Amended in Assembly March 21, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 850

Introduced by Assembly Member Nazarian

February 21, 2013

An act to amend begin delete Section 6585 of end delete begin insert Sections 6585, 6588, 6590, 6591, 6592, and 6599.3 of, and to add Section 6588.7 to, end insert the Government Code, relating to local government finance.

LEGISLATIVE COUNSEL’S DIGEST

AB 850, as amended, Nazarian. Public capital facilities: water quality.

Existing law, the Marks-Roos Local Bond Pooling Act of 1985, authorizes joint powers authorities, among other powers, to issue bonds and loan the proceeds to local agencies to finance specified types of projects and programs.

This bill would begin delete declare the intent of the Legislature to amend the Marks-Roos Local Bond Pooling Act of 1985 to permit end delete begin insert authorize a end insert joint powers begin delete agencies to more affordably finance mandated capital improvement projects relating to water quality, and also would make a technical, nonsubstantive change to the act end delete begin insert authority, commonly referred to as a JPA, upon the application of a local agency that owns and operates a publicly owned utility, as defined, to issue rate reduction bonds to finance a utility project, as defined, under specified circumstances. The bill would provide that the rate reduction bonds are secured by utility project property, as defined. The bill would authorize end insert begin insert the JPA to impose on, and collect from, customers of the publicly owned utility a utility project charge, as a separate nonbypassable charge, to finance the rate reduction bond. The bill would authorize the JPA to adjust the utility project charge to correct for any overcollection or undercollection to ensure timely payment of the financing costs of the rate reduction bonds. The bill would require the JPA to enter into a servicing agreement with the local agency for the collection of the utility project charge 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 delete

SECTION 1.  

It is the intent of the Legislature to amend the
Marks-Roos Local Bond Pooling Act of 1985, to permit joint
powers agencies to more affordably finance mandated capital
improvement projects relating to water quality.

end delete

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

Section 6585 of the Government Code is amended
to read:

6585.  

The definitions in this section shall govern the
construction and interpretation of this article.

(a) (1) Except as provided in paragraphs (2) and (3), “authority”
means an entity created pursuant to Article 1 (commencing with
Section 6500) begin insert and includes any successor to the powers and
functions of that entity end insert .

(2) In the case of an authority issuing bonds pursuant to this
chapter in which VLF receivables, as defined in subdivision (j),
are pledged to the payment of the bonds, other than VLF
receivables so pledged for a county of the first class, an authority
shall consist of not fewer than 100 local agencies.

(3) In the case of an authority issuing bonds pursuant to this
chapter in which Proposition 1A receivables, as defined in
subdivision (g), are pledged to the payment of the bonds, an
authority shall consist of not fewer than 250 local agencies.

(b) “Bond purchase agreement” means a contractual agreement
executed between the authority and the local agency whereby the
authority agrees to purchase bonds of the local agency.

(c) “Bonds” means all of the following:

(1) Bonds, including, but not limited to, assessment bonds,
redevelopment agency bonds, government-issued mortgage bonds,
and industrial development bonds.

(2) Notes, including bond, revenue, tax, or grant anticipation
notes.

(3) Commercial paper, floating rate and variable maturity
securities, and any other evidences of indebtedness.

(4) Certificates of participation or lease-purchase agreements.

begin insert

(d) “Conservation or reclamation purposes” mean a utility
project designed to reduce the amount of potable water to be
supplied by a publicly owned utility or reduce the amount of water
imported by the publicly owned utility, including without limitation,
storm water capture and treatment, water recycling, development
of local groundwater resources, groundwater recharging, and
water reclamation.

end insert begin delete

(d)

end delete

begin insert (e) end insert  “Cost,” as applied to a public capital improvement begin insert , a utility
project, end insert or portion begin delete thereof end delete begin insert of the improvement or utility project end insert
financed under this part, means all of the following:

(1) All or any part of the cost of construction, renovation, and
acquisition of all lands, structures, real or personal property, rights,
rights-of-way, franchises, easements, and interests acquired or
used for a public capital improvement begin insert or a utility project end insert .

(2) The cost of demolishing or removing any buildings or
structures on land so acquired, including the cost of acquiring any
lands to which the buildings or structures may be moved, and the
cost of all machinery and equipment.

(3) Finance charges.

(4) Interest prior to, during, and for a period after, completion
of that construction, as determined by the authority.

(5) Provisions for working capital, reserves for principal and
interest and for extensions, enlargements, additions, replacements,
renovations, and improvements.

(6) The cost of architectural, engineering, financial and legal
services, plans, specifications, estimates, and administrative
expenses.

(7) Other expenses necessary or incidental to determining the
feasibility of constructing any project or incidental to the
construction or acquisition or financing of any public capital
improvement begin insert or utility project end insert .

begin insert

(f) “Financing costs” mean any of the following:

end insert begin insert

(1) Interest and redemption premiums that are payable on rate
reduction bonds.

end insert begin insert

(2) The cost of retiring the principal of rate reduction bonds,
whether at maturity, including acceleration of maturity upon an
event of default, or upon redemption, including sinking fund
redemption.

end insert begin insert

(3) A cost related to issuing or servicing rate reduction bonds,
including, but not limited to, servicing fees, trustee fees, legal fees,
administrative fees, bond counsel fees, bond placement or
underwriting fees, remarketing fees, broker dealer fees,
independent manager fees, payment under an interest rate swap
agreement, financial advisor fees, accounting report fees,
engineering report fees, and rating agency fees.

end insert begin insert

(4) A payment or expense associated with a bond insurance
policy, financial guaranty or a contract, agreement, or other credit
enhancement for rate reduction bonds or a contract, agreement,
or other financial agreement entered into in connection with rate
reduction bonds.

end insert begin insert

(5) The funding of one or more reserve accounts related to rate
reduction bonds.

