BILL ANALYSIS
SB 99
Page 1
Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 99 (Committee on Local Government) - As Amended: May 12,
2009
Policy Committee: Local
GovernmentVote:7-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill imposes additional transparency and accountability
requirements on conduit financing providers in California.
Specifically, the bill:
1)Requires a conduit financing provider to make specified
information available on its website, including its meeting
agendas, notices of special meetings, staff reports on items
on the agendas, minutes of meetings, and audits of the conduit
financing provider's accounts and records.
2)Requires that audits of conduit financing providers contain
specified information, including fees imposed on borrowers by
the financing provider, expenditures of those fees, the amount
of debt that the conduit financer has issued, and what debt is
still outstanding.
3)Requires a conduit financing provider to annually conduct an
audit of its accounts and report the results to the State
Controller's Office (SCO), and provides for penalties for
noncompliance.
4)Requires that notices currently required to be sent by joint
powers agencies related to agreements and amendments to
agreements include a copy of the full text of the agreement.
Currently, only summary information is required to be filed
with the Secretary of State.
FISCAL EFFECT
SB 99
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Administrative costs to the Secretary of State and SCO to
compile annual reports and texts of joint powers authority
agreements, potentially exceeding $150,000 per year. Though the
bill does not explicitly require the SCO to take actions with
respect to audit reports, this estimate assumes that the purpose
of the reporting requirement is to provide increased state
oversight of conduit financing providers.
COMMENTS
1)Background . Federal and state law exempts interest on bonds
issued by state and local governments from income taxes.
Certain types of non-governmental borrowers can take advantage
of tax-exempt financing through "conduit revenue bonds" which
are issued by various governmental agencies, such as state
financing authorities or joint powers authorities. These bonds
may be issued for various projects that have a public benefit,
including economic development, educational and health
facilities, and multi-family housing.
The issuing agency loans the funds obtained from the financing
to a non-governmental borrower who builds and operates the
project. A conduit revenue bond is payable solely from the
loan payment received from the non governmental party, so the
governmental issuer normally has no liability for debt service
on the bonds.
At its February 6, 2008 information hearing, the Senate Local
Government Committee identified a number of concerns about the
transparency and accountability of state and local
governmental entities that issue conduit revenue bonds.
2)Purpose . This bill is intended to address some of the concerns
raised in the2008 hearing. The author's office asserts that
ambiguities in existing law make it difficult to determine
whether all conduit financing providers are complying with
audits, annual financial reporting, and other public
accountability requirements. The bill's enhanced internet
posting, audit, and annual reporting requirements are intended
to ensure that the public's interests in conduit financing
transactions are protected.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081