Stricken language would be deleted from and underlined language would be added to present law.
1 State of Arkansas
2 94th General Assembly A Bill
3 Regular Session, 2023 HOUSE BILL 1022
4
5 By: Representatives Maddox, Vaught
6
7 For An Act To Be Entitled
8 AN ACT REGARDING WATERWORKS AND WATER SUPPLY; TO
9 REPEAL THE LAW REGARDING THE OVERSIGHT OF RETAIL
10 WATER PROVIDERS; AND FOR OTHER PURPOSES.
11
12
13 Subtitle
14 TO REPEAL THE LAW REGARDING THE OVERSIGHT
15 OF RETAIL WATER PROVIDERS.
16
17
18 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
19
20 SECTION 1. Arkansas Code Title 14, Chapter 234, Subchapter 8, is
21 repealed.
22 Subchapter 8 — Oversight of Retail Water Providers
23
24 14-234-801. Findings — Definitions.
25 (a) The General Assembly finds that:
26 (1) Oversight of providers in the state is primarily handled by
27 the Arkansas Natural Resources Commission and the Department of Health;
28 (2) The oversight of these providers is spread out and results
29 in the inability of a single state entity to monitor and help initiate
30 necessary changes in public access of water, rate structures, the
31 sustainability of the providers, and the protection of consumer rights;
32 (3) While local control is important, the current landscape of
33 providers has the potential to create inefficiencies in service and
34 instability in fiscal management;
35 (4) Combining smaller providers may be necessary in some areas
36 in order to guarantee dependable and plentiful provision of water and to
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1 avoid unsustainable rate increases;
2 (5) Many providers have an aging workforce, and there is a need
3 for education of the governing bodies of these providers concerning the
4 importance of recruiting and retaining an expert workforce; and
5 (6) Training of local, state, and federal leaders on issues
6 surrounding provider personnel, finances, compliance, and environmental
7 factors is needed.
8 (b) As used in this subchapter:
9 (1) “Commission” means the Arkansas Natural Resources
10 Commission;
11 (2) “Provider” means any provider of retail water service; and
12 (3) “Provider board” means the governing body of a provider,
13 whether the governing body is organized as a board, commission, committee,
14 council, or other type of entity.
15
16 14-234-802. Fiscal distress — Improvement plans — Rates and rate
17 studies — Definition.
18 (a)(1) For the purposes of this section, a provider is in fiscal
19 distress if the provider:
20 (A) Fails to obtain a rate study as required under this
21 section;
22 (B) Fails to implement a completed rate study required
23 under this section; or
24 (C) Has been found by the Arkansas Natural Resources
25 Commission to be in significant noncompliance with rules of the commission
26 because of inadequate funds for operation and maintenance or inadequate
27 compliance with rules of the commission.
28 (2) A provider may be found by the commission to be subject to
29 this section if a member of the provider's board does not receive the
30 training required under § 14-234-805.
31 (b) The commission shall maintain and publish on the commission's
32 website a list of providers in fiscal distress.
33 (c)(1) A provider shall obtain a rate study on the following schedule:
34 (A) By July 1, 2024, and every five (5) years thereafter
35 for a provider that serves five hundred (500) or fewer customers;
36 (B) By July 1, 2025, and every five (5) years thereafter
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1 for a provider that serves five hundred one (501) to one thousand (1,000)
2 customers; and
3 (C) By July 1, 2026, and every five (5) years thereafter
4 for a provider that serves more than one thousand (1,000) customers.
5 (2)(A) Rates shall adequately address costs for:
6 (i) Operation and maintenance;
7 (ii) Debt service;
8 (iii) Required reserves;
9 (iv) Depreciation;
10 (v) Future capital expenses;
11 (vi) An annual audit or agreed-upon procedures and
12 compilation report; and
13 (vii) Other expenses as necessary.
14 (B)(i) The rates recommended in the rate study that is
15 obtained and chosen by the provider shall be implemented by the provider in
16 the manner provided under the applicable law for modifying rates.
17 (ii) Except as provided in subdivision
18 (c)(2)(B)(iii) of this section, an increase in rates recommended in the rate
19 study shall be implemented within one (1) year of the receipt of the rate
20 study.
