BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 192|
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CONSENT
Bill No: SB 192
Author: Senate Governance and Finance Committee
Amended: As introduced
Vote: 27 - Urgency
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-0, 3/16/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
La Malfa, Liu
NO VOTE RECORDED: Kehoe
SUBJECT : Second Validating Act of 2011
SOURCE : Author
DIGEST : This bill enacts the Second Validating Act 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 : For over 70 years, the Legislature's annual
Validating Acts (Acts) have boosted the stability and
credit ratings of state and local bonds. The Acts cure
public officials' mistakes that might otherwise invalidate
boundary changes or bond issues. They also correct errors
or omissions by local agencies and state departments. The
Acts do not protect against fraud, corruption, or
unconstitutional actions.
This bill enacts the Second Validating Act which validates
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the organization, boundaries, acts, proceedings, and bonds
of the state government, counties, cities, special
districts, school districts, and redevelopment agencies,
among other public bodies.
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 three 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 Acts,
while a corrupt official faces prosecution regardless of
the Acts.
By insulating state and local bonds against harmless
errors, the 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 validating acts (AB 2842 ÝBennett], 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 191 (First Validating Act)
will probably reach Governor Brown's desk this spring,
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validating errors made before the date on which the bill is
chaptered. This bill (Second Validating Act) will reach
Governor Brown in August, validating mistakes made after SB
191. The Third Validating Act (SB 193) will take effect on
January 1, 2012, covering the period between the chaptering
of this bill and the end of 2011.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 3/16/11)
State Controller John Chiang
State Treasurer Bill Lockyer
American Federation of State, County & Municipal Employees
Association of California Water Agencies
California Association of Local Agency Formation
Commissions
California Association of Recreation and Park Districts
California Association of Sanitation Agencies
California Municipal Utilities Association
California Redevelopment Association
California Special Districts Association
California State Association of Counties
County of Sacramento
East Bay Municipal Utility District
Fire Districts Association of California
Midpeninsula Regional Open Space District
Mosquito and Vector Control Association of California
Regional Council of Rural Counties
State Association of County Auditors
Urban Counties Caucus
AGB:do 3/17/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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