BILL NUMBER: AB 1182 CHAPTERED 01/22/04 CHAPTER 7 FILED WITH SECRETARY OF STATE JANUARY 22, 2004 APPROVED BY GOVERNOR JANUARY 21, 2004 PASSED THE ASSEMBLY JANUARY 12, 2004 PASSED THE SENATE SEPTEMBER 3, 2003 AMENDED IN SENATE AUGUST 19, 2003 AMENDED IN SENATE AUGUST 18, 2003 AMENDED IN SENATE JULY 15, 2003 AMENDED IN SENATE JULY 7, 2003 AMENDED IN SENATE JUNE 25, 2003 AMENDED IN ASSEMBLY MAY 23, 2003 AMENDED IN ASSEMBLY APRIL 22, 2003 AMENDED IN ASSEMBLY APRIL 2, 2003 INTRODUCED BY Assembly Member Ridley-Thomas FEBRUARY 21, 2003 An act to amend Section 9109 of the Commercial Code, to amend Section 15147 of the Education Code, to amend Sections 8855, 53692, and 91521.3 of, to amend the heading of Chapter 11.5 (commencing with Section 8855) of Division 1 of Title 2 of, and to repeal Section 8858 of, the Government Code, and to amend Section 44533 of the Health and Safety Code, relating to government financing, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1182, Ridley-Thomas. Government financing. (1) Existing commercial law governs secured transactions, but exempts certain transactions from its provisions, including transactions governed by certain statutes of this state or certain other jurisdictions that relate to security interests created by this state or one of its governmental units. This bill would delete those exemptions and instead provide that a transfer by a government or governmental unit is not subject to the provisions governing secured transactions. (2) Existing law requires the California Debt and Investment Advisory Commission, among other things, to collect, maintain, and provide comprehensive information on all state and local debt authorization, sold and outstanding. This bill instead would require the commission to collect, maintain, and provide that information on all state and local debt authorization and issuance. (3) Existing law requires the California Debt and Investment Advisory Commission to prepare an annual report compiling and detailing the total amount of outstanding state and local public debt and examining recent trends in the composition of that outstanding debt, subject to specified criteria. This bill would repeal this provision. (4) Existing law requires an issuer of public securities to publish notice of intention to sell the securities at a public sale at least 15 days prior to the sale if the securities exceed $1,000,000. This bill would instead require publication of that intention at least 15 days prior to the sale of public securities that exceed $1,000,000 but do not exceed $10,000,000, and at least 5 days prior to the sale if the securities exceed $10,000,000. (5) Existing law requires, with respect to the sale of bonds for a school district or a community college district, that the board of supervisors or community college district, as appropriate, advertise for bids according to specified criteria. This bill instead would require that the board of supervisors or community college district, as appropriate, give notice as required by the provisions of law governing an issuer of public securities amended by this bill. (6) Existing law establishes a corporate instrumentality of the State of California, known as an industrial development authority, in each public agency for the purpose of undertaking projects through the issuance of bonds for the financing in acquiring, constructing, or rehabilitating facilities or property for one or more specified activities or uses, and for the purpose of carrying out and completing the projects. Authorities are not authorized to undertake projects through the issuance of bonds on or after January 1, 2004, with a specified exception. This bill would extend this date to January 1, 2006. (7) Existing law provides that no project or portion of a project is eligible for financing under the California Pollution Control Financing Authority Act if at the time an application is submitted financing has otherwise been obtained. This bill would delete that prohibition. (8) This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 9109 of the Commercial Code is amended to read: 9109. (a) Except as otherwise provided in subdivisions (c) and (d), this division applies to each of the following: (1) A transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract. (2) An agricultural lien. (3) A sale of accounts, chattel paper, payment intangibles, or promissory notes. (4) A consignment. (5) A security interest arising under Section 2401 or 2505, or under subdivision (3) of Section 2711, or subdivision (5) of Section 10508, as provided in Section 9110. (6) A security interest arising under Section 4210 or 5118. (b) The application of this division to a security interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this division does not apply. (c) This division does not apply to the extent that either of the following conditions is satisfied: (1) A statute, regulation, or treaty of the United States preempts this division. (2) The rights of a transferee beneficiary or nominated person under a letter of credit are independent and superior under Section 5114. (d) This division does not apply to any of the following: (1) A landlord's lien, other than an agricultural lien. (2) A lien, other than an agricultural lien, given by statute or other rule of law for services or materials, but Section 9333 applies with respect to priority of the lien. (3) An assignment of a claim for wages, salary, or other compensation of an employee. (4) A sale of accounts, chattel paper, payment intangibles, or promissory notes as part of a sale of the business out of which they arose. (5) An assignment of accounts, chattel paper, payment intangibles, or promissory notes which is for the purpose of collection only. (6) An assignment of a right to payment under a contract to an assignee that is also obligated to perform under the contract. (7) An assignment of a single account, payment intangible, or promissory note to an assignee in full or partial satisfaction of a preexisting indebtedness. (8) Any loan made by an insurance company pursuant to the provisions