21 (iii) If recommended rates increase the provider's
22 rates by fifty percent (50%) or more from the fiscal year before the rate
23 study was completed, the provider may phase in the rate increase over a two-
24 year period.
25 (d)(1) The commission shall determine by rule the requirements of the
26 rate study, including without limitation a review of the provider's
27 refurbishment and replacement account and asset management plan.
28 (2)(A) The rate study shall use as its basis the guidelines of
29 the American Water Works Association and the Water Environment Federation.
30 (B) The commission shall determine by rule an appropriate
31 entity to provide guidelines for the rate study to use as its basis if
32 guidelines of the American Water Works Association and the Water Environment
33 Federation are unavailable.
34 (e) A provider shall deposit a minimum of five percent (5%) per annum
35 of gross revenues in a dedicated refurbishment and replacement account within
36 twelve (12) months of implementation of the rate, unless a different amount
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1 is determined by a rate study.
2 (f)(1) The commission shall maintain an approved list of entities to
3 conduct rate studies required by this section, including without limitation
4 the Arkansas Rural Water Association, professional engineers, certified
5 public accountants, economists, and actuaries.
6 (2) If a provider chooses an entity to conduct the rate study
7 that is not on the approved list of entities, the entity is required to have
8 conducted at least one (1) rate study in the state in the previous five-year
9 period.
10 (g)(1) To ensure fiscal soundness, the commission shall consider and
11 approve a new provider with fewer than three hundred (300) customers within
12 the proposed service area only if:
13 (A) The commission determines that public health or the
14 environment is threatened without the approval of the new provider; or
15 (B) There is no other viable alternative.
16 (2) A new provider with fewer than three hundred (300) customers
17 seeking approval shall:
18 (A) Be organized through a political subdivision,
19 including without limitation an improvement district, a county, or a
20 municipality;
21 (B) Demonstrate the ability to remain fiscally
22 sustainable; and
23 (C) Complete a technical, financial, and managerial
24 capacity review conducted by the commission.
25 (h)(1) A provider that plans to undertake a major development project
26 shall obtain a rate study or amend the provider's existing rate study before
27 beginning the major development project to include consideration of the
28 financial impact of the major development project on the fiscal
29 sustainability of the provider.
30 (2) As used in this subsection, “major development project”
31 means a project that exceeds twenty percent (20%) of gross revenues of the
32 provider for the immediately preceding fiscal year.
33 (i) A provider shall file its most recent rate study annually with
34 Arkansas Legislative Audit at the same time the provider files its audit
35 report or agreed-upon procedures and compilation report as required under §
36 14-234-120.
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1 (j)(1) The commission shall annually identify and notify a provider if
2 the provider is in fiscal distress.
3 (2) The provider may appeal the finding to the Pulaski County
4 Circuit Court.
5 (k)(1) A provider found to be in fiscal distress shall file an
6 improvement plan with the commission, including without limitation specific
7 action to be taken to correct financial, technical, and managerial
8 deficiencies, within ninety (90) days of the finding of fiscal distress.
9 (2)(A) Upon receipt of the improvement plan under this
10 subsection, the commission shall review the improvement plan and:
11 (i) Approve the improvement plan in whole or in
12 part;
13 (ii) Modify the improvement plan; or
14 (iii) Deny the improvement plan.
15 (B) At the time the commission determines that the
16 provider is no longer in fiscal distress, the commission shall remove the
17 fiscal distress designation and notify the provider.
18 (l) If a provider is found to be in fiscal distress, the provider
19 shall not receive state financial assistance for water operations until an
20 improvement plan that has been approved by the commission is in place, unless
21 the financial assistance is immediately necessary to ensure preservation of
22 the public peace, health, and safety, as determined by the commission.
23 (m) If the provider is found to be in fiscal distress, the provider
24 shall obtain written authorization from the commission to:
25 (1) Incur additional debt;
26 (2) Accept assistance for the refurbishment or replacement of
27 facilities or construction of facilities not within the provider's
28 improvement plan; or
29 (3) Transfer assets to another entity.
30
31 14-234-803. Workforce recruitment and retention — Education.
