Today's Law As Amended


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SB-625 Central Basin Municipal Water District: receivership.(2019-2020)



As Amends the Law Today


SECTION 1.
 The Legislature hereby finds and declares all of the following:
(a) In a 2015 audit of the Central Basin Municipal Water District (district), the California State Auditor concluded that the district’s board of directors’ poor leadership, decisionmaking, and oversight hinder the district’s ability to meet its responsibilities. In other findings, the audit states that the board violated state law in creating a $2,750,000 trust fund. In addition, the audit observed that the board gave its members benefits that were too generous. The California State Auditor recommended that the Legislature preserve the district as an independent entity but modify its governance structure to ensure it remains accountable to those it serves—it could change the district’s board from one elected by the public at large to one appointed by the district’s customers.
(b) In 2016, the Legislature reformed the district’s board by enacting Chapter 401 of the Statutes of 2016 to add three water or management professionals appointed by the district’s customers, which are public water systems, increasing the total number of directors to eight. The district does not serve water directly to residents or voters. A majority of the board of a municipal water district constitutes a quorum for the transaction of business, thereby requiring five of the eight total district board members to form a quorum or take any action.
(c) In late 2019, four members of the district’s board (the Four Directors) started asserting that a majority of the board only required four board members, because one of the appointed members had resigned in October 2019. Despite the parties responsible for the appointment completing the required process for appointment, the board has resisted swearing in an eighth member.
(d) On January 30, 2020, the Four Directors rejected the advice from the district’s counsel at a public meeting that, with only four members remaining, they no longer had a quorum and could not legally transact district business. The Four Directors then purported to appoint Leticia Vasquez as president of the board. On February 6, 2020, the Four Directors purported to fire the district’s counsel and hire another attorney, who then advised the board publicly that four members of the board constituted a quorum.
(e) On March 6, 2020, the Los Angeles District Attorney’s Office (DA) sent the district’s board members a letter demanding that they cure the February 6, 2020, violations of the Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government Code). Specifically, the DA demanded the cure of deficient notice of the February 6, 2020, “special meeting” and the insufficient votes to appoint a new attorney. The board’s purported attorney responded in a letter, rejecting the DA’s demand and arguing that four members constituted a majority.
(f) On March 25, 2020, district customers filed City of Commerce, et al. v. Central Basin Municipal Water District, a Special District, et al. to void the district’s alleged illegal actions and stop the board of directors of the district from further illegal action. In response, the board’s purported attorney filed an ex parte application for the superior court to order that four board members constituted a majority. The court denied the ex parte application, and set the trial for July 23, 2020, despite the board’s purported attorney arguing that the district needed an immediate answer because the district could not obtain insurance.
(g) The district operates at a deficit, using its reserve funds to make up the difference. It has failed to enact cost-cutting measures in light of a substantial loss of water sales revenue. The district has not adopted a budget for the 2020–21 fiscal year and has not started the process required to impose the standby charge it has imposed since 1991. Failure to approve the standby charge would reduce the district’s annual revenues by more than $3,000,000.
(h) The district has failed to legally appoint a general manager or general counsel with the necessary five directors to approve those appointments. The district has failed to contract for information technology support services, resulting in risk to its supervisory control and data acquisition (SCADA) system, billing system, payroll system, and computer network.
(i) In light of the COVID-19 crisis, a stable and consistent drinking water supply is essential to the people of the southeastern portion of the County of Los Angeles. They cannot afford to have the public water systems that deliver drinking water to their taps focus on conflict with the district. Their public water systems need a water supply from a stable wholesale water agency.
(j) The problems at the district that the California State Auditor identified in 2015 cannot be resolved by the district board as currently constituted. Protecting the imported water supply from the district requires immediate action to appoint a receiver for the district while the community addresses alternatives for long-term governance.

SEC. 2.

