Bill Text: CA AB240 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

---

Bill Title: Mutual water companies.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2014-03-06 - Last day to consider Governor's item veto pursuant to Joint Rule 58.5. [AB240 Detail]

Download: California-2013-AB240-Amended.html

---

BILL NUMBER: AB 240	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JUNE 18, 2013
	AMENDED IN SENATE  JUNE 5, 2013

INTRODUCED BY   Assembly Member Rendon

                        FEBRUARY 5, 2013

   An act to add Sections 14304, 14305,  and  14306
 , and 14307  to the Corporations Code, to amend Section
116755 of the Health and Safety Code, and to add Section 10531.5 to
the Water Code, relating to mutual water companies.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 240, as amended, Rendon. Mutual water companies.
   Under existing law, a mutual water company is defined as a
corporation organized for or engaged in the business of selling,
distributing, supplying, or delivering water for irrigation or
domestic purposes that provides in its articles or bylaws that the
water shall be sold, distributed, supplied, or delivered only to
owners of its shares, as specified.
   (1) Existing law requires each board member of a mutual water
company that operates a public water system to complete a training
course regarding the duties of board members of mutual water
companies, as specified.
   This bill would require a board member to repeat this training
course every 6 years.
   (2) Existing law permits a mutual water company that is not a
public utility to levy assessments upon its shares, unless otherwise
provided in its articles or bylaws.
   This bill would also permit the board of directors of a mutual
water company, if authorized by its articles or bylaws, to record a
notice of lien against a shareholder's property if the shareholder
has not timely paid any rate, charge, or assessment arising from, or
related to, water services provided by the mutual water company to
the shareholder's property and if the shareholder was given at least
20 days' notice of the lien.
   (3) Existing law, the California Public Records Act, provides that
public records are open to inspection at all times during the office
hours of the state or local agency that retains those records, and
that every person has a right to inspect any public record, except as
provided. The Ralph M. Brown Act requires, with specified
exceptions, that all meetings of a legislative body of a local
agency, as those terms are defined, be open and public and that all
persons be permitted to attend and participate.
    This bill would require a mutual water company that
operates a public water system to comply with the Ralph M. Brown Act
and the California Public Records Act, as specified. The 
 This bill would enact the Mutual Water Company Open Meeting Act,
which would apply to all mutual water companies, and would permit an
eligible person to attend a meeting of a mutual water company, as
those terms are defined, and to speak during the meeting, except as
provided. 
    The  bill would  also  require the board of the
mutual water company  that operates a public water system 
to adopt, in an open meeting, an annual budget on or before the start
of each fiscal year. The bill would require the board of a mutual
water company that operates a public water system to contract with a
certified public accountant or public accountant to make an annual
audit of the accounts and records of the mutual water company, and
would require the report to be filed, within 12 months of the end of
the mutual water company's fiscal year under examination, as a public
record with the mutual water company, and to be sent to the
Controller and any person served by the mutual water company that
submits a written request to the board, as specified. 
   The bill would also require the board of directors of a mutual
water company that operates a public water system to make specified
documents available to an eligible person, as defined, upon payment
of fees covering the direct costs of duplication, as specified. 

   (4) Existing law declares that water is a valuable natural
resource in California and should be managed to ensure the
availability of sufficient supplies to meet the state's agricultural,
domestic, industrial, and environmental needs. Existing law declares
that local agencies can realize efficiencies by coordinating and
integrating their assets and seeking mutual solutions to water
management issues.
   This bill would declare the intent of the Legislature to encourage
collaboration among mutual water companies that operate public water
systems in the City of Maywood to create a public agency that can
consolidate drinking water services for the people and business of
that city.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 14304 is added to the Corporations Code, to
read:
   14304.  If a shareholder of a mutual water company has not timely
paid any rate, charge, or assessment arising from, or related to,
water service provided by the mutual water company to the shareholder'
s property, and if authorized by its articles or bylaws, then after
providing at least 20 days' written notice to the shareholder, the
board of directors of the mutual water company may authorize the
recording of a notice of lien against that shareholder's property to
secure the collection of the rates, charges, and assessments owed to
the mutual water company by the shareholder.
  SEC. 2.  Section 14305 is added to the Corporations Code, to read:

   14305.  (a) A mutual water company that operates a public water
system shall comply with the Ralph M. Brown Act (Chapter 9
(commencing with Section 54950) of Part 1 of Division 2 of Title 5 of
the Government Code) and the California Public Records Act (Chapter
3.5 (commencing with Section 6250) of Division 7 of Title 1 of the
Government Code).
   (b) The board of a mutual water corporation that operates a public
water system shall contract with a certified public accountant or
public accountant to make an annual audit of the accounts and records
of the mutual water company. The audit shall conform to generally
accepted auditing standards. A report of the audit shall be filed as
a public record with the mutual water company and shall be sent to
the Controller and any person served by the mutual water company that
submits a written request to the board. The report shall be filed
within 12 months of the end of the mutual water company's fiscal year
under examination.  
   14305.  (a) This section shall be known and may be cited as the
Mutual Water Company Open Meeting Act.
   (b) Any eligible person may attend meetings of the board of
directors of a mutual water company, except when the board adjourns
to, or meets solely in, executive session to consider litigation,
matters relating to the formation of contracts with third parties,
member or shareholder discipline, personnel matters, or to meet with
a member or shareholder, upon the member or shareholder's request,
regarding the member or shareholder's payment of assessments, as
specified in Section 14303. The board of directors of the association
shall meet in executive session, if requested by a member or
shareholder who may be subject to a fine, penalty, or other form of
discipline, and the member shall be entitled to attend the executive
session. As specified in paragraph (3) of subdivision (m), an
eligible person shall be entitled to attend a teleconference meeting
or the portion of a teleconference meeting that is open to eligible
persons, and that meeting or portion of the meeting shall be audible
to the eligible persons in a location specified in the notice of the
meeting.
   (c) Any matter discussed in executive session shall be generally
noted in the minutes of the immediately following meeting that is
open to eligible persons.
   (d) The minutes, minutes proposed for adoption that are marked to
indicate draft status, or a summary of the minutes, of any meeting of
the board of directors of a mutual water company, other than an
executive session, shall be available to eligible persons within 30
days of the meeting. The minutes, proposed minutes, or summary
minutes shall be distributed to any eligible person upon request and
upon reimbursement of the mutual water company's costs for making
that distribution.
   (e) Eligible persons shall be notified in writing, at the time
that the pro forma budget required in Section 14306 is distributed,
of their right to have copies of the minutes of meetings of the board
of directors, and how and where those minutes may be obtained.
   (f) Unless the bylaws provide for a longer period of notice,
eligible persons shall be given notice of the time and place of a
meeting as defined in subdivision (m), except for an emergency
meeting or a meeting that will be held solely in executive session,
at least four days prior to the meeting. Except for an emergency
meeting, eligible persons shall be given notice of the time and place
of a meeting that will be held solely in executive session at least
two days prior to the meeting. Notice shall be given by posting the
notice in a prominent, publicly accessible place or places within the
territory served by the mutual water company and by mail to any
eligible person who had requested notification of board meetings by
mail, at the address requested by the eligible person. Notice may
also be given by mail, by delivery of the notice to each unit served
by the mutual water company or, with the consent of the eligible
person, by electronic means. The notice shall contain the agenda for
the meeting.
   (g) An emergency meeting of the board may be called by the chief
executive officer of the mutual water company, or by any two members
of the board of directors other than the chief executive officer, if
there are circumstances that could not have been reasonably foreseen
which require immediate attention and possible action by the board,
and which of necessity make it impracticable to provide notice as
required by this section.
   (h) The board of directors of the mutual water company shall
permit any eligible person to speak at any meeting of the mutual
water company or the board of directors, except for meetings of the
board held in executive session. A reasonable time limit for all
eligible persons to speak to the board of directors or before a
meeting of the mutual water company shall be established by the board
of directors.
   (i) (1) Except as described in paragraphs (2) to (4), inclusive,
the board of directors of the mutual water company may not discuss or
take action on any item at a nonemergency meeting unless the item
was placed on the agenda included in the notice that was posted and
distributed pursuant to subdivision (f). This subdivision does not
prohibit an eligible person who is not a member of the board from
speaking on issues not on the agenda.
   (2) Notwithstanding paragraph (1), a member of the board of
directors, mutual water company officers, or a member of the staff of
the mutual water company, may do any of the following:
   (A) Briefly respond to statements made or questions posed by a
person speaking at a meeting as described in subdivision (h).
   (B) Ask a question for clarification, make a brief announcement,
or make a brief report on his or her own activities, whether in
response to questions posed by an eligible person or based upon his
or her own initiative.
   (3) Notwithstanding paragraph (1), the board of directors or a
member of the board of directors, subject to rules or procedures of
the board of directors, may do any of the following:
   (A) Provide a reference to, or provide other resources for factual
information to, the mutual water company's officers or staff.
   (B) Request the mutual water company's officers or staff to report
back to the board of directors at a subsequent meeting concerning
any matter, or take action to direct the mutual water company's
