BILL NUMBER: AB 54	CHAPTERED
	BILL TEXT

	CHAPTER  512
	FILED WITH SECRETARY OF STATE  OCTOBER 7, 2011
	APPROVED BY GOVERNOR  OCTOBER 7, 2011
	PASSED THE SENATE  SEPTEMBER 7, 2011
	PASSED THE ASSEMBLY  SEPTEMBER 8, 2011
	AMENDED IN SENATE  AUGUST 30, 2011
	AMENDED IN SENATE  AUGUST 24, 2011
	AMENDED IN SENATE  AUGUST 22, 2011
	AMENDED IN SENATE  JULY 11, 2011
	AMENDED IN SENATE  JUNE 22, 2011
	AMENDED IN ASSEMBLY  MAY 31, 2011
	AMENDED IN ASSEMBLY  MAY 19, 2011
	AMENDED IN ASSEMBLY  APRIL 14, 2011
	AMENDED IN ASSEMBLY  APRIL 4, 2011
	AMENDED IN ASSEMBLY  MARCH 29, 2011

INTRODUCED BY   Assembly Member Solorio

                        DECEMBER 6, 2010

   An act to amend Section 14300 of, and to add Sections 14300.5,
14301.1, 14301.2, and 14301.3 to, the Corporations Code, to amend
Sections 56375 and 56430 of the Government Code, and to add Section
116760.65 to, and to add Article 12 (commencing with Section 116755)
to Chapter 4 of Part 12 of Division 104 of, the Health and Safety
Code, relating to drinking water.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 54, Solorio. Drinking water.
   (1) Existing law authorizes any corporation organized for or
engaged in the business of selling, distributing, supplying, or
delivering water for irrigation purposes, and requires any
corporation organized for or engaged in the business of selling,
distributing, supplying, or delivering water for domestic use, to
provide in its articles or bylaws that water shall be sold,
distributed, supplied, or delivered only to owners of its shares and
that those shares are appurtenant to certain lands, as specified.
   This bill would specify that any corporation organized for or
engaged in the business of selling, distributing, supplying, or
delivering water for irrigation purposes, and any corporation
organized for or engaged in the business of selling, distributing,
supplying, or delivering water for domestic use that provides in its
articles or bylaws that the water shall be sold, distributed,
supplied, or delivered only to owners of its shares and that those
shares are appurtenant to certain lands shall be known as a mutual
water company.
   The bill would also require each mutual water company that
operates a public water system to, by December 31, 2012, submit a map
depicting the approximate boundaries of the property that the
municipal water company serves to the local agency commission within
the county in which the mutual water company operates. The bill would
prohibit a mutual water company from expanding its boundaries
without approval from the appropriate local agency formation
commission. The bill would require a mutual water company that
operates a public water system to supply certain information to a
local agency formation commission upon request, as specified. This
bill would require a mutual water company that operates a public
water system to maintain a financial reserve fund to be used for
certain types of activities.
   The bill would also require each board member of a mutual water
company that operates a public water system to, within 6 months of
taking office, complete a 2-hour course offered by a qualified
trainer, as specified.
   (2) Existing law, the California Safe Drinking Water Act, requires
the State Department of Public Health to administer provisions
relating to the regulation of drinking water to protect public
health, including, but not limited to, conducting research, studies,
and demonstration programs relating to the provision of a dependable,
safe supply of drinking water, enforcing the federal Safe Drinking
Water Act, adopting enforcement regulations, and conducting studies
and investigations to assess the quality of water in domestic water
supplies.
   Existing law establishes the Safe Drinking Water State Revolving
Fund, continuously appropriated to the department for the provision
of grants and revolving fund loans to provide for the design and
construction of projects for public water systems that will enable
suppliers to meet safe drinking water standards. Existing law
requires the department to establish criteria to be met for projects
to be eligible for consideration for this funding.