end insert begin insert

(g) (1) “Financing resolution” means a resolution adopted by
the governing body of an authority financing a utility project with
rate reduction bonds that establishes and imposes a utility project
charge in connection with the rate reduction bonds in accordance
with Section 6588.7

end insert begin insert

(2) A financing resolution may be separate from a resolution
authorizing the issuance of the rate reduction bonds.

end insert begin delete

(e)

end delete

begin insert (h) end insert  “Legislative body” means the governing body of a local
agency.

begin delete

(f)

end delete

begin insert (i) end insert  “Local agency” means a party to the agreement creating the
authority, or an agency or subdivision of that party, sponsoring a
project of public capital improvements, or any city, county, city
and county, authority, district, or public corporation of this state.

begin insert

(j) “Mandate” means a requirement, imposed by a mandating
entity by any means, including without limitation, a statute, rule,
regulation, an administrative or judicial order, a building,
operating, or licensing requirement or condition, or an agreement
with, or license or permit from, the mandating entity, on a facility
of a publicly owned utility or a facility operated in whole or in
part for the benefit of a publicly owned utility, or on the operations
of the publicly owned utility, or on the water pumped, acquired,
or supplied by the publicly owned utility.

end insert begin insert

(k) (1) “Mandating entity” means the United States; a state of
the United States; an agency, department, commission, or other
subdivision of the United States or a state of the United States; a
court of the United States or a state of the United States; or any
other body or organization, that has jurisdiction over the
operations of a publicly owned utility; the facility of a publicly
owned utility, or a facility operated in whole or in part for the
benefit of a publicly owned utility; or the water pumped, acquired
or sold by a publicly owned utility.

end insert begin insert

(2) “Mandating entity” does not include a local agency that
owns the publicly owned utility.

end insert begin delete

(g)

end delete

begin insert (l) end insert  “Proposition 1A receivable” means the right to payment of
moneys due or to become due to a local agency, pursuant to clause
(iii) of subparagraph (B) of paragraph (1) of subdivision (a) of
Section 25.5 of Article XIII of the California Constitution and
Section 100.06 of the Revenue and Taxation Code.

begin delete

(h)

end delete

begin insert (m) end insert  “Public capital improvements” means one or more projects
specified in Section 6546.

begin insert

(n) “Publicly owned utility” means a utility furnishing water
service to retail customers that is owned and operated by a local
agency or a department or other subdivision of a local agency and
includes any successor to the powers and functions of the
department or other subdivision.

end insert begin insert

(o) “Rate reduction bonds” mean bonds that are issued by an
authority, the proceeds of which are used directly or indirectly to
pay or reimburse a local agency or its publicly owned utility for
the payment of the costs of a utility project, and that are secured
by a pledge of, and are payable from, bonds as provided in Section
6588.7.

end insert begin delete

(i)

end delete

begin insert (p) end insert  “Revenue” means income and receipts of the authority from
any of the following:

(1) A bond purchase agreement.

(2) Bonds acquired by the authority.

(3) Loans installment sale agreements, and other
revenue-producing agreements entered into by the authority.

(4) Projects financed by the authority.

(5) Grants and other sources of income.

(6) VLF receivables purchased pursuant to Section 6588.5.

(7) Proposition 1A receivables purchased pursuant to Section
6588.6.

(8) Interest or other income from any investment of any money
in any fund or account established for the payment of principal or
interest or premiums on bonds.

begin insert

(q) “Utility project” means the acquisition, construction,
installation, retrofitting, rebuilding, or other addition to, or
improvement of, any equipment, device, structure, improvement,
process, facility, technology, rights or property, located either
within, or outside of, the State of California, and that is used, or
to be used, in connection with the operations of a publicly owned
utility in response to a mandate related to water quality or to a
mandate for conservation or reclamation purposes.

end insert begin insert

(r) “Utility project charge” means a charge paid or to be paid
by water distribution customers of a publicly owned utility to pay
financing costs of rate reduction bonds issued to finance a utility
project for a publicly owned utility that is imposed pursuant to
Section 6588.7, including any adjustment of the charge pursuant
to Section 6588.7.

end insert begin insert

(s) “Utility project property” means the property right created
pursuant to Section 6588.7, including without limitation, the right,
title, and interest of an authority for any of the following:

end insert begin insert

(1) In and to the financing resolution and the utility charge
established with respect to the rate reduction bonds, as adjusted
from time to time in accordance with Section 6588.7.

end insert begin insert

(2) To be paid the financing costs of the rate reduction bonds
and to all revenues, collections, claims, payments, moneys, or
proceeds for, or arising from, the utility project charge relating
to the rate reduction bonds.

end insert begin insert

(3) In and to all rights to obtain adjustments to the utility project
charge relating to the rate reduction bonds pursuant to Section
6588.7.

end insert begin delete

(j)

end delete

begin insert (t) end insert  “VLF receivable” means the right to payment of moneys due
or to become due to a local agency out of funds payable in
connection with vehicle license fees to a local agency pursuant to
Section 10754.11 of the Revenue and Taxation Code.

begin delete

(k)

end delete

begin insert (u) end insert  “Working capital” means money to be used by, or on behalf
of, a local agency for any purpose for which a local agency may
borrow money pursuant to Section 53852, or for any purpose for
which a VLF receivable or a Proposition 1A receivable sold to an
authority could have been used by the local agency.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 6588 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

6588.  

In addition to other powers specified in an agreement
pursuant to Article 1 (commencing with Section 6500) and Article
2 (commencing with Section 6540), the authority may do any or
all of the following:

(a) Adopt bylaws for the regulation of its affairs and the conduct
of its business.

(b) Sue and be sued in its own name.

(c) Issue bonds, including, at the option of the authority, bonds
bearing interest, to pay the cost of any public capital improvement,
working capital, or liability or other insurance program. In addition,
for any purpose for which an authority may execute and deliver
or cause to be executed and delivered certificates of participation
in a lease or installment sale agreement with any public or private
entity, the authority, at its option, may issue or cause to be issued
bonds, rather than certificates of participation, and enter into a
loan agreement with the public or private entity.

