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AB-2050 Small System Water Authority Act of 2018.(2017-2018)

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Date Published: 08/29/2018 09:00 PM
AB2050:v92#DOCUMENT

Enrolled  August 29, 2018
Passed  IN  Senate  August 22, 2018
Passed  IN  Assembly  August 27, 2018
Amended  IN  Senate  August 06, 2018
Amended  IN  Senate  June 11, 2018
Amended  IN  Assembly  May 25, 2018
Amended  IN  Assembly  May 09, 2018
Amended  IN  Assembly  April 17, 2018
Amended  IN  Assembly  March 19, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill
No. 2050

Introduced by Assembly Member Caballero

February 06, 2018

An act to amend Sections 56017.1, 56017.2, 56069, 56653, 56658, and 56895 of, and to add Section 56666.5 to, the Government Code, and to add Division 23 (commencing with Section 78000) to the Water Code, relating to small system water authorities.


LEGISLATIVE COUNSEL'S DIGEST


AB 2050, Caballero. Small System Water Authority Act of 2018.
Existing law, the California Safe Drinking Water Act, provides for the operation of public water systems and imposes on the State Water Resources Control Board various responsibilities and duties. The act authorizes the state board to order consolidation with a receiving water system where a public water system or a state small water system, serving a disadvantaged community, as defined, consistently fails to provide an adequate supply of safe drinking water. The act, if consolidation is either not appropriate or not technically and economically feasible, authorizes the state board to contract with an administrator to provide administrative and managerial services to designated public water systems and to order the designated public water system to accept administrative and managerial services, as specified.
Existing law, the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, provides the exclusive authority and procedure for the initiation, conduct, and completion of changes of organization and reorganization for cities and districts, except as specified.
This bill would create the Small System Water Authority Act of 2018 and state legislative findings and declarations relating to authorizing the creation of small system water authorities that will have powers to absorb, improve, and competently operate noncompliant public water systems. The bill, no later than March 1, 2019, would require the state board to provide written notice to cure to all public agencies, private water companies, or mutual water companies that operate a public water system that has either less than 3,000 service connections or that serves less than 10,000 people, and are not in compliance, for 4 consecutive quarters, with one or more state or federal primary drinking water standard maximum contaminant levels as of December 31, 2018, as specified. The bill would require the state board to provide a copy of the notice, in the case of a water corporation, to the Public Utilities Commission and would require the Public Utilities Commission to be responsible with the state board for ensuring compliance with the provisions of the bill. The bill would require an entity receiving the notice to respond to the state board, and, if appropriate, the Public Utilities Commission, as to whether the violations of drinking water standards are remedied and the basis for that conclusion, as specified. The bill would require an entity reporting a continuing violation of drinking water standards to have 180 days from the date of a specified response filed with the state board to prepare and submit a plan to the state board to permanently remedy a violation of drinking water standards within a reasonable time that is not later than January 1, 2024. The bill would require the state board to review the plan and accept, accept with reasonable conditions, or reject the plan, as prescribed. The bill would require an entity with an accepted plan to provide quarterly reports to the state board on progress towards a permanent remedy for violations of drinking water standards and would require the state board to annually hold a public hearing to consider whether the progress is satisfactory. The bill would require the state board, if it rejects the plan and after a certain period to allow for a petition for reconsideration, to cause the formation of an authority by the applicable local agency formation commission to serve the customers of the public water system that submitted the plan the state board rejects, if certain findings are made by the state board.
The bill would require the state board, no later than January 1, 2021, to provide written notice to each county, city, water district, private water company, or mutual water company located within a county where an entity receiving a notice to cure from the state board is located stating that the state board may consider the formation of an authority within that county and inviting other public water suppliers to consider a voluntary dissolution and subsequent inclusion into the authority that may be formed. The bill would require an agency wishing to consolidate into a proposed authority to provide a written statement opting into an authority to the administrator of the authority on or before July 1, 2021. The bill would authorize an agency wishing to join an authority after the formation of an authority to do so by a proposal or petition to the local agency formation commission. The bill would require any county or city receiving a notice to cure from the state board to determine, not later than June 1, 2021, whether any county service areas, county waterworks districts, or other dependent special districts providing water service or water and sewer service located within the county that provide water service or water and sewer service only in the proposed area of the authority should be included within the proposed authority, as prescribed. The bill would authorize an authority to include areas that are not contiguous.
The bill would require the state board, no later than 30 days after the rejection of an entity’s plan to permanently remedy a violation of drinking water standards, to notify a local agency formation commission of a county where the public water system that submitted the plan is located, and if appropriate, the Public Utilities Commission, that it has determined that the public water system shall be consolidated into an authority. The bill would require the state board, no later than 60 days after the rejection, to notify the local agency formation commission, and if appropriate, the Public Utilities Commission of the public water systems that will be consolidated into an authority and to appoint an administrator for each proposed authority. The bill would require an administrator to be responsible for the interim administration and management of the authority and would require the state board to bear the cost of the administrator, as specified. The bill would require the administrator, after consultation with the executive officer of the local agency formation commission, to submit to the state board a conceptual formation plan, with specified components. The bill would require the state board to provide comments on the conceptual formation plan to the administrator and applicable local agency formation commission within 60 days of its receipt.
The bill would require the administrator, within 180 days after the state board provides comments on the draft conceptual formation plan, to submit an application for formation and proposed plan for service to the local agency formation commission for review and would require the commission to hold a hearing on the plan and approve or deny it, as prescribed. The bill would require an authority to file a statement, under penalty of perjury, with the executive office of the local agency formation commission certifying that the authority will take the appropriate actions to comply with an approved plan. By expanding the application of the crime of perjury, this bill would impose a state-mandated local program. The bill would require the executive officer of the commission, within 30 days of the filing of a statement, to issue a notice of completion to the authority and send a copy of that notice to the state board. The bill would authorize the state board, in the event that the authority fails to timely file a statement certifying compliance with the plan, to issue an order to the authority requiring the filing of a statement certifying compliance with the plan or other remedial action as may be appropriate. The bill would require, annually for the first 3 years after the date of an authority’s formation by a local agency formation commission, an authority to file a certain report with the local agency formation commission. The bill would require a local agency formation commission to hold a public hearing within 90 days of receipt of the report to review the authority’s performance during the previous year and would authorize a local agency formation commission to order an authority to remedy any failures to comply with conditions imposed by the commission or the plan for service. The bill would authorize a local agency formation commission to impose a civil penalty on an authority of up to $500 per day for each violation if an authority fails to timely comply with a remedial order by a local agency formation commission, up to a maximum of $10,000 per year for each particular violation.
The bill would require the Public Utilities Commission to order the dissolution of a public water system and the transfer of all assets of a subject water corporation to an authority formed by the local agency formation commission, as prescribed. The bill would require the state board to petition a court for an order dissolving any mutual water company, water corporation, or private corporation that has been operating a public water system and transferring the assets of that company or corporation to the authority formed by the local agency formation commission. The bill would provide for an owner or shareholder of a dissolved public water system to be compensated, as specified, in accordance with a distressed business valuation issued by the state board. The bill would authorize an authority to receive financing from the state to pay all liabilities assumed from a public water system and would require an authority to issue bonds to repay the state with interest.
The bill would require the Controller, in consultation with the state board and various associations, no later than January 1, 2025, to contract with an independent consultant to review the startup operations of the authorities and the management of the authorities by the administrators. The bill would require the consultant to prepare a report for the Legislature regarding the fiscal and operational health of the authorities that includes recommendations regarding the need for supplemental state funding, if any, and the potential sources of that funding.
The bill would provide for the appointment of an initial board of an authority, and the election of subsequent boards of an authority. The bill would require a director to be a resident of the area served by the authority and, to the extent practicable, to represent a division with equal population being served by the authority. The bill would require a director to receive compensation in an amount not to exceed $250 per day, not to exceed a total of 10 days in any calendar month, together with any expenses incurred in the performance of the director’s duties required or authorized by the board. The bill would require the board to hold meetings, exercise and perform all powers, privileges, and duties of an authority, designate a depository to have custody of the funds of the authority, appoint officers, and hire employees, as specified. The bill would require the board to file a certain certificate with the Secretary of State within 180 days of its initial meeting after formation. The bill would require a person convicted of an infraction for a violation of any local ordinance or regulation adopted by an authority to be punished upon a first conviction by a fine not exceeding $50 and for a 2nd conviction within a period of one year by a fine of not exceeding $100 and for a 3rd or any subsequent conviction within a period of one year by a fine of not exceeding $250. By creating new crimes, this bill would impose a state-mandated local program.
The bill would specify the powers of an authority, including that an authority is authorized to acquire, control, distribute, store, spread, sink, treat, purify, recycle, recapture, and salvage any water, including sewage and stormwater, for the beneficial use of the authority. The bill would authorize the authority to fix a water standby assessment or availability charge, as prescribed. The bill would require a board of supervisors to levy the standby charge in the amounts for the respective parcels fixed by the board of the authority. The bill would require all county officers charged with the duty of collecting taxes to collect district standby charges with the regular tax payments to the county and would require the charges to be paid to the authority. The bill would authorize an authority to restrict the use of authority water, as specified, and would provide that it is a misdemeanor, punishable as specified, for any person to use or apply water received from the authority contrary to or in violation of any restriction or prohibition specified in the authority’s ordinance. By creating a new crime, this bill would impose a state-mandated local program. The bill would authorize an authority to conduct inspections and would authorize an authority to obtain an inspection warrant. Because the willful refusal of an inspection lawfully authorized by an inspection warrant is a misdemeanor, this bill would impose a state-mandated local program by expanding the application of a crime. The bill would require an authority to notify the county or city building inspector, county health inspector, or other affected county or city employee or office, in writing, within a reasonable time if an actual violation of an authority, city, or county ordinance is discovered during the investigation.
The bill would require the administrator to prepare and submit a capital improvement plan to the state board no later than one year after the date upon which an authority is formed. The bill would require the plan to bring the authority into full compliance with drinking water standards within 3 years, which time may be extended by the state board for good cause. The bill would require the state board, upon appropriation by the Legislature from the General Fund, or, to the extent funds are available from bond revenues or other sources, including federal, state, academic, or other public or private entities, to provide funding for the administrator and for formation and startup costs for up to 3 fiscal years after formation of the authority, as specified. The bill would provide for the state board, upon appropriation by the Legislature from the General Fund, or, to the extent funds are available from bond revenues or other sources, including federal, state, academic, or other public or private entities, to receive up to $5,400,000 for the preparation of distressed business valuations to determine the net fair market value of the water corporation or company.
By imposing new duties or a higher level of service on cities, counties, and local area formation commissions, this bill would impose a state-mandated local program.
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 with regard to certain mandates no reimbursement is required by this act for a specified reason.
With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Section 56017.1 of the Government Code is amended to read:

