Existing law, the Municipal Water District Law of 1911, authorizes the formation of a municipal water district to acquire and sell water. The district law authorizes a municipal water district to make contracts.

This bill would prohibit the Central Basin Municipal Water District from using sole source contracts, except as prescribed. This bill would require the district to rebid a contract if the district significantly changes the scope of work of the contract. This bill would require the general manager of the district to submit a quarterly report to the districts board detailing all of the districts contracts, contract amendments, and contract and amendment dollar amounts. By imposing new duties on a municipal water district, this bill would impose a state-mandated local program.

The district law provides that the board of directors of a municipal water district shall act only by ordinance, resolution, or motion which shall only pass to become effective with the affirmative vote of a majority of the members of the board.

This bill would require that no ordinance, motion, or resolution relating to the ethics, compensation, or benefits of the members of the Central Basin Municipal Water District board of directors be passed or become effective without the affirmative votes of ²/₃ of the members of the board.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Central Basin Municipal Water District.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

This bill would become operative only if AB 1794 of the 201516 Regular Session is enacted and becomes effective on or before January 1, 2017.

Existing law, the Municipal Water District Law of 1911, authorizes the formation of a municipal water district to acquire and sell water. The district law authorizes a municipal water district to make contracts.

This bill would prohibit the Central Basin Municipal Water District from using sole source contracts, except as prescribed. This bill would require the district to rebid a contract if the district significantly changes the scope of work of the contract. This bill would require the general manager of the district to submit a quarterly report to the districts board detailing all of the districts contracts, contract amendments, and contract and amendment dollar amounts. By imposing new duties on a municipal water district, this bill would impose a state-mandated local program.

The district law provides that the board of directors of a municipal water district shall act only by ordinance, resolution, or motion which shall only pass to become effective with the affirmative vote of a majority of the members of the board.

This bill would require that no ordinance, motion, or resolution relating to the ethics, compensation, or benefits of the members of the Central Basin Municipal Water District board of directors be passed or become effective without the affirmative votes of ²/₃ of the members of the board.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Central Basin Municipal Water District.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

This bill would become operative only if AB 1794 of the 201516 Regular Session is enacted and becomes effective on or before January 1, 2017.

Existing law, the Municipal Water District Law of 1911, authorizes the formation of a municipal water district to acquire and sell water. The district law authorizes a municipal water district to make contracts.

This bill would prohibit the Central Basin Municipal Water District from using sole source contracts, except as prescribed. This bill would require the district to rebid a contract if the district significantly changes the scope of work of the contract. This bill would require the general manager of the district to submit a quarterly report to the districts board detailing all of the districts contracts, contract amendments, and contract and amendment dollar amounts. By imposing new duties on a municipal water district, this bill would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Central Basin Municipal Water District.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Existing law, the Municipal Water District Law of 1911, authorizes the formation of a municipal water district to acquire and sell water. The district law authorizes a municipal water district to make contracts.

This bill would prohibit the Central Basin Municipal Water District from using sole source contracts, except as prescribed. This bill would require the district to rebid a contract if the district significantly changes the scope of work of the contract. This bill would require the general manager of the district to submit a quarterly report to the districts board detailing all of the districts contracts, contract amendments, and contract and amendment dollar amounts. By imposing new duties on a municipal water district, this bill would impose a state-mandated local program.

The district law requires the board of directors of a municipal water district to consist of 5 members members, and each member is required to be a resident of the division from which he or she is elected.

This bill would require the board of directors of the Central Basin Municipal Water District to consist of 7 members, 5 members elected and 2 members with certain qualifications appointed by the board of supervisors of the County of Los Angeles, as prescribed. This bill would prohibit the Central Basin Municipal Water District from providing any member of its board of directors with district funds to conduct community outreach activities.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Central Basin Municipal Water District.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Existing law, the Municipal Water District Law of 1911, authorizes the formation of a municipal water district to acquire and sell water. The district law authorizes a municipal water district to make contracts.

This bill would prohibit the Central Basin Municipal Water District from using sole source contracts, except as prescribed. This bill would require the district to rebid a contract if the district significantly changes the scope of work of the contract. This bill would require the general manager of the district to submit a quarterly report to the districts board detailing all of the districts contracts, contract amendments, and contract and amendment dollar amounts. By imposing new duties on a municipal water district, this bill would impose a state-mandated local program.

The district law requires the board of directors of a municipal water district to consist of 5 members and each member is required to be a resident of the division from which he or she is elected.

This bill would require the board of directors of the Central Basin Municipal Water District to consist of 7 members, 5 members elected and 2 members with certain qualifications appointed by the board of supervisors of the County of Los Angeles, as prescribed. This bill would prohibit the Central Basin Municipal Water District from providing any member of its board of directors with district funds to conduct community outreach activities.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Central Basin Municipal Water District.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

 UNFINISHED BUSINESS  

Bill No: SB 953

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 5-1, 4/6/16

AYES: Hertzberg, Beall, Hernandez, Lara, Pavley

NOES: Moorlach

NO VOTE RECORDED: Nguyen

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16

AYES: Lara, Beall, Hill, McGuire, Mendoza

NOES: Bates, Nielsen

SENATE FLOOR: 26-11, 5/31/16

AYES: Allen, Beall, Block, De León, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Nguyen, Pan, Pavley, Roth, Wieckowski, Wolk

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Huff, Moorlach, Morrell, Nielsen, Stone, Vidak

NO VOTE RECORDED: Cannella, Galgiani, Runner

ASSEMBLY FLOOR: 78-0, 8/18/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill imposes restrictions on the Central Basin Municipal Water District’s (CBMWD’s) contracting practices and requires a super-majority vote of the board to take specified actions relating to ethics, compensation, and benefits.

Assembly Amendments delete language that expanded the size of CBMWD’s board and prohibited board members from using district funds for outreach purposes; and add language requiring a two-thirds vote of CBMWD’s board to approve an ordinance, motion, or resolution relating to the ethics, compensation, or benefits of CBMWD’s board members.

ANALYSIS:

Existing law:

1. Governs, pursuant to the Municipal Water District Law of 1911, the formation, internal organization, and elections for municipal water districts.
2. Requires the board of directors of a municipal water district to consist of five members elected by voters in each of five divisions of the district, and requires each board member to be a resident of the division that he or she represents.
3. Requires municipal water district board members to receive compensation of up to $100 per day, up to six days per month, for attendance at board meetings or other service rendered as a board member, plus expenses incurred in the performance of official duties.