of a policy or contract issued by it and upon the sole security of the policy or contract. (9) An assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral. (10) A right of recoupment or setoff, provided that both of the following sections apply: (A) Section 9340 applies with respect to the effectiveness of rights of recoupment or setoff against deposit accounts. (B) Section 9404 applies with respect to defenses or claims of an account debtor. (11) The creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for each of the following: (A) Liens on real property in Sections 9203 and 9308. (B) Fixtures in Section 9334. (C) Fixture filings in Sections 9501, 9502, 9512, 9516, and 9519. (D) Security agreements covering personal and real property in Section 9604. (12) An assignment of a claim arising in tort, other than a commercial tort claim, but Sections 9315 and 9322 apply with respect to proceeds and priorities in proceeds. (13) An assignment of a deposit account in a consumer transaction, but Sections 9315 and 9322 apply with respect to proceeds and priorities in proceeds. (14) Any security interest created by the assignment of the benefits of any public construction contract under the Improvement Act of 1911 (Division 7 (commencing with Section 5000) of the Streets and Highways Code). (15) Transition property, as defined in Section 840 of the Public Utilities Code, except to the extent that the provisions of this division are referred to in Article 5.5 (commencing with Section 840) of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code. (16) A claim or right of an employee or employee's dependents to receive workers' compensation under Division 1 (commencing with Section 50) or Division 4 (commencing with Section 3200) of the Labor Code. (17) A transfer by a government or governmental unit. SEC. 1.5. Section 15147 of the Education Code is amended to read: 15147. Before selling the bonds, or any part of them, the board of supervisors or community college district, as appropriate, shall give notice as required by Section 53692 of the Government Code. SEC. 2. The heading of Chapter 11.5 (commencing with Section 8855) of Division 1 of Title 2 of the Government Code is amended to read: CHAPTER 11.5. CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION SEC. 3. Section 8855 of the Government Code is amended to read: 8855. (a) There is created the California Debt and Investment Advisory Commission, consisting of nine members, selected as follows: (1) The Treasurer, or his or her designee. (2) The Governor or the Director of Finance. (3) The Controller, or his or her designee. (4) Two local government finance officers appointed by the Treasurer, one each from among persons employed by a county and by a city or a city and county of this state, experienced in the issuance and sale of municipal bonds and nominated by associations affiliated with these agencies. (5) Two Members of the Assembly appointed by the Speaker of the Assembly. (6) Two Members of the Senate appointed by the Senate Committee on Rules. (b) (1) The term of office of an appointed member is four years, but appointed members serve at the pleasure of the appointing power. In case of a vacancy for any cause, the appointing power shall make an appointment to become effective immediately for the unexpired term. (2) Any legislators appointed to the commission shall meet with and participate in the activities of the commission to the extent that the participation is not incompatible with their respective positions as Members of the Legislature. For purposes of this chapter, the Members of the Legislature shall constitute a joint interim legislative committee on the subject of this chapter. (c) The Treasurer shall serve as chairperson of the commission and shall preside at meetings of the commission. (d) Appointed members of the commission shall not receive a salary, but shall be entitled to a per diem allowance of fifty dollars ($50) for each day's attendance at a meeting of the commission not to exceed three hundred dollars ($300) in any month, and reimbursement for expenses incurred in the performance of their duties under this chapter, including travel and other necessary expenses. (e) The commission may adopt bylaws for the regulation of its affairs and the conduct of its business. (f) The commission shall meet on the call of the chairperson, at the request of a majority of the members, or at the request of the Governor. A majority of all nonlegislative members of the commission constitutes a quorum for the transaction of business. (g) The office of the Treasurer shall furnish all administrative and clerical assistance required by the commission. (h) The commission shall do all of the following: (1) Assist all state financing authorities and commissions in carrying out their responsibilities as prescribed by law, including assistance with respect to federal legislation pending in Congress. (2) Upon request of any state or local government units, to assist them in the planning, preparation, marketing, and sale of new debt issues to reduce cost and to assist in protecting the issuer's credit. (3) Collect, maintain, and provide comprehensive information on all state and all local debt authorization and issuance, and serve as a statistical clearinghouse for all state and local debt issues. This information shall be readily available upon request by any public official or any member of the public. (4) Maintain contact with state and municipal bond issuers, underwriters, credit rating agencies, investors, and others to improve the market for state and local government debt issues. (5) Undertake or commission studies on methods to reduce the costs and improve credit ratings of state and local issues. (6) Recommend changes in state laws and local practices to improve the sale and servicing of state and local debts. (7) Establish a continuing education program for local officials having direct or supervisory responsibility over municipal investments, and debt issuance. The commission shall undertake these and any other activities necessary to