BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 613|
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THIRD READING
Bill No: SB 613
Author: Harman (R), et al
Amended: 1/21/10
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 3-0, 1/6/10
AYES: Cox, Aanestad, Kehoe
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Irvine Ranch Water District and Santa Margarita
Water Distri
SOURCE : Irvine Ranch Water District
DIGEST : This bill authorizes the Irvine Ranch Water
District and the Santa Margarita Water District to provide
credit enhancement, liquidity support, or both, by pledging
and applying all or any part of the districts' revenues to
the payment or security of the principal, redemption price,
purchase price, and interest of any general obligation
bonds for improvement districts or consolidated general
obligation bonds for improvement districts issued or
carried by the districts. This bill allows the districts
to make that pledge in the manner and upon terms that the
districts' boards deem advisable.
ANALYSIS : The Irvine Ranch Water District (IRWD) and the
Santa Margarita Water District (SMWD) are special
districts, formed under the California Water District Act,
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which together provide water and sewer service to
approximately 480,000 residents within a service area of
over 177,000 acres in Orange County.
IRWD and SMWD can form improvement districts, which are
geographical subdivisions through which each district can
fund capital improvements that benefit those specific
geographic areas. With a two-thirds vote of the property
owners in an improvement district, IRWD and SMWD can
finance capital projects by issuing general obligation
bonds, which are secured by property tax revenues outside
of the standard one percent rate.
This bill authorizes IRWD and the SMWD to provide credit
enhancement, liquidity support, or both, by pledging and
applying all or any part of the districts' revenues to the
payment or security of the principal, redemption price,
purchase price, and interest of any general obligation
bonds for improvement districts or consolidated general
obligation bonds for improvement districts issued or
carried by the districts. This bill allows the districts
to make that pledge in the manner and upon terms that the
districts' boards deem advisable.
In connection with the pledge, this bill authorizes the
board of each district to provide, in the document in which
the pledge is provided for or created, any covenants,
promises, restrictions, and provisions that the district
may deem necessary or desirable, including, but not limited
to, covenants, promises, restrictions, and provisions
relating to:
1.The use of bond proceeds.
2.The maintenance, operation, and preservation of the
district's facilities.
3.Any rates and charges to be established and collected by
the district, including rates and charges for the
services or products furnished or provided by the
district's facilities.
4.The incurring of additional indebtedness payable from the
revenues.
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5.The establishment, maintenance, and use of reserve funds,
sinking funds, interest and redemption funds, maintenance
and operation funds, and other special funds for the
payment or security of any or all of the principal,
redemption price, purchase price, and interest.
This bill allows the board of each district to exercise the
powers specified in the Revenue Bond Law of 1941 to carry
out the bill's provisions.
This bill specifies that pledges authorized by the bill are
governed by specified statutes relating to pledges of
collateral to secure bonds.
This bill requires the board of each district to adopt
criteria to govern its determinations to use the general
revenue pledge. The criteria may include evaluating the
use of a pledge in lieu of, or in combination with, other
available credit enhancement and liquidity options.
This bill states that the authority granted by the bill is
in addition to any authority granted by other provisions of
law relating to the payment of the districts' general
obligation bonds from the proceeds of assessments to be
levied upon and collected from lands of any improvement
district or relating to the levy and collection of the
assessments. The bill states that it does not affect any
other law authorizing or providing for the issuance or
carrying of bonds by the districts. This bill declares
that it shall be deemed to provide a complete and
supplemental method for exercising the powers authorized by
the bill, and shall be deemed supplemental to the powers
conferred by other applicable laws. This bill requires the
districts to report to the Legislature and State
Treasurer's Office on their use of the bill's provisions,
as specified, by January 1, 2014.
Comments
Recent volatility in the credit markets and the financial
industry has increased bond issuers' costs of borrowing by
dramatically increasing the cost of purchasing third-party
credit enhancements for bonds. Credit enhancement costs
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can be particularly high for the issuance of consolidated
improvement district bonds because the bond market tends to
perceive the strength of the consolidated bonds in terms of
the weakest improvement districts included in those bonds.
Rather than relying entirely on third-party credit
enhancements, IRWD and SMWD can use this bill to pledge
their general revenues towards the payment and security of
their improvement districts' general obligation bonds. By
allowing IRWD and SMWD to use their strong overall credit
to support general obligation bonds issued by their
improvement districts, this bill will significantly lower
the districts' cost of borrowing and, as a result, will
save money for taxpayers and ratepayers.
The California Constitution prohibits special legislation
when a general law can apply. This bill contains findings
and declarations explaining the need for legislation that
applies only to IRWD and SMWD.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 1/12/10)
Irvine Ranch Water District (source)
California Special Districts Association
Orange County Business Council
Santa Margarita Water District
AGB:do 1/25/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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