This bill:

1. Prohibits CBMWD from using sole source contracts unless one of the following conditions is met:
   1. The contract is limited to an emergency circumstance.
   2. The circumstances are that only one vendor can meet the district’s needs.
2. Requires that CBMWD, before executing a sole source contract, must provide written justification, which must include specified information, demonstrating the reasons for not competitively bidding the services.
3. Requires CBMWD to rebid a contract if the district significantly changes the scope of work of the contract. This bill defines “significant changes” to include changes to the nature of the services or work products.
4. Requires CBMWD’s general manager to submit a quarterly report to the district’s board detailing all of the district’s contracts, contract amendments, and contract and amendment dollar amounts.
5. Prohibits any ordinance, motion, or resolution relating to the ethics, compensation, or benefits of the members of the CBMWD board of directors from passing or becoming effective without the affirmative votes of two-thirds of the members of the board.

Background

The CBMWD was established by voters in 1952 to help mitigate groundwater over pumping in southeast Los Angeles County. CBMWD purchases imported water from the Metropolitan Water District of Southern California for sale to retail water suppliers, including cities, other water districts, mutual water companies, investor-owned utilities, and private companies within the district’s boundaries. Those water retailers in turn provide water to residents and businesses within their respective service areas. CBMWD serves a population of more than two million people living in 24 cities and some unincorporated areas within the district’s approximately 227 square-mile service area. The five members of CBMWD’s board of directors are each elected by voters residing in one of five divisions within the district’s boundaries.

An audit report issued in December of 2015 by the Bureau of State Audits identified numerous concerns with various aspects of CBMWD’s operations, including deficiencies in the district’s contracting practices, a pattern of expenditures that may have constituted gifts of public funds, and inadequate leadership by the board of directors. Specifically, the audit report found that:

• CBMWD often inappropriately circumvented its competitive bidding processes when it awarded contracts to vendors during the period that was audited. In support of this finding, the audit report noted that the district did not use competitive bidding for 13 of the 20 contracts reviewed by auditors and did not adequately justify why it failed to competitively bid for 11 of those 13 sole source contracts.
• CBMWD spent thousands of dollars of district money on purposes unrelated to its underlying authority, some of which likely constitute gifts of public funds. For example, the audit report noted that CBMWD provided thousands of dollars in community outreach funds to each board member annually, which various board members had the district donate on their behalf to golf tournaments, a legislator’s breakfast panel, religious organizations, high school sports programs, pageants, and car shows.
• The board of director’s poor leadership has impeded CBMWD’s ability to effectively meet its responsibilities. In support of this finding, the audit report cited the board’s failure to provide stability in the district’s general manager position, lack of essential policies necessary to safeguard the district’s long-term financial viability, inability to maintain the district’s insurance coverage, and failure to disclose the district’s establishment of a legal trust fund and transfers of money into the trust fund.

All but one of the more than two dozen recommendations contained in the audit report are the CBMWD’s responsibility to implement. However, some public officials want the Legislature to change the district’s governing statute to ensure that the district remains accountable to those it serves.

Comments

Purpose of the bill. This bill amends state laws governing the CBMWD to implement some of the recommendation made in the audit report published by the Bureau of State Audits last year. The changes this bill makes to state law will promote public transparency, sound fiscal management, and improved governance at the CBMWD.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee, ongoing costs to the District, likely in the range of $230,000 per year, some of which may be reimbursable by the state General Fund. Actual costs would depend upon a determination by the Commission on State Mandates regarding what expenses incurred by CBMWD in implementing the bill are deemed to be subject to state reimbursement.

SUPPORT: (Verified 8/18/16)

Central Basin Municipal Water District

Central Basin Water Association

City of Huntington Park

City of Lakewood

City of Lynwood

City of Maywood

City of Montebello

City of Paramount

City of Signal Hill

City of South Gate

City of Vernon

Gateway Water Management Authority

Huntington Park City Council Member Karina Macias

OPPOSITION: (Verified 8/18/16)

None received

ASSEMBLY FLOOR: 78-0, 8/18/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Roger Hernández, Kim

Prepared by:

8/24/16 18:31:55

**** END ****

SENATE THIRD READING

STR Bill Id:SB 953

Author:(Lara)

As Amended Ver:August 15, 2016

Majority vote

SENATE VOTE: 26-11

SUMMARY: Establishes restrictions on the Central Basin Municipal Water District's (District) use of sole source contracting. Specifically, this bill:

1. Prohibits the District from using sole source contracts, unless one of the following conditions is met:
   1. The contract is limited to an emergency circumstance; or,
   2. The circumstances are that only one vendor can meet the District's needs.
2. Requires the District, before executing a sole source contract, to provide written justification demonstrating the reasons for not competitively bidding the services. Requires the justification to include all of the following information:
   1. The background of the purchase;
   2. A description of the vendor's uniqueness;
   3. An explanation of the consequences of not purchasing from the vendor;
   4. Market research to substantiate a lack of competition; and,
   5. An analysis of pricing and alternatives.
3. Requires the District to rebid a contract if the District significantly changes the scope of work of the contract. Provides that significant changes include, but are not limited to, changes to the nature of the services or work products.
4. Requires the District's general manager to submit a quarterly report to the District's Board of Directors (Board) detailing all of the District's contracts, contract amendments, and contract and amendment dollar amounts.
5. Prohibits any ordinance, motion, or resolution relating to ethics, compensation, or benefits of the members of the District's Board to be passed or become effective without the affirmative votes of two-thirds of the members of the Board.
6. Provides that the enactment of this bill is contingent upon the enactment of AB 1794 (Garcia) of the current legislative session.
7. Finds and declares that a special law is necessary because of the unique circumstances with the District, as described in the California State Auditor's December 3, 2015 report.
8. Provides that, if the Commission on State Mandates determines that this bill contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made, pursuant to current law governing state mandated local costs.

FISCAL EFFECT: According to the Assembly Appropriations Committee, there are minor costs to the District.

