BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   SB 843|
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                                    CONSENT


          Bill No:  SB 843
          Author:   Senate Local Government Committee
          Amended:  2/11/10
          Vote:     21

           
           SENATE LOCAL GOVERNMENT COMMITTEE  :  4-0, 3/3/10
          AYES:  Cox, Aanestad, Kehoe, Price
          NO VOTE RECORDED:  Wiggins


           SUBJECT  :    Third Validating Act of 2010

           SOURCE  :     Author


           DIGEST  :    This bill enacts the Third 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  
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          local agencies and state departments.  The Acts do not  
          protect against fraud, corruption, or unconstitutional  
          actions.

           Comments
           
          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 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 (AB 2842 [Bennett], of  
          1939).  The current custom and practice is to pass three  
          Validating Acts that retroactively cure public officials'  
          mistakes.  The first two bills are urgency bills that go  
          into effect when they are chaptered.  SB 841 (First  
          Validating Act [Senate Local Government Committee] of 2009)  
          will probably reach Governor Schwarzenegger's desk this  

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          spring, validating errors made before the date on which the  
          bill is chaptered.  SB 842 (Second Validating Act [Senate  
          Local Government Committee] of 2009) will reach Governor  
          Schwarzenegger in August, validating mistakes made after SB  
          841.  This bill 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 LAFCOs
          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:do  3/3/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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