officers or staff to place a matter of business on a future agenda.
   (C) Direct the mutual water companies officers or staff to perform
administrative tasks that are necessary to carry out this
subdivision.
   (4) (A) Notwithstanding paragraph (1), the board of directors may
take action on any item of business not appearing on the agenda
posted and distributed pursuant to subdivision (f) under any of the
following conditions:
   (i) Upon a determination made by a majority of the board of
directors present at the meeting that an emergency situation exists.
An emergency situation exists if there are circumstances that could
not have been reasonably foreseen by the board, that require
immediate attention and possible action by the board, and that, of
necessity, make it impracticable to provide notice.
   (ii) Upon a determination made by the board by a vote of
two-thirds of the members present at the meeting, or, if less than
two-thirds of total membership of the board is present at the
meeting, by a unanimous vote of the members present, that there is a
need to take immediate action and that the need for action came to
the attention of the board after the agenda was posted and
distributed pursuant to subdivision (f).
   (iii) The item appeared on an agenda that was posted and
distributed pursuant to subdivision (f) for a prior meeting of the
board of directors that occurred not more than 30 calendar days
before the date that action is taken on the item and, at the prior
meeting, action on the item was continued to the meeting at which the
action is taken.
   (B) Before discussing any item pursuant to this paragraph, the
board of directors shall openly identify the item to the members in
attendance at the meeting.
   (j) (1) The board of directors shall not take action on any item
of business outside of a meeting.
   (2) (A) Notwithstanding any other provision of law, the board of
directors shall not conduct a meeting via a series of electronic
transmissions, including, but not limited to, electronic mail, except
as specified in subparagraph (B).
   (B) Electronic transmissions may be used as a method of conducting
an emergency meeting if all members of the board, individually or
collectively, consent in writing to that action, and if the written
consent or consents are filed with the minutes of the meeting of the
board. These written consents may be transmitted electronically.
   (k) An eligible person may bring a civil action for declaratory or
equitable relief for a violation of this section by a mutual water
company for which he or she is defined as an eligible person,
including, but not limited to, injunctive relief, restitution, or a
combination thereof, within one year of the date the cause of action
accrues.
   (l) An eligible person who prevails in a civil action to enforce
his or her rights pursuant to this section shall be entitled to
reasonable attorney's fees and court costs, and the court may impose
a civil penalty of up to five hundred dollars ($500) for each
violation, except that each identical violation shall be subject to
only one penalty if the violation affects each member of the
association equally. A prevailing mutual water company shall not
recover any costs, unless the court finds the action to be frivolous,
unreasonable, or without foundation.
   (m) As used in this section:
   (1) "Eligible person" means a person who is any of the following:
   (A) A stockholder or member of the mutual water company.
   (B) A person who is an occupant, pursuant to a lease or a rental
agreement, of commercial space or a dwelling unit to which the mutual
water company sells, distributes, supplies, or delivers drinking
water.
   (C) An elected official of a city or county who represents people
who receive drinking water directly from the mutual water company on
a retail basis.
   (D) Any other person eligible to participate in the mutual water
company's meetings under provisions of the company's articles or
bylaws.
   (2) "Item of business" means any action within the authority of
the board, except those actions that the board has validly delegated
to any other person or persons, officer of the mutual water company,
or committee of the board comprising less than a majority of the
directors.
   (3) "Meeting" means either of the following:
   (A) A congregation of a majority of the members of the board at
the same time and place to hear, discuss, or deliberate upon any item
of business that is within the authority of the board.
   (B) A teleconference in which a majority of the members of the
board, in different locations, are connected by electronic means,
through audio or video or both. A teleconference meeting shall be
conducted in a manner that protects the rights of members of the
association and otherwise complies with the requirements of this
title. Except for a meeting that will be held solely in executive
session, the notice of the teleconference meeting shall identify at
least one physical location so that members of the association may
attend and at least one member of the board of directors or a person
designated by the board shall be present at that location.
Participation by board members in a teleconference meeting
constitutes presence at that meeting as long as all board members
participating in the meeting are able to hear one another and members
of the association speaking on matters before the board.
   (4) "Mutual water company" means a mutual water company, as
defined in Section 14300, that operates a public water system, as
defined in Section 14300.5. 
  SEC. 3.  Section 14306 is added to the Corporations Code, to read:
   14306.   (a)    The board of a mutual water
company that operates a public water system shall adopt, in an open
meeting, an annual budget on or before the start of each fiscal year
of the mutual water company. 
   (b) The board of a mutual water corporation that operates a public
water system shall contract with a certified public accountant or
public accountant to make an annual audit of the accounts and records
of the mutual water company. The audit shall conform to generally
accepted auditing standards. A report of the audit shall be filed
with the mutual water company and shall be sent to the Controller and
any person served by the mutual water company that submits a written
request to the board. The report shall be filed within 12 months of
the end of the mutual water company's fiscal year under examination.
 
