BILL ANALYSIS
SB 842
Page 1
SENATE THIRD READING
SB 842 (Local Government Committee)
As Amended February 11, 2010
2/3 vote. Urgency
SENATE VOTE :31-0
LOCAL GOVERNMENT 9-0
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|Ayes:|Smyth, Caballero, | | |
| |Arambula, Bradford, | | |
| |Davis, Knight, Logue, | | |
| |Solorio, Torlakson | | |
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SUMMARY : 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.
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. 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 from
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
SB 842
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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 (Local Government Committee), Chapter 16, Statutes of 2010,
the First Validating Act, took effect this spring. This bill, the
Second Validating Act, will take effect this summer, validating
mistakes that have occurred since 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
this bill and the end of 2010.
Analysis Prepared by : Dixie Petty / L. GOV. / (916) 319-3958 FN:
0005349