COMMENTS:

1. Bill Summary. Under this bill, the District may only use sole source contracts if the contract is limited to an emergency circumstance or in a circumstance where is there only one vendor that can meet the District's needs. This bill also establishes requirements that the District must fulfill to provide specified written justification and reporting on contracts and costs. This bill also prohibits the Board from adopting any ordinance, motion or resolution, relating to the ethics, compensation, or benefits of Board members without a two-thirds vote of the Board.
2. Central Basin Municipal Water District. The District was formed in 1952 by the voters, pursuant to the Municipal Water District Act of 1911, to help mitigate the overpumping of groundwater in southeast Los Angeles County. The District is a member agency of the Metropolitan Water District of Southern California (Metropolitan), where it purchases imported water from Metropolitan to whole to 40 retail water agencies and one wholesaler that includes cities, water districts, mutual water companies, investor-owned utilities, and private companies. A smaller source of the District's incoming revenue is from the sale of recycled water for municipal, commercial, and industrial use. The District serves nearly 2 million people in 24 cities in southeast Los Angeles County and in some unincorporated areas of the County.
3. Audit Findings. The District has been under increased scrutiny as news reports have highlighted the District's misuse of public funds, inappropriate contracting and employment practices, and several lawsuits. In December 2015, the Bureau of State Audits (BSA) issued a report that identified several key findings:
   1. The Board has failed to provide the leadership necessary for the District to fulfill its responsibilities;
   2. There are a lack of policies to safeguard the District's long-term financial viability;
   3. The District's debt coverage ratio is insufficient and the District's credit rating has been downgraded several times;
   4. The Board's actions caused the District to lose its insurance coverage;
   5. The Board violated state law in 2010, when it approved the establishment of a legal trust fund without adequate public disclosure;
   6. The District frequently inappropriately avoided its competitive bidding processes, while awarding contracts to vendors;
   7. The District spent thousands of dollars on purposes unrelated to its underlying authority; and,
   8. The District failed to follow its policies for hiring employees and failed to ensure stability in its key executive management position.

To address these findings, the audit made numerous recommendations, most of which do not require legislation. Additionally, the audit included an addendum report from the District, which includes actions to put in place many of the recommendations contained in the audit.

The audit only includes one recommendation that requires legislation: "To ensure the efficient and effective delivery of imported and recycled water in southeastern Los Angeles County, the Legislature should pass special legislation to preserve the district as an independent entity but modify the District's governance structure. In doing so, the Legislature should consider a governance structure that ensures the District remains accountable to those it serves, for example, by changing the District's board from one elected by the public at large to one appointed by the District's customers."

1. Related Legislation and Contingent Enactment. AB 1794 (Garcia), pending in the Senate, establishes a governance structure for the District. This bill and AB 1794 (Garcia) contain language that requires contingent enactment.
2. Policy Consideration. According to the BSA report, "Given the concerns we raise in this report, a dissolution or restructuring may become necessary in the future. Should the board not succeed in maintaining a stable leadership team, should the district experience additional lawsuits, or should it lose its insurance coverage again, it will risk not being able to operate effectively as an independent entity. However, because of the recent progress, a complete dissolution may be premature at this time." The Legislature may wish to consider if the internal changes made by the District, combined with proposed changes in this bill, will be enough to address the multitude of issues identified by the audit.

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958 FN: 0004193

Date of Hearing: August 3, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 953

Author:(Lara) – As Amended Ver:August 1, 2016

Urgency: No State Mandated Local Program: Yes Reimbursable: Yes

SUMMARY:

This bill revises the composition of the Central Basin Municipal Water District's (CBMWD) Board of Directors (Board) by specifying a seven-member board of directors comprised of five elected directors and two directors appointed by Los Angeles County Board of Supervisors, and establishes restrictions on the District's use of sole source contracting.

FISCAL EFFECT:

On-going costs to the District, likely in the range of $230,000 per year, some of which may be reimbursable by the state General Fund. Actual costs would depend upon a determination by the Commission on State Mandates (Commission) regarding what expenses incurred by CBMWD in implementing the bill are deemed to be subject to state reimbursement.

COMMENTS:

1. Purpose. According to the author, "This bill amends state laws governing the CBMWD to implement some of the recommendations made in the audit report published by the Bureau of State Audits last year. Specifically, this bill implements the auditor’s recommendation for legislation to change the membership of District's governing board. By requiring the Board of Supervisors to appoint two additional members to District's board, this bill seeks to add some independent participants to the District’s policymaking process and make the board more representative and accountable. The changes this bill makes to state law will promote public transparency, sound fiscal management, and improved governance at the District."
2. Central Basin Municipal Water District. Existing law, the Municipal Water District Law of 1911, governs the formation, internal organization, and elections for municipal water districts. That law requires the board of directors of a municipal water district to consist of five members elected by voters in each of five divisions of the district, and requires each board member to be a resident of the division that he or she represents. Existing law requires board members to receive compensation of up to $100 per day, up to six days per month, for attendance at board meetings or other service rendered as a board member, plus expenses incurred in the performance of official duties. Municipal water districts have the authority to fix rates at which water is sold, as specified, to cover operating expenses, repairs and maintenance, improvements, and principal and interest on debt payments.

The CBMWD was established by voters in 1952 to help mitigate groundwater overpumping in southeast Los Angeles County. CBMWD purchases imported water from the Metropolitan Water District of Southern California for sale to retail water suppliers, including cities, other water districts, mutual water companies, investor‑owned utilities, and private companies within the district’s boundaries. Those water retailers in turn provide water to residents and businesses within their respective service areas. CBMWD serves a population of more than 2 million people living in 24 cities and some unincorporated areas within the district’s approximately 227 square mile service area.

An audit report issued in December of 2015 by the Bureau of State Audits (BSA) identified numerous concerns with various aspects of CBMWD’s operations, including deficiencies in the district’s contracting practices, a pattern of expenditures that may have constituted gifts of public funds, and inadequate leadership by the board of directors. Among other issues, the audit report found that:

"Poor leadership by the board of directors has impeded CBMWD’s ability to effectively meet its responsibilities. In support of this finding, the audit report cited the board’s failure to provide stability in the district’s general manager position, lack of essential policies necessary to safeguard the district’s long-term financial viability, inability to maintain the district’s insurance coverage, and failure to disclose the district’s establishment of a legal trust fund and transfers of money into the trust fund."

All but one of the more than two dozen recommendations contained in the audit report are the CBMWD’s responsibility to implement. However, one recommendation in the audit report is directed to the Legislature. Specifically, the audit report suggests a change in state law that would preserve the district as an independent entity but modify the district's governance structure to ensure that the district remains accountable to those it serves.

Related Legislation.

