BILL ANALYSIS Ó AB 612 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 612 (Gordon) As Amended June 23, 2011 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |78-0 |(May 19, 2011) |SENATE: |39-0 |(July 5, 2011) | ----------------------------------------------------------------- Original Committee Reference: L. GOV. SUMMARY : Provides that indebtedness that is incurred by the Midpeninsula Regional Open Space District (MROSD), on or after January 1, 2012, be repaid during a period that does not exceed 30 years. The Senate amendments require MROSD to formally pledge the revenue that will repay the indebtedness. EXISTING LAW : 1)Provides that indebtedness that is incurred in that manner on or after July 1, 1982, is generally required to be repaid during a period that does not exceed 20 years from the date on which it is incurred. 2)Provides that all indebtedness for acquisition of lands and facilities designated in the East Bay Regional Park District's master plan shall be repaid during a period not to exceed 30 years. 3)Requires each indebtedness to be authorized by a resolution adopted by the affirmative votes of at least two-thirds of the members of the district board. 4)Requires each indebtedness to be evidenced by a promissory note or contract signed by the president of the board and attested by the secretary or treasurer. 5)Requires each indebtedness to be sold at not less than 95% of the principal amount in the manner determined by the board at a discount that equals the underwriter's spread. 6)Requires the board to determine that the discount reflects an underwriter's spread that is both reasonable and customary AB 612 Page 2 under the prevailing market. AS PASSED BY THE ASSEMBLY , this bill: 1)Required MROSD to identify the source of revenue to be used to repay the indebtedness. 2)Specified that the interest rate on indebtedness not exceed the rate allowable under provisions governing issuance of local general obligation bonds for all regional park districts, regional park and open-space districts, and regional open-space districts. FISCAL EFFECT : None COMMENTS : Under existing law, many kinds of special districts are authorized to borrow money by issuing promissory notes. Currently, regional park and open-space districts can issue promissory notes for the acquisition of land and facilities. These districts can borrow up to five years of anticipated property tax revenues or 20 years of anticipated special tax revenues, or both. The district must repay the promissory note within 20 years. MROSD was established to permanently protect and restore lands, preserve wilderness, wildlife habitat, watershed, and fragile ecosystems, and provide opportunities for public recreation and environmental education. Over nearly 40 years, MROSD has permanently preserved nearly 60,000 acres of open space and created 26 open space preserves. MROSD covers an area of 550 square miles in San Mateo, Santa Clara, and Santa Cruz Counties. This bill would extend the term from 20 to 30 years that MROSD has to repay promissory notes authorized under existing law. It would not increase the property taxes paid by property owners. Allowing MROSD to amortize borrowing costs of promissory notes over a 30-year period rather than a 20-year period would provide approximately 20% more in funds to purchase and save open space each time the district issues notes. According to the author, being able to use existing revenues to accelerate the purchase of open space is the goal of the proposed change and consistent with the wishes of residents for more open space and recreation. However, if terms are not favorable for long term issuance, the district would still have the flexibility to issue shorter term notes. Because MROSD buys land that the public owns in AB 612 Page 3 perpetuity, the change provides a benefit for residents today as well as future generations. Support arguments: Supporters, including the MROSD, state that this bill would greatly help the MROSD use taxpayer money more effectively and increase resources to purchase and preserve vital public natural open space lands. Opposition arguments: Opposition could argue that it may be more prudent to just expand the debt limit on securitized limited obligation notes instead of increasing the promissory note debt capacity on individual special districts. Analysis Prepared by : Katie Kolitsos / L. GOV. / (916) 319-3958 FN: 0001409