(d) Engage the services of private consultants to render
professional and technical assistance and advice in carrying out
the purposes of this article.

(e) As provided by applicable law, employ and compensate
bond counsel, financial consultants, and other advisers determined
necessary by the authority in connection with the issuance and sale
of any bonds.

(f) Contract for engineering, architectural, accounting, or other
services determined necessary by the authority for the successful
development of a public capital improvement.

(g) Pay the reasonable costs of consulting engineers, architects,
accountants, and construction, land-use, recreation, and
environmental experts employed by any sponsor or participant if
the authority determines those services are necessary for the
successful development of public capital improvements.

(h) Take title to, and sell by installment sale or otherwise, lands,
structures, real or personal property, rights, rights-of-way,
franchises, easements, and other interests in lands that are located
within the state that the authority determines are necessary or
convenient for the financing of public capital improvements, or
any portion thereof.

(i) Receive and accept from any source, loans, contributions,
or grants, in either money, property, labor, or other things of value,
for, or in aid of, the construction financing, or refinancing of public
capital improvement, or any portion thereof or for the financing
of working capital or insurance programs, or for the payment of
the principal of and interest on bonds if the proceeds of those bonds
are used for one or more of the purposes specified in this section.

(j) Make secured or unsecured loans to any local agency in
connection with the financing of capital improvement projects,
working capital or insurance programs in accordance with an
agreement between the authority and the local agency. However,
no loan shall exceed the total cost of the public capital
improvements, working capital or insurance needs of the local
agency as determined by the local agency and by the authority.

(k) Make secured or unsecured loans to any local agency in
accordance with an agreement between the authority and the local
agency to refinance indebtedness incurred by the local agency in
connection with public capital improvements undertaken and
completed.

(l) Mortgage all or any portion of its interest in public capital
improvements and the property on which any project is located,
whether owned or thereafter acquired, including the granting of a
security interest in any property, tangible or intangible.

(m) Assign or pledge all or any portion of its interests in
mortgages, deeds of trust, indentures of mortgage or trust, or
similar instruments, notes, and security interests in property,
tangible or intangible, of a local agency to which the authority has
made loans, and the revenues therefrom, including payment or
income from any interest owned or held by the authority, for the
benefit of the holders of bonds issued to finance public capital
improvements. The pledge of moneys, revenues, accounts, contract
rights, or rights to payment of any kind made by or to the authority
pursuant to the authority granted in this part shall be valid and
binding from the time the pledge is made for the benefit of the
pledgees and successors thereto, against all parties irrespective of
whether the parties have notice of the claim.

(n) Lease the public capital improvements being financed to a
local agency, upon terms and conditions that the authority deems
proper; charge and collect rents therefor; terminate any lease upon
the failure of the lessee to comply with any of the obligations of
the lease; include in any lease provisions that the lessee shall have
options to renew the lease for a period or periods, and at rents as
determined by the authority; purchase or sell by an installment
agreement or otherwise any or all of the public capital
improvements; or, upon payment of all the indebtedness incurred
by the authority for the financing or refinancing of the public
capital improvements, the authority may convey any or all of the
project to the lessee or lessees.

(o) Charge and apportion to local agencies that benefit from its
services the administrative costs and expenses incurred in the
exercise of the powers authorized by this article. These fees shall
be set at a rate sufficient to recover, but not exceed, the authority’s
costs of issuance and administration. The fee charged to each local
obligation acquired by the pool shall not exceed that obligation’s
proportionate share of those costs. The level of these fees shall be
disclosed to the California Debt and Investment Advisory
Commission pursuant to Section 6599.1.

(p) Issue, obtain, or aid in obtaining, from any department or
agency of the United States or of the state, or any private company,
any insurance or guarantee to, or for, the payment or repayment
of interest or principal, or both, or any part thereof, on any loan,
lease, or obligation or any instrument evidencing or securing the
same, made or entered into pursuant to this article.

(q) Notwithstanding any other provision of this article, enter
into any agreement, contract, or any other instrument with respect
to any insurance or guarantee; accept payment in the manner and
form as provided therein in the event of default by a local agency;
and assign any insurance or guarantee that acts as security for the
authority’s bonds.

(r) Enter into any agreement or contract, execute any instrument,
and perform any act or thing necessary, convenient, or desirable
to carry out any power authorized by this article.

(s) Invest any moneys held in reserve or sinking funds, or any
moneys not required for immediate use or disbursement, in
obligations that are authorized by law for the investment of trust
funds.

(t) At the request of affected local agencies, combine and pledge
revenues to public capital improvements for repayment of one or
more series of bonds issued pursuant to this article.

(u) Delegate to any of its individual parties or other responsible
individuals the power to act on its behalf subject to its general
direction, guidelines, and oversight.

(v) Purchase, with the proceeds of its bonds or its revenue, bonds
issued by any local agency at public or negotiated sale. Bonds
purchased pursuant to this subdivision may be held by the authority
or sold to public or private purchasers at public or negotiated sale,
in whole or in part, separately or together with other bonds issued
by the authority.

(w) Purchase, with the proceeds of its bonds or its revenue, VLF
receivables sold to the authority pursuant to Section 6588.5. VLF
receivables so purchased may be pledged to the payment of bonds
issued by the authority or may be resold to public or private
purchasers at public or negotiated sale, in whole or in part,
separately or together with other VLF receivables purchased by
the authority.

(x) (1) Purchase, with the proceeds of its bonds or its revenue,
Proposition 1A receivables pursuant to Section 6588.6. Proposition
1A receivables so purchased may be pledged to the payment of
bonds issued by the authority or may be resold to public or private
purchasers at public or negotiated sales, in whole or in part,
separately or together with other Proposition 1A receivables
purchased by the authority.

