Amended in Senate August 29, 2013

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 Bill No. 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 begin delete Section 53508.5 end delete begin insert Sections 53508.5 and 53508.6 end insert to begin delete , and to add and repeal Section 53508.6 of, end delete 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 bond 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 begin delete a general obligation bond end delete begin insert bonds end insert issued begin insert pursuant to this authority end insert by a school district or community college district begin delete by resolution shall not have a maturity exceeding 30 years, except, until January 1, 2019, bonds end delete that do not allow for the compounding of interest may have a maturity that is greater than 30 years, but not greater than 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 to this authority to conform the bond issuance to certain requirements otherwise applicable to bonds issued by a school district or community college district pursuant to the authority specified in (1), above.

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

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

SECTION 1.  

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

15140.5.  

For purposes 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.

SEC. 2.  

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.

SEC. 3.  

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

15144.2.  

A bond 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 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
bond that allows for the compounding of interest was issued.

SEC. 4.  

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 2, 3, 5, and 6 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 2, 3, 5, and 6 of
Assembly Bill 182 of the 2013-14 Regular Session that are the
subject of the waiver.

SEC. 5.  

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 bonds that allow for the compounding
of interest, including, but not limited to, capital appreciation bonds,
disclosure of the financing term and time of maturity, repayment
ratio, and the estimated change in the assessed value of taxable
property within the school district or community college district
over the term of the bonds.

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

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

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

(3) The reason bonds that allow for the compounding of interest
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.

SEC. 6.  

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

begin delete

53508.5.  

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

(b) 

end delete

begin insert

begin insert 53508.5. end insert   

end insert

Notwithstanding any other law and except as provided
in Section 53508.6, 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 to this article shall comply with the requirements of
Sections 15143, 15144, 15144.1, and 15144.2, and subdivisions
(b) and (c) of Section 15146, of the Education Code.

SEC. 7.  

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

53508.6.  

begin delete (a) end delete begin delete   end delete 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 not greater than 40 years,
if the school district or community college district does both of
the following:

begin delete

(1)

end delete

begin insert (a) end insert  Complies with the requirements of subdivisions (b) and (c)
of Section 15146 of the Education Code.

begin delete

(2)

end delete

begin insert (b) end insert  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 not greater than
40 years, equals or exceeds the maturity date of those bonds.

begin delete

(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 delete