Amended in Senate August 14, 2013

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 BillNo. 182


Introduced by Assembly Members Buchanan and Hueso

(Principal coauthor: Assembly Member Alejo)

(Principal coauthors: Senators Block and Wyland)

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

(Coauthor: Senator Torres)

January 24, 2013


An act to amend Section 15146 of, and to add Sections 15140.5, 15144.1, 15144.2, and 15144.3 to, the Education Code, and to add Section 53508.5 to, and to add and repeal Section 53508.6 of, 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 bond, as defined, that allows for the compounding of interest, including, but not limited to, a capital appreciation bond, 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 bondbegin delete that allows for the compounding of interestend delete 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 a 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 bonds that allow for the compounding of interest, including, but not limited to, capital appreciation bonds, the agenda item to identify that bonds that allow for the compounding of interest are proposed and require the governing board of the school district or community college district to be presented with specified information concerning the bonds. 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 a general obligation bond issued by a school district or community college district by resolution shall not have a maturity exceeding 30 years, except, until January 1, 2019, bonds that do not allow for the compounding of interest may have a maturity that is greater than 30 years, butbegin delete that does not exceedend deletebegin insert not greater thanend insert 40 years, if certain requirements are satisfied. The bill would require a school district or community college district that intends to issue bonds that allow for the compounding of interest, including, but not limited to, capital appreciation bonds, pursuant tobegin delete its authority to issue bonds or refunding bonds by resolutionend deletebegin insert this authorityend insert to conform the bond issuance to certain requirements otherwise applicable to bonds issued by a school district or community college district pursuant tobegin delete an election, as specifiedend deletebegin insert the authority specified in (1), aboveend insert.

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

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

P3    1

SECTION 1.  

Section 15140.5 is added to the Education Code,
2to read:

3

15140.5.  

Forbegin delete purposeend deletebegin insert purposesend insert of this article, “bonds” means
4bonds, notes, warrants, or other evidence of indebtedness payable,
5both principal and interest, from the proceeds of ad valorem
6property taxes that may be levied without limitation as to rate or
7amount upon property subject to taxation by the governing board
8of the school district or community college district.

9

SEC. 2.  

Section 15144.1 is added to the Education Code, to
10read:

11

15144.1.  

The ratio of total debt service to principal for each
12bond series shall not exceed four to one.

13

SEC. 3.  

Section 15144.2 is added to the Education Code, to
14read:

15

15144.2.  

A bond that allows for the compounding of interest,
16including, but not limited to, a capital appreciation bond, maturing
17more than 10 years after its date of issuance shall be subject to
18redemption before its fixed maturity date, with or without a
19premium, at any time, or from time to time, at the option of the
20issuer, beginning no later than the 10th anniversary of the date the
21bond that allows for the compounding of interest was issued.

22

SEC. 4.  

Section 15144.3 is added to the Education Code, to
23read:

24

15144.3.  

A school district or community college district with
25a note issued before December 31, 2013, pursuant to Section 15150
26may seek from the state board or the Chancellor of the California
27Community Colleges, as applicable, a one-time waiver from one
28or more of the requirements of Sections 2, 3, 5, and 6 of Assembly
29Bill 182 of the 2013-14 Regular Session, if both of the following
30are satisfied:

P4    1(a) The proceeds of the issuance subject to the waiver will be
2used only for the purpose of paying the note.

3(b) The school district or community college district has
4provided to the state board or the Chancellor of the California
5Community Colleges, as applicable, an analysis from a financial
6adviser unaffiliated with the school district, the community college
7district, or the underwriter used by the school district or community
8college district, showing the total overall costs of the proposed
9bond, how the issuance is the most cost-effective method, and the
10reasons why the school district or community college district is
11unable to meet those requirements of Sections 2, 3, 5, and 6 of
12Assembly Bill 182 of the 2013-14 Regular Session that are the
13subject of the waiver.

14

SEC. 5.  

Section 15146 of the Education Code is amended to
15read:

16

15146.  

(a) The bonds shall be issued and sold pursuant to
17Section 15140, payable out of the interest and sinking fund of the
18district. The governing board may sell the bonds at a negotiated
19sale or by competitive bidding.

20(b) (1) Before the sale, the governing board shall adopt a
21resolution, as an agenda item at a public meeting, that includes all
22of the following:

23(A) Express approval of the method of sale.

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

25(C) Disclosure of the identity of the bond counsel, and the
26identities of the bond underwriter and the financial adviser if either
27or both are used for the sale, unless these individuals have not been
28selected at the time the resolution is adopted, in which case the
29governing board shall disclose their identities at the public meeting
30occurring after they have been selected.

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

32(E) If the sale includes bonds that allow for the compounding
33of interest, including, but not limited to, capital appreciation bonds,
34disclosure of the financing term and time of maturity, repayment
35ratio, and the estimated change in the assessed value of taxable
36property within the school district or community college district
37over the term of the bonds.

38(2) If the sale includes bonds that allow for the compounding
39of interest, including, but not limited to, capital appreciation bonds,
40the resolution shall be publicly noticed on at least two consecutive
P5    1meeting agendas, first as an information item and second as an
2action item.