56017.1.
 “Applicant” means a local agency or person or persons that submits an application, as defined by Section 56017.2, or the State Water Resources Control Board where an application is submitted by its appointed administrator pursuant to Section 78038 of the Water Code.

SEC. 2.

 Section 56017.2 of the Government Code is amended to read:

56017.2.
 “Application” means any of the following:
(a) A resolution of application or petition initiating a change of organization or reorganization with supporting documentation as required by the commission or executive officer.
(b) A request for a sphere of influence amendment or update pursuant to Section 56425.
(c) A request by a city or district for commission approval of an extension of services outside the agency’s jurisdictional boundaries pursuant to Section 56133.
(d) A request by a public agency for commission approval of an extension of services outside the agency’s jurisdictional boundaries pursuant to Section 56134.
(e) A request by the State Water Resources Control Board that includes the formation of a small system water authority made pursuant to Section 78038 of the Water Code.

SEC. 3.

 Section 56069 of the Government Code is amended to read:

56069.
 “Proposal” means a desired change of organization or reorganization initiated by a petition, by resolution of application of a legislative body or school district, or by order of the State Water Resources Control Board in the case of an application including the formation of a small system water authority submitted pursuant to Section 78038 of the Water Code, for which a certificate of filing has been issued.

SEC. 4.

 Section 56653 of the Government Code, as amended by Section 1 of Chapter 43 of the Statutes of 2017, is amended to read:

56653.
 (a) If a proposal for a change of organization or reorganization is submitted pursuant to this part, the applicant shall submit a plan for providing services within the affected territory.
(b) The plan for providing services shall include all of the following information and any additional information required by the commission or the executive officer:
(1) An enumeration and description of the services currently provided or to be extended to the affected territory.
(2) The level and range of those services.
(3) An indication of when those services can feasibly be extended to the affected territory, if new services are proposed.
(4) An indication of any improvement or upgrading of structures, roads, sewer or water facilities, or other conditions the local agency would impose or require within the affected territory if the change of organization or reorganization is completed.
(5) Information with respect to how those services will be financed.
(c) (1) In the case of a change of organization or reorganization initiated by a local agency that includes a disadvantaged, unincorporated community as defined in Section 56033.5, a local agency may include in its resolution of application for change of organization or reorganization an annexation development plan adopted pursuant to Section 99.3 of the Revenue and Taxation Code to improve or upgrade structures, roads, sewer or water facilities, or other infrastructure to serve the disadvantaged, unincorporated community through the formation of a special district or reorganization of one or more existing special districts with the consent of each special district’s governing body.
(2) The annexation development plan submitted pursuant to this subdivision shall include information that demonstrates that the formation or reorganization of the special district will provide all of the following:
(A) The necessary financial resources to improve or upgrade structures, roads, sewer or water facilities, or other infrastructure. The annexation development plan shall also clarify the local entity that shall be responsible for the delivery and maintenance of the services identified in the application.
(B) An estimated timeframe for constructing and delivering the services identified in the application.
(C) The governance, oversight, and long-term maintenance of the services identified in the application after the initial costs are recouped and the tax increment financing terminates.
(3) If a local agency includes an annexation development plan pursuant to this subdivision, a local agency formation commission may approve the proposal for a change of organization or reorganization to include the formation of a special district or reorganization of a special district with the special district’s consent, including, but not limited to, a community services district, municipal water district, or sanitary district, to provide financing to improve or upgrade structures, roads, sewer or water facilities, or other infrastructure to serve the disadvantaged, unincorporated community, in conformity with the requirements of the principal act of the district proposed to be formed and all required formation proceedings.
(4) Pursuant to Section 56881, the commission shall include in its resolution making determinations a description of the annexation development plan, including, but not limited to, an explanation of the proposed financing mechanism adopted pursuant to Section 99.3 of the Revenue and Taxation Code, including, but not limited to, any planned debt issuance associated with that annexation development plan.
(d) This section shall not preclude a local agency formation commission from considering any other options or exercising its powers under Section 56375.
(e) A plan for providing services accompanying an application that includes the formation of a small system water authority submitted pursuant to subdivision (a) of Section 78038 of the Water Code shall meet the requirements set forth in subdivision (b) of Section 78038 of the Water Code.
(f) This section shall remain in effect only until January 1, 2025, and as of that date is repealed.

SEC. 5.

 Section 56658 of the Government Code is amended to read:

56658.
 (a) Any petitioner or legislative body desiring to initiate proceedings shall submit an application to the executive officer of the principal county.
(b) (1) Immediately after receiving an application and before issuing a certificate of filing, the executive officer shall give mailed notice that the application has been received to each affected local agency, the county committee on school district organization, and each school superintendent whose school district overlies the affected territory. The notice shall generally describe the proposal and the affected territory. The executive officer shall not be required to give notice pursuant to this subdivision if a local agency has already given notice pursuant to subdivision (c) of Section 56654.
(2) It is the intent of the Legislature that a proposal for incorporation or disincorporation shall be processed in a timely manner. With regard to an application that includes an incorporation or disincorporation, the executive officer shall immediately notify all affected local agencies and any applicable state agencies by mail and request the affected agencies to submit the required data to the commission within a reasonable timeframe established by the executive officer. Each affected agency shall respond to the executive officer within 15 days acknowledging receipt of the request. Each affected local agency and the officers and departments thereof shall submit the required data to the executive officer within the timelines established by the executive officer. Each affected state agency and the officers and departments thereof shall submit the required data to the executive officer within the timelines agreed upon by the executive officer and the affected state departments.
(3) If a special district is, or as a result of a proposal will be, located in more than one county, the executive officer of the principal county shall immediately give the executive officer of each other affected county mailed notice that the application has been received. The notice shall generally describe the proposal and the affected territory.
(c) Except when a commission is the lead agency pursuant to Section 21067 of the Public Resources Code, the executive officer shall determine within 30 days of receiving an application whether the application is complete and acceptable for filing or whether the application is incomplete.
(d) The executive officer shall not accept an application for filing and issue a certificate of filing for at least 20 days after giving the mailed notice required by subdivision (b). The executive officer shall not be required to comply with this subdivision in the case of an application which meets the requirements of Section 56662 or in the case of an application for which a local agency has already given notice pursuant to subdivision (c) of Section 56654.
(e) If the appropriate fees have been paid, an application shall be deemed accepted for filing if no determination has been made by the executive officer within the 30-day period. An executive officer shall accept for filing, and file, any application submitted in the form prescribed by the commission and containing all of the information and data required pursuant to Section 56652.
(f) When an application is accepted for filing, the executive officer shall immediately issue a certificate of filing to the applicant. A certificate of filing shall be in the form prescribed by the executive officer and shall specify the date upon which the proposal shall be heard by the commission. From the date of issuance of a certificate of filing, or the date upon which an application is deemed to have been accepted, whichever is earlier, an application shall be deemed filed pursuant to this division.
(g) If an application is determined not to be complete, the executive officer shall immediately transmit that determination to the applicant specifying those parts of the application which are incomplete and the manner in which they can be made complete.
(h) Following the issuance of the certificate of filing, the executive officer shall proceed to set the proposal for hearing and give published notice thereof as provided in this part. The date of the hearing shall be not more than 90 days after issuance of the certificate of filing or after the application is deemed to have been accepted, whichever is earlier. In the case of an application submitted pursuant to subdivision (a) of Section 78038 of the Water Code by an administrator appointed by the State Water Resources Control Board, the date of the hearing shall be not more than 180 days after issuance of the certificate of filing or after the application is deemed to have been accepted, whichever is earlier. Notwithstanding Section 56106, the date for conducting the hearing, as determined pursuant to this subdivision, is mandatory.