1. AB 1794 (Garcia), an urgency measure pending in the Senate Appropriations Committee, also revises the governance structure of the CBMWD by specifying a seven-member board of directors comprised of four elected directors and three directors appointed by water purveyors. The bill would also require the board to establish a technical advisory committee within the CBMWD.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: June 29, 2016

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Susan Talamantes Eggman, Chair

SBPCA Bill Id:SB 953

Author:(Lara) – As Introduced Ver:February 4, 2016

SENATE VOTE: 26-11

SUBJECT: Central Basin Municipal Water District.

SUMMARY: Makes changes to the composition of the Central Basin Municipal Water District's (District) Board of Directors (Board) and establishes restrictions on the District's use of sole source contracting. Specifically, this bill:

1. Requires the Board to consist of seven members to each serve four-year terms. Requires the members of the Board to be selected as follows:
   1. Five (5) directors elected in accordance with the Municipal Water District Law, which requires each of the five directors to be a resident from the division from which they are elected. Requires the directors elected on or before January 1, 2018, to continue to serve their term, pursuant to existing law.
   2. Two (2) directors appointed by the Los Angeles County Board of Supervisors (Board of Supervisors) in a public meeting. Requires the Board of Supervisors to consider any nominations of candidates for appointment made by a water retailer that purchases water from the District, if any, and allows the Board of Supervisors to also consider other qualified candidates for appointment.
2. Requires each appointed director to possess the following qualifications:
   1. Residence within the District's boundaries; and,
   2. Knowledge of the water industry and familiarity with the role and responsibilities of a municipal water district.
3. Requires the Board of Supervisors to appoint a director to fill a vacancy of any appointed director who is unable to serve for the duration of his or her term, pursuant to 1b), above.
4. Prohibits the District from using sole source contracts, unless one of the following conditions is met:
   1. The contract is limited to an emergency circumstance; or,
   2. The circumstances are that only one vender can meet the District's needs.
5. Requires the District, before executing a sole source contract, to provide written justification demonstrating the reasons for not competitively bidding the services. Requires the justification to include all of the following information:
   1. The background of the purchase;
   2. A description of the vendor's uniqueness;
   3. An explanation of the consequences of not purchasing from the vendor;
   4. Market research to substantiate a lack of competition; and,
   5. An analysis of pricing and alternatives.
6. Requires the District to rebid a contract if the District significantly changes the scope of work of the contract. Provides that significant changes include, but are not limited to, changes to the nature of the services or work products.
7. Requires the District's general manager to submit a quarterly report to the District's Board detailing all of the District's contracts, contract amendments, and contract and amendment dollar amounts.
8. Prohibits the District from providing any members of the Board with District funds to conduct community outreach activities.
9. Finds and declares that a special law is necessary because of the unique circumstances with the District, as described in the California State Auditor's December 3, 2015 report.
10. Provides that, if the Commission on State Mandates determines that this bill contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made, pursuant to current law governing state mandated local costs.

EXISTING LAW:

1. Establishes the Municipal Water District Law, which governs the formation, internal organization, and elections for municipal water districts.
2. Requires a municipal water district board of directors to consist of five members elected by the voters in each of the five divisions of the district. Requires that each director elected is a resident of that division.
3. Requires directors to be elected at general district elections, which means the election of directors held in each even-numbered year at the time of the general election.
4. Authorizes a municipal water district to contract with other public agencies, private corporations, or persons to finance acquisitions, constructions, and operations for the purpose of carrying out any of the powers of a district.

FISCAL EFFECT: According to the Senate Appropriations Committee, this bill contains unknown local costs, some of which may be reimbursable by the state General Fund. Potentially reimbursable costs may exceed $50,000. Actual costs would depend upon a determination by the Commission on State Mandates regarding what expenses incurred by [the District] in implementing the bill are deemed to be subject to state reimbursement. See staff comments [in the Senate Appropriations Committee analysis] for a discussion of potentially reimbursable costs.

COMMENTS:

1. Bill Summary. This bill establishes a governance structure for the District. This bill establishes a seven-member Board composed of five directors elected, pursuant to the Municipal Water District Law, and two directors appointed by the Local Angeles County Board of Supervisors in a public meeting. The two appointed directors must reside within the boundaries of the District and have knowledge of the water industry and familiarity with the role and responsibilities of a municipal water district.

Under this bill, the District may only use sole source contracts if the contract is limited to an emergency circumstance or in a circumstance where is there only one vender that can meet the District's needs. This bill also establishes requirements that the District must fulfill to provide specified written justification and reporting on contracts and costs. This bill also prohibits funds from being provided to the Board for community outreach activities.

1. Author's Statement. According to the author, "This bill amends state laws governing the CBMWD to implement some of the recommendations made in the audit report published by the Bureau of State Audits last year. Specifically, this bill implements the auditor’s recommendation for legislation to change the membership of [District's] governing board. By requiring the [Board of Supervisors] to appoint two additional members to [District's] board, this bill seeks to add some independent participants to the [District’s] policymaking process and make the board more representative and accountable. The changes this bill makes to state law will promote public transparency, sound fiscal management, and improved governance at the [District]."
2. Central Basin Municipal Water District. The District was formed in 1952 by the voters, pursuant to the Municipal Water District Act of 1911, to help mitigate the overpumping of groundwater in southeast Los Angeles County. The District is a member agency of the Metropolitan Water District of Southern California (Metropolitan), where it purchases imported water from Metropolitan to whole to 40 retail water agencies and one wholesaler that includes cities, water districts, mutual water companies, investor-owned utilities, and private companies. A smaller source of the District's incoming revenue is from the sale of recycled water for municipal, commercial, and industrial use. The District serves nearly two million people in 24 cities in southeast Los Angeles County and in some unincorporated areas of the County.

The District is governed by a five-member Board with each director representing a division within the District. Voters within each division elect a director to a four-year term. There are no term limits for the Board, as some directors are currently serving their fourth and fifth terms on the Board. Directors in three of the five divisions are up for election in November of 2016.

The District has been under increased scrutiny as news reports have highlighted the District's misuse of public funds, inappropriate contracting and employment practices, and several lawsuits. In June of 2014, the Los Angeles County Board of Supervisors directed the County Chief Executive Office, County Counsel, and Department of Public Works to consult with the District to ensure all necessary steps were being taken to address and correct their ongoing problems, investigate options to ensure continued water availability and service to the District's customers, and report back to the Board of Supervisors with findings and recommendations. While the report contained a section discussing the transfer of ownership of the District to another entity and the dissolution process outlined in current law, the ultimate recommendation to the Board of Supervisors was to request a comprehensive audit of the District by the California State Auditor.

