Bill Text: CA AB2050 | 2017-2018 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Small System Water Authority Act of 2018.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Vetoed) 2018-09-28 - Vetoed by Governor. [AB2050 Detail]

Download: California-2017-AB2050-Amended.html

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 add Division 23 (commencing with Section 78000) to the Water Code, relating to small system water authorities.


LEGISLATIVE COUNSEL'S DIGEST


AB 2050, as amended, 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 would define various terms and require a change in organization to be carried out as set forth in the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000. The bill would state the intent of the Legislature to enact legislation to protect public health that would require the board to provide notice to a water agency that is chronically providing contaminated drinking water, require the agency to develop a plan, as specified, and would subject to a merger with other agencies serving contaminated water an agency that is not able to develop a plan to correct the serving of contaminated water, the merger of which would create a small system water authority. The bill would state the intent of the Legislature to enact legislation that would subject a small system water authority to oversight by the appropriate local agency formation commission and the board’s Division of Drinking Water, and that would require the Treasurer to create and submit to the Legislature an oversight report. 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 with applicable drinking water standards as of December 31, 2018. The bill would require an entity receiving the notice to respond to the state board 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 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, 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 April 1, 2019, to provide written notice to each county, city, or water district 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 consolidating with 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 on or before July 1, 2019. The bill would authorize an agency wishing to join an authority after July 1, 2019, to do so by a petition to the local agency formation commission. The bill would require a local agency formation commission to include within an authority all public agencies that timely indicate that they wish to be included, and all county service areas, county waterworks districts, or other dependent special districts providing water service located within the county that provide water service only in the proposed area of the authority, as prescribed. The bill would prohibit a local agency formation commission from including any dependent special district in the authority if the county board of supervisors objects in writing within a certain period to the inclusion of the special district. 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 or the Department of Business Oversight, 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 or the Department of Business Oversight, 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 applicable local agency formation commission to form an authority to provide safe drinking water to the public water systems’ customers, as prescribed. 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 issues a notice that it has determined that the public water system shall be consolidated into an authority, 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 certificate, to issue a notice of completion to the authority and send a copy of that notice to the state board. The bill would require, annually on the date of an authority’s formation by a local agency formation commission, an authority to file a certain report with the 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 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 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 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 Department of Business Oversight to order the dissolution of the public water system and the transfer of all assets of a subject mutual water company to an 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 Department of Business Oversight. 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 Treasurer, in consultation with the state board and various associations, no later than January 1, 2022, to contract with an independent consultant to review the start-up 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 stormwaters, 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, to provide funding for the administrator and for formation and start-up costs for up to 2 fiscal years after formation of the authority, as specified. The bill would provide for the Department of Business Oversight, upon appropriation by the Legislature, to receive up to an unspecified amount per water corporation or mutual water company consolidated into an authority for the preparation of a distressed business valuation to determine the net fair market value of the corporation or company.
By imposing new duties or a higher level of service on 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: NOYES   Local Program: NOYES  

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


SECTION 1.

 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, man-made 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, or private mutual water companies, 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

78010.78005.
 Unless the context otherwise requires, the provisions of this part govern the construction of this division.

78011.78006.
 “Affected county” means any county in which the land of a proposed authority is situated.

78012.78007.
 “Authority” means a small system water authority formed pursuant to this division.

78013.78008.
 “Board” means the board of directors of an authority.

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

78014.78010.
 “City” means any chartered or general law city.

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

78015.78012.
 “Local agency formation commission” means a local agency formation commission of the principal county in which the proposed authority is located.

78016.78013.
 “President” means the president of the board of directors of an authority.

78017.78014.
 “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 United States or any department or agency thereof, the state or any department or agency thereof, and a county, city, public corporation, or public district of the state.

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.

4.Written Notification to Cure
78030.

It is the intent of the Legislature to enact legislation to protect public health that would do the following:

(a)Require the state board to provide notice to a water agency that is chronically providing contaminated drinking water.

