BILL ANALYSIS Ó
AB 621
Page 1
ASSEMBLY THIRD READING
AB 621 (Wagner)
As Amended April 25, 2013
Majority vote
LOCAL GOVERNMENT 7-2 ELECTIONS 7-0
-----------------------------------------------------------------
|Ayes:|Achadjian, Bradford, |Ayes:|Fong, Donnelly, |
| |Gordon, Melendez, Mullin, | |Bocanegra, Bonta, Hall, |
| |Waldron, Atkins | |Logue, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Levine, Alejo | | |
| | | | |
-----------------------------------------------------------------
SUMMARY : Prohibits local agencies from entering into financial
or legal advisory relationships or underwriting relationships
with an individual or firm regarding a bond issue
if that individual or firm, or specified related persons,
provided or will provide bond campaign services to the bond
campaign. Specifically, this bill :
1)Prohibits a local agency from entering into a financial
advisory, legal advisory, underwriting, or similar
relationship with an individual or firm, with respect to a new
issue of bonds that requires voter approval on or after
January 1, 2014, if that individual or firm, or an employee,
agent, or person related to an employee or agent of the
individual or firm, provided or will provide bond campaign
services to the bond campaign.
2)Defines the term "bond campaign services" to include
fundraising, donation by the individual or firm to the bond
campaign, public opinion polling, election strategy and
management, organization of campaign volunteers,
get-out-the-vote services, development of campaign literature,
and advocacy materials.
3)Specifies that the definition of "bond campaign services" does
not include either of the following:
a) Advice and support related to the preparation of tax
AB 621
Page 2
rate statements and other documentation required for
inclusion in the voter pamphlet published by the applicable
county registrar of voters; or,
b) Public opinion polling that is conducted before a bond
measure is placed on the ballot for the purposes of
gathering information regarding, and evaluating the
potential for, the adoption of the bond measure by the
electorate.
4)Defines the term "related" to include, but not be limited to,
a family relationship by blood or marriage, a financial
relationship, an affiliation between business associations, or
business associations with directors or principals in common.
EXISTING LAW :
1)Provides that it is unlawful for any elected state or local
officer, including any state or local appointee, employee, or
consultant, to use or permit the use of public resources for a
campaign activity, or personal or other purposes which are not
authorized by law, and provides for civil penalties for the
violation.
2)Makes it a crime to use school district or community college
district funds, services, supplies or equipment to urge the
support or defeat of any ballot measure or candidate.
3)Requires, before selling bonds, the governing board of a
school district or community college district to disclose
specified information about the method of sale, the identity
of the bond counsel, underwriter, and financial adviser
involved in the sale, and cost estimates. After a bond sale,
the governing board must present actual cost information at
its next scheduled public meeting and submit an itemized
summary of costs to the California Debt and Investment
Advisory Commission.
4)Allows local agencies to issue and sell general obligation
(GO) bonds through the negotiated sale method, and imposes
nearly identical requirements as listed in 3) above, on any
city, county, city and county, or special district that sells
bonds at a negotiated sale.
AB 621
Page 3
FISCAL EFFECT : None
COMMENTS : This bill prohibits a local agency from entering into
a financial advisory, legal advisory, underwriting, or similar
relationship with an individual or firm, with respect to a bond
issue that requires voter approval on or after January 1, 2014,
if that firm or individual provided, or will provide bond
campaign services to the bond campaign. This prohibition also
applies to any employee, agent, or person related to an employee
or agent of that individual or firm. Additionally, the bill
clarifies the definition of "bond campaign services" and defines
the types of relationships that are prohibited. This bill is
sponsored by the author.
According to the author's office, "Currently, it is illegal for
school officials to use public funds to hire political
consultants to pass a bond measure. However, all over the
state, school districts are having their banks or outside
financial advisors hire political strategists to run the bond
campaigns?AB 621 seeks to close this loophole that is being
exploited for the sake of a desire to build with taxpayer
money."