3(c) If the sale includes bonds that allow for the compounding
4of interest, including, but not limited to, capital appreciation bonds,
5the agenda item shall identify that bonds that allow for the
6compounding of interest are proposed and the governing board
7shall be presented with all of the following:

8(1) An analysis containing the total overall cost of the bonds
9that allow for the compounding of interest.

10(2) A comparison to the overall cost of current interest bonds.

11(3) The reason bonds that allow for the compounding of interest
12are being recommended.

13(4) A copy of the disclosure made by the underwriter in
14compliance with Rule G-17 adopted by the federal Municipal
15Securities Rulemaking Board.

16(d) After the sale, the governing board shall do both of the
17following:

18(1) Present the actual cost information for the sale at its next
19scheduled public meeting.

20(2) Submit an itemized summary of the costs of the bond sale
21to the California Debt and Investment Advisory Commission.

22(e) The governing board shall ensure that all necessary
23information and reports regarding the sale or planned sale of bonds
24by the district it governs are submitted to the California Debt and
25Investment Advisory Commission in compliance with Section
268855 of the Government Code.

27(f) The bonds may be sold at a discount not to exceed 5 percent
28and at an interest rate not to exceed the maximum rate permitted
29by law. If the sale is by competitive bid, the governing board shall
30comply with Sections 15147 and 15148. The bonds shall be sold
31by the governing board no later than the date designated by the
32governing board as the final date for the sale of the bonds.

33(g) The proceeds of the sale of the bonds, exclusive of any
34premium received, shall be deposited in the county treasury to the
35credit of the building fund of the school district, or community
36college district as designated by the California Community
37Colleges Budget and Accounting Manual. The proceeds deposited
38shall be drawn out as other school moneys are drawn out. The
39bond proceeds withdrawn shall not be applied to any purposes
40other than those for which the bonds were issued. Any premium
P6    1or accrued interest received from the sale of the bonds shall be
2deposited in the interest and sinking fund of the school district or
3community college district.

4(h) The governing board may cause to be deposited proceeds
5of sale of any series of the bonds in an amount not exceeding 2
6percent of the principal amount of the bonds in a costs of issuance
7account, which may be created in the county treasury or held by
8a fiscal agent appointed by the school district or community college
9district for this purpose, separate from the building fund and the
10interest and sinking fund of the district. The proceeds deposited
11shall be drawn out on the order of the governing board or an officer
12of the district duly authorized by the governing board to make the
13order, only to pay authorized costs of issuance of the bonds. Upon
14the order of the governing board or duly authorized officer, the
15remaining balance shall be transferred to the county treasury to
16the credit of the building fund of the school district or community
17college district. The deposit of bond proceeds pursuant to this
18subdivision shall be a proper charge against the building fund of
19the school district or community college district.

20(i) The governing board may cause to be deposited proceeds of
21sale of any series of the bonds in the interest and sinking fund of
22the district in the amount of the annual reserve permitted by Section
2315250 or in any lesser amount, as the governing board shall
24determine from time to time. The deposit of bond proceeds
25pursuant to this subdivision shall be a proper charge against the
26building fund of the school district or community college district.

27(j) The governing board may cause to be deposited proceeds of
28sale of any series of the bonds in the interest and sinking fund of
29the district in the amount not exceeding the interest scheduled to
30 become due on that series of bonds for a period of two years from
31the date of issuance of that series of bonds. The deposit of bonds
32proceeds pursuant to this subdivision shall be a proper charge
33against the building fund of the school district or community
34college district.

35

SEC. 6.  

Section 53508.5 is added to the Government Code, to
36read:

37

53508.5.  

(a) Notwithstanding any other law and except as
38provided in subdivision (b) or Section 53508.6, a bond issued by
39a school district or community college district pursuant to this
40article shall not have a maturity exceeding 30 years.

P7    1(b) Notwithstanding any other law and except as provided in
2Section 53508.6, a school district or community college district
3that intends to issue bonds that allow for the compounding of
4interest, including, but not limited to, capital appreciation bonds,
5pursuant to this article shall comply with the requirements of
6Sections 15143, 15144, 15144.1,begin insert andend insert 15144.2, andbegin insert subdivisions
7(b) and (c) of Sectionend insert
15146begin insert,end insert of the Education Code.

8

SEC. 7.  

Section 53508.6 is added to the Government Code, to
9read:

10

53508.6.  

(a) Notwithstanding any other law, a school district
11or community college district may, pursuant to this article, issue
12bonds that do not allow for the compounding of interest and that
13have a maturity greater than 30 years, butbegin delete that does not exceedend deletebegin insert not
14greater than end insert
40 years, if the school district or community college
15district does both of the following:

16(1) Complies with the requirements ofbegin insert subdivisions (b) and (c)
17ofend insert
Section 15146 of the Education Code.

18(2) Makes a finding that the useful life of the facility financed
19with the bonds that do not allow for the compounding of interest
20and that have a maturity greater than 30 years, butbegin delete that does not
21exceedend delete
begin insert not greater thanend insert 40 years, equals or exceeds the maturity
22date of those bonds.

23(b) This section shall remain in effect only until January 1, 2019,
24and as of that date is repealed, unless a later enacted statute, that
25is enacted before January 1, 2019, deletes or extends that date.



O

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