BILL ANALYSIS                                                                                                                                                                                                    

                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

          |Bill No:  |SB 1262                          |Hearing    |4/20/16  |
          |          |                                 |Date:      |         |
          |Author:   |Pavley                           |Tax Levy:  |No       |
          |Version:  |2/18/16                          |Fiscal:    |Yes      |
          |Consultant|Favorini-Csorba                                       |
          |:         |                                                      |

                                 Water supply planning

          Increases requirements that new developments must meet in order  
          to demonstrate that its water supplies are sufficient.


           Water Supply Planning for New Development.  An urban water  
          supplier with more than 3,000 customers must adopt an urban  
          water management plan (UWMP).  An important component of a UWMP  
          is an assessment of water service reliability during normal,  
          dry, and multiple-dry years.  Part of that analysis requires  
          information about the availability of groundwater supplies.  

          Cities and counties must consider information provided by water  
          suppliers when they act on proposals for large-scale  
          residential, commercial, hotel, industrial, or mixed-use  
          projects (SB 901, Costa, 1995).  Every large-scale development  
          project-proposing new 500 connections or an equivalent size for  
          other uses-must have a water supply assessment (SB 610, Costa,  
          2001), prepared according to the following process.  First, a  
          city or county, at the time that it determines that a  
          development is subject to the California Environmental Quality  
          Act (CEQA), must identify any water system that that may supply  
          water for the project.  If the proposed project was included in  
          the UWMP of one of the identified systems, the water system  
          prepares the water supply assessment for the project.  If the  


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          projected demand was not accounted for, or the city or county  
          was not able to identify a water system to serve the project,  
          the city or county prepares the assessment, in consultation with  
          the local agency formation commission (LAFCO) and other relevant  
          water systems. 

          A water supply assessment must identify any existing water  
          supply entitlements, water rights, or water service contracts  
          relevant to the identified water supply for the proposed  
          project, and describe the quantities of water received in prior  
          years by the public water system or the city or county through  
          its water rights or other sources.  If a water supply for a  
          proposed project includes groundwater, the water supply  
          assessment must include additional information, including a  
          description of any groundwater basins that will supply the  
          project, the court or SWRCB order if the basin is adjudicated,  
          and an analysis of the sufficiency of the groundwater from the  
          basin or basins. The water supply assessment must be  
          incorporated into the analysis of the project under the  
          California Environmental Quality Act (CEQA).   LAFCOs then use  
          the water supply assessment in determining whether to authorize  
          an annexation or extension of service to the proposed  

          Greater certainty about water supplies for a proposed  
          development is required later in the process of approving a  
          development.  Specifically, the Subdivision Map Act requires  
          cities and counties to demonstrate that a sufficient water  
          supply is available as a condition in their approval of a  
          tentative map for a subdivision with more than 500 dwelling  
          units (SB 221, Kuehl, 2001).  Proof of sufficient water must be  
          based on a written verification from the applicable public water  
          system. In order to be sufficient, the water supply must be able  
          to meet the demands of existing and future planned uses in  
          addition to the subdivision's demand over the next 20 years.  

          Sustainable Groundwater Management Act.  In response to a  
          multi-year drought, the Legislature enacted the Sustainable  
          Groundwater Management Act (SGMA) in 2014. Composed of three  
          bills-AB 1739 (Dickinson), SB 1168 (Pavley) and SB 1319  
          (Pavley)-SGMA comprehensively reformed California's groundwater  
          laws.  Among other provisions, the Act directs the Department of  
          Water Resources (DWR) to categorize the state's groundwater  
          basins into high, medium, low, and very low priorities, based on  


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          factors such as the population overlying the basin, number of  
          wells in the basin, and overlying irrigated acreage.  DWR must  
          also identify basins subject to critical overdraft.

          Under SGMA, basins designated as high or medium priority must be  
          managed by a groundwater sustainability agency.  That agency  
          must develop a groundwater sustainability plan (GSP) to ensure  
          that by 2040, the basin is in a sustainable condition-there can  
          be no undesirable results (such as land sinking) from use of the  
          basin. If a basin does not have a groundwater sustainability  
          agency, or the agency fails to adopt or implement a GSP, the  
          State Water Resources Control Board may designate the basin as  
          "probationary" and can develop a plan to achieve sustainability  
          for the basin. 