disclose investment and debt issuance practices and strategies that may be conducive for oversight purposes. (8) Collect, maintain, and provide information on local agency investments of public funds for local agency investment. (9) Publish a monthly newsletter describing and evaluating the operations of the commission during the preceding month. (i) The city, county, or city and county investor of any public funds, no later than 60 days after the close of the second and fourth quarters of each calendar year, shall provide the quarterly reports required pursuant to Section 53646 and, no later than 60 days after the close of the second quarter of each calendar year and 60 days after the subsequent amendment thereto, provide the statement of investment policy required pursuant to Section 53646, to the commission by mail, postage prepaid, or by any other method approved by the commission. The commission shall collect these reports to further its educational responsibilities as described under subdivision (e). Nothing in this section shall be construed to create additional oversight responsibility for the commission or any of its members. Sole responsibility for control, oversight, and accountability of local investment decisions shall remain with local officials. The commission shall not be considered to have any fiduciary duty with respect to any local agency income report received under this subdivision. In addition, the commission shall not have any legal liability with respect to these investments. (j) The commission, no later than May 1, 2006, shall report to the Legislature describing its activities since the inception of the local agency investment reporting program regarding the collection and maintenance of information on local agency investment reporting practices and how the commission uses that information to fulfill its statutory goals. (k) The issuer of any proposed new debt issue of state or local government shall, no later than 30 days prior to the sale of any debt issue at public or private sale, give written notice of the proposed sale to the commission, by mail, postage prepaid. This subdivision shall also apply to any nonprofit public benefit corporation incorporated for the purpose of acquiring student loans. The notice shall include the proposed sale date, the name of the issuer, the type of debt issue, and the estimated principal amount of the debt. Failure to give this notice shall not affect the validity of the sale. (l) The issuer of any new debt issue of state or local government, not later than 45 days after the signing of the bond purchase contract in a negotiated or private financing, or after the acceptance of a bid in a competitive offering, shall submit a report of final sale to the commission by mail, postage prepaid, or by any other method approved by the commission. A copy of the final official statement for the issue shall accompany the report of final sale. The commission may require information to be submitted in the report of final sale that it considers appropriate. SEC. 4. Section 8858 of the Government Code is repealed. SEC. 5. Section 53692 of the Government Code is amended to read: 53692. In addition to any other requirement imposed by law, at least 15 days prior to the sale of any public securities that exceed one million dollars ($1,000,000) but do not exceed ten million dollars ($10,000,000) at a public sale and at least five days prior to the sale of any public securities that exceed ten million dollars ($10,000,000) at a public sale, an issuer shall publish notice of the intention to sell the securities in a financial publication generally circulated throughout the state or reasonably expected to be disseminated among prospective bidders for the securities. The notice shall include the date, time, and place of the intended sale and the amount of the securities to be sold. SEC. 6. Section 91521.3 of the Government Code is amended to read: 91521.3. Authorities shall not be authorized to undertake projects through the issuance of bonds on or after January 1, 2006, unless a later enacted statute, which is enacted before January 1, 2006, deletes or extends that date. This section does not apply to issuance of bonds to refund any bonds issued prior to January 1, 2006. SEC. 7. Section 44533 of the Health and Safety Code is amended to read: 44533. (a) No project relating to the improvement of air or water quality or solid waste control or related to the remediation of property contaminated by a release of hazardous materials shall be eligible for financing under this division unless, prior to the issuance of bonds or notes, a local, regional, state, or federal environmental authority exercising jurisdiction over the project certifies that the project, as designed, will further compliance with federal, state, or local pollution control standards and requirements. Within 60 days of the receipt of a written request for that certification by either the authority or a participating party, the local, regional, state, or federal authority shall issue a written certificate to that effect if, in fact, the project as designed, is in furtherance of those purposes. The certification requirements of this subdivision may be waived by the authority, at the request of the participating party, if that certification is not necessary to qualify the bonds or notes for tax-exempt status under federal laws and regulations. (b) No certification issued pursuant to subdivision (a) shall be admissible in evidence, constitute an admission, or bind any certifying authority in any proceeding in which the compliance of a participating party's facilities with any applicable pollution control, land use, zoning, or other similar law is an issue or in any application or proceeding for a permit to locate or construct facilities. SEC. 8. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to correct statutory ambiguities and duplications relating to the issuance of public debt and other matters relating to public finance at the earliest possible time, it is necessary that this act take effect immediately.