(2) (A) All entities subject to a reduction of ad valorem property
tax revenues required under Section 100.06 of the Revenue and
Taxation Code pursuant to the suspension set forth in Section
100.05 of the Revenue and Taxation Code shall be afforded the
opportunity to sell their Proposition 1A receivables to the authority.

(B) If these entities offer Proposition 1A receivables to the
authority for purchase and duly authorize the sale of the Proposition
1A receivable pursuant to documentation approved by the
authority, the authority shall purchase all Proposition 1A
receivables so offered to the extent it can sell bonds therefor. If
the authority does not purchase all Proposition 1A receivables
offered, it shall purchase a pro rata share of each entity’s offered
Proposition 1A receivables.

(C) The authority may establish a deadline, no earlier than
November 3, 2009, by which these entities shall offer their
Proposition 1A receivables for sale to the authority and complete
the application required by the authority.

(3) For purposes of meeting costs incurred in performing its
duties relative to the purchase and sale of Proposition 1A
receivables, the authority shall be authorized to charge a fee to
each entity from which it purchases a Proposition 1A receivable.
The fee shall be computed based on the percentage value of the
Proposition 1A receivable purchased from each entity, in relation
to the value of all Proposition 1A receivables purchased by the
authority. The amount of the fee shall be paid from the proceeds
of the bonds and shall be included in the principal amount of the
bonds.

(4) Terms and conditions of any and all fees and expenses
charged by the authority, or those it contracts with, and the terms
and conditions of sales of Proposition 1A receivables and bonds
issued pursuant to this subdivision, including the terms of optional
early redemption provisions, if any, shall be approved by the
Treasurer and the Director of Finance, who shall not unreasonably
withhold their approval. The aggregate principal amount of all
bonds issued pursuant to this subdivision shall not exceed two
billion two hundred fifty million dollars ($2,250,000,000), and the
rate of interest paid on those bonds shall not exceed 8 percent per
annum. The authority shall exercise its best efforts to obtain the
lowest cost financing possible. Any and all premium obtained shall
be used for either of the following:

(A) Applied to pay the costs of issuance of the bonds.

(B) Deposited in a trust account that is pledged to bondholders
and used solely for the payment of interest on, or for repayment
of, the bonds.

(5) (A) In connection with any financing backed by Proposition
1A receivables, the Treasurer may retain financial advisors, legal
counsel, and other consultants to assist in performing the duties
required by this chapter and related to that financing.

(B) Notwithstanding any other provision of law, none of the
following shall apply to any agreements entered into by the
Treasurer pursuant to subparagraph (A) in connection with any
Proposition 1A financing:

(i) Section 11040 of the Government Code.

(ii) Section 10295 of the Public Contract Code.

(iii) Article 3 (commencing with Section 10300) and Article 4
(commencing with Section 10335) of, Chapter 2 of Part 2 of
Division 2 of the Public Contract Code, except for the authority
of the Department of Finance under Section 10336 of the Public
Contract Code to direct a state agency to transmit to it a contract
for review, and except for Section 10348.5 of the Public Contract
Code.

(C) Any costs incurred by the Treasurer in connection with any
Proposition 1A financing shall be reimbursed out of the proceeds
of the financing.

begin insert

(y) Finance utility projects through the issuance of rate
reduction bonds, and to impose and adjust utility project charges
in connection with the financing pursuant to Section 6588.7.

end insert begin delete

(y)

end delete

begin insert (z) end insert  Set any other terms and conditions on any purchase or sale
pursuant to this section as it deems by resolution to be necessary,
appropriate, and in the public interest, in furtherance of the
purposes of this article.

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 6588.7 is added to the end insert begin insert Government Code end insert begin insert , to
read: end insert

begin insert

begin insert 6588.7. end insert   

(a) A local agency that owns and operates a publicly
owned utility may apply to an authority to finance costs of a utility
project for the publicly owned utility with the proceeds of rate
reduction bonds. In its application to an authority for the financing,
the local agency shall specify the utility project to be financed by
the rate reduction bonds, the maximum principal amount, the
maximum interest rate, and the maximum stated terms of the rate
reduction bonds.

(b) A local agency shall not apply to an authority for financing
of a utility project pursuant to this section unless the legislative
body of the local agency has determined all of the following:

(1) The project to be financed is a utility project.

(2) The local agency is electing to finance costs of the utility
project pursuant to this section and the financing costs associated
with the financing are to be paid from utility project property,
including the utility project charge for the rate reduction bonds
issued for the utility project in accordance with this section.

(3) Based on information available to, and projections used by,
the legislative body, the financing is expected to result in lower
rates to the customers of the local agency’s publicly owned utility
compared with financing the utility project through bonds payable
from revenues of the publicly owned utility.

(c) (1) Subject to the requirements of Article XIII D of the
California Constitution, an authority financing the costs of a utility
project or projects for a local agency’s publicly owned utility with
rate reduction bonds is authorized and directed to impose and
collect a utility project charge with respect to the rate reduction
bonds as provided in this section. The imposition of the utility
project charge shall be made and evidenced by the adoption of a
financing resolution by the governing body of the authority. The
financing resolution with respect to financing a utility project or
project with rate reduction bonds for a publicly owned utility shall
include all of the following:

(A) The addition of a separate charge to the bill of each
customer of distribution service of the publicly owned utility in
the class or classes of customers specified in the financing
resolution.

(B) A description of the financial calculation, formula, or other
method that the authority is to use to determine the utility project
charge. The calculation, formula or other method shall include a
periodic adjustment method to the then current utility project
charge, to be applied at least annually, that shall be utilized by
the authority to correct for any overcollection or undercollection
of financing costs from the utility project charge or any other
adjustment necessary to ensure timely payment of the financing
costs of the rate reduction bonds, including, but not limited to, the
adjustment of the utility project charge to pay any debt service
coverage requirement for the rate reduction bonds. The financial
calculation, formula, or other method, including the periodic
adjustment method, established in the financing resolution pursuant
to this section, and the allocation of utility project charges to, and
among, water distribution customers shall be decided solely by
the governing body of the authority and shall be final and
conclusive. In no event shall the periodic adjustment method
established in the financing resolution be applied less frequently
than required by the financing resolution and the documents
relating to the applicable rate reduction bonds. Once the financial
calculation, formula, or other method for determining the utility
project charge, and the periodic adjustment method, have been
established in the financing resolution and have become final and
conclusive as provided in this section, they shall not be changed.