 Part 3.5 (commencing with Section 71400) is added to Division 20 of the Water Code, to read:

PART 3.5. Central Basin Municipal Water District Receivership

71400.
 For purposes of this part, “district” means the Central Basin Municipal Water District.
71401.
 Notwithstanding Chapter 1.6 (commencing with Section 71265) of Part 3, all of the following shall apply:
(a) The board of directors of the district is hereby dissolved. A member of the board of directors of the district shall have no claim for benefits other than those the member actually received while a member of the board of directors.
(b) Upon the effective date of this part, the district’s board of directors shall surrender all control of the district and its resources to the Water Replenishment District of Southern California. The members of the district’s board of directors shall surrender to district staff all district property, including, but not limited to, keys, mobile telephones, and credit cards, and access to district bank accounts and other resources or information provided to the directors in their capacity as directors.
(c) The board of directors of the district shall not have any authority, including, but not limited to, the authority to do either of the following:
(1) Represent the interests of the voters or public water systems within the service territory of the district.
(2) Influence the operation of the district.
(d) The November 3, 2020, election for directors of the district shall not occur.
71402.
 (a) The Water Replenishment District of Southern California shall act as the receiver for the district.
(b) The Water Replenishment District of Southern California shall have all necessary powers described in this division to take control of the district, including, but not limited to, powers related to assets, revenues, employees, facilities, and services. Financial institutions holding money or other assets owned by the district shall transfer control of those assets to the Water Replenishment District of Southern California.
(c) All powers vested in the board of directors of the district are hereby transferred to the board of directors of the Water Replenishment District of Southern California, except that the Water Replenishment District of Southern California shall not have the authority to do any of the following:
(1) Dissolve the district.
(2) Revise the transfer of powers from the district to the Water Replenishment District of Southern California as provided in this part.
(3) (A) Change the wages, hours, or other terms and conditions of employment of the district’s employees, including imposing layoffs or furloughs, unless the Water Replenishment District of Southern California makes such changes after meeting and conferring with a recognized employee organization representative of the district’s employees pursuant to Chapter 10 (commencing with Section 3500) of Division 4 of Title 1 of the Government Code.
(B) Notwithstanding subparagraph (A), the Water Replenishment District of Southern California shall have the authority to increase wages and benefits of the district’s employees.
(d) The board of directors of the Water Replenishment District of Southern California shall, on or before 30 days after the effective date of this part, present a financial plan for managing the receivership to its existing budget advisory committee.
(e) The Water Replenishment District of Southern California shall, on or before 60 days after the effective date of this part, complete the annual process required by the Uniform Standby Charge Procedures Act (Chapter 12.4 (commencing with Section 54984) of Part 1 of Division 2 of Title 5 of the Government Code) to impose the standby charge that the district has imposed annually since 1991.
(f) The Water Replenishment District of Southern California shall use only the district’s revenues to pay the costs of the receivership and the reasonable costs of the Local Agency Formation Commission for the County of Los Angeles to complete the municipal service review required pursuant to Section 71403.
(g) To the extent permitted under the Constitution of the United States or the Constitution of the State of California, the Water Replenishment District of Southern California and the Local Agency Formation Commission for the County of Los Angeles shall not be held liable for claims concerning the operation and supply of water from the district before the commencement of the receivership.
71403.
 (a) The Local Agency Formation Commission for the County of Los Angeles shall, using its existing authority, conduct a municipal service review of the district pursuant to Section 56430 of the Government Code.
(b) (1) The commission shall report the results of the municipal service review to the Legislature in compliance with Section 9795 of the Government Code on or before nine months after the effective date of this part or December 31, 2020, whichever date occurs later.
(2) The report shall focus on the element of the municipal service review described in paragraph (7) of subdivision (a) of Section 56430 of the Government Code by recommending alternatives for long-term governance of the services of selling Metropolitan Water District of Southern California water to public water systems in the service territory of the district and selling recycled water from the Los Angeles County Sanitation Districts.
(c) (1) The commission shall, through a public process, seek ideas for governance of the district from all of the following:
(A) Customers who buy water from the district, represented by the Central Basin Water Association.
(B) Other public agencies in or near the district’s service territory, including, but not limited to, the County of Los Angeles, the Water Replenishment District of Southern California, and the Metropolitan Water District of Southern California.
(C) The general public in and near the district’s service territory.
(2) The commission shall include the results of the public process in the report.
71404.
 This part shall become inoperative 18 months after the effective date of this part, and, as of January 1 of the following year, is repealed.
SEC. 3.
 The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique need to protect the imported water supply from the Central Basin Municipal Water District by immediately appointing a receiver for the district while the community addresses alternatives for long-term governance.
SEC. 4.
 No reimbursement is required by this act pursuant to Section 6 of Article XIII   B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.
However, if the Commission on State Mandates determines that this act contains other costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
SEC. 5.
 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to protect the imported water supply from the Central Basin Municipal Water District by immediately appointing a receiver for the district while the community addresses alternatives for long-term governance, it is necessary that this act take effect immediately.