(b)Require a water agency provided notice to develop a plan to stop serving contaminated water to its customers.

(c)Require a plan developed to stop serving contaminated water to be reported to the state board by July 1, 2019.

(d)Subject to a merger with other agencies that are serving contaminated water within the same county or an adjacent county through the local agency formation commission process any water agency not able to develop a plan to correct the serving of contaminated water, thereby creating a larger public water agency known as a small system water authority that will have an improved economy of scale and that will, through the composition of its governing board, be responsive to the needs of local residents.

(e)Subject a small system water authority to oversight by the appropriate local agency formation commission and the state board’s Division of Drinking Water.

(f)Require the Treasurer to create and submit to the Legislature an oversight report.

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.
 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:
(a) Operate a public water system that has either less than 3,000 service connections or that serves less than 10,000 people.
(b) Are not in compliance with applicable drinking water standards as of December 31, 2018.

78031.
 An entity receiving a notice pursuant to Section 78030 shall respond to the state board 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 Section 78030 reports pursuant to Section 78031 that a violation of drinking water standards is continuing, the entity shall have 180 days 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 Section 78030 has begun a remediation plan under the authority of the state board, a California regional water quality control board, 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 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 systems is a threat to public health and safety.
(B) Public assistance, in the form of financial, managerial, or technical resources, is required to remedy the public health violations.
(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.

78033.
 (a) No later than April 1, 2019, the state board shall provide written notice to each county, city, or water district located within a county where an entity receiving a notice under 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 consolidating with the authority that may be formed. An agency wishing to consolidate into a proposed authority shall provide a written statement opting into an authority on or before July 1, 2019. After July 1, 2019, an agency wishing to join an authority may do so by means of a 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) In determining which public agencies are to be included within an authority, a local agency formation commission shall include all public agencies timely indicating that they wish to be included in the authority pursuant to subdivision (a). The local agency formation commission shall also include all county service areas, county waterworks districts, or other dependent special districts providing water service located within the county that provide water service only in the proposed area of the authority, provided that the local agency formation commission provides at least 60 days’ written notice to the board of supervisors of the proposed inclusion of a county service area, county waterworks district, or other dependent special district in the new authority. A local agency formation commission shall not include any dependent special district in the authority if the board of supervisors, within the 60-day period, objects in writing to the inclusion of the special district. An authority may include areas that are not contiguous.

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 or the Department of Business Oversight, 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 an entity 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.
(c) No later than 180 days after the administrator submits an application for formation and proposed plan for service pursuant to Section 78038, the applicable local agency formation commission shall initiate proceedings to form an authority to provide safe drinking water to the public water systems’ customers. A local agency formation commission shall not form an authority unless the authority consists of at least five public water systems that may include public water systems from county service areas or other dependent special districts, other public water systems that have been meeting drinking water standards, and public water systems identified by the state board that chronically serve contaminated water in the county in which the proposed authority will be formed.

78035.
 (a) No later than 60 days after the state board issues a notice pursuant to paragraph (1) of subdivision (b) of Section 78034, 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) In appointing an administrator, the state board shall consult with the executive officers of a local agency formation commission for a county in which the authority will be formed to ensure that there are sufficient water purveyors in a proposed authority to provide economies of scale in the operation of the proposed authority and to ensure that the proposed authority will be responsive to local ratepayers’ concerns. A single administrator may provide services to several authorities if, in the judgment of the state water board, the services can be provided in a manner that achieves the purposes of this division.
(b) 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.
(c) 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.
(d) 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.
(e) 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 Department of Business Oversight shall order the dissolution of the public water system and the transfer of all assets of the mutual water company subject to this paragraph 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 Department of Business Oversight 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) 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 Department of Business Oversight 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 Department of Business Oversight shall be based on substantial evidence in the record before the Department of Business Oversight.
(3) If an owner or shareholder disputes the distressed business valuation of the Department of Business Oversight, 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 date of dissolution, shall be paid by the authority within three 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).