SEC. 6.

 Section 56666.5 is added to the Government Code, to read:

56666.5.
 (a) This section applies only to a proposal that includes the formation of a small system water authority submitted pursuant to subdivision (a) of Section 78038 of the Water Code.
(b) At the hearing described in Section 56666, the commission shall approve the plan and the formation of the authority, approve the plan and the formation of the authority with modifications, or disapprove the plan and request resubmittal by the administrator.
(c) If the commission disapproves the plan, the commission shall, within 30 days of the hearing, provide the administrator with written comments identifying the changes that the administrator must make in order to submit an acceptable plan. If the administrator concurs with those changes, the administrator may provide a written statement of concurrence to the commission and the commission shall deem approved the commission’s proposed changes upon receipt of the written statement of concurrence. If the administrator disagrees with those changes, the administrator shall provide a revised plan for service to the commission no later than 90 days after the date on which the commission provides the administrator with comments disapproving the plan.
(d) The commission shall hold a hearing no later than 90 days after the date the administrator provides a revised plan for service to the commission, during which the commission shall approve the revised plan for service, either as proposed by the administrator or with the modifications the commission believes best serve the public interest.

SEC. 7.

 Section 56895 of the Government Code is amended to read:

56895.
 (a) When a commission has adopted a resolution making determinations, any person or affected agency may file a written request with the executive officer requesting amendments to or reconsideration of the resolution. The request shall state the specific modification to the resolution being requested and shall state what new or different facts that could not have been presented previously are claimed to warrant the reconsideration. If the request is filed by a school district that received notification pursuant to Section 56658, the commission shall consider that request at a public hearing.
(b) Notwithstanding Section 56106, the deadlines set by this section are mandatory. The person or agency shall file the written request within 30 days of the adoption of the initial or superseding resolution by the commission making determinations. If no person or agency files a timely request, the commission shall not take any action pursuant to this section.
(c) Upon receipt of a timely request, the executive officer shall not take any further action until the commission acts on the request.
(d) Upon receipt of a timely request by the executive officer, the time to file any action, including, but not limited to, an action pursuant to Section 21167 of the Public Resources Code and any provisions of Part 4 (commencing with Section 57000) governing the time within which the commission is to act shall be tolled for the time that the commission takes to act on the request.
(e) The executive officer shall place the request on the agenda of the next meeting of the commission for which notice can be given pursuant to this subdivision. The executive officer shall give notice of the consideration of the request by the commission in the same manner as for the original proposal. The executive officer may give notice in any other manner as he or she deems necessary or desirable.
(f) At that meeting, the commission shall consider the request and receive any oral or written testimony. The consideration may be continued from time to time but not to exceed 35 days from the date specified in the notice. The person or agency that filed the request may withdraw it at any time prior to the conclusion of the consideration by the commission.
(g) At the conclusion of its consideration, the commission may approve with or without amendment, wholly, partially, or conditionally, or disapprove the request. If the commission disapproves the request, it shall not adopt a new resolution making determinations. If the commission approves the request, with or without amendment, wholly, partially, or conditionally, the commission shall adopt a resolution making determinations that shall supersede the resolution previously issued.
(h) The determinations of the commission shall be final and conclusive. No person or agency shall make any further request for the same change or a substantially similar change, as determined by the commission.
(i) Notwithstanding subdivision (h), clerical errors or mistakes may be corrected pursuant to Section 56883.
(j) This section does not apply to commission determinations for a proposal that includes the formation of a small system water authority submitted pursuant to subdivision (a) of Section 78038 of the Water Code.

SEC. 8.

 Division 23 (commencing with Section 78000) is added to the Water Code, to read:

DIVISION 23. Small System Water Authority Act of 2018

PART 1. Short Title

78000.
 This division shall be known, and may be cited as, the Small System Water Authority Act of 2018.

PART 2. Findings and Declarations

78001.
 The Legislature finds and declares all of the following:
(a) As of November 2017, according to the state board, there are 329 public water systems in the State of California that are chronically serving contaminated water to their customers and are operationally deficient in violation of public health regulations.
(b) The vast majority of those systems are small, only serving a population of less than 10,000 people, with deficiencies that range from natural contaminants, manmade contaminants, and failing infrastructure. These systems are located throughout California, with a greater percentage of these failing systems primarily located in economically distressed or rural counties.
(c) These chronically out of compliance systems lack the financial, managerial, and technical resources to adequately serve their communities and face higher costs per customer to provide adequate service because of their small size, rural location, and aging infrastructure.
(d) There is an inefficient deployment of existing local system financial resources and potential funding shortfalls, largely due to duplication of overhead and the inability to access state and other funding streams necessary for modern water service.
(e) A new category of public water agency is needed to absorb and consolidate failing small public water systems to provide technical, managerial, and financial capabilities to ensure the provision of safe, clean, affordable, and accessible water and local governance.
(f) This act authorizes the creation of small system water authorities that will have unique powers to absorb, improve, and competently operate currently noncompliant public water systems with either contiguous or noncontiguous boundaries.
(g) Existing public water systems, whether public agencies, investor-owned utilities, water corporations regulated by the Public Utilities Commission, private mutual water companies, or other private unregulated water systems, that are currently providing adequate water service but that are located in a county where an authority may be formed will have the option of voluntarily consolidating with a new authority.

PART 3. Definitions

78005.
 Unless the context otherwise requires, the provisions of this part govern the construction of this division.

78006.
 “Affected county” means any county in which the land of a proposed authority is situated.

78007.
 “Authority” means a small system water authority formed pursuant to this division.

78008.
 “Board” means the board of directors of an authority.

78009.
 “Board of supervisors” means the board of supervisors of the principal county.

78010.
 “City” means any chartered or general law city.

78011.
 “County clerk” means the county clerk of the principal county.

78012.
 “Local agency formation commission” means a local agency formation commission of the principal county in which the proposed authority is located.

78013.
 “President” means the president of the board of directors of an authority.

78014.
 “Principal county” means the county in which the greater portion of the land of a proposed authority is situated.

78015.
 “Private corporation” means any private corporation organized under the laws of the United States or of this or any other state.

78016.
 “Public agency” means the state or any department or agency thereof, and a county, city, public corporation, or public district of the state, including an authority formed pursuant to this division.

78017.
 “Public water system” has the same meaning as defined in Section 116275 of the Health and Safety Code.

78018.
 “Secretary” means the secretary of an authority.

78019.
 “State board” means the State Water Resources Control Board.

78020.
 “Voter” means a voter as defined in Section 359 of the Elections Code.

78021.
 “Water” includes potable water and nonpotable water.

78022.
 “Water corporation” has the same meaning as defined in Section 241 of the Public Utilities Code.

PART 4. Formation

CHAPTER  1. In General

78025.
 The area proposed to be served by a proposed authority may consist of the service areas of one or more public agencies, private water companies, or mutual water companies that need not be contiguous. The area proposed to be served by a proposed authority may also include one or more parcels that need not be contiguous, either with each other or with the service areas of the public agencies, private water companies, or mutual water companies that will be served through the proposed authority.

CHAPTER  2. Formation Proceedings

78030.
 (a) No later than March 1, 2019, the state board shall provide written notice to cure to all public agencies, private water companies, or mutual water companies that meet both of the following criteria:
(1) Operate a public water system that has either less than 3,000 service connections or that serves less than 10,000 people.
(2) Are not in compliance with one or more state or federal primary drinking water standard maximum contaminant levels as of December 31, 2018, and for four consecutive quarters before the March 1, 2019, notice date.
(b) In the case of a water corporation, the state board shall provide a copy of the notice to the Public Utilities Commission and the Public Utilities Commission shall be responsible with the state board for ensuring compliance with this part.

78031.
 An entity receiving a notice pursuant to subdivision (a) of Section 78030 shall respond to the state board and, if appropriate, the Public Utilities Commission, within 60 days of receiving the notice as to whether the violations of drinking water standards are remedied and the basis for that conclusion.