          SGMA also took steps to integrate groundwater considerations  
          into local planning.  A GSP must take into account the most  
          recent planning assumptions contained in the general plans of  
          cities and counties overlying the basin, and the GSP must be  
          provided to the legislative body of those cities and counties.   
          If the basin is managed pursuant to a court order, SWRCB order,  
          or SWRCB plan for a probationary basin, that order must be  
          provided instead of the GSP.  Similarly, a city or county that  
          is proposing to amend its general plan must refer the proposed  
          amendment to the relevant groundwater sustainability agency for  
          comment.  Some legislators want to also incorporate groundwater  
          considerations into the water supply planning required for new  

           Proposed Law

           Senate Bill 1262 requires cities and counties, when making a  
          determination of water supply sufficiency for a proposed  
          subdivision that relies in whole or in part on groundwater, to  
          consider certain plans and information regarding the basin.  
          Specifically, the city or county must consider the order or  
          decree adopted by the court or the SWRCB for a basin that has  
          been adjudicated. For basins that have not been adjudicated, the  
          city or county must consider:

                     In high or medium priority basins, the most recently  
                 adopted or revised adopted groundwater sustainability  


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                     In low or very low priority basins, whether the  
                 Department of Water Resources has identified the basin or  
                 basins as overdrafted or has projected that the basin  
                 will become overdrafted if present management conditions  

          The bill allows this information to support the agency's  
          determination, and also provides that water from a probationary  
          basin shall not be counted as a water supply.

          SB 1262 also makes conforming changes to the information  
          required in a water supply assessment that includes groundwater  
          from a non-adjudicated basin.  In addition, in the case that the  
          project relies on water from an overdrafted basin of low or very  
          low priority, SB 1262 requires the water supply assessment to  
          include a detailed description of the efforts being undertaken  
          in the basin or basins to eliminate the overdraft. It also  
          prohibits hauled water and groundwater from a probationary basin  
          from being considered a source of water.  In addition, if the  
          water supply for a proposed project includes water that doesn't  
          meet all primary and secondary drinking water standards, the  
          following additional information needs to be included:

                 A detailed description of the concentration of  
               contaminants in the water.

                 The proposed method for treating, blending, or otherwise  
               ensuring that the water will meet drinking water quality  

                 The project cost to achieve drinking water quality.

                 An analysis of the affordability of water for the  
               project's anticipated residents.

          SB 1262 also recasts the process for developing water supply  
          assessments.  If a city or county cannot identify a water system  
          for a proposed project, or if the systems identified are  
          unwilling to supply water to the project, SB 1262 requires the  
          city or county to prepare a technical report that includes all  
          of the following:

                 The name of each public water system that has a service  
               area boundary within five miles of the proposed project.


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                 An analysis of the feasibility of a water system  
               annexing, connecting, or otherwise supplying domestic water  
               to the project.
                 An analysis of the long-term feasibility of creating a  
               new water system to serve the project, including, but not  
               limited to, projecting the capacity of anticipated  
               ratepayers to sustain a water system if there is the  
               potential that water treatment will be required in the  
               foreseeable future.
                 A description of all actions taken by the city or county  
               to secure a supply of domestic water from an existing  
               public water system for the project.
                 A description of all actions taken by the project  
               proponent to pursue a contract for managerial or  
               operational oversight from an existing public water system.

          If the city or county concludes, based on the technical report,  
          that it is feasible for a water system to provide water to the  
          project, SB 1262 requires the city or county submit their  
          technical report to the relevant LAFCO.  If the LAFCO doesn't  
          approve an annexation or extension of service, the city or  
          county must develop the water supply assessment for the project.

           State Revenue Impact

           No estimate.


           1.  Purpose of the bill  . Cities and counties must already  
          consider information provided by water suppliers in their  
          general plans, and California's water supply assessment laws,  
          enacted through SB 610 and 221, have helped to ensure that new  
          developments in California have sufficient water supplies.   
          However, the passage of SGMA in 2014 introduced new plans and  
          requirements for groundwater extraction, and the  
          "show-me-the-water" legislation has not yet caught up.  In  
          addition, some loopholes in SB 610 and SB 211 allow new  
          developments to skirt the requirements for sufficient water  
          supplies by establishing new systems without consideration of  
          their long-term sustainability.  SB 1262 provides the necessary  
          updates to harmonize new development approvals with the  
          requirements of SGMA and creates a process to discourage the  


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          creation of new water systems when it is geographically and  
          economically feasible to connect to an existing system.