1. Audit Findings. In December 2015, the Bureau of State Audits (BSA) issued a report that identified several key findings:
   
   1. The Board has failed to provide the leadership necessary for the District to fulfill its responsibilities;
      
   2. There are a lack of policies to safeguard the District's long-term financial viability;
      
   3. The District's debt coverage ratio is insufficient and the District's credit rating has been downgraded several times;
      
   4. The Board's actions caused the District to lose its insurance coverage;
      
   5. The Board violated state law in 2010, when it approved the establishment of a legal trust fund without adequate public disclosure;
      
   6. The District frequently inappropriately avoided its competitive bidding processes, while awarding contracts to vendors;
      
   7. The District spent thousands of dollars on purposes unrelated to its underlying authority; and,
      
   8. The District failed to follow its policies for hiring employees and failed to ensure stability in its key executive management position.
      

To address these findings, the audit made numerous recommendations, most of which do not require legislation. Additionally, the audit included an addendum report from the District, which includes actions to put in place many of the recommendations contained in the audit.

The audit only includes one recommendation that requires legislation: "To ensure the efficient and effective delivery of imported and recycled water in southeastern Los Angeles County, the Legislature should pass special legislation to preserve the district as an independent entity but modify the District's governance structure. In doing so, the Legislature should consider a governance structure that ensures the District remains accountable to those it serves, for example, by changing the District's board from one elected by the public at large to one appointed by the District's customers."

1. Related Legislation. AB 1794 (Garcia), pending in the Senate, also establishes a governance structure for the District. AB 1794 adds three appointed directors to the Board and creates a technical oversight committee.
   
   
2. Policy Considerations. According to the BSA report, "Given the concerns we raise in this report, a dissolution or restructuring may become necessary in the future. Should the board not succeed in maintaining a stable leadership team, should the district experience additional lawsuits, or should it lose its insurance coverage again, it will risk not being able to operate effectively as an independent entity. However, because of the recent progress, a complete dissolution may be premature at this time." The Committee may wish to consider if the internal changes made by the District, combined with proposed changes to the governance structure, will be enough to address the multitude of issues identified by the audit.
3. Arguments in Support. Supporters argue that this bill creates greater transparency in the District's contracting process and that this bill increases public accountability by authorizing the Board of Supervisors to appoint two additional members to the Board.
4. Arguments in Opposition. None on file.

REGISTERED SUPPORT / OPPOSITION:

Support

Central Basin Municipal Water District (if amended)

Cities of Lakewood, Lynwood, Maywood, Montebello, Paramount, Signal Hill, South Gate,

and Vernon

Karina Macias, City Council Member, City of Huntington Park

Opposition

None on file

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958

 THIRD READING  

Bill No: SB 953

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 5-1, 4/6/16

AYES: Hertzberg, Beall, Hernandez, Lara, Pavley

NOES: Moorlach

NO VOTE RECORDED: Nguyen

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16

AYES: Lara, Beall, Hill, McGuire, Mendoza

NOES: Bates, Nielsen

SUBJECT:

SOURCE: Author

DIGEST: This bill changes the membership of the Central Basin Municipal Water District’s board of directors, prohibits directors from using district funds for outreach purposes, and imposes restrictions on the District’s contracting practices.

ANALYSIS:

Existing law:

1. Governs, pursuant to the Municipal Water District Law of 1911, the formation, internal organization, and elections for municipal water districts.
2. Requires the board of directors of a municipal water district to consist of five members elected by voters in each of five divisions of the district, and requires each board member to be a resident of the division that he or she represents.
3. Requires municipal water district board members to receive compensation of up to $100 per day, up to six days per month, for attendance at board meetings or other service rendered as a board member, plus expenses incurred in the performance of official duties.

This bill:

1. Expands the membership of Central Basin Municipal Water District’s (CBMWD’s) board of directors from five to seven members.
2. Requires that five members of the board must be elected to four-year terms pursuant to specified provisions of current state law and two additional members of the governing board must be appointed to four-year terms by the board of supervisors of the County of Los Angeles in a public meeting.
3. Requires the board of supervisors to consider any nominations of candidates for appointment made by a water retailer that purchases water from the district, if any, and allows the supervisors to consider other qualified candidates for appointment.
4. Requires each member of the board of directors appointed by the board of supervisors to possess the following qualifications:
   1. Residence within the boundaries of the district.
   2. Knowledge of the water industry and familiarity with the role and responsibilities of a municipal water district.
5. Specifies the manner in which the board of supervisors must appoint a member to fill a vacancy if a member of CBMWD’s board of directors appointed by the board of supervisors is unable to serve for the duration of his or her term.
6. Prohibits CBMWD from using sole source contracts unless one of the following conditions is met:
   1. The contract is limited to an emergency circumstance.
   2. The circumstances are that only one vendor can meet the district’s needs.
7. Requires that CBMWD, before executing a sole source contract, must provide written justification, which must include specified information, demonstrating the reasons for not competitively bidding the services.
8. Requires CBMWD to rebid a contract if the district significantly changes the scope of work of the contract. This bill defines “significant changes” to include changes to the nature of the services or work products.
9. Requires CBMWD’s general manager to submit a quarterly report to the district’s board detailing all of the district’s contracts, contract amendments, and contract and amendment dollar amounts.
10. Prohibits CBMWD from providing any member of its board of directors with district funds to conduct community outreach activities.

Background

The CBMWD was established by voters in 1952 to help mitigate groundwater over pumping in southeast Los Angeles County. CBMWD purchases imported water from the Metropolitan Water District of Southern California for sale to retail water suppliers, including cities, other water districts, mutual water companies, investor-owned utilities, and private companies within the district’s boundaries. Those water retailers in turn provide water to residents and businesses within their respective service areas. CBMWD serves a population of more than two million people living in 24 cities and some unincorporated areas within the district’s approximately 227 square mile service area. The five members of CBMWD’s board of directors are each elected by voters residing in one of five divisions within the district’s boundaries.