   This bill would provide that in considering an application for
funding a project, the department shall not be prejudiced by the
applicant initiating the project prior to the department approving
the application for funding. This bill would also provide that
preliminary 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.
   (3) Existing law, the Cortese-Knox-Hertzberg Local Government
Reorganization Act of 2000, sets forth the powers and duties of a
local agency formation commission, including, among others, the
powers to review and approve or disapprove with or without amendment,
wholly, partially, or conditionally, proposals for changes of
organization or reorganization, consistent with written policies,
procedures, and guidelines adopted by the commission.
   This bill would additionally authorize the commission to approve,
with or without amendment, wholly, partially, or conditionally, or
disapprove the annexation of territory served by a mutual water
company that operates a public water system into the jurisdiction of
a city, a public utility, or a special district, with the consent of
the respective public agency or public utility and mutual water
company.
   (4) Under the Cortese-Knox-Hertzberg Local Government
Reorganization Act of 2000, each local agency formation commission is
required to develop and determine the sphere of influence of each
local governmental agency within the county and enact policies
designed to promote the logical and orderly development of areas
within the sphere of influence. In order to prepare and update
spheres of influence, the commission is required to conduct a service
review, including the review of growth and population projections
for the affected area, present and planned capacity of public
facilities and adequacy of public services, financial ability of
agencies to provide services, the status of, and opportunities for,
shared facilities, accountability for community service needs, and
any other matter related to effective or efficient service delivery,
as required by commission policy.
   This bill would authorize the commission to include in the service
review, a review of whether the agencies under review comply with
safe drinking water standards. This bill would provide that a public
water system may comply with that review by submitting certain
documents.
   (5) Existing law provides for the imposition of civil fines in
amounts up to $5,000 or $25,000 for specified violations of the
California Safe Drinking Water Act.
   This bill would provide that a mutual water company is liable for
any fines, penalties, costs, expenses, or other amounts that may be
imposed upon the mutual water company under the California Safe
Drinking Water Act. This bill would authorize a mutual water company
to levy an assessment to pay those fines. This bill would provide
that if the amount of those fines exceeds 5% of the annual budget of
a mutual water company, then the mutual water company would be
required to levy an assessment to pay those fines.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) Californians rely on a broad diversity of public and private
organizations to deliver clean and safe drinking water to their home
water taps. Regardless of the form of the organization that operates
a public water system, these organizations provide a public service
that remains one of the core duties of the people's government.
   (b) While the state's goal is to ensure clean and safe drinking
water, California's drinking water quality has deteriorated and some
public water systems continue to suffer poor water quality that are
inconsistent with safe drinking water standards.
   (c) 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. Based on the
United States Environmental Protection Agency's Drinking Water
Infrastructure Needs Survey and Assessment, which was performed in
2007, the State Department of Public Health 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.
  SEC. 2.  Section 14300 of the Corporations Code is amended to read:

   14300.  (a) Any corporation organized for or engaged in the
business of selling, distributing, supplying, or delivering water for
irrigation purposes may provide, and any corporation organized for
or engaged in the business of selling, distributing, supplying, or
delivering water for domestic use shall provide, in its articles or
bylaws that water shall be sold, distributed, supplied, or delivered
only to owners of its shares and that the shares shall be appurtenant
to certain lands when the same are described in the certificate
issued therefor; and when the certificate is so issued and a
certified copy of the articles or bylaws recorded in the office of
the county recorder in the county where the lands are situated the
shares of stock shall become appurtenant to the lands and shall only
be transferred therewith, except after sale or forfeiture for
delinquent assessments thereon as provided in Section 14303.
Notwithstanding this provision in its articles or bylaws, any such
corporation may sell water to the state, or any department or agency
thereof, or to any school district, or to any public agency, or, to
any other mutual water company or, during any emergency resulting
from fire or other disaster involving danger to public health or
safety, to any person at the same rates as to holders of shares of
the corporations; and provided further, that any corporation may
enter into a contract with a county fire protection district to
furnish water to fire hydrants and for fire suppression or fire
prevention purposes at a flat rate per hydrant or other connection.
