Amended in Senate July 11, 2013

Amended in Senate July 1, 2013

Amended in Senate May 21, 2013

Amended in Assembly April 2, 2013

Amended in Assembly March 12, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 182

Introduced by Assembly Members Buchanan and Hueso

(Principal coauthor: Assembly Member Alejo)

(Principal coauthors: Senators Block and Wyland)

begin delete

(Coauthor: Senator Torres)

end delete

(Coauthors: Assembly Members Ian Calderon, Chávez, Roger Hernández, and Williams)

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(Coauthor: Senator Torres)

end insert

January 24, 2013

An act to amend Section 15146 of, and to add Sections begin insert 15140.5, end insert 15144.1, 15144.2, and 15144.3 to, the Education Code, and to add Section 53508.5 to, begin insert and to add and repeal Section 53508.6 of, end insert the Government Code, relating to bonds.

LEGISLATIVE COUNSEL’S DIGEST

AB 182, as amended, Buchanan. Bonds: school districts and community college districts.

(1) Existing law authorizes the governing board of any school district or community college district to order an election and submit to the electors of the district the question whether the bonds of the district should be issued and sold to raise money for specified purposes. Existing law requires the bonds to bear a rate of interest that does not exceed 8% per annum and requires the number of years the whole or any part of the bonds are to run to not exceed 25 years.

This bill would require the ratio of total debt service to principal for each bond series to not exceed 4 to one. The bill would require each begin insert bond, as defined, that allows for the compounding of interest, including, but not limited to, a end insert capital appreciation bond begin insert , end insert maturing more than 10 years after its date of issuance to be subject to redemption before its fixed maturity date, as specified, beginning no later than the 10th anniversary of the date the begin delete capital appreciation end delete bond begin insert that allows for the compounding of interest end insert was issued. The bill would authorize a school district or community college district with a note issued before December 31, 2013, to seek from the State Board of Education or the Chancellor of the California Community Colleges, as applicable, a one-time waiver from certain requirements of this bill if 2 specified conditions are satisfied.

(2) Existing law requires the governing board of begin delete the end delete begin insert a end insert school district or community college district, before the sale of bonds, to adopt a resolution as an agenda item at a public meeting that includes specified information.

This bill would require, if the sale includes begin insert bonds that allow for the compounding of interest, including, but not limited to, end insert capital appreciation bonds, the agenda item to identify that begin delete capital appreciation end delete bonds begin insert that allow for the compounding of interest end insert are proposed and require the governing board of the school district or community college district to be presented with begin delete an analysis containing the overall cost of end delete begin insert specified information concerning end insert the begin delete capital appreciation bonds, a comparison to the overall cost of current interest bonds, the reason capital appreciation bonds are being recommended, a copy of a certain disclosure made by the underwriter, and disclosure of the financing term and time of maturity, repayment ratio, and the estimated change in assessed value of local property end delete begin insert bonds end insert . The bill would require the resolution to be publicly noticed on at least 2 consecutive meeting agendas, first as an information item and 2nd as an action item.

(3) Additionally and alternatively to the authority described above, existing law authorizes the legislative body of an issuer, by resolution, to provide for the issuance of bonds or refunding bonds.

This bill would provide that begin delete the number of years the whole or any part of end delete a general obligation bond issued by a school district or community college district begin delete is to run shall not exceed end delete begin insert by resolution shall not have a maturity exceeding end insert 30 years begin insert , except, until January 1, 2019, bonds that do not allow for the compounding of interest end insert begin insert may have a maturity that is greater than 30 years, but that does not exceed 40 years, if certain requirements are satisfied end insert . The bill would require a school district or community college district that intends to issue begin delete a capital appreciation bond end delete begin insert bonds that allow for the compounding of interest, including, but not limited to, capital appreciation bonds, end insert pursuant to its authority to issue bonds or refunding bonds by resolution to conform the begin delete capital appreciation end delete bond issuance to certain requirements otherwise applicable to bonds issued by a school district or community college district pursuant to an election begin insert , as specified end insert .

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 15140.5 is added to the end insert begin insert Education Code end insert begin insert ,
to read: end insert

begin insert

begin insert 15140.5. end insert   

For purpose of this article, “bonds” means bonds,
notes, warrants, or other evidence of indebtedness payable, both
principal and interest, from the proceeds of ad valorem property
taxes that may be levied without limitation as to rate or amount
upon property subject to taxation by the governing board of the
school district or community college district.

end insert

begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

Section 15144.1 is added to the Education Code, to
read:

15144.1.  

