BILL ANALYSIS
SB 841
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Date of Hearing: April 7, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 841 (Local Government Committee) - As Amended: February 11,
2010
SENATE VOTE : 31-0
SUBJECT : First Validating Act of 2010.
SUMMARY : Enacts the First Validating Act of 2010, which
validates the organization, boundaries, acts, proceedings, and
bonds of the state government, counties, cities, special
districts, school districts, and redevelopment agencies, among
other public bodies.
EXISTING LAW allows local agencies to make changes to the
organization, boundaries, acts, proceedings, and bonds of the
state, cities, counties, special districts, school districts,
redevelopment agencies, and other local agencies.
FISCAL EFFECT : None
COMMENTS : According to the Senate Local Government Committee,
the annual Validating Acts protect investors from the chance
that a minor error might undermine the legal integrity of a
public agency's bond. Banks, pension funds, and other investors
will not buy public agencies' securities unless they are sound
investments. Investors rely on legal opinions from bond
counsels to assure the bonds' credit worthiness. Without
legislative action to cure technical errors, bond counsels are
reluctant to certify bonds as good credit risks. SB 841 gives
legislative protection to public agencies and private investors.
The Validating Acts cure typographical, grammatical, and
procedural errors. They do not forgive fraud, corruption, or
unconstitutional acts. A local official who makes a technical
error will find reassurance in the Validating Acts, while a
corrupt official faces prosecution regardless of the Acts.
By insulating state and local bonds against harmless errors, the
Validating Acts save taxpayers money. Strong legal opinions
from bond counsels result in higher credit ratings for state and
local bonds. Higher credit ratings allow state and local
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officials to pay lower interest rates to private investors.
Lower borrowing costs save money for taxpayers.
Starting in the mid-1920s, the Legislature passed separate
validating acts for different types of bonds, several classes of
special districts, and various local boundary changes. By the
late 1930s, the practice was to pass annual comprehensive
validating acts. Following its customary practice, the Senate
Local Government Committee, is again authoring three Validating
Acts this year that will retroactively cure public officials'
mistakes. The first two are urgency measures that go into
effect when they are chaptered. SB 841, the First Validating
Act, will take effect sometime this spring. SB 842, the Second
Validating Act, will take effect late summer, validating
mistakes that occur after the chaptering of the First Validating
Act. SB 843, the Third Validating Act, will take effect on
January 1, 2011, covering the period between the chaptering of
SB 842 and the end of 2010.
REGISTERED SUPPORT / OPPOSITION :
Support
State Controller John Chiang
State Treasurer Bill Lockyer
American Federation of State, County and Municipal Employees,
AFL-CIO
Association of CA Water Agencies
CA Association of Local Agency Formation Commissions
CA Association of Recreation and Park Districts
CA Association of Sanitation Agencies
CA Fire Chiefs Association
CA Public Securities Association
CA Redevelopment Association
CA Special Districts Association
CA State Association of Counties
County of Sacramento
East Bay Municipal Utility District
Fire Districts Association of CA
League of CA Cities
Midpeninsula Regional Open Space District
Mosquito and Vector Control Association
Regional Council of Rural Counties
Urban Counties Caucus
SB 841
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Opposition
None on file
Analysis Prepared by : Dixie Petty / L. GOV. / (916) 319-3958