In the event lands to which any stock is appurtenant are owned or
purchased by the state, or any department or agency thereof, or any
school district, or public agency, the stock shall be canceled by the
secretary, but shall be reissued to any person later acquiring title
to the land from the state department, agency, or school district,
or public agency.
   (b) A corporation described in subdivision (a) shall be known as a
mutual water company.
  SEC. 3.  Section 14300.5 is added to the Corporations Code, to
read:
   14300.5.  For purposes of this chapter, "public water system"
shall have the same meaning as provided in Section 116275 of the
Health and Safety Code.
  SEC. 4.  Section 14301.1 is added to the Corporations Code, to
read:
   14301.1.  (a) No later than December 31, 2012, each mutual water
company that operates a public water system shall submit to the local
agency formation commission for its county a map depicting the
approximate boundaries of the property that the mutual water company
serves.
   (b) A mutual water company that operates a public water system
shall respond to a request from a local agency formation commission,
located within a county that the mutual water company operates in,
for information in connection with the preparation of municipal
service reviews or spheres of influence pursuant to Chapter 4
(commencing with Section 56425) of Part 2 of Division 3 of Title 5 of
the Government Code within 45 days of the request. The mutual water
company shall provide all reasonably available nonconfidential
information relating to the operation of the public water system. The
mutual water company shall explain, in writing, why any requested
information is not reasonably available. The mutual water company
shall not be required to disclose any information pertaining to the
names, addresses, or water usage of any specific shareholder. This
subdivision shall not be interpreted to require a mutual water
company to undertake any study or investigation. A mutual water
company may comply with this section by submitting to the local
agency formation commission the same information that the mutual
water company submitted to the State Department of Public Health.
   (c) A mutual water company that operates a public water system
shall be subject to the requirements of, and has the powers granted
by, subdivision (b) of Section 116755 of the Health and Safety Code.
  SEC. 5.  Section 14301.2 is added to the Corporations Code, to
read:
   14301.2.  Each board member of a mutual water company that
operates a public water system shall comply with the training
requirements set out in subdivision (a) of Section 116755 of the
Health and Safety Code.
  SEC. 6.  Section 14301.3 is added to the Corporations Code, to
read:
   14301.3.  (a) All construction on public water systems operated by
a mutual water company shall be designed and constructed to comply
with the applicable California Waterworks standards, as provided in
Chapter 16 of Title 22 of the California Code of Regulations.
   (b) A mutual water company that operates a public water system
shall maintain a financial reserve fund for repairs and replacements
to its water production, transmission, and distribution facilities at
a level sufficient for continuous operation of facilities in
compliance with the federal Safe Drinking Water Act (42 U.S.C. Sec.
300f et seq.) and the California Safe Drinking Water Act (Chapter 4
(commencing with 116270) of Part 12 of Division 104 of the Health and
Safety Code).
  SEC. 7.  Section 56375 of the Government Code is amended to read:
   56375.  The commission shall have all of the following powers and
duties subject to any limitations upon its jurisdiction set forth in
this part:
   (a) (1) To review and approve with or without amendment, wholly,
partially, or conditionally, or disapprove proposals for changes of
organization or reorganization, consistent with written policies,
procedures, and guidelines adopted by the commission.
   (2) The commission may initiate proposals by resolution of
application for any of the following:
   (A) The consolidation of a district, as defined in Section 56036.
   (B) The dissolution of a district.
   (C) A merger.
   (D) The establishment of a subsidiary district.
   (E) The formation of a new district or districts.
   (F) A reorganization that includes any of the changes specified in
subparagraph (A), (B), (C), (D), or (E).
