BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 182|
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THIRD READING
Bill No: AB 182
Author: Buchanan (D), et al.
Amended: 7/11/13 in Senate
Vote: 21
SENATE EDUCATION COMMITTEE : 8-0, 6/26/13
AYES: Liu, Wyland, Block, Correa, Hancock, Hueso, Huff, Torres
NO VOTE RECORDED: Monning
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 7/3/13
AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu
ASSEMBLY FLOOR : 75-0, 4/8/13 - See last page for vote
SUBJECT : Capital Appreciation Bonds
SOURCE : State Treasurer Bill Lockyer
DIGEST : This bill establishes restrictions on the use of
capital appreciation bonds (CABs), requires local governing
boards to be provided specified information regarding the
issuance of CABs, and reduces the term of the current interest
bonds (CIBs) issued under the Government Code (GOV) from 40 to
30 years beginning January 1, 2019.
ANALYSIS : Existing law authorizes the governing boards of
school districts and community college districts (CCDs) to order
and submit to voters the order to issue bonds for school
facility construction purposes. Existing law establishes
conditions over the issuance and sale of these bonds by school
CONTINUED
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districts and CCDs. Existing law, under the Education Code,
authorizes school districts and CCDs to issue bonds with a
maximum interest rate of 8% and a maximum maturity of 25 years.
In addition, existing law authorizes any city, county, city and
county, school district, CCD, or special district to issue
general obligation bonds, secured by the levy of ad valorem
taxes, and establishes a process for such issuances under the
GOV. Among other things, the GOV authorizes the issuance of
bonds with a maximum interest rate of 12% and a maximum maturity
of 40 years.
This bill:
1. Limits the terms of CABs to 25 years and reduces the terms
of CIBs issued under the GOV from 40 to 30 years, beginning
January 1, 2019.
2. Prohibits the ratio of the total debt service (principal and
interest) to principal for each bond series from exceeding
four to one under the Education Code.
3. Requires a CAB with a term longer than 10 years to have a
refinancing mechanism beginning no later than the 10th year
from the date the bond was issued, at the discretion of the
issuer.
4. Requires a local governing board agenda to indicate that a
CAB is proposed, and requires the local governing board to
first hold an informational hearing prior to taking action to
approve a CAB at a subsequent meeting.
5. Requires specified information to be provided to local
governing boards regarding proposed CABs:
A. An analysis of the overall cost of the CAB, including
the term of the financing, the time of maturity, the
repayment ratio, and the projected change in assessed
valuations.
B. A comparison of the CAB to the overall cost of a CIB.
C. The reason a CAB is recommended.
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D. A copy of the disclosure regarding the role of
underwriters as required by the regulatory agency
overseeing underwriters and financial advisors.
6. Requires CIBs with terms between 30 and 40 years issued
under the GOV to provide information similar to those
required of CABs (until January 1, 2019).
7. Requires local governing boards issuing 30 to 40 year CIBs
to include a finding in the local governing board resolution
that the useful life of the facility is equal to or exceeds
the maturity date of the bond (until January 1, 2019).
8. Authorizes school districts or CCDs that had issued bond
anticipation notes prior to December 31, 2013 to seek a
waiver with the State Board of Education or the Community
College Chancellor's office.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 8/7/13)
State Treasurer Bill Lockyer (source)
California Association of County Treasurers and Tax Collectors
California League of Bond Oversight Committees
California Taxpayers Association
Contra Costa County Board of Supervisors
County of San Diego, Treasurer-Tax Collector
Howard Jarvis Taxpayers Association
Humboldt County Board of Supervisors
Humboldt Taxpayer's League
Napa County Board of Supervisors, Mark Luce
San Diego County Treasurer-Tax Collector, Dan McAllister
Sierra County Board of Supervisors
Siskiyou County Board of Supervisors
OPPOSITION : (Verified 8/7/13)
Association of California School Administrators
Beverly Hills Unified School District
California Association of School Business Officials
California Association of Suburban School Districts
California School Boards Association
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Coalition for Adequate School Housing
Community College League of California
Fresno Unified School District
Oceanside Unified School District
Office of the Riverside County Superintendent of Schools
Riverside County Superintendent of Schools
San Diego Unified School District
Small School Districts' Association
Tustin Unified School District Superintendent
ARGUMENTS IN SUPPORT : According to the California Debt and
Investment Advisory Commission, almost 500 general obligation
CABs have been issued since 2007, the majority of which were by
K-12 school districts (85.5%), with CCDs a distant second
(12.7%). The terms of CABs are commonly up to 40 years and can
cost more than 10 times the amount borrowed, putting a financial
burden on tax payers for years to come.
ARGUMENTS IN OPPOSITION : The primary reasons for opposition
are the limitation on CIBs after five years and the four to one
ratio on CABs as a fixed ratio that does not adjust as interest
rates change.
ASSEMBLY FLOOR : 75-0, 4/8/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Cooley, Dahle, Daly,
Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines,
Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Grove, Hagman,
Hall, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer,
Levine, Linder, Logue, Maienschein, Medina, Melendez,
Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande,
Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk,
Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Torres,
Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Blumenfield, Conway, Lowenthal, Mansoor,
Vacancy
PQ:k 8/8/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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