78032.
 (a) (1) If an entity receiving a notice pursuant to subdivision (a) of Section 78030 reports pursuant to Section 78031 that a violation of drinking water standards is continuing, the entity shall have 180 days from the date of the response filed with the state board pursuant to Section 78031 to prepare and submit a plan to the state board to permanently remedy a violation of drinking water standards within a reasonable time that is not later than January 1, 2024.
(2) The state board shall review a plan submitted pursuant to paragraph (1) and, within 60 days of receipt, shall accept, accept with reasonable conditions, or reject the plan.
(3) The state board shall not accept the plan with reasonable conditions or reject the plan without meeting with the entity at least 15 days before the acceptance with reasonable conditions or rejection of the plan. The state board may extend the 60-day period described in paragraph (2) by no more than 180 days in order to allow for full consultation and collaboration between the state board and the entity, with the goal of that full consultation and collaboration being a mutually agreeable plan to remedy the violations of drinking water standards in a timely manner. The state board shall not unreasonably withhold or delay approval of a plan or impose unreasonable conditions on a plan.
(b) If an entity receiving a notice pursuant to subdivision (a) of Section 78030 has begun a remediation plan under the authority of the state board, a California regional water quality control board, the Public Utilities Commission, or a local agency formation commission, the state board shall deem the remediation plan acceptable without additional conditions.
(c) (1) If the state board accepts the plan or accepts the plan with conditions, the entity shall provide quarterly reports to the state board on progress towards a permanent remedy for the violations of drinking water standards and the state board shall hold an annual public hearing to consider whether progress is satisfactory.
(2) If the state board rejects the plan, the state board shall cause the formation of an authority, subject to the provisions of subdivision (d), by the applicable local agency formation commission, in accordance with Section 78034, to serve the customers of the public water system that submitted the plan the state board rejects, if the state board makes all of the following findings:
(A) The continued operation of the public water system in its current condition is a threat to public health and safety.
(B) The public water system lacks the financial, managerial, or technical resources required to remedy the violation of state or federal primary drinking water standards, which results in the entity’s inability to remain operationally viable as a public water system.
(C) There is no alternative that would protect the public drinking water supplies of the public water system other than for there to be the formation of an authority to serve the customers of the public water system.
(d) Before causing the formation of an authority by the applicable local agency formation commission, the state board shall provide the entity with a period of 15 business days from the date on which the state board issues a written determination rejecting the plan to file a petition for reconsideration. The state board shall, if so requested by the entity, hold an evidentiary hearing under the provisions of the Administrative Procedure Act that shall commence within 90 days of the date on which the petition for reconsideration is filed with the state board and shall issue a final order not later than 60 days after the close of the evidentiary hearing. If the entity does not request an evidentiary hearing, the state board shall issue a final order not later than 60 days after the date on which the entity files its petition for reconsideration.
(e) If the state board and the Public Utilities Commission reject the plan of a water corporation regulated by the commission, the commission shall proceed with the consolidation or receivership, or both, under the commission’s existing programs, or, in consultation with the state board, the commission shall cause the dissolution and transfer of assets of the water corporation into an authority pursuant to paragraph (2) of subdivision (a) of Section 78037.

78033.
 (a) No later than January 1, 2021, the state board shall provide written notice to each county, city, water district, private water company, or mutual water company located within a county where an entity receiving a notice under subdivision (a) of Section 78030 is located stating that the state board may consider the formation of an authority within that county and inviting other public water suppliers to consider a voluntary dissolution and subsequent inclusion into the authority that may be formed. An entity wishing to consolidate into a proposed authority shall provide a written statement opting into an authority to the administrator of the authority on or before July 1, 2021. After the formation of an authority, an entity wishing to join an authority may do so by means of a proposal or petition to the local agency formation commission pursuant to the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (Division 3 (commencing with Section 56000) of Title 5 of the Government Code).
(b) On or before June 1, 2021, a county or city receiving notice from the state board pursuant to subdivision (a) shall determine whether any county service areas, county waterworks districts, or other dependent special districts providing water service or water and sewer service located within the county that provide water service or water and sewer service only in the proposed area of the authority should be included within the proposed authority. If the governing board of the county or city determines that the dependent special district should be included within the proposed authority, the county or city shall provide a written statement on behalf of the dependent special district opting into an authority to the administrator of the authority on or before July 1, 2021. After the formation of an authority, a county or city that concludes that a dependent special district should be consolidated into an authority shall make a proposal or petition to the local agency formation commission for the consolidation pursuant to the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (Division 3 (commencing with Section 56000) of Title 5 of the Government Code).
(c) An authority may include areas that are not contiguous.
(d) No later than March 1, 2021, the administrator for an authority shall consult with all entities identified pursuant to subdivision (a) to provide advice as to the advantages and disadvantages of opting into being included in the authority.

78034.
 (a) No later than 30 days after the rejection of a plan pursuant to Section 78032, the state board shall notify a local agency formation commission of a county where the public water system that submitted the plan is located, and, if appropriate given the governance of the public water system, the Public Utilities Commission, that it has determined that the public water system shall be consolidated into an authority.
(b) No later than 60 days after the rejection of a proposed plan, the state board shall do both of the following:
(1) Notify the appropriate state agency identified in subdivision (a) of the public water systems that will be consolidated into an authority.
(2) Appoint an independent administrator pursuant to Section 78035 for each proposed authority who shall be responsible for the preparation of a plan for service and interim administration and management of the authority.

78035.
 (a) On or before January 1, 2022, the administrator, after consultation with the executive officer of the local agency formation commission, shall submit to the state board a conceptual formation plan that includes all of the following:
(1) The public water system service areas to be served by the authority.
(2) The population to be served by the authority.
(3) The available infrastructure to be used by the authority and any known deficiencies.
(4) The recorded violations of drinking water standards and the nature of the threat to public health and safety.
(5) Financial and operational provisions to be addressed in the plan for service pursuant to Section 78038.
(b) The state board shall provide comments on the conceptual formation plan to the administrator and applicable local agency formation commission within 60 days of its receipt.
(c) The state board or an authority may determine the legality of the existence of the authority or validate the financial provisions of an interim plan in an action brought pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure.

78036.
 (a) On or before January 1, 2020, the state board shall establish and publish a list of individuals who meet the qualifications in subdivision (e) to serve as administrators pursuant to this division.
(b) A single administrator may provide services to several authorities if, in the judgment of the state board, the services can be provided in a manner that achieves the purposes of this division.
(c) An administrator, who may be an employee of a consulting firm, shall provide or contract for administrative and managerial service to establish the authority, retain staff and consultants, and commence the remediation of the violations of drinking water standards.
(d) The state board shall bear the cost of the administrator and be responsible for all compensation of and reasonable expenses incurred by the administrator for the duration of the period that the administrator serves the authority.
(e) The state board may establish minimum qualifications and a selection process for potential administrators, but all administrators shall have both of the following minimum qualifications and shall not be permanent employees of the state board:
(1) A bachelor’s degree in engineering or finance, or an advanced degree in business, law, public administration, or public policy.
(2) At least 10 years of increasingly responsible experience in the management of a public water system.
(f) An administrator shall serve at the pleasure of the state board until whichever of the following dates occurs earlier:
(1) The local agency formation commission issues a notice of completion of the plan for service pursuant to Section 78038.
(2) Three years from the date that the local agency formation commission forms an authority.
(3) No sooner than 30 days after the appointment of a general manager by the board of the authority, at which date the services of the administrator shall be terminated.

78037.
 (a) (1) No later than 240 days after the state board issues a notice pursuant to paragraph (1) of subdivision (b) of Section 78034, the Public Utilities Commission shall order the dissolution of the public water system and the transfer of all assets of the water corporation subject to this paragraph to the authority formed by the local agency formation commission.
(2) No later than 240 days after the state board issues a notice pursuant to paragraph (1) of subdivision (b) of Section 78034, the state board shall petition a court of competent jurisdiction for an order dissolving any mutual water company, water corporation, or private corporation that has been operating a public water system identified in subdivision (a) of Section 78034 and transferring the assets of that company or corporation to the authority formed by the local agency formation commission.
(b) An owner or shareholder of a water corporation or a mutual water company consolidated into an authority pursuant to subdivision (a) shall be compensated as follows:
(1) Within 180 days of the dissolution, the state board shall cause to be prepared a distressed business valuation to determine the net fair market value of the corporation or company, calculated as follows:
(A) The assets of the water corporation or mutual water company shall be calculated by estimating the net book value of all assets, including, but not limited to, cash and investments, receivables, prepaid expenses, water in storage, real property, water rights, structures and improvements, equipment, general facilities, and other assets.
(B) Notwithstanding subparagraph (A), water rights shall be appraised at their market value if both of the following requirements are met:
(i) The water rights provide for the extraction of groundwater in a groundwater basin that has been fully adjudicated and wherein the production right of the water corporation or mutual water company has been determined in that adjudication.
(ii) The market valuation is calculated so as to exclude any capital or operating costs that may be required to bring the water being produced under the water right into full compliance with all state and federal law.
(C) The liabilities of the water corporation or mutual water company shall be calculated by estimating the financial liabilities, including, but not limited to, accounts payable, unfunded pension or other benefit liabilities, notes payable, bonds payable, as well as outstanding fines, fees, or other assessments for drinking water or other public health violations, estimated costs for outstanding litigation and other anticipated liabilities, and the estimated costs to bring all structures and works into good repair and in compliance with contemporary water infrastructure and drinking water standards.
(2) Upon issuance by the state board of the distressed business valuation determining the net fair market value, the authority may seek an order for immediate possession of all of the assets and liabilities of the corporation or company using the procedures set forth in Article 3 (commencing with Section 1255.410) of Chapter 6 of Title 7 of Part 3 of the Code of Civil Procedure. A court shall grant immediate possession if the court determines that the procedures in this section have been followed. Judicial review of the determinations by the state board shall be based on substantial evidence in the record before the state board.
(3) If an owner or shareholder disputes the distressed business valuation of the state board, the owner or shareholder may file an action pursuant to Section 1094.5 of the Code of Civil Procedure seeking a writ of mandate overturning the valuation. An action pursuant to this paragraph shall have preference in the civil calendar.
(4) Payment of the net fair market value of the water corporation or mutual water company, with interest accruing from the effective date of dissolution, shall be paid by the authority within two years of the authority’s formation from the proceeds of bond sales or other available funds derived from rates, fees, charges, taxes, or other revenue sources.
(5) The authority shall assume all obligations and liabilities of the public water system. After paying the net fair market value to the owners or shareholders of a water corporation or mutual water company, the authority may receive financing from the state to pay all liabilities. The authority shall issue bonds to repay the state with interest for those liabilities pursuant to Part 8 (commencing with Section 78100).
(c) At the time a water corporation or a mutual water company is dissolved and consolidated into an authority pursuant to subdivision (a), if there is pending any action in state or federal court or other judicial proceeding brought or maintained by the water corporation or mutual water company for damages to property associated with contamination or pollution of its water supply against one or more responsible parties, both of the following apply:
(1) The water corporation’s or mutual water company’s rights, interests, claims, and causes of action in the action or proceeding shall be deemed transferred, as that term is used in Section 954 of the Civil Code and Section 368.5 of the Code of Civil Procedure, to the authority.
(2) The authority shall assume any and all contractual obligations of the water corporation or mutual water company owed to any attorney or law firm in connection with the attorney’s or firm’s representation of the water corporation or mutual water company in connection with the action or proceeding.