          2.  Burdensome requirements  . Historically, some developments in  
          California have proceeded on shaky water supply assumptions.   
          However, since the passage of SB 610 and SB 221, developments  
          have been required to demonstrate that they have sufficient  
          water supplies before receiving the needed land use approvals  
          from local governments.  These laws already require cities and  
          counties to do water supply assessments if no system is  
          available to serve the development.  SB 1262 adds a new  
          requirement to prepare a technical report that includes analyses  
          of future ratepayers ability to pay for a water system before  
          ground can be broken on a project.  It also requires cities and  
          counties to look at all water systems within five miles of the  
          proposed development, regardless of whether it makes sense for  
          those systems to serve the project or not.  The costs of this  
          technical report will be passed along in the form of higher  
          development fees, potentially creating a disincentive to new,  
          more water efficient development.  

          3.  Analysis paralysis  . Under current law, the water supply  
          assessment is a part of the CEQA process, which must precede any  
          LAFCO action on an annexation or extension of services needed to  
          support a development.  SB 1262 upends this process by requiring  
          a water supply assessment to be prepared after LAFCO has acted  
          in order to encourage developments to use existing water systems  
          even when a water system is opposed.  But this structure  
          deprives LAFCOs of important information and potentially creates  
          a loop within CEQA that cannot be completed.  For example, a  
          city or county may prepare a water supply assessment that  
          identifies a water system to serve the development, have an  
          application for annexation be rejected by LAFCO, and then have  
          to prepare another water supply assessment that must again  
          identify the same public water system. Retaining the existing  
          statutory language that governs the order of land use approvals  
          for new developments may eliminate these issues.

          4.  Missed connections  . SB 1262 intends to ensure that new  
          developments have sustainable water supplies and ratepayer bases  
          that can support the long term funding and effective management  
          of a water system.  However, the state's show-me-the-water  
          statutes only apply to developments with 500 or more  
          connections.  This threshold only covers large developments;  


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          according to an estimate by CALAFCO, it may only cover half the  
          growth in the state.  It may miss smaller developments that are  
          in fact more vulnerable to water supply shocks or economic  
          challenges due to lack of economies of scale.  On the other  
          hand, setting the threshold too low could burden small projects  
          that tie into an existing system with adequate capacity with no  
          adverse effects.  Under state law, a public water system with  
          200 or fewer connections is considered a small system and can be  
          regulated by the county health department instead of the State  
          Water Resources Control Board.  The Committee may wish to  
          consider amending SB 1262 to lower the threshold for water  
          supply assessments and verifications to more closely align with  
          other state laws on water systems.

          5.  Incoming  ! The Senate Natural Resources and Water Committee  
          approved SB 1262 by a vote of 7-2 on March 29, 2016.

          6.  Mandate  . The California Constitution generally requires the  
          state to reimburse local agencies for their costs when the state  
          imposes new programs or additional duties on them.  According to  
          the Legislative Counsel's Office, SB 1262 creates a new  
          state-mandated local program.  SB 1262 provides that if the  
          Commission on State Mandates determines that this bill contains  
          a reimbursable mandate, payment to local agencies must be made  
          pursuant to an existing statutory process.

          7.  Related legislation  .  SB 1263 (Wiekowski) increases state  
          oversight of the formation of new public water systems by  
          requiring, among other provisions, a potential system to develop  
          a technical report on its water sources and future costs.

           Support and  
          Opposition   (4/14/16)

           Support  :  Clean Water Action; Community Water Center; Desert  
          Water Agency; Leadership Counsel for Justice and Accountability;  
          Planning and Conservation League; Sierra Club California; Valley  
          Ag Water Coalition.

           Opposition  :  California Apartment Association; California  
          Association of Realtors; California Building Industries  
          Association; California Business Properties Association;  


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          California Chamber of Commerce; California Independent Petroleum  

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