An audit report issued in December of 2015 by the Bureau of State Audits identified numerous concerns with various aspects of CBMWD’s operations, including deficiencies in the district’s contracting practices, a pattern of expenditures that may have constituted gifts of public funds, and inadequate leadership by the board of directors. Specifically, the audit report found that:

• CBMWD often inappropriately circumvented its competitive bidding processes when it awarded contracts to vendors during the period that was audited. In support of this finding, the audit report noted that the district did not use competitive bidding for 13 of the 20 contracts reviewed by auditors and did not adequately justify why it failed to competitively bid for 11 of those 13 sole source contracts.
• CBMWD spent thousands of dollars of district money on purposes unrelated to its underlying authority, some of which likely constitute gifts of public funds. For example, the audit report noted that CBMWD provided thousands of dollars in community outreach funds to each board member annually, which various board members had the district donate on their behalf to golf tournaments, a legislator’s breakfast panel, religious organizations, high school sports programs, pageants, and car shows.
• The board of director’s poor leadership has impeded CBMWD’s ability to effectively meet its responsibilities. In support of this finding, the audit report cited the board’s failure to provide stability in the district’s general manager position, lack of essential policies necessary to safeguard the district’s long-term financial viability, inability to maintain the district’s insurance coverage, and failure to disclose the district’s establishment of a legal trust fund and transfers of money into the trust fund.

All but one of the more than two dozen recommendations contained in the audit report are the CBMWD’s responsibility to implement. However, one recommendation in the audit report is directed to the Legislature. Specifically, the audit report suggests a change in state law that would preserve the district as an independent entity but modify the district's governance structure to ensure that the district remains accountable to those it serves.

Comments

Purpose of this bill. This bill amends state laws governing the CBMWD to implement some of the recommendation made in the audit report published by the Bureau of State Audits last year. Specifically, this bill implements the auditor’s recommendation for legislation to change the membership of CBMWD’s governing board. By requiring the Los Angeles County Board of Supervisors to appoint two additional members to CBMWD’s board, this bill seeks to add some independent participants to the CBMWD’s policymaking process and make the board more representative and accountable. The changes this bill makes to state law will promote public transparency, sound fiscal management, and improved governance at the CBMWD.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, unknown local costs, some of which may be reimbursable by the state General Fund. Potentially reimbursable costs may exceed $50,000. Actual costs would depend upon a determination by the Commission on State Mandates regarding what expenses incurred by CBMWD in implementing the bill are deemed to be subject to state reimbursement.

SUPPORT: (Verified 5/27/16)

Central Basin Water Association

City of Huntington Park

City of Lynwood

City of Maywood

City of Montebello

City of Signal Hill

City of South Gate

City of Vernon

OPPOSITION: (Verified 5/27/16)

None received

Prepared by:

5/28/16 16:45:56

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 953 (Lara) - Central Basin Municipal Water District

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 953 would add two appointed members to the Central Basin Municipal Water District’s (CBMWD’s) board of directors, prohibit the use of district funds for board members to conduct community outreach, and make specified changes to CBMWD’s contracting practices.

Fiscal Impact:

Unknown local costs, some of which may be reimbursable by the state General Fund. Potentially reimbursable costs may exceed $50,000. Actual costs would depend upon a determination by the Commission on State Mandates (Commission) regarding what expenses incurred by CBMWD in implementing the bill are deemed to be subject to state reimbursement. See staff comments for a discussion of potentially reimbursable costs.

Background:

Existing law, the Municipal Water District Law of 1911, governs the formation, internal organization, and elections for municipal water districts. That law requires the board of directors of a municipal water district to consist of five members elected by voters in each of five divisions of the district, and requires each board member to be a resident of the division that he or she represents. Existing law requires board members to receive compensation of up to $100 per day, up to six days per month, for attendance at board meetings or other service rendered as a board member, plus expenses incurred in the performance of official duties. Municipal water districts have the authority to fix rates at which water is sold, as specified, to cover operating expenses, repairs and maintenance, improvements, and principal and interest on debt payments.

The CBMWD was established by voters in 1952 to help mitigate groundwater overpumping in southeast Los Angeles County. CBMWD purchases imported water from the Metropolitan Water District of Southern California for sale to retail water suppliers, including cities, other water districts, mutual water companies, investor‑owned utilities, and private companies within the district’s boundaries. Those water retailers in turn provide water to residents and businesses within their respective service areas. CBMWD serves a population of more than 2 million people living in 24 cities and some unincorporated areas within the district’s approximately 227 square mile service area.

An audit report issued in December of 2015 by the Bureau of State Audits (BSA) identified numerous concerns with various aspects of CBMWD’s operations, including deficiencies in the district’s contracting practices, a pattern of expenditures that may have constituted gifts of public funds, and inadequate leadership by the board of directors. Specifically, the audit report found that:

• CBMWD often inappropriately circumvented its competitive bidding processes when it awarded contracts to vendors during the period that was audited. The BSA noted that the district did not use competitive bidding for 13 of the 20 contracts reviewed by auditors, and did not adequately justify why it failed to competitively bid for 11 of those 13 sole source contracts.
• CBMWD spent thousands of dollars of district money on purposes unrelated to its underlying authority, some of which likely constitute gifts of public funds. For example, the audit report noted that CBMWD provided thousands of dollars in community outreach funds to each board member annually, which various board members had the district donate on their behalf to golf tournaments, a legislator’s breakfast panel, religious organizations, high school sports programs, pageants, and car shows.
• Poor leadership by the board of directors has impeded CBMWD’s ability to effectively meet its responsibilities. In support of this finding, the audit report cited the board’s failure to provide stability in the district’s general manager position, lack of essential policies necessary to safeguard the district’s long-term financial viability, inability to maintain the district’s insurance coverage, and failure to disclose the district’s establishment of a legal trust fund and transfers of money into the trust fund.

All but one of the more than two dozen recommendations contained in the audit report are the CBMWD’s responsibility to implement. However, one recommendation in the audit report is directed to the Legislature. Specifically, the audit report suggests a change in state law that would preserve the district as an independent entity but modify the district's governance structure to ensure that the district remains accountable to those it serves.

Proposed Law:

SB 953 would expand the membership of CBMWD’s board of directors from five to seven members. Five board members of the board must be elected to four year terms, as specified in current state law, and two additional board members must be appointed to four year terms by the Los Angeles County board of supervisors in a public meeting, as specified. The board of supervisors must consider any nominations of candidates for appointment made by a water retailer that purchases water from the district, if any, and may also consider other qualified candidates for appointment. Each appointed board member must own a residence within the boundaries of the district, and possess knowledge of the water industry and familiarity with the role and responsibilities of a municipal water district.