78038.
 (a) Within 180 days after the state board provides comments on the draft conceptual formation plan pursuant to subdivision (b) of Section 78035, the administrator shall submit an application for the dissolution and formation and proposed plan for service to the local agency formation commission for review and potential approval pursuant to Part 3 (commencing with Section 56650) of Division 3 of Title 5 of the Government Code. An application to form an authority shall include at least five public water systems and may include the following:
(1) A public water system from a county service area or other dependent special district.
(2) A public water system that has been meeting drinking water standards and that wishes to join the proposed authority.
(3) A public water system identified by the state board as chronically serving water that fails to meet drinking water standards in the county in which the proposed authority will be formed.
(b) A proposed plan for service shall include all of the following information, as well as any additional information required or requested by the local agency formation commission or its executive officer:
(1) In the case of the formation of an authority that does not involve the dissolution of an existing special district, the plan for service shall include all of the following:
(A) An enumeration and description of the services currently provided and to be extended to the affected territory, including the level and range of those services and an indication of when those services can feasibly be extended to the affected territory.
(B) An indication of any improvement or upgrading of water facilities, or other conditions the authority would impose or require within the affected territory.
(C) Information with respect to how the services to be provided by the authority will be financed, in accordance with Articles XIII, XIII A, XIII C, and XIII D and any other applicable provisions of the California Constitution, that shall include all of the following:
(i) The necessary financial resources to improve or upgrade water facilities or other infrastructure identified in the formation application.
(ii) A discussion of the economies of scale that accrue when several small organizations are consolidated into a single authority.
(iii) An estimated timeframe for constructing and delivering the services identified in the formation application.
(iv) The operation and maintenance needs of the authority.
(v) Financial plans for the financing of capital improvements, operation and maintenance of facilities, and operation of the authority.
(vi) The governance, oversight, and long-term maintenance of the services identified in the formation application after the initial costs are recouped and any tax increment financing terminates.
(2) In the case of the formation of an authority that includes dissolution of an existing special district, the plan for services shall include all of the following:
(A) All of the elements required pursuant to subparagraphs (A) to (C), inclusive, of paragraph (1).
(B) An enumeration and description of the services currently provided by the special district proposed for dissolution and identification of the authority proposed to be formed by the successor to assume responsibility for the services following completion of the dissolution.
(C) An enumeration and description of each service proposed to be discontinued or transferred, the current financing of each service, and any method of financing proposed by the successor.
(D) A delineation of any existing financing of services currently provided to include, but not be limited to, bonds, assessments, general taxes, special taxes, other charges, and joint powers authorities or agreements.
(E) Information about any current bankruptcy proceeding, including, but not limited to, the status and exit plan.
(F) Information about any current order relating to services provided by the special district proposed for dissolution by any agency, department, office, or other division of the state, including, but not limited to, a cease and desist order or water prohibition order.
(G) Any other information that the local agency formation commission or its executive officer may deem necessary to evaluate the plan for services submitted.
(3) A statement by the administrator that the administrator has consulted with representatives of the entities whose customers will be served by the authority to consider the plan for service.
(c) If the administrator determines that the formation of an authority would be infeasible for financial, technical, or operational reasons, or would not provide the necessary economies of scale or operating benefits, the administrator may set forth those conclusions in a report to the state board in lieu of submitting a plan for service to the local agency formation commission. The administrator shall submit the report to the state board no later than 180 days after the state board issues a notice pursuant to subdivision (b) of Section 78035.
(d) (1) If the local agency formation commission approves the plan and the formation of the authority, the authority shall take the appropriate actions to comply with the plan, subject to Articles XIII, XIII A, XIII C, and XIII D and any other applicable provisions of the California Constitution.
(2) If the local agency formation commission approves the plan and the formation of the authority with modifications, the authority shall take the appropriate actions to comply with the modifications within 180 days of the plan’s approval with modifications in accordance with Articles XIII, XIII A, XIII C, and XIII D and any other applicable provisions of the California Constitution.
(3) An authority subject to paragraph (1) or (2) shall file a statement, under penalty of perjury, with the executive officer of the local agency formation commission certifying compliance with the plan. An authority shall take the appropriate actions to comply with Articles XIII, XIII A, XIII C, and XIII D and any other applicable provisions of the California Constitution and shall file a statement, under penalty of perjury, with the executive officer of the local agency formation commission certifying the compliance. Within 30 days of filing a statement, the executive officer of the local agency formation commission shall issue a notice of completion to the authority and send a copy of that notice to the state board. In the event that the authority fails to timely file a statement certifying compliance with the plan, the state board may issue an order to the authority requiring the filing or other remedial action as may be appropriate.
(e) An authority is deemed to be a successor agency to an entity identified in subdivision (a) of Section 78030. An action described in this chapter shall not affect an authority’s eligibility or priority for a state loan or grant.

78039.
 Division 13 (commencing with Section 21000) of the Public Resources Code does not apply to either of the following:
(a) The formation of an authority pursuant to this chapter.
(b) The dissolution of a public water system pursuant to this chapter.

78040.
 (a) Annually for the first three years after the date of an authority’s formation by the local agency formation commission, an authority shall file a report with the local agency formation commission as follows:
(1) The report shall contain both of the following:
(A) A description of operations over the past year.
(B) Details of any violations of drinking water standards and the actions taken to remediate a violation.
(2) The administrator or, after the discharge of the administrator, the general manager of the authority shall submit the report.
(3) A certificate stating that the report consists of a true, full, and complete description of the activities of the authority during the past year shall accompany the report.
(b) A local agency formation commission shall hold a public hearing within 90 days of receipt of a report pursuant to subdivision (a) to review the authority’s performance during the previous year. If a report states that an authority has failed to comply with any conditions imposed by the commission on either the original formation or the plan for service adopted pursuant to Section 78038, the commission may order the authority to remedy the violations within a reasonable period of time. If an authority fails to timely comply with a remedial order by a local agency formation commission, the commission may impose a civil penalty on the authority in an amount not to exceed five hundred dollars ($500) per day for each violation and not to exceed ten thousand dollars ($10,000) per year for each particular violation.

78041.
 (a) No later than January 1, 2025, the Controller, in consultation with the state board, the Association of California Water Agencies, the California Association of Local Agency Formation Commissions, the California Municipal Utilities Association, the California Association of Mutual Water Companies, the California State Association of Counties, and others deemed appropriate by the Controller, shall contract with an independent consultant to review the startup operations of the authorities and the management of the authorities by the administrators. The consultant shall prepare a report for the Legislature regarding fiscal and operational health of the authorities that includes recommendations regarding the need for supplemental state funding, if any, and the potential sources of that funding.
(b) (1) A report to be submitted pursuant to subdivision (a) shall be submitted in compliance with Section 9795 of the Government Code.
(2) Pursuant to Section 10231.5 of the Government Code, the requirement for submitting a report imposed under subdivision (a) is inoperative on January 1, 2029.

