BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 842|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
CONSENT
Bill No: SB 842
Author: Senate Local Government Committee
Amended: 2/11/10
Vote: 27 - Urgency
SENATE LOCAL GOVERNMENT COMMITTEE : 4-0, 3/3/10
AYES: Cox, Aanestad, Kehoe, Price
NO VOTE RECORDED: Wiggins
SUBJECT : Second Validating Act of 2010
SOURCE : Author
DIGEST : This bill enacts the Second 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.
ANALYSIS : 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.
For over 70 years, the Legislature's annual Validating Acts
have boosted the stability and credit ratings of state and
local bonds. The Validating Acts cure public officials'
mistakes that might otherwise invalidate boundary changes
or bond issues. They also correct errors or omissions by
CONTINUED
SB 842
Page
2
local agencies and state departments. The Acts do not
protect against fraud, corruption, or unconstitutional
actions.
Comments
The annual Validating Acts protect investors form 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. This bill 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 form bond counsels result in higher credit
ratings for state and local bonds. Higher credit ratings
allow state and local officials to pay lower interest rates
to private investors. Lower borrowing costs save money for
taxpayers.
Starting in the mid-1920's, the Legislature passed separate
validating acts for different types of bonds, several
classes of special districts, and various local boundary
changes. By the late 1930's, the practice was to pass
annual comprehensive e validating acts (AB 2842, Bennett,
1939). The current custom and practice is to pass three
Validating Acts that retroactively cure public officials'
mistakes. The first two measures are urgency bills that go
into effect when they are chaptered. SB 841 (First
Validating Act) will probably reach Governor
Schwarzenegger's desk this spring, validating errors made
SB 842
Page
3
before the date on which the bill is chaptered. SB 842
(Second Validating Act) will reach Governor Schwarzenegger
in August, validating mistakes made after SB 841. The
Third Validating Act (SB 843) will take effect on January
1, 2011, covering the period between the chaptering of SB
842 and the end of 2010.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 3/3/10)
State Controller John Chiang
State Treasurer Bill Lockyer
American Federation of State, County and Municipal
Employees, AFL-CIO
Association of California Water Agencies
California Association of Local Agency Formation
Commissions
California Association of Sanitation Agencies
California Public Securities Association
California Special Districts Association
California State Association of Counties
County of Sacramento
East Bay Municipal Utility District
League of California Cities
Regional Council of Rural Counties
Urban Counties Caucus
AGB:cm 3/8/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****