(C) A requirement that the authority enter into a servicing
agreement for the collection of the utility project charge with the
local agency for which the financing is undertaken or its publicly
owned utility and the local agency or its publicly owned utility
shall act as a servicing agent for purposes of collecting the utility
project charge as long as the servicing agreement remains in effect.
Moneys collected by the local agency or its publicly owned utility,
acting as a servicing agent on behalf of the authority, as a utility
project charge shall be held in trust for the exclusive benefit of the
persons entitled to the financing costs to be paid, directly or
indirectly, from the utility project charge and shall not lose their
character as revenues of the authority by virtue of possession by
the local agency or its publicly owned utility. The local agency or
its publicly owned utility shall provide the authority with the
information as to estimated sales of water and any other
information concerning the publicly owned utility required by the
authority in connection with the initial establishment and the
adjustment of the utility project charge.

(2) The determination of the legislative body of the local agency
that a project to be financed with rate reduction bonds is a utility
project shall be final and conclusive and the rate reduction bonds
issued to finance the utility project and the utility project charge
imposed relating to the rate reduction bonds shall be valid and
enforceable in accordance with the terms of the financing
resolution and the documents relating to the rate reduction bonds.
The authority shall require, in its financing resolution with respect
to a utility project charge, that as long as a customer obligated to
pay the utility project charge obtains water distribution service
from the applicable publicly owned utility, the customer shall pay
the utility project charge regardless of whether or not the customer
obtains water or water services other than water distribution
service from a person or entity other than the publicly owned
utility. The utility project charge shall be a nonbypassable charge
to all water distribution customers of the publicly owned utility in
the class or classes of customers specified in the financing
resolution that are receiving water distribution service from the
publicly owned utility at the time of adoption of the financing
resolution and all future water distribution customers in that class
or classes. If a customer of the publicly owned utility that is subject
to a utility project charge ceases taking water or water services
other than water distribution service from the publicly owned
utility, the customer shall remain liable for the payment of its share
of the utility project charge as if it had not ceased taking the water
or water service from the publicly owned utility. The liability may
be discharged by the continued payment of its share of the utility
project charge as it accrues or by a one-time payment, as
determined by the authority. All provisions of a financing resolution
adopted pursuant to this subdivision shall be binding on the
authority.

(3) The timely and complete payment of all utility project
charges by a person liable for the charges shall be a condition of
receiving water service from the publicly owned utility of the local
agency and each of the local agency and its publicly owned utility
is authorized to use its established collection policies and all rights
and remedies provided by law to enforce payment and collection
of the utility project charge. In no event shall a person liable for
a utility project charge be entitled or authorized to withhold
payment, in whole or in part, of the utility project charge for any
reason.

(4) The authority shall determine whether adjustments to the
utility project charge relating to rate reduction bonds are required
upon the issuance of the rate reduction bonds and at least annually,
and at additional intervals as may be provided for in the financing
resolution or the documents relating to the rate reduction bonds.
Each adjustment shall be made and put into effect in accordance
with the financial calculation, formula, or other method that the
authority is to use to determine the utility project charge pursuant
to the financing resolution expeditiously after the authority’s
determination that the adjustment is required.

(5) All revenues with respect to utility project property related
to rate reduction bonds, including payments of the utility project
charge, shall be applied first to the payment of the financing costs
of the related rate reduction bonds then due, including the funding
of reserves for the rate reduction bonds, with any excess being
applied as determined by the authority for the benefit of the utility
for which the rate reduction bonds were issued.

(6) The authority shall be obligated to impose and collect the
utility project charge relating to rate reduction bonds in amounts,
based on estimates of water usage subject to the utility project
charge, sufficient to pay on a timely basis the financing costs
associated with the rate reduction bonds when due. The pledge of
a utility project charge to secure the payment of rate reduction
bonds shall be irrevocable, and the State of California, the
authority, or any limited liability company acting pursuant to
subdivision (i) shall not reduce, impair, or otherwise adjust the
utility project charge, except that the authority shall implement
the periodic adjustments to the utility project charge relating to
rate reduction bonds as required by the applicable financing
resolution and the documents relating to the rate reduction bonds.
Revenue from a utility project charge shall be deemed special
revenue of the authority and shall not constitute revenue of the
local agency or its publicly owned utility for any purpose, including
without limitation, any dedication, commitment, or pledge of
revenue, receipts, or other income that the local agency or its
publicly owned utility has made or will make for the security of
any of its obligations.

(7) A utility project charge shall constitute a utility project
property when, and to the extent that, a financing resolution
authorizing the utility project charge has become effective in
accordance with its terms, and the utility project property shall
thereafter continuously exist as property for all purposes with all
of the rights and privileges of this section for the period, and to
the extent, provided in the financing resolution, but in any event
until all financing costs with respect to the related rate reduction
bonds are paid in full, including all arrearages thereon.

(8) Utility project property shall constitute a current property
right notwithstanding that the value of the property right will
depend on consumers using water or, in those instances where
consumers are customers of the publicly owned utility, the publicly
owned utility performing certain services.

(9) In the event a local agency for which rate reduction bonds
have been issued and remain outstanding ceases to provide water
distribution services, either directly or through its publicly owned
utility, references in this section to the local agency or to its
publicly owned utility shall be to the entity providing water
distribution service in lieu of the local agency and the entity shall
assume and perform all obligations of the local agency and its
publicly owned utility required by this section and the servicing
agreement with the local agency while the rate reduction bonds
remain outstanding.

