BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 612
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 612 (Gordon)
          As Amended  June 23, 2011
          Majority vote
           
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          |ASSEMBLY:  |78-0 |(May 19, 2011)  |SENATE: |39-0 |(July 5, 2011) |
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           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 








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            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 








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          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 


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