the district authorizes the issuance of bonds under
Section 685, the district, notwithstanding Article 5 (commencing
with Section 53760) of Chapter 4 of Part 1 of Division 2 of Title
5 of the Government Code, shall not be eligible to file for
bankruptcy pursuant to Chapter 9 (commencing with Section 901)
of Title 11 of the United States Code as long as the district bonds
and related financing costs are outstanding and unpaid and shall
remain ineligible for a period of one year and one day following
the full payment of the bonds and costs.

SEC. 10.  

The provisions of this act are severable. If any
provision of this act or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given
effect without the invalid provision or application.

SEC. 11.  

The Legislature finds and declares that a special law
is necessary and that a general law cannot be made applicable
within the meaning of Section 16 of Article IV of the California
Constitution because of the unique circumstances applicable only
to the Monterey Peninsula, Californian American Water, and the
Monterey Peninsula Water Management District. Therefore, this
special statute is necessary.

SEC. 12.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.