PART 5. Internal Organization

CHAPTER  1. Directors

78045.
 (a) The initial board of an authority shall consist of an odd number of directors composed as follows:
(1) One representative from each entity consolidated into the authority appointed by the entity before its dissolution.
(2) One representative from the board of supervisors.
(3) Additional directors, as needed, appointed by the board of supervisors to comprise at least a five-member board of directors, if one of the entities does not appoint a director.
(b) The public water system representatives in consultation with the administrator shall determine the final number of directors that will compose the initial board if it will consist of more than five members because of the number of former public water systems included in the authority. If the number of directors cannot be agreed upon by the representatives of the public water systems that will become part of the authority in a timely manner, the local agency formation commission shall determine the number of directors that will compose the initial board.
(c) If the initial board consists of five members, the directors shall classify themselves by lot so that two of them shall hold office until the qualification of their successors after the first general district election and three of them shall hold office until the election and qualification of their successors and the second general district election. If the initial board of directors consists of more than five members, the local agency formation commission shall provide for the classification of directors so as to provide that not more than a majority of the directors stand for election every two years.
(d) If the initial board consists of more than five members, the administrator shall include, as part of the plan for service, after consultation with the representatives of public water systems, and the local agency formation commission shall include, as part of the order forming the authority, a transitional plan that will bring the number of directors to five within a reasonable period of time. To the extent practicable, the transitional plan shall ensure that each director represents a division with equal population being served by the authority and that the final divisions are drawn so as to ensure that each director represents a division with equal population being served by the authority.

78046.
 (a) A director shall be a resident of the area served by the authority. To the extent practicable, a director shall represent a division with equal population being served by the authority. If a director moves residence, as defined in Section 244 of the Government Code, outside of the area served by the authority, the director shall have 180 days after the move to reestablish a place of residence within the area served by the authority. If a director cannot establish a place of residence, it shall be presumed that a permanent change of residence has occurred and that a vacancy exists on the board of directors pursuant to Section 1770 of the Government Code.
(b) Each elected director shall hold office for a term of four years. A director elected to office shall take office at noon on the first Friday in December succeeding his or her election.
(c) Whenever a vacancy occurs in the office of director it shall be filled pursuant to Section 1780 of the Government Code by a qualified person.

78047.
 Notwithstanding Section 20201, a director shall receive compensation in an amount not to exceed two hundred fifty dollars ($250) per day for each day’s attendance at meetings of the board or for each day’s service rendered as a director by request of the board, not exceeding a total of 10 days in any calendar month, together with any expenses incurred in the performance of the director’s duties required or authorized by the board. For purposes of this section, the determination of whether a director’s activities on any specific day are compensable shall be made pursuant to, and reimbursement for these expenses is subject to, Article 2.3 (commencing with Section 53232) of Chapter 2 of Part 1 of Division 2 of Title 5 of the Government Code. The board may adjust the compensation for directors pursuant to Chapter 2 (commencing with Section 20200) of Division 10.

CHAPTER  2. The Board

78050.
 (a) The board is the governing body of the authority.
(b) The board shall hold its first meeting as soon as possible after the selection of the first board of directors and not later than the sixth Monday after the date of the formation.
(c) At its first meeting, the board shall provide for the time and place of holding its meetings and the manner in which its special meetings may be called.
(d) At its first meeting, and its first meeting in the month of January of each odd-numbered year, the board shall elect one of its members as president. The board may, at any meeting, elect one of its members as vice president. If the president is absent or unable to act, the vice president shall exercise the powers of the president granted in this division.
(e) A majority of the board shall constitute a quorum for the transaction of business. However, no ordinance, motion, or resolution may become effective without the affirmative vote of a majority of the members of the board.
(f) The board shall act only by ordinance, resolution, or motion. Votes of the members of the board shall not be cast or exercised by proxy.
(g) On all ordinances the roll shall be called and the ayes and noes shall be recorded in the journal of the proceedings of the board.
(h) The board may adopt resolutions or motions by voice vote, but on demand of any member of the board, the roll shall be called.
(i) The board may destroy a record pursuant to Chapter 7 (commencing with Section 60200) of Division 1 of Title 6 of the Government Code.

78051.
 (a) The board shall exercise and perform all powers, privileges, and duties of an authority.
(b) Any executive, administrative, and ministerial powers may be delegated and redelegated by the board to any of the offices created by this division or by the board.
(c) The board may fix the time and place or places at which its regular meetings will be held and shall provide for the calling and holding of special meetings.
(d) The board may fix the location of the principal place of business of the authority and the location of all offices and departments maintained under this division.
(e) The board may, by ordinance, prescribe a system of business administration.
(f) The board may create any necessary offices and establish and reestablish the powers, duties, and compensation of all officers and employees.
(g) The board may require and fix the amount of all official bonds necessary for the protection of the funds and property of the authority.
(h) The board may, by ordinance, prescribe a system of civil service.
(i) The board may, by ordinance, delegate and redelegate to the officers of the authority the power to employ clerical, legal, and engineering assistants and labor.
(j) The board may prescribe a method of auditing and allowing or rejecting claims and demands.
(k) The board shall designate a depository or depositories to have the custody of the funds of the authority, all of which depositories shall give security sufficient to secure the authority against possible loss, and who shall pay the warrants drawn by the authority’s treasurer for demands against the authority under any rules the directors may prescribe.
(l) An authority may issue bonds, borrow money, and incur indebtedness as authorized by law.
(m) An authority may refund bonds, loans, or indebtedness by the issuance of the same obligations following the same procedure or retire any indebtedness or lien that may exist against the authority or its property.
(n) An authority may insure its directors, officers, assistants, employees, agents, and deputies for injury, death, or disability incurred while engaged in the business of the authority and the cost of the insurance is a proper charge against the authority. The insurance is in addition to any compensation secured under the provisions of Division 4 (commencing with Section 3201) of the Labor Code and inuring to the benefit of the director, officer, deputy, assistant, employee, or agent, or his or her beneficiary or heir.

78052.
 Within 180 days of its initial meeting after formation, the board shall file a certificate with the Secretary of State that includes all of the following:
(a) The name of the authority.
(b) The date of formation.
(c) Any county in which the authority is located and a legal description of the boundaries of the authority, a reference to a map showing the boundaries of the authority, or a reference to a map on file with a county recorder’s office showing the boundaries of the authority.
(d) An identification of all of the public agencies, water corporations, or mutual water companies that were consolidated into the authority.

CHAPTER  3. Officers and Employees

78055.
 (a) At its first meeting, or as soon as practicable, the board shall appoint, by a majority vote, a secretary, treasurer, attorney, general manager, and auditor. The board, at any meeting, may appoint a deputy secretary and a deputy treasurer. The board shall define the duties of these officers and fix their compensation. Each officer shall serve at the pleasure of the board. A deputy director, deputy secretary, attorney, general manager, and auditor shall not be directors, but the secretary and treasurer may be directors.
(b) The officers appointed pursuant to subdivision (a) shall, until such time as the local agency formation commission issues a notice of completion, pursuant to Section 78038, take direction from the administrator appointed by the state board.
(c) The board may employ additional assistants, contractors, and employees as the board deems necessary to efficiently maintain and operate the authority.
(d) The board may consolidate the offices of secretary and treasurer.

78056.
 (a) The president and secretary, in addition to the duties imposed on them by law, shall perform any duties that may be imposed on them by the board.
(b) The treasurer, or other person as may be authorized by the board, shall draw checks or warrants to pay demands when the demands have been audited and approved in the manner prescribed by the board.
(c) Subject to the approval of the board, the general manager shall have full charge and control of the maintenance, operation, and construction of the waterworks or waterworks system of the authority, with full power and authority to employ and discharge all employees and assistants, other than those described in subdivision (a) of Section 78055, at pleasure, prescribe their duties, and fix their compensation.
(d) The general manager shall perform duties as may be imposed on him or her by the board. The general manager shall report to the board in accordance with the rules and regulations adopted by the board.
(e) The attorney shall be the legal adviser of the authority and shall perform any other duties that may be prescribed by the board.
(f) The general manager, secretary, and treasurer, and other employees or assistants of the authority designated by the board, shall give any bonds to the authority conditioned for the faithful performance of their duties that the board from time to time may provide. The premiums on the bonds shall be paid by the authority.

PART 6. Elections

78060.
 Elections shall be conducted pursuant to the provisions of the Uniform District Election Law (Part 4 (commencing with Section 10500) of Division 10 of the Elections Code).

PART 7. Powers and Purposes

CHAPTER  1. Powers Generally

78065.
 An authority may exercise the powers that are expressly granted by this division or are necessarily implied.

78066.
 An authority may have perpetual succession. An authority may adopt a seal and alter it at pleasure.

78067.
 An authority may make contracts, employ labor, and do all acts necessary for the full exercise of its powers.

78068.
 (a) An authority may provide by ordinance for the pensioning of officers or employees, for the terms and conditions under which the pensions shall be awarded, and for the time and extent of service of officers or employees before the pensions shall be available to them.
(b) An authority may contract with any insurance corporation, the Public Employees’ Retirement System, or any other insurance carrier for the maintenance of a service covering the pension of the authority officers or employees and for their health and accident insurance coverage.

78069.
 An authority may disseminate information concerning the rights, properties, and activities of the authority. The power shall not be construed as an exception to the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code).