78038.
 (a) Within 180 days after the state board issues a notice pursuant to paragraph (1) of subdivision (b) of Section 78034, the administrator shall submit an application for formation and proposed plan for service to the local agency formation commission for review and potential approval pursuant to Chapter 6 (commencing with Section 56880) of Part 3 of Division 3 of Title 5 of the Government Code.
(b) A proposed plan for service shall include all of the following information:
(1) Any information required by the local agency formation commission or its executive officer.
(2) An enumeration and description of the services to be provided by the authority.
(3) An indication of when the services to be provided by the authority can feasibly be provided to the affected territory.
(4) An indication of any improvement or upgrading of structures or water facilities, or other conditions the authority would impose or require within the affected territory in order to provide safe and clean drinking water.
(5) 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:
(A) A discussion of the economies of scale that accrue when several small organizations are consolidated into a single authority.
(B) The operation and maintenance needs of the authority.
(C) Financial plans for the financing of capital improvements, operation and maintenance of facilities, and operation of the authority.
(c) The local agency formation commission shall hold a public hearing on the proposed plan for service no later than 180 days after the date upon which the administrator submits the proposed plan to the local agency formation commission. At the hearing, the local agency formation commission shall approve the plan and the formation of the authority, approve the plan and the formation of the authority with conditions, or disapprove the plan and request resubmittal by the administrator.
(d) If the local agency formation 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 local agency formation’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 local agency formation commission no later than 90 days after the date on which the local agency formation commission provides the administrator with comments disapproving the plan. The local agency formation 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 it may take the actions identified in subdivision (c).
(e) (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 provision of the California Constitution.
(2) If the local agency formation commission approves the plan and the formation of the authority with conditions, the authority shall take the appropriate actions to comply with the conditions within 180 days of the plan’s conditional approval 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 certificate, 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.

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 on 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 all 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.
(C) A description of the authority’s compliance with any conditions imposed by the local agency formation commission on either the original formation or the plan for service adopted pursuant to Section 78038.
(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, 2022, the Treasurer, 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, and the California State Association of Counties, shall contract with an independent consultant to review the start-up 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, 2026.

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.
(b) The public water system representatives in consultation with the administrator shall determine the final number of 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, as part of the order forming the authority, the local agency formation commission shall provide for a transitional plan that will bring the number of directors to five within a reasonable period of time.

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. An adjustment to the compensation for directors shall be 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 stormwaters, 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 of 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 thousand dollars ($1,000) per acre per year for each acre of land on which the charge is levied or one thousand dollars ($1,000) 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, constructions, 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 Article 4 (commencing with Section 53500) of Chapter 3 of, and Chapter 6 (commencing with Section 54300) of, Part 1 of Division 2 of Title 5 of the Government Code, and 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, the state board shall provide funding for the administrator pursuant to subdivision (c) of Section 78036, and for formation and start-up costs of the authority for up to two fiscal years after formation of the authority, as follows:
(1) The state board shall provide a local agency formation commission in each county in which one or more authorities are to be formed up to ____ dollars ($____) per formation of an authority for staffing and consulting resources and other reasonable expenses to implement Sections 78035, 78038, 78040, and 78041.
(2) The state board shall provide funding assistance to each authority for two consecutive fiscal years after formation based upon the plan for service approved by the local agency formation commission pursuant to Section 78038 in an amount not to exceed twenty percent of an authority’s annual operating budget.
(b) Upon appropriation by the Legislature, the Department of Business Oversight shall receive up to ____dollars ($____) per water corporation or mutual water company consolidated into an authority for the preparation of a distressed business valuation to determine the net fair market value of the corporation or company pursuant to Section 78037.

PART  9. Changes in Organization

78035.78120.
 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. 2.

 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.

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