   (3) A commission may initiate a proposal described in paragraph
(2) only if that change of organization or reorganization is
consistent with a recommendation or conclusion of a study prepared
pursuant to Section 56378, 56425, or 56430, and the commission makes
the determinations specified in subdivision (b) of Section 56881.
   (4) A commission shall not disapprove an annexation to a city,
initiated by resolution, of contiguous territory that the commission
finds is any of the following:
   (A) Surrounded or substantially surrounded by the city to which
the annexation is proposed or by that city and a county boundary or
the Pacific Ocean if the territory to be annexed is substantially
developed or developing, is not prime agricultural land as defined in
Section 56064, is designated for urban growth by the general plan of
the annexing city, and is not within the sphere of influence of
another city.
   (B) Located within an urban service area that has been delineated
and adopted by a commission, which is not prime agricultural land, as
defined by Section 56064, and is designated for urban growth by the
general plan of the annexing city.
   (C) An annexation or reorganization of unincorporated islands
meeting the requirements of Section 56375.3.
   (5) As a condition to the annexation of an area that is
surrounded, or substantially surrounded, by the city to which the
annexation is proposed, the commission may require, where consistent
with the purposes of this division, that the annexation include the
entire island of surrounded, or substantially surrounded, territory.
   (6) A commission shall not impose any conditions that would
directly regulate land use density or intensity, property
development, or subdivision requirements.
   (7) The decision of the commission with regard to a proposal to
annex territory to a city shall be based upon the general plan and
prezoning of the city. When the development purposes are not made
known to the annexing city, the annexation shall be reviewed on the
basis of the adopted plans and policies of the annexing city or
county. A commission shall require, as a condition to annexation,
that a city prezone the territory to be annexed or present evidence
satisfactory to the commission that the existing development
entitlements on the territory are vested or are already at build-out,
and are consistent with the city's general plan. However, the
commission shall not specify how, or in what manner, the territory
shall be prezoned.
   (b) With regard to a proposal for annexation or detachment of
territory to, or from, a city or district or with regard to a
proposal for reorganization that includes annexation or detachment,
to determine whether territory proposed for annexation or detachment,
as described in its resolution approving the annexation, detachment,
or reorganization, is inhabited or uninhabited.
   (c) With regard to a proposal for consolidation of two or more
cities or districts, to determine which city or district shall be the
consolidated successor city or district.
   (d) To approve the annexation of unincorporated, noncontiguous
territory, subject to the limitations of Section 56742, located in
the same county as that in which the city is located, and that is
owned by a city and used for municipal purposes and to authorize the
annexation of the territory without notice and hearing.
   (e) To approve the annexation of unincorporated territory
consistent with the planned and probable use of the property based
upon the review of general plan and prezoning designations. No
subsequent change may be made to the general plan for the annexed
territory or zoning that is not in conformance to the prezoning
designations for a period of two years after the completion of the
annexation, unless the legislative body for the city makes a finding
at a public hearing that a substantial change has occurred in
circumstances that necessitate a departure from the prezoning in the
application to the commission.
   (f) With respect to the incorporation of a new city or the
formation of a new special district, to determine the number of
registered voters residing within the proposed city or special
district or, for a landowner-voter special district, the number of
owners of land and the assessed value of their land within the
territory proposed to be included in the new special district. The
number of registered voters shall be calculated as of the time of the
last report of voter registration by the county elections official
to the Secretary of State prior to the date the first signature was
affixed to the petition. The executive officer shall notify the
petitioners of the number of registered voters resulting from this
calculation. The assessed value of the land within the territory
proposed to be included in a new landowner-voter special district
shall be calculated as shown on the last equalized assessment roll.
   (g) To adopt written procedures for the evaluation of proposals,
including written definitions consistent with existing state law. The
commission may adopt standards for any of the factors enumerated in
Section 56668. Any standards adopted by the commission shall be
written.
