BILL ANALYSIS Ó SB 192 Page 1 SENATE THIRD READING SB 192 (Governance and Finance Committee) As Amended May 16, 2011 2/3 vote. Urgency SENATE VOTE :36-0 LOCAL GOVERNMENT 8-1 ----------------------------------------------------------------- |Ayes:|Smyth, Alejo, Bradford, | | | | |Campos, Davis, Gordon, | | | | |Hueso, Norby | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Knight | | | | | | | | ----------------------------------------------------------------- SUMMARY : Enacts the Second Validating Act of 2011, which would validate the organization, boundaries, acts, proceedings, and bonds of the state government, counties, cities, special districts, school districts, and other public bodies, excluding redevelopment agencies. 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. FISCAL EFFECT : None COMMENTS : According to the Senate Governance and Finance Committee, the Legislature has adopted annual Validating Acts for over 70 years that retroactively fix public officials' inadvertent procedural errors or omissions. The annual bills affect the state government, as well as counties, cities, special districts, school districts, and redevelopment agencies. Beginning 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. SB 192 Page 2 In Miller v. McKenna (1944), 23 Cal.2d 774, the California Supreme Court explained that the "Legislature may cure irregularities or omissions to comply with provisions of a statute which could have been omitted in the first instance." The Validating Acts save taxpayers money. The bills allow bond counsels to issue strong legal opinions. Strong legal opinions result in higher credit ratings. Higher credit ratings result in lower interest rates. Lower interest rates mean lower borrowing costs. Lower borrowing costs save money for state and local taxpayers. The Validating Acts cannot forgive fraud, corruption, or unconstitutional actions. It was customary practice for members of the former Senate Local Government Committee to jointly author these annual Validating Acts. Following this established tradition, the Senate Governance and Finance Committee is authoring this year's Validating Acts. As an urgency measure, SB 191, the First Validating Act, will take effect this spring, when the Governor signs the bill into law. SB 192, the Second Validating Act, also an urgency bill, will take effect late summer, validating mistakes that occur after the chaptering of the First Validating Act. SB 193, the Third Validating Act, will take effect on January 1, 2012, covering the period between the chaptering of SB 192 and the end of 2011. The May 2 amendments exclude redevelopment agencies (RDAs), Community Development Commissions, and Joint Powers Authorities acting as redevelopment agencies, from the provisions of the bill. These amendments were requested by the Department of Finance in order to avoid conflict at this time with the Governor's Budget and budget legislation ÝSB 77 (Budget and Fiscal Review Committee)] that remains pending on the Assembly Floor. The amendments do not invalidate any actions of RDAs. They avoid putting the Legislature in the position of appearing to validate the numerous actions that RDAs have taken purporting to commit current and future funds in agreement with their host communities and others. Pre-January 2011 actions already have been validated by legislation last session. Depending on the final budget action on redevelopment, these measures can be revised as appropriate in the second and third validating acts, and these validations would reach back to January 1, 2011. The amendments are intended to allow these bills to move forward now SB 192 Page 3 and provide the extra security of validation to local government entities and the state while the redevelopment budget action remains pending. Nothing in the provisions of this measure prohibit an RDA from individually requesting a superior court to determine validity of a matter pursuant to the Code of Civil Procedure Section 860. Support arguments: Supporters argue that the annual Validating Acts are a cost effective way of correcting inadvertent procedural errors or omissions of the state and local governments without having to have thousands of entities go to the superior court to get their actions validated. Opposition arguments: Opposition argues that singling out one type of local government entity for exclusion from the Validating Acts is unprecedented. It will cast an unwarranted shadow of uncertainty over redevelopment transactions to the detriment of both agencies and the private investors in those transactions. Analysis Prepared by : Katie Kolitsos / L. GOV. / (916) 319-3 FN: 0000651