SB 953 would prohibit CBMWD from using sole source contracts unless the contract is limited to an emergency circumstance, or there is only one vendor that can meet the district’s needs. Before executing a sole source contract, CBMWD must provide written justification, which must include specified information demonstrating the reasons for not competitively bidding the services. In addition, CBMWD would be required to rebid a contract if the district significantly changes the scope of the contract. The bill defines “significant changes” to include changes to the nature of the services or work products.

SB 953 would also require CBMWD’s general manager to submit a quarterly report to the board of directors that details all of the district’s contracts, contract amendments, and contract and amendment dollar amounts.

Finally, SB 953 would prohibit CBMWD from providing any member of its board of directors with district funds to conduct community outreach activities.

Related Legislation:

AB 1794 (Garcia), an urgency measure that is pending in the Assembly Appropriations Committee, would revise the governance structure of the CBMWD by specifying a seven-member board of directors comprised of four elected directors and three directors appointed by water purveyors. The bill would also require the board to establish a technical advisory committee within the CBMWD.

Staff Comments:

SB 953 would impose new duties and costs on the CBMWD by requiring the appointment of two new members to the board of directors and requiring changes to the district’s contracting practices.

Board of directors: This bill would expand the size of CBMWD’s board of directors from five to seven members, and require the two new board members to be appointed by the Los Angeles County board of supervisors, as specified. The CBMWD indicates that it expects to incur the following annual expenses related to each new board member: $27,960 in per diem compensation, $2,400 in communications expenses, $4,764 in transportation expenses (not including mileage reimbursements), $24,000 in health benefits, and $7,000 in conference and travel expenses. Staff notes that most of this compensation is provided at the discretion of the board, and current law only requires compensation of up to $100 per day for a maximum of six days per month ($7,200 per year), plus reimbursement of expenses incurred in the performance of official duties. The BSA audit report noted that some of the benefits provided to board members, such as full health benefits and a generous automobile allowance, may be overly generous considering board members essentially work part time. The CBMWD also estimates that the additional board members may also drive indirect costs of $50,000 per director for district staff and general counsel services. Most of these costs are not likely to be subject to state-reimbursement because they are provided at the district’s discretion, rather than by statutory requirement.

SB 953 would require the Los Angeles County board of supervisors to appoint two new board members to the CBMWD. In doing so, the bill requires the board of supervisors to consider candidates nominated by water retailers that purchase water from CBMWD, authorizes the county to consider other qualified candidates, and requires the appointments to be made at a public hearing. Staff notes that costs for the board of supervisors to vet candidates and appoint two new CBMWD board members every four years should be relatively minor. Actual costs subject to state reimbursement would be determined by the Commission, if Los Angeles County files a successful reimbursement claim.

CBMWD contracts: This bill would prohibit CBMWD from using sole source contracts unless the contract is limited to an emergency circumstance, or there is only one vendor that can meet the district’s needs. The district would likely incur one-time administrative costs to update contracting procedures to account for the elimination of sole source contracts and the new requirement that the district rebid contracts with significant scope changes. There would also be ongoing administrative costs for the district to comply with competitive bidding requirements when contracting for services. Requiring competitive bidding is likely to result in lower overall contracting costs, however, since the district would be required to select the lowest qualified bidder to perform the contract. The magnitude of these savings is unknown, but likely to be sufficient to offset any increased administrative costs.

Mandate reimbursement: Under the mandates process, local governments, including special districts, may file test claims with the Commission alleging that statutes, regulations, and executive orders impose new programs or increased levels of service upon local entities. The Commission primarily relies on Article XIII of the California Constitution and related case law to make determinations. Reimbursement is required under Article XIII B, section 6 only when the local agency is subject to constitutional tax and spend limitations, and reimbursement is not required when costs are for expenses that are recoverable from sources other than tax revenue (service charges, fees, or assessments).

The CBMWD is an enterprise special district with revenues derived from water rates. Existing law provides the district with the authority to set those rates to cover operating expenses, repairs and maintenance, improvements, and principal and interest on debt payments.

Two recent Commission decisions raise questions about whether any new costs imposed upon CBMWD by SB 953 would be deemed eligible for reimbursement. The Commission’s Statement of Decision on AB 1234, Chapter 700, Statutes of 2005, (Case # 07-TC-04) regarding new requirements for local agency officials to comply with certain ethics training requirements, denied reimbursement authority for special districts that are not funded by proceeds of taxes and are not subject to the tax and spend restrictions of articles XIII A and XIII B of the CA Constitution. According to special district reports filed with the State Controller’s Office, the CBMWD does not receive any proceeds of taxes. In addition, the Commission denied reimbursement to urban retail water suppliers and agricultural water suppliers in its combined Statement of Decision on SBx7 7, Chapter 4, seventh extraordinary session of 2009-10 (Case # 10-TC-12), and Agricultural Water Measurement regulations promulgated by the Department of Water Resources (Case # 12-TC-01). These measures imposed new water conservation requirements on water suppliers and expanded their duties when adopting urban water management plans. The Commission found in this decision that enterprise districts funded exclusively through user fees, charges, or assessments are ineligible for mandate reimbursement. As noted above, the CBMWD is also an enterprise district funded through service charges, fees, or assessments.

Staff notes, however, that decisions by the Commission are not precedential, and each test claim is decided on its individual merits. To the extent that CBMWD is deemed eligible to claim reimbursement, and successfully files a claim with the Commission, reimbursable costs could exceed $50,000. Actual costs would be dependent upon what the Commission determines are eligible mandated costs subject to reimbursement.

-- END --

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

Central Basin Municipal Water District

Changes the membership of the Central Basin Municipal Water District’s board of directors and imposes restrictions on the district’s use of sole source contracts.

Background

The Central Basin Municipal Water District (CBMWD) was established by voters in 1952 to help mitigate groundwater overpumping in southeast Los Angeles County. CBMWD purchases imported water from the Metropolitan Water District of Southern California for sale to retail water suppliers, including cities, other water districts, mutual water companies, investor‑owned utilities, and private companies within the district’s boundaries. Those water retailers in turn provide water to residents and businesses within their respective service areas. CBMWD serves a population of more than 2 million people living in 24 cities and some unincorporated areas within the district’s approximately 227 square mile service area. The five members of CBMWD’s board of directors are each elected by voters residing in one of five divisions within the district’s boundaries.