   (h) To adopt standards and procedures for the evaluation of
service plans submitted pursuant to Section 56653 and the initiation
of a change of organization or reorganization pursuant to subdivision
(a).
   (i) To make and enforce regulations for the orderly and fair
conduct of hearings by the commission.
   (j) To incur usual and necessary expenses for the accomplishment
of its functions.
   (k) To appoint and assign staff personnel and to employ or
contract for professional or consulting services to carry out and
effect the functions of the commission.
   (l) To review the boundaries of the territory involved in any
proposal with respect to the definiteness and certainty of those
boundaries, the nonconformance of proposed boundaries with lines of
assessment or ownership, and other similar matters affecting the
proposed boundaries.
   (m) To waive the restrictions of Section 56744 if it finds that
the application of the restrictions would be detrimental to the
orderly development of the community and that the area that would be
enclosed by the annexation or incorporation is so located that it
cannot reasonably be annexed to another city or incorporated as a new
city.
   (n) To waive the application of Section 22613 of the Streets and
Highways Code if it finds the application would deprive an area of a
service needed to ensure the health, safety, or welfare of the
residents of the area and if it finds that the waiver would not
affect the ability of a city to provide any service. However, within
60 days of the inclusion of the territory within the city, the
legislative body may adopt a resolution nullifying the waiver.
   (o) If the proposal includes the incorporation of a city, as
defined in Section 56043, or the formation of a district, as defined
in Section 2215 of the Revenue and Taxation Code, the commission
shall determine the property tax revenue to be exchanged by the
affected local agencies pursuant to Section 56810.
   (p) To authorize a city or district to provide new or extended
services outside its jurisdictional boundaries pursuant to Section
56133.
   (q) To enter into an agreement with the commission for an
adjoining county for the purpose of determining procedures for the
consideration of proposals that may affect the adjoining county or
where the jurisdiction of an affected agency crosses the boundary of
the adjoining county.
   (r) To approve with or without amendment, wholly, partially, or
conditionally, or disapprove pursuant to this section the annexation
of territory served by a mutual water company formed pursuant to Part
7 (commencing with Section 14300) of Division 3 of Title 1 of the
Corporations Code that operates a public water system to a city or
special district. Any annexation approved in accordance with this
subdivision shall be subject to the state and federal constitutional
prohibitions against the taking of private property without the
payment of just compensation. This subdivision shall not impair the
authority of a public agency or public utility to exercise eminent
domain authority.
  SEC. 8.  Section 56430 of the Government Code is amended to read:
   56430.  (a) In order to prepare and to update spheres of influence
in accordance with Section 56425, the commission shall conduct a
service review of the municipal services provided in the county or
other appropriate area designated by the commission. The commission
shall include in the area designated for service review the county,
the region, the subregion, or any other geographic area as is
appropriate for an analysis of the service or services to be
reviewed, and shall prepare a written statement of its determinations
with respect to each of the following:
   (1) Growth and population projections for the affected area.
   (2) Present and planned capacity of public facilities and adequacy
of public services, including infrastructure needs or deficiencies.
   (3) Financial ability of agencies to provide services.
   (4) Status of, and opportunities for, shared facilities.
   (5) Accountability for community service needs, including
governmental structure and operational efficiencies.
   (6) Any other matter related to effective or efficient service
delivery, as required by commission policy.
   (b) In conducting a service review, the commission shall
comprehensively review all of the agencies that provide the
identified service or services within the designated geographic area.

   (c) In conducting a service review, the commission may include a
review of whether the agencies under review, including any public
water system as defined in Section 116275, are in compliance with the
Safe Drinking Water Act. A public water system may satisfy any
request for information as to compliance with the Safe Drinking Water
Act by submission of the consumer confidence or water quality report
prepared by the public water system as provided by Section 116470 of
the Health and Safety Code.