Until the past few years, school districts and community college
districts were the only local agencies authorized to sell GO
bonds at a private sale using the negotiated sale method.
AB 1388 (Hernandez), Chapter 529, Statutes of 2009, changed this
by authorizing cities, counties and special districts to sell GO
bonds at a negotiated sale, under specified conditions.
The negotiated sale method provides a means of offering
municipal bonds in which the issuing entity and a selected
underwriter negotiate the terms of the issue, as opposed to
having multiple underwriting groups competitively bidding on the
issue to establish its terms.
County treasurers report that many local agencies issue bonds in
negotiated sales with underwriters or financial advisors that
also provide campaign services to help win voter approval for
the bonds. Pre-packaged campaign and underwriting relationships
may result in higher fees and less favorable terms in bond
issuances conducted in a negotiated sale. This bill aims to
curb these types of relationships.
AB 621
Page 4
Existing law makes it unlawful for any elected state or local
officer, including any state or local appointee, employee, or
consultant, to use or permit the use of public resources for a
campaign activity, or personal or other purposes which are not
authorized by law, and provides for civil penalties for the
violation. Current law also makes it a crime to use school
district or community college district resources to support the
passage or defeat of any ballot measure. It also requires
specified disclosures to the public about a bond sale before and
after the sale, including negotiated sales by local agencies.
The Legislature may wish to ask the author why the bill is
necessary in light of existing law.
State Treasurer Bill Lockyer on March 25 requested an opinion
from the State Attorney General (AG) on several questions
related to school districts that award underwriting firms an
exclusive, sole-source contract to underwrite all voter-approved
bonds in an election in return for obtaining pre-election
campaign services from the underwriter. The Legislature may
wish to consider whether this bill is premature given that the
AG's opinion has not yet been rendered.
This bill includes in its definition of "bond campaign services"
a donation to the bond campaign by the individual or firm
providing financial advisory, legal advisory, or underwriting
services. The Legislature may wish to consider whether
donations to a bond campaign constitute a "service," or whether
such donations arguably should remain in the sphere of
permissible political activity.
Several attempts have been made to enact the provisions of this
bill. AB 1045 (Norby) of 2011 was nearly identical to this
bill. AB 1045 passed the Assembly Local Government Committee on
a 5-3 vote on May 11, 2011. AB 1045 subsequently failed passage
in the Senate Governance and Finance Committee. SB 1461
(Ashburn) of 2010, a substantially similar bill, was heard in
Senate Local Government Committee and failed passage on May 5,
2010. SB 623 (Ashburn) of 2010 was substantially amended in the
Assembly with virtually the same language as SB 1461. SB 623
passed the Assembly Local Government Committee on a 5-2 vote and
passed the Assembly Floor, but ultimately died in the Senate
Local Government Committee. SB 799 (Wiggins) of 2009 was
another nearly identical bill and was never heard in committee.
Another similar bill, AB 2011 (Cook) of 2008 was heard in the
AB 621
Page 5
Assembly Local Government Committee and also failed passage.
Support arguments: The author contends that "When the bonds are
approved they end up costing the taxpayers millions of dollars.
For example, one $22 million borrowing will end up costing
taxpayers nearly $280 million. The reason that it grows to such
a large amount of debt being that these are capital appreciation
bonds, which no payments are required for up to 40 years while
interest builds; interest which the taxpayers have to
cover?(this bill) will hopefully save taxpayers millions of
dollars."
Opposition arguments: Opponents argue that this bill will limit
choice regarding which campaign-services company a school
district could hire, noting that more than 50% of bond programs
are implemented by full service firms, which would increase
costs due to reduced competition. They also assert that the
bill's restriction on campaign contributions will make it more
difficult for small district community organizations to raise
funds to pass school bonds. Opponents contend that this bill
will harm urban, rural, small, and predominantly poor
communities, and that it is redundant to existing law.
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
FN: 0000414