The ratio of total debt service to principal for each
bond series shall not exceed four to one.

begin delete SEC. 2. end delete
begin insert SEC. 3. end insert   

Section 15144.2 is added to the Education Code, to
read:

15144.2.  

A begin insert bond that allows for the compounding of interest,
including, but not limited to, a end insert capital appreciation begin delete bond end delete begin insert bond, end insert
maturing more than 10 years after its date of issuance shall be
subject to redemption before its fixed maturity date, with or without
a premium, at any time, or from time to time, at the option of the
issuer, beginning no later than the 10th anniversary of the date the
begin delete capital appreciation end delete bond begin insert that allows for the compounding of
interest end insert was issued.

begin delete SEC. 3. end delete
begin insert SEC. 4. end insert   

Section 15144.3 is added to the Education Code, to
read:

15144.3.  

A school district or community college district with
a note issued before December 31, 2013, pursuant to Section 15150
may seek from the state board or the Chancellor of the California
Community Colleges, as applicable, a one-time waiver from one
or more of the requirements of Sections begin delete 1, 2, and 4 end delete begin insert 2, 3, 5, and 6 end insert
of Assembly Bill 182 of the 2013-14 Regular Session, if both of
the following are satisfied:

(a) The proceeds of the issuance subject to the waiver will be
used only for the purpose of paying the note.

(b) The school district or community college district has
provided to the state board or the Chancellor of the California
Community Colleges, as applicable, an analysis from a financial
adviser unaffiliated with the school district, the community college
district, or the underwriter used by the school district or community
college district, showing the total overall costs of the proposed
bond, how the issuance is the most cost-effective method, and the
reasons why the school district or community college district is
unable to meet those requirements of Sections begin delete 1, 2, and 4 end delete begin insert 2, 3, 5,
and 6 end insert of Assembly Bill 182 of the 2013-14 Regular Session that
are the subject of the waiver.

begin delete SEC. 4. end delete
begin insert SEC. 5. end insert   

Section 15146 of the Education Code is amended to
read:

15146.  

(a) The bonds shall be issued and sold pursuant to
Section 15140, payable out of the interest and sinking fund of the
district. The governing board may sell the bonds at a negotiated
sale or by competitive bidding.

(b) (1) Before the sale, the governing board shall adopt a
resolution, as an agenda item at a public meeting, that includes all
of the following:

(A) Express approval of the method of sale.

(B) Statement of the reasons for the method of sale selected.

(C) Disclosure of the identity of the bond counsel, and the
identities of the bond underwriter and the financial adviser if either
or both are used for the sale, unless these individuals have not been
selected at the time the resolution is adopted, in which case the
governing board shall disclose their identities at the public meeting
occurring after they have been selected.

(D) Estimates of the costs associated with the bond issuance.

(E) If the sale includes begin insert bonds that allow for the compounding
of interest, including, but not limited to, end insert capital appreciation bonds,
disclosure of the financing term and time of maturity, repayment
ratio, and the estimated change in begin insert the end insert assessed value of begin delete local
property end delete begin insert taxable property within the school district or community
college district over the term of the bonds end insert .

(2) If the sale includes begin insert bonds that allow for the compounding
of interest, including, but not limited to, end insert capital appreciation bonds,
the resolution shall be publicly noticed on at least two consecutive
meeting agendas, first as an information item and second as an
action item.

(c) If the sale includes begin insert bonds that allow for the compounding
of interest, including, but not limited to, end insert capital appreciation bonds,
the agenda item shall identify that begin delete capital appreciation end delete bonds begin insert that
allow for the compounding of interest end insert are proposed and the
governing board shall be presented with all of the following:

(1) An analysis containing the total overall cost of the begin delete capital
appreciation end delete bonds begin insert that allow for the compounding of interest end insert .

(2) A comparison to the overall cost of current interest bonds.

(3) The reason begin delete capital appreciation end delete bonds begin insert that allow for the
compounding of interest end insert are being recommended.

(4) A copy of the disclosure made by the underwriter in
compliance with Rule G-17 adopted by the federal Municipal
Securities Rulemaking Board.

(d) After the sale, the governing board shall do both of the
following:

(1) Present the actual cost information for the sale at its next
scheduled public meeting.