  SEC. 4.    Section 14307 is added to the Corporations
Code, to read:
   14307.  (a) Unless its governing documents impose more stringent
standards, a mutual water company that operates a public water system
shall make the following records promptly available upon request to
an eligible person upon payment of fees covering direct costs of
duplication:
   (1) Agendas and minutes of board meetings.
   (2) A copy of an annual budget adopted pursuant to subdivision (a)
of Section 14306.
   (3) A copy of an audit report prepared pursuant to subdivision (b)
of Section 14306.
   (4) A copy of any records reporting the results of a water quality
test.
   (5) A copy of an annual report.
   (b) For the purposes of this section, "eligible person" means a
person who is any of the following:
   (1) A stockholder or member of the mutual water company.
   (2) A person who is an occupant, pursuant to a lease or a rental
agreement, of commercial space or a dwelling unit to which the mutual
water company sells, distributes, supplies, or delivers drinking
water.
   (3) An elected official of a city or county who represents people
who receive drinking water directly from the mutual water company on
a retail basis.
   (4) Any other person eligible to obtain copies of the records
listed in subdivision (a) under provisions of the mutual water
company's articles or bylaws. 
   SEC. 4.   SEC. 5.   Section 116755 of
the Health and Safety Code is amended to read:
   116755.  (a) Each board member of a mutual water company that
operates a public water system, as defined in Section 116275, shall,
within six months of taking office, or by December 31, 2012, if that
member was serving on the board on December 31, 2011, complete a
two-hour course offered by a qualified trainer regarding the duties
of board members of mutual water companies, including, but not
limited to, the duty of a corporate director to avoid contractual
conflicts of interest and fiduciary duties, the duties of public
water systems to provide clean drinking water that complies with the
federal Safe Drinking Water Act (42 U.S.C. Sec. 300f et seq.) and
this chapter, and long-term management of a public water system. A
board member of a mutual water company shall repeat this training
every six years. For the purposes of this subdivision, a trainer may
be qualified in any of the following ways:
   (1) Membership in the California State Bar.
   (2) Accreditation by the International Association of Continuing
Education and Training (IACET) ANSI/IACET 1-2007.
   (3) Sponsorship by either the Rural Community Assistance
Corporation or the California Rural Water Association.
   (b) A mutual water company formed pursuant to Part 7 (commencing
with Section 14300) of Division 3 of Title 1 of the Corporations Code
shall be liable for the payment of any fines, penalties, costs,
expenses, and other amounts that may be imposed upon the mutual water
company pursuant to this chapter. The mutual water company may levy
an assessment, pursuant to Section 14303 of the Corporations Code, to
pay these fines, penalties, costs, expenses, and other amounts so
imposed. If the amount of outstanding fines, penalties, costs,
expenses and other amounts imposed pursuant to this chapter exceed 5
percent of the annual budget of the mutual water company, then the
mutual water company shall levy an assessment, pursuant to Section
14303 of the Corporations Code, to pay those fines, penalties, costs,
expenses, and other amounts so imposed.
   SEC. 5.   SEC. 6.   Section 10531.5 is
added to the Water Code, to read:
   10531.5.  It is the intent of the Legislature to encourage
collaboration among mutual water companies that operate public water
systems in the City of Maywood to create a public agency that can
consolidate drinking water services for the people and businesses of
that city.