BILL NUMBER: AB 240 CHAPTERED
BILL TEXT
CHAPTER 633
FILED WITH SECRETARY OF STATE OCTOBER 8, 2013
APPROVED BY GOVERNOR OCTOBER 8, 2013
PASSED THE SENATE SEPTEMBER 3, 2013
PASSED THE ASSEMBLY SEPTEMBER 12, 2013
AMENDED IN SENATE AUGUST 13, 2013
AMENDED IN SENATE JULY 1, 2013
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, 14306, and 14307 to the
Corporations Code, to amend Section 116755 of the Health and Safety
Code, to add Section 10531.5 to the Water Code, and to amend Item
4265-111-6051 of Section 2.00 of the Budget Act of 2011, relating to
mutual water companies, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 240, 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 enact the Mutual Water Company Open Meeting Act,
which would apply to 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 conduct an annual review of the financial
records and reports of the mutual water company, 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.
The Budget Act of 2011 appropriated $7,500,000 from the Safe
Drinking Water, Water Quality and Supply, Flood Control, River and
Coastal Protection Fund of 2006 to the Department of Public Health
for the provision of grants to public agencies, as specified, to
improve drinking water infrastructure in communities served by mutual
water companies in the Cities of Maywood and Santa Ana.
This bill would limit the use of this appropriation to providing
grants to the Water Replenishment District of Southern California for
water quality improvement projects for the benefit of the City of
Maywood, subject to specified conditions.
Appropriation: yes.
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) (1) This section shall be known and may be cited as
the Mutual Water Company Open Meeting Act.
(2) This section shall only apply to a mutual water company that
operates a public water system.
(b) Any eligible person, upon 24 hours advance written notice, 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, conducted on or
after January 1, 2014, 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 provided to
any eligible person upon request and upon reimbursement of the mutual
water company's costs for providing the minutes.
(e) The pro forma budget required in Section 14306 shall be
available to eligible persons within 30 days of the meeting at which
the budget was adopted. The budget shall be provided to any eligible
person upon request and upon reimbursement of the mutual water
company's costs.
(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. Eligible
persons requesting notice by mail shall pay the costs of reproduction
and mailing of the notice in advance. 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 a 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 company's 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) Notwithstanding any other law, 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) (1) 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 for a judicial determination that an action taken by the board
is null and void under this section.
(2) Prior to the commencement of an action pursuant to paragraph
(1), the eligible person shall make a demand on the board to cure or
correct the action alleged to be taken in violation of this section.
The demand shall be in writing, and submitted within 90 days from the
date the action was taken. The demand shall state the challenged
action of the board and the nature of the alleged violation.
(3) Within 30 days of receipt of the demand, the board shall cure
or correct the challenged action and inform the demanding party in
writing of its actions to cure or correct, or inform the demanding
party in writing of its decision not to cure or correct the
challenged action.
(4) Within 15 days of receipt of the written notice of the board's
decision to cure or correct or not to cure or correct, or within 15
days of the expiration of the 30-day period to cure or correct,
whichever is earlier, the demanding party shall commence the action
pursuant to paragraph (1). If the demanding party fails to commence
the action pursuant to paragraph (1), that party shall be barred from
commencing the action thereafter.
(l) A board action that is alleged to have been taken in violation
of this section shall not be determined to be void if the action
taken was in substantial compliance with this section.
(m) The fact that the board of directors of a mutual water company
takes subsequent action to cure or correct an action taken pursuant
to this section shall not be construed as, or admissible as evidence
of, a violation of this section.
(n) 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. A prevailing mutual water
company shall not recover any costs, unless the court finds the
action to be frivolous, unreasonable, or without foundation.
(o) As used in this section:
(1) "Eligible person" means a person who is any of the following:
(A) A shareholder 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 company that operates a public
water system shall contract with a certified public accountant or
public accountant to conduct an annual review of the financial
records and reports of the mutual water company. The review shall be
subject to generally accepted accounting standards.
(c) Eligible persons may request a copy of the report, and shall
reimburse the mutual water company for the costs of providing the
report.
(d) For purposes of this section, the term "eligible persons" has
the same meaning as that term is defined in subdivision (o) of
Section 14305.
SEC. 4. Section 14307 is added to the Corporations Code, to read:
14307. (a) (1) 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
written request to an eligible person upon payment of fees covering
direct costs of duplication:
(A) Agendas and minutes of board meetings conducted on or after
January 1, 2014.
(B) A copy of an annual budget adopted pursuant to subdivision (a)
of Section 14306.
(C) A copy of an accounting report prepared pursuant to
subdivision (b) of Section 14306.
(D) A copy of any records reporting the results of a water quality
test.
(E) A copy of an annual report that has been distributed to the
mutual water company's shareholder or members.
(2) Any request for records pursuant to this subdivision shall be
limited to the three calendar years preceding the written request for
the records.
(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. 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 that operates a public water
system 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, that operates a public water system, 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. 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.
SEC. 7. Item 4265-111-6051 of Section 2.00 of the Budget Act of
2011 is amended to read:
4265-111-6051--For local assistance,
Department of Public Health, payable from the
Safe Drinking Water, Water Quality and Supply,
Flood Control, River and Coastal Protection
Fund of 2006................................... 7,500,000
Provisions:
1. The funds appropriated in this item
shall be to provide grants to public
agencies, as provided in Section 75022
of the Public Resources Code, to
improve drinking water infrastructure
in communities served by mutual
water companies in the City of
Maywood. Grants may be made to the
Water Replenishment District of
Southern California for water quality
improvement projects to benefit the
residents of the City of Maywood,
subject to the following conditions:
(a) the district manages the design
and implementation or construction of
the project; (b) the district oversees
its operation; (c) a public agency
remains the owner of the project after
construction; and (d) the mutual water
company that incorporates the project
into its system complies with Section
14305 of the Corporations Code.
Notwithstanding any other law, the
funds appropriated in this item
shall be available for expenditure
until January 1, 2018. Any funds
that are not awarded on or before
January 1, 2018, shall revert back to
the Safe Drinking Water, Water Quality
and Supply, Flood Control, River and
Coastal Protection Fund of 2006.