(2) Submit an itemized summary of the costs of the bond sale
to the California Debt and Investment Advisory Commission.

(e) The governing board shall ensure that all necessary
information and reports regarding the sale or planned sale of bonds
by the district it governs are submitted to the California Debt and
Investment Advisory Commission in compliance with Section
8855 of the Government Code.

(f) The bonds may be sold at a discount not to exceed 5 percent
and at an interest rate not to exceed the maximum rate permitted
by law. If the sale is by competitive bid, the governing board shall
comply with Sections 15147 and 15148. The bonds shall be sold
by the governing board no later than the date designated by the
governing board as the final date for the sale of the bonds.

(g) The proceeds of the sale of the bonds, exclusive of any
premium received, shall be deposited in the county treasury to the
credit of the building fund of the school district, or community
college district as designated by the California Community
Colleges Budget and Accounting Manual. The proceeds deposited
shall be drawn out as other school moneys are drawn out. The
bond proceeds withdrawn shall not be applied to any purposes
other than those for which the bonds were issued. Any premium
or accrued interest received from the sale of the bonds shall be
deposited in the interest and sinking fund of the school district or
community college district.

(h) The governing board may cause to be deposited proceeds
of sale of any series of the bonds in an amount not exceeding 2
percent of the principal amount of the bonds in a costs of issuance
account, which may be created in the county treasury or held by
a fiscal agent appointed by the school district or community college
district for this purpose, separate from the building fund and the
interest and sinking fund of the district. The proceeds deposited
shall be drawn out on the order of the governing board or an officer
of the district duly authorized by the governing board to make the
order, only to pay authorized costs of issuance of the bonds. Upon
the order of the governing board or duly authorized officer, the
remaining balance shall be transferred to the county treasury to
the credit of the building fund of the school district or community
college district. The deposit of bond proceeds pursuant to this
subdivision shall be a proper charge against the building fund of
the school district or community college district.

(i) The governing board may cause to be deposited proceeds of
sale of any series of the bonds in the interest and sinking fund of
the district in the amount of the annual reserve permitted by Section
15250 or in any lesser amount, as the governing board shall
determine from time to time. The deposit of bond proceeds
pursuant to this subdivision shall be a proper charge against the
building fund of the school district or community college district.

(j) The governing board may cause to be deposited proceeds of
sale of any series of the bonds in the interest and sinking fund of
the district in the amount not exceeding the interest scheduled to
become due on that series of bonds for a period of two years from
the date of issuance of that series of bonds. The deposit of bonds
proceeds pursuant to this subdivision shall be a proper charge
against the building fund of the school district or community
college district.

begin delete SEC. 5. end delete
begin insert SEC. 6. end insert   

Section 53508.5 is added to the Government Code, to
read:

53508.5.  

(a) Notwithstanding any other law and except as
provided in subdivision begin delete (b), the number of years the whole or any
part of end delete begin insert (b) or Section 53508.6, end insert a bond issued by a school district
or community college district begin delete is to run shall not exceed 30 years
from the date of the bonds or the date of any series thereof end delete begin insert pursuant
to this article shall not have a maturity exceeding 30 years end insert .

(b) Notwithstanding any other law begin insert and except as provided in
Section 53508.6 end insert , a school district or community college district
that intends to issue begin delete a capital appreciation bond end delete begin insert bonds that allow
for the compounding of interest, including, but not limited to,
capital appreciation bonds, end insert pursuant to this article shall comply
with the requirements of Sections 15143, 15144, 15144.1, 15144.2,
and 15146 of the Education Code.

begin insert

begin insert SEC. 7. end insert   

end insert

begin insert Section 53508.6 is added to the end insert begin insert Government Code end insert begin insert , to
read: end insert

begin insert

begin insert 53508.6. end insert   

(a) Notwithstanding any other law, a school district
or community college district may, pursuant to this article, issue
bonds that do not allow for the compounding of interest and that
have a maturity greater than 30 years, but that does not exceed
40 years, if the school district or community college district does
both of the following:

(1) Complies with the requirements of Section 15146 of the
Education Code.

(2) Makes a finding that the useful life of the facility financed
with the bonds that do not allow for the compounding of interest
and that have a maturity greater than 30 years, but that does not
exceed 40 years, equals or exceeds the maturity date of those
bonds.

(b) This section shall remain in effect only until January 1, 2019,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2019, deletes or extends that date.

end insert