(d) (1) Rate reduction bonds shall be within the parameters of
the financing set forth by the local agency pursuant to subdivision
(a) in connection with the rate reduction bonds and the proceeds
of the rate reduction bonds made available to the local agency or
its publicly owned utility shall be utilized for the utility project
identified in the application for financing of the utility project or
projects pursuant to subdivision (a).

(2) An authority shall authorize the issuance of rate reduction
bonds by a resolution of its governing body. Rate reduction bonds
shall be nonrecourse to the credit or any assets of the local agency
and the publicly owned utility for which the utility project is
financed and shall be payable from, and secured by a pledge of,
the utility project property relating to the rate reduction bonds
and any additional security or credit enhancement specified in the
documents relating to the rate reduction bonds.

(3) An authority issuing rate reduction bonds shall pledge the
utility project property relating to the rate reduction bonds as
security for the payment of the rate reduction bonds, which pledge
shall be made pursuant to, and with the effect set forth in Section
5451 of the Government Code. All rights of an authority with
respect to utility project property pledged as security for the
payment of rate reduction bonds shall be for the benefit of, and
enforceable by, the beneficiaries of the pledge to the extent
provided in the documents relating to the rate reduction bonds.

(4) To the extent that any interest in utility project property is
pledged as security for the payment of rate reduction bonds, the
applicable local agency or its publicly owned utility shall contract
with the authority, which contract shall be part of the utility project
property, that the local agency or its publicly owned utility will
continue to operate its publicly owned utility system that includes
the financed utility project to provide service to its customers, will,
as servicer, collect amounts in respect of the utility project charge
for the benefit and account of the authority and the beneficiaries
of the pledge of the utility project charge and will account for and
remit these amounts to, or for the account of, the authority.

(5) Notwithstanding any other law, any requirement under this
section, a financing resolution, any other resolution of the
authority, or the provisions of the documents relating to rate
reduction bonds to the effect that the authority shall take action
with respect to the utility project property relating to the rate
reduction bonds shall be binding upon the authority, as its
governing body may be constituted from time to time, and the
authority shall have no power or right to rescind, alter, or amend
any resolution or document containing the requirement.

(6) Notwithstanding any law, except as otherwise provided in
this section with respect to adjustments to a utility project charge,
the recovery of the financing costs for the rate reduction bonds
from the utility project charge shall be irrevocable and the
authority shall not have the power either by rescinding, altering,
or amending the applicable financing resolution or otherwise, to
revalue or revise for ratemaking purposes the financing costs of
rate reduction bonds, determine that the financing costs for the
related rate reduction bonds or the utility project charge is unjust
or unreasonable, or in any way reduce or impair the value of utility
project property that includes the utility project charge, either
directly or indirectly; nor shall the amount of revenues arising
with respect to the financing costs for the related rate reduction
bonds or the utility project charge be subject to reduction,
impairment, postponement, or termination for any reason until all
financing costs to be paid from the utility project charge are fully
met and discharged. Except as otherwise provided in this section
with respect to adjustments to a utility project charge, the State
of California does hereby pledge and agree with the owners of
rate reduction bonds that the State of California shall neither limit
nor alter the financing costs or the utility project property,
including the utility project charge, relating to the rate reduction
bonds, or any rights in, to or under, the utility project property
until all financing costs with respect to the rate reduction bonds
are fully met and discharged. This section does not preclude
limitation or alteration if and when adequate provision shall be
made by law for the protection of the owners. The authority is
authorized to include this pledge and undertaking by the State of
California in the governing documents for rate reduction bonds.
Notwithstanding any other provision of this section, the authority
shall make the adjustments to the utility project charge relating
to rate reduction bonds provided by this section and the documents
related to those rate reduction bonds as may be necessary to ensure
timely payment of all financing costs with respect to the rate
reduction bonds. The adjustments shall not impose the utility
project charge upon classes of customers which were not subject
to the utility project charge pursuant to the financing resolution
imposing the utility project charge.

(e) (1) Financing costs in connection with rate reduction bonds
do not constitute a debt or liability of the State of California or of
any political subdivision thereof, other than the special obligation
of the authority, and do not constitute a pledge of the full faith and
credit of the State of California or any of its political subdivisions,
including the authority, but are payable solely from the funds
provided therefor under this section and in the documents relating
to the rate reduction bonds. This subdivision shall in no way
preclude guarantees or credit enhancements in connection with
rate reduction bonds. All the rate reduction bonds shall contain
on the face thereof a statement to the following effect:

Neither the full faith and credit nor the taxing power of the State
of California or any political subdivision thereof is pledged to the
payment of the principal of, or interest on, this bond.

(2) The issuance of rate reduction bonds shall not directly,
indirectly, or contingently obligate the State of California or any
political subdivision thereof to levy or to pledge any form of
taxation to pay the rate reduction bonds or to make any
appropriation for their payment.

(f) (1) Utility project property shall constitute property for all
purposes, including for contracts securing rate reduction bonds,
whether or not the revenues and proceeds arising with respect
thereto have accrued.

(2) Subject to the terms of the pledge document with respect to
a pledge of utility project property, the validity and relative priority
of a pledge created or authorized under this section is not defeated
or adversely affected by the commingling of revenues arising with
respect to the utility project property with other funds of the local
agency or the publicly owned utility collecting a utility project
charge on behalf of an authority.