78070.
 An authority may, by resolution, obtain membership in an association having for its purpose the furtherance of a subject relating to the powers and duties of the authority and for the interchange of information relating to those powers and duties. An authority may appropriate the funds necessary for these purposes.

78071.
 An authority may, by resolution of the board of directors spread on its minutes, change the name of the authority. Certified copies of the resolution changing the name of the authority shall be recorded in the office of the county recorder of every affected county and sent to the county clerk of every affected county and to the state board.

78072.
 Every person convicted of an infraction for a violation of any local ordinance or regulation adopted pursuant to this division shall be punished upon a first conviction by a fine not exceeding fifty dollars ($50) and for a second conviction within a period of one year by a fine of not exceeding one hundred dollars ($100) and for a third or any subsequent conviction within a period of one year by a fine of not exceeding two hundred fifty dollars ($250).

78073.
 (a) In order to enforce the provisions of any ordinance of the authority, including an ordinance fixing charges for the furnishing of commodities or services, the authority may correct any violation of an ordinance of the authority. The authority may also petition the superior court for the issuance of a preliminary or permanent injunction, or both, as may be appropriate, restraining any person from the continued violation of any ordinance of the authority or for the issuance of an order stopping or disconnecting a service if the charges for that service are unpaid at the time specified in the ordinance.
(b) The authority may enter upon the private property of any person within the jurisdiction of the authority in order to investigate possible violations of an ordinance of the authority. The investigation shall be made with the consent of the owner or tenant of the property or, if consent is refused, with a warrant duly issued pursuant to the procedures set forth in Title 13 (commencing with Section 1822.50) of Part 3 of the Code of Civil Procedure, except that, notwithstanding Section 1822.52 of the Code of Civil Procedure, the warrant shall be issued only upon probable cause.
(c) The authority shall notify the county or city building inspector, county health inspector, or other affected county or city employee or office, in writing, within a reasonable time if an actual violation of an authority, city, or county ordinance is discovered during the investigation.

CHAPTER  2. Water

78075.
 (a) An authority may acquire, control, distribute, store, spread, sink, treat, purify, recycle, recapture, and salvage any water, including sewage and stormwater, for the beneficial use of the authority.
(b) An authority may undertake a water conservation program to reduce water use and may require, as a condition of new service, that reasonable water-saving devices and water reclamation devices be installed to reduce water use.
(c) An authority may sell water under its control, without preference, to cities, other public corporations, agencies, and persons, within the authority for use within the authority.
(d) An authority may fix the rates at which water shall be sold. Different rates may be established for different classes or conditions of service, but rates shall be uniform throughout the authority for like classes and conditions of service. Rates fixed by an authority shall result in revenues that will do all of the following:
(1) Pay the operating expenses of the authority.
(2) Provide for repairs and depreciation of works.
(3) Provide a reasonable surplus for improvements, extensions, and enlargements.
(4) Pay the interest on any bonded debt.
(5) Provide a sinking or other fund for the payment of the principal of the bonded debt as it becomes due.
(e) An authority furnishing water for residential use to a tenant shall not seek to recover any charge or penalty for the furnishing of water to or for the tenant’s residential use from any subsequent tenant on account of nonpayment of charges by a previous tenant. The authority may require that service to subsequent tenants be furnished on the account of the landlord or property owner.

78076.
 (a) Pursuant to the notice, protest, and hearing requirements imposed by Section 53753 of the Government Code, an authority, by ordinance on or before the third Monday in August in each fiscal year, may fix a water standby assessment or availability charge in the authority or in any portion of the authority to which the authority makes water available, whether the water is actually used or not.
(b) The standby assessment or availability charge shall not exceed one hundred dollars ($100) per acre per year for each acre of land on which the charge is levied or one hundred dollars ($100) per year for a parcel less than one acre.
(c) The ordinance fixing a standby assessment or availability charge shall be adopted by the board pursuant to the notice, protest, and hearing procedures in Section 53753 of the Government Code and only after adoption of a resolution setting forth the particular schedule or schedules of charges or assessments proposed to be established by ordinance and after a hearing on the resolution.
(d) If the procedures set forth in this section were followed, the board may, by ordinance, continue the standby assessment or availability charge pursuant to this chapter in successive years at the same rate. If new, increased, or extended assessments are proposed, the board shall comply with the notice, protest, and hearing procedures in Section 53753 of the Government Code.
(e) An ordinance fixing a standby assessment or availability charge may establish a schedule varying the charges according to land uses, water uses, and degree of water availability.
(f) On or before the third Monday in August, the board shall furnish in writing to the board of supervisors and the county auditor of each affected county a description of each parcel of land within the authority upon which a standby charge is to be levied and collected for the current fiscal year, together with the amount of standby charge fixed by the authority on each parcel of land.
(g) The board shall direct that, at the time and in the manner required by law for the levying of taxes for county purposes, the board of supervisors shall levy, in addition to any other tax it levies, the standby charge in the amounts for the respective parcels fixed by the board.
(h) All county officers charged with the duty of collecting taxes shall collect authority standby charges with the regular tax payments to the county. The charges shall be collected in the same form and manner as county taxes are collected, and shall be paid to the authority.
(i) Charges fixed by the authority shall be a lien on all the property benefited by the charges. Liens for the charges shall be of the same force and effect as other liens for taxes, and their collection may be enforced by the same means as provided for the enforcement of liens for state and county taxes.

78077.
 (a) An authority may restrict the use of authority water during any emergency caused by drought, or other threatened or existing water shortage, and may prohibit the wastage of authority water or the use of authority water during periods for any purpose other than household uses or other restricted uses as the authority determines to be necessary. An authority may also prohibit use of authority water during these periods for specific uses which it finds to be nonessential.
(b) An authority may prescribe and define by ordinance the restrictions, prohibitions, and exclusions referred to in subdivision (a). The ordinance is effective upon adoption; but, within 10 days after its adoption, the ordinance shall be published pursuant to Section 6061 of the Government Code in full in a newspaper of general circulation which is printed, published, and circulated in the authority. If there is no newspaper of general circulation printed, published, and circulated in the authority, the ordinance shall be posted within 10 days after its adoption in three public places within the authority.
(c) A finding by the board upon the existence, threat, or duration of an emergency or shortage, or upon the matter of necessity or of any other matter or condition referred to in subdivision (a), shall be made by resolution or ordinance. The finding is prima facie evidence of the fact or matter so found, and the fact or matter shall be presumed to continue unchanged unless and until a contrary finding is made by the board by resolution or ordinance.
(d) The finding made by the board pursuant to subdivision (c) shall be received in evidence in any civil or criminal proceeding in which it may be offered, and shall be proof and evidence of the fact or matter found until rebutted or overcome by other sufficient evidence received in the proceeding. A copy of any resolution or ordinance setting forth the finding shall, when certified by the secretary of the authority, be evidence that the finding was made by the authority as shown by the resolution or ordinance and certification.
(e) From and after the publication or posting of any ordinance pursuant to subdivision (b), and until the ordinance has been repealed or the emergency or threatened emergency has ceased, it is a misdemeanor for any person to use or apply water received from the authority contrary to or in violation of any restriction or prohibition specified in the ordinance. Upon conviction, such a person shall be punished by imprisonment in the county jail for not more than 30 days, or by fine not exceeding six hundred dollars ($600), or by both.

CHAPTER  3. Property

78080.
 An authority may, within or without the authority, take real and personal property of every kind by grant, purchase, gift, device, or lease, and hold, use, enjoy, lease, or dispose of real and personal property of every kind.

78081.
 An authority may do all of the following:
(a) Acquire, or contract to acquire, waterworks or a waterworks system, waters, water rights, lands, rights, and privileges.
(b) Construct, maintain, and operate conduits, pipelines, reservoirs, works, machinery, and other property useful or necessary to store, convey, supply, or otherwise make use of water for a waterworks plant or system for the benefit of the authority.
(c) Complete, extend, add to, repair, or otherwise improve any waterworks or waterworks system acquired by the authority.
(d) Carry on and conduct waterworks or a waterworks system.

78082.
 An authority may lease from any person, or public corporation or agency, with the privilege of purchasing or otherwise, all or any part of water storage, transportation, or distribution facilities, existing waterworks, or a waterworks system.

78083.
 An authority may exercise the right of eminent domain to take any property necessary to supply the authority or any portion of the authority with water. The authority, in exercising the power, shall, in addition to the damage for the taking, injury, or destruction of property, also pay the cost of removal, reconstruction, or relocation of any structure, railways, mains, pipes, conduits, wires, cables, or poles of any public utility which is required to be removed to a new location.

78084.
 An authority may construct works along and across any stream of water, watercourse, street, avenue, highway, canal, ditch, or flume, or across any railway which the route of the works may intersect or cross. The works shall be constructed in such a manner as to afford security for life and property, and the authority shall restore the crossings and intersections to their former state as near as may be, or in a manner so as not to have impaired unnecessarily their usefulness.

