Legal Alerts Jun 23, 2015

Drought Bill To Combat Water Shortages Passes In California Legislature

Measure Would Allow Forced Consolidation Of Water Suppliers, Large Civil Fines

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The California Legislature approved a budget bill that would grant the state authority to force water systems to consolidate to serve disadvantaged communities where a steady supply of clean drinking water is not available. Senate Bill 88 also would give public water suppliers the power to impose civil fines of up to $10,000 for violations of water conservation programs, impose new measuring and reporting requirements for water diversions, and suspend environmental review for certain drought-related projects.

The bill approved Friday, which can be read here, passed on divided votes of 24-14 in the Senate and 52-28 in the Assembly. It now awaits Gov. Jerry Brown’s signature.  

The legislation comes on the heels of unprecedented action last month by the State Water Resources Control Board to address an emergency order by Brown. On May 5 the Board approved emergency regulations designed to achieve an overall 25 percent reduction in potable urban water use across California. Some areas must achieve water use reductions as high as 36 percent. The regulations have left cities, special districts and other water suppliers scrambling to adopt urgency ordinances and other measures to comply with the regulations.

Forced Consolidations of Water Suppliers
One of the bill’s more controversial elements involves granting the State Water Resources Control Board authority to force local water systems in disadvantaged communities located in an unincorporated area, or served by a mutual water company, to consolidate to deliver safe drinking water to disadvantaged communities. This provision would apply where a water system within a disadvantaged community consistently fails to provide a supply of safe drinking water. In such cases, the Board may order consolidation with a public water system (the “receiving water system”). The consolidation may be physical or operational. The Board could also order the extension of service to such a community, so long as the extension is an interim extension in preparation for consolidation. The provision grants authority to the Board to set timelines and performance measures to complete such consolidations.

The provision drew harsh criticism among legislators and communities throughout California as an unnecessary and inappropriate abuse of power by the state’s executive arm. Concerns were raised that the new measures would enable the state to bypass the normal consolidation procedures overseen by Local Agency Formation Commissions operating in counties throughout California. The consolidation provision was developed and passed by the Legislature within a matter of days, with minimal public policy discussion and debate. Concerns were also raised about forced consolidations involving private water suppliers, which have complicated governance structures and land and property rights, and about potential debts and liabilities from absorbed water systems.

Under the legislation, forced consolidation or service-extension measures would be undertaken only after the Board has taken other steps, including encouraging voluntary consolidation or extension of service and meeting various requirements for consultations, efforts to improve water service, and public hearings. If consolidation ultimately is ordered, the Board must make funds available, “as necessary and appropriate” and “upon appropriation by the Legislature,” to the receiving water system for costs related to consolidation or extension of service. The legislation requires the Board to coordinate with the appropriate local agency formation commission and other local agencies to facilitate the change of organization or reorganization, and adequately compensate owners of a privately owned subsumed water system for the fair market value of the system as prescribed in the bill.

Disadvantaged communities are defined as communities with an annual median household income of less than 80 percent of the statewide annual median household income.

Conservation Fines and Penalties
One of the more difficult aspects of the Board’s emergency regulations is how to persuade customers to comply with locally designed water restrictions aimed at achieving the mandatory water use reductions. SB 88 provides new tools.

The bill amends section 377 of the California Water Code, which contains provisions for criminal convictions, to permit a court or public water supplier to hold a person civilly liable for violations of water conservation programs and regulations. The fines are not to exceed $10,000 for violating a local water conservation program adopted under Water Code section 376 or for violating an emergency regulation adopted by the Water Board pursuant to Water Code section 1058.5. This provision would be codified as subdivision (b) of Water Code section 377. For residential water users, the civil liability for the first violation may not exceed $1,000 unless the court or public entity finds the following extraordinary situations: the residential water user had actual notice of the requirement that was violated; the conduct was intentional; and the amount of water at issue was substantial. On the 31st day after a person has been notified of a violation under subdivision (b), the water user “may additionally be civilly liable” in an amount not to exceed $10,000, plus $500 for each additional day the violation continues. Civil liability imposed pursuant to Water Code section 377 shall be collected by the public entity and expended solely for purposes of water conservation. In addition to these remedies, this bill authorizes a public entity to enforce water use limitations by a volumetric penalty in an amount established by the public entity.

SB 88 allows the top executive officer of public entities to identify “designees” to issue citations and complaints where violations of local water conservation programs or emergency Water Board regulations have occurred.

Additional Provisions
SB 88 includes exemptions from the California Environmental Quality Act if a project: mitigates drought conditions; is for construction or expansion of a recycled water pipeline, and any directly related infrastructure, or certain projects related to groundwater replenishment. The exemption expires January 1, 2017.  It also includes new requirements that people who divert 10 acre feet of water or more per year measure their diversions, maintain records and report the information to the Board.  

If you have any questions about this proposed law or how it may impact your agency, please contact the attorney authors of this legal alert listed to the right in the Special Districts, Public Finance, Municipal Law or Environmental Law & Natural Resources practice groups, or your BB&K attorney.

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Disclaimer: BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

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