(g) (1) There shall exist a statutory lien on the utility project
property relating to rate reduction bonds. Upon the effective date
of the financing resolution relating to rate reduction bonds, there
shall exist a first priority statutory lien on all utility project
property, then existing or, thereafter arising, to secure the payment
of the rate reduction bonds. This lien shall arise pursuant to law
by operation of this section automatically without any action on
the part of the authority, the local agency or its publicly owned
utility, or any other person. This lien shall secure the payment of
all financing costs, then existing or subsequently arising, to the
holders of the rate reduction bonds, the trustee or representative
for the holders of the rate reduction bonds, and any other entity
specified in the financing resolution or the documents relating to
the rate reduction bonds. This lien shall attach to the utility project
property regardless of who shall own, or shall subsequently be
determined to own, the utility project property including any local
agency or its publicly owned utility, the authority, or any other
person. This lien shall be valid and enforceable against the owner
of the utility project property and all third parties upon the
effectiveness of the financing resolution without any further public
notice.

(2) The statutory lien on utility project property created by this
section is a continuously perfected lien on all revenues and
proceeds arising with respect thereto, whether or not the revenues
or proceeds have accrued. Utility project property shall constitute
property for all purposes, including for contracts securing rate
reduction bonds, whether or not the revenues or proceeds arising
with respect thereto have accrued.

(3) In addition, the authority may require, in a financing
resolution creating utility project property, that, in the event of
default by the local agency or its publicly owned utility, in payment
of revenues arising with respect to the utility project property, the
authority, upon the application by the beneficiaries of the statutory
lien, and without limiting any other remedies available to the
beneficiaries by reason of the default, shall order the sequestration
and payment to the beneficiaries of revenues arising with respect
to the utility project property.

(h) Notwithstanding any other law, an authority that has
financed a utility project through the issuance of rate reduction
bonds is not authorized, and no governmental officer or
organization shall be empowered to authorize the authority, to
become a debtor in a case under the United States Bankruptcy
Code (11 U.S.C. Sec. 1 et seq.) or to become the subject of any
similar case or proceeding under any other law, whether federal
or State of California, as long as any payment obligation from
utility project property remains with respect to the rate reduction
bonds.

(i) An authority may elect to effect a financing of a utility project
pursuant to this section through a single member limited liability
company formed by the authority by authorizing the company to
adopt the financing resolution and the authority’s issuing rate
reduction bonds payable from, and secured by a pledge of, amounts
paid by the company to the authority from the applicable utility
project property pursuant to an agreement. The provisions of
subdivisions (f) and (g) shall apply to and be the exclusive method
of perfecting a pledge of utility project property by the company
securing the payment of financing costs under any agreement of
the company in connection with the issuance of rate reduction
bonds. Reference to the authority in this section and in all related
defined terms shall mean or include the company as necessary to
implement this subdivision.

end insert

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 6590 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

6590.  

The authority may, from time to time, issue its bonds in
the principal amount as the authority determines necessary to
provide sufficient funds for its purposes, which may include, but
shall not be limited to, providing funds for bond purchase
agreements, payment of the purchase price of VLF receivables,
payment of the purchase price of Proposition 1A receivables,
begin insert financing utility projects, end insert payment of interest on bonds of the
authority, establishment of reserves to secure the bonds, and other
expenditures of the authority incident to issuance of the bonds.
The authority may also issue bonds for the purpose of making
loans to local agencies, to the extent those local agencies are
authorized by law to borrow moneys, or to purchase VLF
receivables from local agencies as provided in Section 6588.5, or
to purchase Proposition 1A receivables as provided in Section
6588.6, and the loan or sale proceeds shall be used by the local
agencies to pay for public capital improvements, working capital,
or insurance programs. The aggregate principal amount of all bonds
issued pursuant to this section that are backed by Proposition 1A
receivables shall not exceed two billion two hundred fifty million
dollars ($2,250,000,000), and that issuance shall be approved by
the Department of Finance and the Treasurer.

In the case of any authority in existence on January 1, 1988, no
loans shall be made to local agencies for working capital or
insurance, unless that purpose is first approved by resolution of
the governing body of the authority by unanimous vote of all
members of the governing body.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 6591 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

6591.  

(a) The authority is authorized from time to time to issue
bonds to provide funds to achieve its purposes.

(b) Bonds may be authorized to finance any of the following:

(1) A single public capital improvement, begin insert utility projects, end insert working
capital, purchase of VLF receivables, purchase of Proposition 1A
receivables, or insurance program for a single local agency.

(2) A series of public capital improvements, begin insert utility projects, end insert
working capital, purchases of VLF receivables, purchase of
Proposition 1A receivables, or insurance program for a single local
agency.

(3) A single public capital improvement, begin insert utility projects, end insert working
capital, purchases of Proposition 1A receivables, or purchases of
VLF receivables or insurance program for two or more local
agencies.

(4) A series of public capital improvements, begin insert utility projects, end insert
working capital, purchases of VLF receivables or purchases of
Proposition 1A receivables or insurance programs for two or more
local agencies.

(c) Bonds issued for the purpose of financing working capital
shall be used to make loans to local agencies for any of the
purposes for which a local agency may borrow money pursuant
to Section 53852. The loans shall be repaid in accordance with the
terms of Section 53854.

(d) Except as otherwise expressly provided by the authority,
every issue of its bonds shall be general obligations of the authority
payable from any revenues or moneys of the authority available
therefor and not otherwise pledged. These revenues or moneys
may include the proceeds of additional bonds, subject only to any
agreements with the holders of particular bonds pledging any
particular revenues or moneys. Notwithstanding that the bonds
may be payable from a special fund, these bonds shall be deemed
to be negotiable instruments for all purposes, subject only to the
bond registration provisions.

(e) (1) The bonds may be issued as serial bonds or as term
bonds, or the authority may issue bonds of both types. The bonds
shall be authorized by resolution of the authority and shall, as
provided by the resolution or indenture pursuant to which the bonds
are issued, meet all of the following conditions:

(A) Bear the date of issuance.

(B) Bear the time of maturity, not exceeding 50 years from their
date of issuance.

(C) Bear the rate of interest, either fixed or variable, and, if
variable, not in excess of the maximum rate of interest specified
therein.

(D) Be payable as to principal and interest at the time or times
provided.

(E) Be in the denominations and in the form provided.