CHAPTER  4. Contracts

78085.
 Contracts mentioned in this chapter include those made with the United States under the Federal Reclamation Act of June 17, 1902, and all acts amendatory thereof or supplementary thereto, or any other act of Congress heretofore or hereafter enacted permitting cooperation.

78086.
 An authority may join with one or more public agencies, private corporations, or other persons for the purpose of carrying out any of the powers of the authority, and for that purpose may contract with any other public agencies, private corporations, or persons to finance acquisitions, construction, and operations.

78087.
 The contracts with other public agencies, private corporations, or persons may provide for contributions to be made by each party to the contract, for the division and apportionment of the expenses of the acquisitions and operations, and for the division and apportionment of the benefits, services, and products from the contract. The contracts may also provide for an agency to effect the acquisitions and to carry on the operations, and shall provide in the powers and methods of procedure for the agency the method by which the agency may contract. The contracts may contain other and further covenants and agreements as may be necessary or convenient to accomplish the purposes of the contract.

CHAPTER  5. Controversies

78090.
 An authority may sue and be sued, except as otherwise provided in this division or by law, in all actions and proceedings in all courts and tribunals of competent jurisdiction.

78091.
 An authority may commence, maintain, intervene in, and compromise, in the name of the authority, any action or proceeding involving or affecting the ownership or use of water or water rights within the authority, used or useful for any purpose of the authority, or a common benefit to lands within the authority or inhabitants of the authority.

78092.
 An action to determine the validity of any contract authorized by Chapter 4 (commencing with Section 78085) and any bonds, notes, or other evidences of indebtedness may be brought pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure.

78093.
 All claims for money or damages against the authority are governed by Part 3 (commencing with Section 900) and Part 4 (commencing with Section 940) of Division 3.6 of Title 1 of the Government Code except as provided therein, or by other statutes or regulations expressly applicable to the authority.

78094.
 To carry out the purposes of this division, an authority shall have the power to commence, maintain, intervene in, defend, and compromise, in the name of the authority, or as a class representative of the inhabitants, property owners, taxpayers, water producers, or water users within the authority, or otherwise, and to assume the costs and expenses of any and all actions and proceedings now or hereafter begun to determine or adjudicate all or substantially all of the water rights of a basin or other hydrologic unit overlain, in whole or in part, by the authority, as between owners of or claimants to such rights, to prevent any interference with water or water rights used or useful to the lands, inhabitants, owners, operators, or producers within the authority, or to prevent the diminution of the quantity or quality of the water supply of the authority or the basin, or to prevent unlawful exportation of water from the authority or basin.

78095.
 An authority may employ counsel to defend any action brought against it or against any of its officers, agents, or employees on account of any claimed action or inaction involving any claimed injury, taking, damage, or destruction, and the fees and expenses involved in the defense shall be a lawful charge against the authority.

78096.
 If any officer, agent, or employee of the authority is held liable for any act or omission in his or her official capacity, except in case of actual fraud or actual malice, and any judgment is rendered, the authority shall pay the judgment without obligation for repayment by the officer, agent, or employee.

PART 8. Financial Provisions

CHAPTER  1. Powers

78100.
 Article 4 (commencing with Section 53500) and Article 4.5 (commencing with Section 53506) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code apply to an authority for the purpose of providing funds for the acquisition, construction, improving, or financing of any public improvement authorized by this division. For the purposes of Article 4 (commencing with Section 53500) and Article 4.5 (commencing with Section 53506) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code, “property” shall refer to both land and improvements with the effect that ad valorem taxes or assessments levied by an authority to repay a general obligation bond may be levied upon both land and improvements if approved by the electorate.

78101.
 Any money belonging to an authority may be deposited or invested and drawn out as provided in Article 2 (commencing with Section 53630) of Chapter 4 of Part 1 of Division 2 of Title 5 of the Government Code, as that article may be amended. References in that article to “auditor” shall mean, for the purposes of an authority, the secretary of an authority.

78102.
 (a) An improvement district may be formed in an authority in the same manner as an improvement district is formed in an irrigation district pursuant to Part 7 (commencing with Section 23600) of Division 11. When formed, an improvement district shall be governed and have the same powers as an improvement district in an irrigation district pursuant to Part 7 (commencing with Section 23600) of Division 11.
(b) A board shall have the same rights, powers, duties, and responsibilities with respect to the formation and government of an improvement district as the board of directors of an irrigation district has with respect to an improvement district in an irrigation district pursuant to Division 11 (commencing with Section 20500).
(c) An assessment in an improvement district in an authority shall be levied, collected, and enforced at the same time and in as nearly the same manner as practicable as annual taxes for purposes of the authority in which formed, except that the assessment shall be made in the same manner as provided with respect to an improvement district in an irrigation district pursuant to Part 7 (commencing with Section 23600) of Division 11.
(d) All powers and duties of an authority may be exercised on behalf of or within any improvement district formed pursuant to this section.
(e) An authority may issue revenue bonds in accordance with the Revenue Bond Law of 1941 (Chapter 6 (commencing with Section 54300) of Part 1 of Division 2 of Title 5 of the Government Code) on behalf of any portion of the authority created as an improvement district pursuant to this section, except that the issuance of revenue bonds by an authority shall not be subject to the election procedures of Article 3 (commencing with Section 54380) of Chapter 6 of Part 1 of Division 2 of Title 5 of the Government Code. The board shall authorize undertaking the improvement and the issuance of revenue bonds for that purpose by ordinance or resolution of the board, which shall be subject to referendum. If an authority issues revenue bonds on behalf of an improvement district, the issuance of the revenue bonds is limited to the area of the improvement district. The proceeds of any revenue bonds issued on behalf of an improvement district shall not be used to finance public improvements to provide service outside the service area of the improvement district. Only revenue derived from rates or charges for providing the service within the service area of the improvement district shall be pledged or used to pay for any revenue bonds issued on behalf of an improvement district.
(f) For the purposes of subdivision (e), “service area of the improvement district” means the territory of an improvement district as it existed at the time of revenue bond issuance plus lands outside of the improvement district, if any, being served at the time of the bond issuance by the improvement district facilities, and additional territory, if any, annexed to the improvement district as the improvement district existed at the time of the issuance election, not exceeding, in the aggregate, 40 percent by area of the improvement district as the improvement district existed at the time of the bond issuance.

78103.
 The authority may exercise the powers granted pursuant to Division 10 (commencing with Section 8500) of the Streets and Highways Code.

CHAPTER  2. Financial Plan and Implementation

78110.
 No later than one year after the date upon which an authority is formed, the administrator shall prepare and submit a capital improvement plan to the state board. The plan shall bring the authority into full compliance with drinking water standards within three years, which time may be extended by the state board for good cause.

78111.
 No later than 18 months after the date upon which an authority is formed, the authority shall levy an assessment, fee, charge, or special tax, in accordance with Articles XIII, XIII A, XIII C, and XIII D of the California Constitution, and any other applicable law, to fund the ongoing operations and maintenance of the public water system.

CHAPTER  3. Fiscal Provisions

78115.
 (a) Upon appropriation by the Legislature from the General Fund, or, to the extent funds are available from bond revenues or other sources, including federal, state, academic, or other public or private entities, the state board shall provide funding for the administrator pursuant to subdivision (d) of Section 78036, and for formation and startup costs of the authority for up to three fiscal years after formation of the authority, as follows:
(1) The state board shall provide to the local agency formation commission in the counties in which one or more authorities are to be formed up to a total of eleven million seven hundred thousand dollars ($11,700,000) for staffing and consulting resources and other reasonable expenses to implement Sections 78035, 78038, 78040, and 78041. This amount shall be for all formations of authorities pursuant to this division.
(2) The state board shall provide, for the administrator and consulting resources under Section 78036, funding of up to a total of fifteen million dollars ($15,000,000). This amount shall be for all formations of authorities pursuant to this division.
(3) The state board shall provide funding assistance to each authority for three consecutive fiscal years after formation based upon the plan for service approved by the local agency formation commission pursuant to Section 78038 in an amount not to exceed 33 percent of an authority’s annual projected rate revenue in the first fiscal year, 20 percent of an authority’s projected rate revenue in the second fiscal year, and 10 percent of an authority’s projected rate revenue in the third fiscal year. The total funding requirement for this paragraph shall not exceed thirteen million three hundred thousand dollars ($13,300,000).
(4) The state board shall provide funding assistance to each authority in its first fiscal year equivalent to 25 percent of an authority’s projected rate revenue to function as a working capital reserve fund. The total funding requirement for this paragraph shall not exceed five million three hundred thousand dollars ($5,300,000).
(b) Upon appropriation by the Legislature from the General Fund, or, to the extent funds are available from bond revenues or other sources, including federal, state, academic, or other public or private entities, the state board shall receive up to five million four hundred thousand dollars ($5,400,000) for the preparation of distressed business valuations to determine the net fair market value of the water corporations or mutual water companies pursuant to Section 78037.

PART 9. Changes in Organization

78120.
 Provided that a change in organization is consistent with this division, a change in organization shall be carried out as set forth in the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (Division 3 (commencing with Section 56000) of Title 5 of the Government Code).

SEC. 9.

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