BILL ANALYSIS Ó AB 276 Page 1 Date of Hearing: May 11, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 276 (Alejo) - As Amended: April 4, 2011 Policy Committee: Local GovernmentVote:8-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill increases penalties for local agencies, including specified joint powers agencies, that fail to file their annual financial transaction reports with the State Controller's Officer in a timely manner, and makes other specified changes to local agency financial reporting requirements. Specifically, this bill: 1)Requires the State Controller to compile and publish reports of the financial transactions of each joint powers agency (JPA) that issues conduit revenue bonds and is formed pursuant to the Joint Exercise of Powers Act. 2)Increases fines for an officer of a local agency, including a community redevelopment agencies and a JPA, who fails or refuses to make and file his or her report within 20 days after receipt of a written notice of the failure from the Controller. The fines depend on the size of the jurisdiction. For example, the bill increases penalties from $1,000 to $2,500, in the case of a local agency with total revenue, in the prior year, of less than $100,000, as reported in the Controller's annual financial reports, with steeper fines for larger jurisdictions. The bill also increases fines for jurisdictions that miss deadlines for two and three consecutive years. 3)Prohibits a community redevelopment agency from using any of the funds in the Low and Moderate Income Housing Fund to fund any forfeiture or fine assessed because of the provision of the bill. AB 276 Page 2 4)Makes other conforming changes by repealing outdated sections of law related to financial reporting of schools, and deletes findings and declarations language related to JPAs that issue conduit revenue bonds. FISCAL EFFECT The State Controller's office estimates that there will administrative costs of approximately $30,000 to implement this bill. COMMENTS 1)Purpose. The State Controller's office asserts that currently there is very limited oversight of the activities of JPAs, which provide conduit financing that annually provides billions of dollars of tax-exempt financing to the private sector. By requiring JPAs to file these financial reports, the Controller's Office will be better able to determine that conduit financing providers are complying with audit, annual financial reporting and other public accountability requirements. 2)Fines. According to the sponsor, the State Controller's Office, in some cases local agencies have been content to pay the fines rather than file the required reports. This bill aims to stop that sort of behavior by increasing penalties to a more meaningful level. In addition to increasing the amount of fines in existing law, this bill also doubles these fines if the agency fails to submit the report to the SCO for two consecutive years, and triples the fines if the agency fails to report after three consecutive years. After the third violation, this bill gives the Controller the authority to conduct an independent financial audit report of that agency. The increased penalties apply to cities, counties, special districts, JPAs and community redevelopment agencies. 3)Background. Existing law requires the officer of each local agency, who has charge of the financial records of the agency, to furnish to the Controller a report of all the financial transactions of the local agency during the next preceding fiscal year, within 90 days of the close of each fiscal year. "Local agency," for purposes of these financial reports includes any city, county, district, and specified community redevelopment agencies. AB 276 Page 3 Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081