   (d) The commission may request information, as part of a service
review under this section, from identified public or private entities
that provide wholesale or retail supply of drinking water, including
mutual water companies formed pursuant to Part 7 (commencing with
Section 14300) of Division 3 of Title 1 of the Corporations Code, and
private utilities, as defined in Section 1502 of the Public
Utilities Code.
   (e) The commission shall conduct a service review before, or in
conjunction with, but no later than the time it is considering an
action to establish a sphere of influence in accordance with Section
56425 or 56426.5 or to update a sphere of influence pursuant to
Section 56425.
  SEC. 9.  Article 12 (commencing with Section 116755) of Chapter 4
of Part 12 of Division 104 is added to the Health and Safety Code, to
read:

      Article 12.  Board Member Training


   116755.  (a) Each board member of a mutual water company that
operates a public water system, as defined in Section 116275, shall,
within six months of taking office, or by December 31, 2012, if that
member was serving on the board on December 31, 2011, complete a
two-hour course offered by a qualified trainer regarding the duties
of board members of mutual water companies, including, but not
limited to, the duty of a corporate director to avoid contractual
conflicts of interest and fiduciary duties, the duties of public
water systems to provide clean drinking water that complies with the
federal Safe Drinking Water Act (42 U.S.C. Sec. 300f et seq.) and
this chapter, and long-term management of a public water system. For
the purposes of this subdivision, a trainer may be qualified in any
of the following ways:
   (1) Membership in the California State Bar.
   (2) Accreditation by the International Association of Continuing
Education and Training (IACET) ANSI/IACET 1-2007.
   (3) Sponsorship by either the Rural Community Assistance
Corporation or the California Rural Water Association.
   (b) A mutual water company formed pursuant to Part 7 (commencing
with Section 14300) of Division 3 of Title 1 of the Corporations Code
shall be liable for the payment of any fines, penalties, costs,
expenses, and other amounts that may be imposed upon the mutual water
company pursuant to this chapter. The mutual water company may levy
an assessment, pursuant to Section 14303 of the Corporations Code, to
pay these fines, penalties, costs, expenses, and other amounts so
imposed. If the amount of outstanding fines, penalties, costs,
expenses and other amounts imposed pursuant to this chapter exceed 5
percent of the annual budget of the mutual water company, then the
mutual water company shall levy an assessment, pursuant to Section
14303 of the Corporations Code, to pay those fines, penalties, costs,
expenses, and other amounts so imposed.
  SEC. 10.  Section 116760.90 of the Health and Safety Code is
amended to read:
   116760.90.  (a) The department shall not approve an application
for funding unless the department determines that the proposed study
or project is necessary to enable the applicant to meet safe drinking
water standards, and is consistent with an adopted countywide plan,
if any. The department may refuse to fund a study or project if it
determines that the purposes of this chapter may more economically
and efficiently be met by means other than the proposed study or
project. The department shall not approve an application for funding
a project with a primary purpose to supply or attract future growth.
The department may limit funding to costs necessary to enable
suppliers to meet primary drinking water standards, as defined in
Chapter 4 (commencing with Section 116270).
   (b) With respect to applications for funding of project design and
construction, the department shall also determine all of the
following:
   (1) Upon completion of the project, the applicant will be able to
supply water that meets safe drinking water standards.
   (2) The project is cost-effective.
   (3) If the entire project is not to be funded under this chapter,
the department shall specify which costs are eligible for funding.
   (c) In considering an application for funding a project that meets
all other requirements of this chapter and regulations, the
department shall not be prejudiced by the applicant initiating the
project prior to the department approving the application for
funding. Preliminary project costs that are otherwise eligible for
funding pursuant to the provisions of this chapter shall not be
ineligible because the costs were incurred by the applicant prior to
the department approving the application for funding. Construction
costs that are otherwise eligible for funding pursuant to the
provisions of this chapter shall not be ineligible because the costs
were incurred after the approval of the application by the department
but prior to the department entering into a contract with the
applicant pursuant to Section 116761.50.