32 A provider shall:
33 (1) Work with the Association of Arkansas Counties and the
34 Arkansas Municipal League to develop training for leaders of the county or
35 municipality;
36 (2) Provide suitable compensation and incentives to encourage
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1 individuals to consider a career with the provider; and
2 (3) Promote the recruitment, education, and licensing of
3 employees of the provider.
4
5 14-234-804. Municipal providers — Provision of water to nonresident
6 customers — Advisory committee.
7 (a)(1) If a municipal provider is unable or unwilling to provide
8 service to a nonresident property owner residing in the provider's service
9 area, the Arkansas Natural Resources Commission may require the municipal
10 provider to release the nonresident property owner to a willing provider.
11 (2) If required by the willing provider, a nonresident property
12 owner may be required to pay the costs of necessary extensions to connect to
13 the willing provider.
14 (3) A municipal provider shall not release a service area of the
15 municipal provider if the release would invalidate or encumber the issuance
16 or retirement of a bond, promissory note, or certificate of indebtedness
17 related to the service area.
18 (b)(1) A municipal provider that is willing to provide service to
19 areas outside the municipal boundaries and within its service area shall do
20 so through an application made by the affected property owner or through an
21 agreement executed by the municipal provider and the affected property owner.
22 (2) If the municipal provider has a prerequisite that the
23 affected property owner annex into the municipal boundaries before providing
24 service, the prerequisite shall be clearly defined in an application or
25 agreement.
26 (3) Failure to clearly define any annexation requirement within
27 the application or agreement prohibits the municipal provider from requiring
28 annexation in exchange for service for those areas without agreement from the
29 affected property owner.
30 (c)(1) If a municipal provider services customers outside the
31 municipal boundaries of the municipal provider and the number of those
32 customers outside the municipal boundaries and in unincorporated areas equals
33 or exceeds twenty percent (20%) of the total customer base of the municipal
34 provider, a nonvoting advisory committee to the municipal provider board
35 shall be created by the governing body of the municipality in which the
36 municipal provider is located.
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1 (2) The makeup and duties of an advisory committee created under
2 subdivision (c)(1) of this section shall be determined by the governing body
3 of the municipality that creates the advisory committee.
4 (3) Two (2) nonresident customers from the area served outside
5 the municipal boundaries and in unincorporated areas shall serve on the
6 advisory committee.
7 (d) The commission shall intervene if a municipal provider:
8 (1) Is prohibited from providing water to potential customers
9 within the municipal provider's service area by the political subdivision
10 under which the municipal provider is organized;
11 (2) Practices business irresponsibly in relation to consumer
12 rights; or
13 (3) Is not following best management practices in providing
14 water service.
15 (e) Except as otherwise provided in this section, a consumer shall not
16 be denied access to service if suitable distribution and collection
17 infrastructure already exists or if the consumer is willing to pay for
18 suitable distribution and collection infrastructure, unless:
19 (1) A municipal provider has made the decision not to extend
20 service outside the municipal boundaries of the municipal provider;
21 (2) An engineering, capacity, physical feasibility, or fiscal
22 feasibility issue exists as determined by a professional engineer or
23 certified public accountant; or
24 (3) A consumer does not submit an application or enter into an
25 agreement under subsection (b) of this section.
26
27 14-234-805. Training.
28 (a)(1)(A) Within one (1) year of election or appointment, a majority
29 of the members of a provider board shall receive a minimum of eight (8) hours
30 of provider training as promulgated by rule of the Arkansas Natural Resources
31 Commission.
32 (B) A member of a provider board as of January 1, 2021,
33 shall receive the training required under this section by December 31, 2022.
34 (2) If a majority of the members of a provider board do not
35 receive the training required under this section, the commission may find the
36 provider is subject to § 14-234-802.
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1 (3) This section does not apply to a member of a provider board
2 who has served on the provider board for ten (10) years or more.
3 (b) The commission shall consult with an advisory training board for
4 the development of the training required under this section, whose members
5 shall include without limitation:
6 (1) The Secretary of the Department of Health or his or her
7 designee;
8 (2) The Director of the Arkansas Natural Resources Commission or
9 his or her designee;
10 (3) The State Director of the United States Department of