(F) Carry the registration privileges provided.

(G) Be executed in the manner provided.

(H) Be payable in lawful money of the United States at the place
or places provided within or without the state.

(I) Be subject to the terms of redemption provided.

(2) Notwithstanding paragraph (1), the bonds backed by
Proposition 1A receivables shall have a maturity date no later than
August 1, 2013.

(3) For bonds backed by Proposition 1A receivables, both of
the following shall apply:

(A) The option to call shall be exercised upon receipt by the
authority of a timely written notification from the Director of
Finance, but no earlier than 30 days after delivery by the director
of a written notice of the intent to do so to the Joint Legislative
Budget Committee.

(B) The bonds may bear interest payable on periodic interest
payment dates or may accrue interest to their maturity date or any
combination thereof, subject to the approval of the Department of
Finance and the State Treasurer pursuant to subdivision (x) of
Section 6588.

(f) The bonds shall be sold by the authority at the time and in
the manner set out in the authority’s resolution. The sale may be
a public or private sale, and for price or prices, and on terms and
conditions as the authority determines proper, after giving due
consideration to the recommendations of any local agency to be
assisted from the proceeds of the bonds. Pending preparation of
the definitive bonds, the authority may issue interim receipts,
certificates, or temporary bonds which shall be exchanged for
definitive bonds. For bonds backed by Proposition 1A receivables,
the authority shall use its best efforts to obtain the lowest overall
cost of the bonds, and shall certify that it so used its best efforts.
The authority shall, in consultation with the Treasurer and
Department of Finance, structure the sale of the bonds backed by
Proposition 1A receivables and shall include those terms and
conditions approved by the Treasurer and the Department of
Finance.

(g) In the case of bonds issued by an authority, on or after
January 1, 1995, for the purpose of purchasing bonds of a local
agency, all of the bonds of the local agency shall be purchased by
the authority from the proceeds of the authority bonds within 90
days of the date of issuance of the authority bonds. Nothing in this
subdivision shall be construed to preclude an authority from issuing
parity bonds at any time.

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert Section 6592 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

6592.  

Any resolution authorizing any bonds or any issue of
bonds may contain the following provisions, which shall be a part
of the contract with the holders of the bonds to be authorized:

(a) Provisions pledging the full faith and credit of the authority,
or pledging all or any part of the revenues of any public capital
improvements, or any revenue-producing contract or contracts
made by the authority with any local agency, any VLF receivables
purchased pursuant to Section 6588.5, begin insert any utility project property, end insert
any Proposition 1A receivables purchased pursuant to Section
6588.6, or any other moneys of the authority, to secure the payment
of the bonds, and of any special account, subject to those
agreements with bondholders as may then exist.

(b) Provisions setting out the rentals, fees, purchase payments,
loan repayments, and other charges, and the amounts to be raised
in each year thereby, and the use and disposition of the revenues.

(c) Provisions setting aside reserves or sinking funds, and the
regulation and disposition thereof.

(d) Limitations on the right of the authority or its agent to restrict
and regulate the use of the public capital improvements to be
financed out of the proceeds of the bonds or any particular issue
of bonds.

(e) Limitations on the purpose to which the proceeds of sale of
any issue of bonds may be applied, and pledging the proceeds to
secure the payment of the bonds or any issue of the bonds.

(f) Limitations on the issuance of additional bonds, the terms
upon which additional bonds may be issued and secured, and the
refunding of outstanding bonds.

(g) The procedure, if any, by which the terms of any contract
with bondholders may be amended or abrogated, the amount of
bonds and the holders thereof that are required to give consent
thereto, and the manner in which the consent may be given.

(h) Limitations on expenditures for operating, administrative,
or other expenses of the authority.

(i) Definitions of acts or omissions to act which constitute a
default in the duties of the authority to holders of its obligations,
and providing the rights and remedies of the holders in the event
of a default.

(j) The mortgaging of any public capital improvements and the
site thereof for the purpose of securing the bondholders.

(k) The mortgaging of land, improvements, or other assets
owned by a local agency for the purpose of securing the
bondholders.

(l) Procedures for the selection of public capital improvements
to be financed with the proceeds of the bonds authorized by the
resolution, if the bonds are to be sold in advance of designating
the public capital improvements and the local agency to receive
the financing.

begin insert

begin insert SEC. 7. end insert   

end insert

begin insert Section 6599.3 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

6599.3.  

Notwithstanding any other provision of law, an action
may be brought under Chapter 9 (commencing with Section 860)
of Title 10 of Part 2 of the Code of Civil Procedure, to determine
the validity of any bonds issued under this article to finance the
purchase of bonds for local agencies, the financing of public capital
improvements begin insert or utility projects end insert , or the purchase of VLF
receivables pursuant to Section 6588.5 or Proposition 1A
receivables pursuant to Section 6588.6 and any contracts of sale
of VLF receivables or Proposition 1A receivables begin insert or utility project
property end insert entered into by any local agency, and any related
documents. If an action is commenced, the action shall be brought
in the jurisdiction in which the authority maintains its principal
office and is not required to be brought in the jurisdiction or
jurisdictions of any of the local agencies. However, publication of
summons, as provided in Section 861 of the Code of Civil
Procedure, shall be made in the county in which the authority
maintains its principal office and in each county in which any local
agency that has sold bonds to the authority, for which a public
capital improvement is being financed or that has entered into a
sales agreement for a VLF receivable or a Proposition 1A
receivable where the authority is located.

begin insert

begin insert SEC. 8. end insert   

end insert

begin insert This act and all grants of power and authority in this
act shall be liberally construed to effectuate their purposes, and
all incidental powers necessary to carry into effect the provisions
of this act are expressly granted to, and conferred upon, public
entities. end insert

begin insert

begin insert SEC. 9. end insert   

end insert begin insert

The provisions of this act are severable. If any
provision of this act or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given
effect without the invalid provision or application.

end insert