An audit report issued in December of 2015 by the Bureau of State Audits identified numerous concerns with various aspects of CBMWD’s operations, including deficiencies in the district’s contracting practices, a pattern of expenditures that may have constituted gifts of public funds, and inadequate leadership by the board of directors. Specifically, the audit report found that:

• CBMWD often inappropriately circumvented its competitive bidding processes when it awarded contracts to vendors during the period that was audited. In support of this finding, the audit report noted that the district did not use competitive bidding for 13 of the 20 contracts reviewed by auditors and did not adequately justify why it failed to competitively bid for 11 of those 13 sole source contracts.
• CBMWD spent thousands of dollars of district money on purposes unrelated to its underlying authority, some of which likely constitute gifts of public funds. For example, the audit report noted that CBMWD provided thousands of dollars in community outreach funds to each board member annually, which various board members had the district donate on their behalf to golf tournaments, a legislator’s breakfast panel, religious organizations, high school sports programs, pageants, and car shows.
• The board of director’s poor leadership has impeded CBMWD’s ability to effectively meet its responsibilities. In support of this finding, the audit report cited the board’s failure to provide stability in the district’s general manager position, lack of essential policies necessary to safeguard the district’s long-term financial viability, inability to maintain the district’s insurance coverage, and failure to disclose the district’s establishment of a legal trust fund and transfers of money into the trust fund.

All but one of the more than two dozen recommendations contained in the audit report are the CBMWD’s responsibility to implement. However, one recommendation in the audit report is directed to the Legislature. Specifically, the audit report suggests a change in state law that would preserve the district as an independent entity but modify the district's governance structure to ensure that the district remains accountable to those it serves.

Proposed Law

Senate Bill 953 expands the membership of CBMWD’s board of directors from five to seven members. Five members of the board must be elected to four year terms pursuant to specified provisions of current state law. Two additional members of the governing board must be appointed to four year terms by the board of supervisors of the County of Los Angeles in a public meeting. The board of supervisors must consider any nominations of candidates for appointment made by a water retailer that purchases water from the district, if any, and may also consider other qualified candidates for appointment. Each member of the board of directors appointed by the board of supervisors must possess the following qualifications:

• Residence within the boundaries of the district.
• Knowledge of the water industry and familiarity with the role and responsibilities of a municipal water district.

SB 953 specifies the manner in which the board of supervisors must appoint a member to fill a vacancy if a member of CBMWD’s board of directors appointed by the board of supervisors is unable to serve for the duration of his or her term.

Senate Bill 953 prohibits CBMWD from using sole source contracts unless one of the following conditions is met:

• The contract is limited to an emergency circumstance.
• The circumstances are that only one vendor can meet the district’s needs.

SB 953 requires that CBMWD, before executing a sole source contract, must provide written justification, which must include specified information, demonstrating the reasons for not competitively bidding the services.

SB 953 requires CBMWD to rebid a contract if the district significantly changes the scope of work of the contract. The bill defines “significant changes” to include changes to the nature of the services or work products.

SB 953 requires CBMWD’s general manager to submit a quarterly report to the district’s board detailing all of the district’s contracts, contract amendments, and contract and amendment dollar amounts.

SB 953 prohibits CBMWD from providing any member of its board of directors with district funds to conduct community outreach activities.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. SB 953 amends state laws governing the CBMWD to implement some of the recommendation made in the audit report published by the Bureau of State Audits last year. Specifically, the bill implements the auditor’s recommendation for legislation to change the membership of CBMWD’s governing board. By requiring the Los Angeles County Board of Supervisors to appoint two additional members to CBMWD’s board, SB 953 seeks to add some independent participants to the CBMWD’s policymaking process and make the board more representative and accountable. The changes SB 953 makes to state law will promote public transparency, sound fiscal management, and improved governance at the Central Basin Municipal Water District.

2. Independence vs. responsiveness. SB 953 adds two new members to CBMWD’s governing board and specifies relatively broad qualifications that the appointees must fulfill. By making the Los Angeles County Board of Supervisors responsible for appointing the two new district board members, the bill ensures that the appointees will bring some independent perspectives to CBMWD’s board. However, placing the appointments in the hands of some county supervisors who don’t represent any of the area within CBMWD’s boundaries raises questions about whether the appointees will be sufficiently responsive to water purveyors and consumers within the district. To help to achieve a balance between independence and responsiveness, the bill could require appointees to meet more specific and rigorous qualifications that will ensure that they possess sufficient expertise and familiarity with CBMWD’s important responsibilities in the communities that it serves. For example, the bill could require that appointees have at least five years of prior service with a retail water provider as either an elected official or manager.

3. Not just governance. SB 953 goes beyond the auditor’s recommendation that state law should change the CBMWD’s governance structure to enact several other requirements relating to CBMWD’s contracting procedures and a prohibition on board members spending outreach funds. These other provisions reflect audit recommendations that last year’s audit report identified as being the district’s responsibility to implement. District officials note that they have already implemented approximately two-thirds of the recommendations made in the audit report. Among the many recommendations that have already been adopted, the district has improved contract management by adopting stronger procurement policies and has eliminated board director outreach funds. Although some of SB 953’s provisions may not have been suggested as statutory changes by the auditor and may require CBMWD to take actions that it is already in the process of implementing, placing those requirements in state law will provide the public with greater confidence that a future CBMWD governing board could not undo some of the progress that the district has made since the audit’s completion.

4. Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). SB 953 contains findings and declarations explaining the need for legislation that applies only to CBMWD.

5. Mandate. The California Constitution requires the state to reimburse local governments for the costs of new or expanded state mandated local programs. Because SB 953 imposes new reporting requirements and other additional duties on CBMWD officials, Legislative Counsel says that it imposes a new state mandate. SB 953 requires the state to reimburse local agencies if the Commission on State Mandates determines that the bill imposes a reimbursable mandate.

6. Related legislation. AB 1794 (Garcia) would alter the membership of CBMWD’s board of directors to include seven members, comprised of four directors elected by voters and three directors appointed by water purveyors. The bill would also require CBMWD to establish a technical advisory committee. AB 1794 is scheduled to be considered by the Assembly Local Government Committee at its April 6, 2016 hearing.

Support and Opposition

(3/31/16)

Support: Central Basin Water Association; Cities of Maywood, Lynwood, Montebello, Signal Hill, South Gate, and Vernon.

Opposition: Unknown.

-- END --