BILL ANALYSIS                                                                                                                                                                                                    




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 850                      HEARING:  6/26/13
          AUTHOR:  Nazarian                     FISCAL:  No
          VERSION:  6/19/13                     TAX LEVY:  No
          CONSULTANT:  Weinberger               

                    RATE REDUCTION BONDS FOR LOCAL UTILITIES
          

          Allows joint powers authorities to finance projects for  
          public retail water utilities using asset-backed securities  
          called "rate reduction bonds."


                           Background and Existing Law  

          Rate reduction bonds are asset-backed securities that are  
          structured to minimize borrowing costs by qualifying for  
          AAA credit ratings.  AAA ratings allow a utility to borrow  
          funds at an interest rate that is well below the rate that  
          would otherwise apply to a utility's long-term debt.  To  
          qualify for the AAA rating, rate reduction bond financing  
          typically includes:
                 Statutory authority to impose a dedicated charge on  
               utility customers to repay the bonds.
                 A requirement that the bonds must be issued, and  
               the dedicated charge must be imposed, by a "bankruptcy  
               remote special purpose entity."
                 A "true-up" mechanism by which charges collected to  
               pay debt service are regularly adjusted to ensure that  
               bonds are paid off at the final maturity date.
                 A pledge made by the state not to impair the right  
               to collect charges until bonds are paid in full.

          The rate reduction bond securitization structure was  
          introduced in response to electricity market deregulation  
          in the 1990s to allow investor-owned-utilities in  
          deregulated markets to recover so-called "stranded" costs  
          of investments the utilities made before deregulation.  For  
          example, California's investor-owned electric utilities  
          used rate reduction bonds when the state restructured its  
          energy industry.  In that instance, the California  
          Infrastructure and Development Bank (I-Bank) formed a trust  
          that issued the bonds on behalf of the utilities.  More  
          recently, other states have adopted statutes allowing  




          AB 850 -- 6/19/13 -- Page 2



          investor owned utilities to us rate reduction bond  
          financing for other purposes.  

          The Joint Exercise of Powers Act allows two or more public  
          agencies to use their powers in common if they sign a joint  
          powers agreement.  Sometimes an agreement creates a new,  
          separate government called a joint powers authority (JPA).   
          The Marks-Roos Local Bond Pooling Act allows public  
          agencies to use JPAs to finance infrastructure.  These JPAs  
          issue Marks-Roos Act bonds and loan the capital to local  
          agencies for public works, working capital, and insurance  
          programs (SB 17, Marks, 1985).

          In response to substantial demands for investments in  
          projects to enhance water quality, conservation, and  
          supplies, officials from the Los Angeles Department of  
          Water and Power (LADWP) and other public water agencies  
          want to decrease their agencies' borrowing costs by forming  
          JPAs that can issue rate reduction bonds to finance water  
          utility projects. 


                                   Proposed Law  

          Assembly Bill 850 allows a joint powers authority (JPA)  
          that limits its financing activities to financing utility  
          projects and projects for the use or benefit of public  
          water agencies to finance specified utility projects by  
          issuing rate reduction bonds and imposing utility project  
          charges.  Specifically, AB 850: 
          I.   Details how local agencies must apply to JPAs to  
          finance utility projects.
          II.  Specifies how JPAs must impose utility project  
          charges.
          III. Specifies how JPAs must issue rate reduction bonds.
          IV.  Creates a statutory lien on property related to rate  
          reduction bonds.
          V.   Shields JPAs that issue rate reduction bonds from  
          bankruptcy cases.
          VI.  Allows JPAs to finance utility projects through  
          limited liability companies.
          VII. Defines terms used in the bill.
          VIII.Makes other declarations and conforming changes to  
          state law.

          I.   Financing local agencies' utility projects  .  Assembly  





          AB 850 -- 6/19/13 -- Page 3



          Bill 850 allows a local agency that owns and operates a  
          utility that provides retail water service to apply to a  
          JPA to finance costs of a utility project with the proceeds  
          of rate reduction bonds.  The bill defines a "utility  
          project" as acquiring, constructing, installing,  
          retrofitting, rebuilding, adding to, or improving, any  
          equipment, device, structure, improvement, process,  
          facility, technology, rights or property, located either  
          within, or outside of, the State of California, that is  
          used in connection with the a utility's operations for  
          conservation or reclamation purposes or in response to a  
          requirement imposed by a federal or state entity.

          Assembly Bill 850 allows a local agency to apply for  
          financing only if, at the time of application, the  
          utility's revenue bonds are, or upon issuance would be,  
          rated investment grade by a nationally recognized rating  
          agency.

          Assembly Bill 850 requires that a local agency's  
          application to a JPA for financing must 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.   
          Assembly Bill 850 prohibits a local agency from applying to  
          a JPA to finance a utility project unless the agency's  
          legislative body has determined that:
                 The project to be financed is a utility project.
                 The local agency is electing to finance costs of  
               the utility project pursuant to the bill's provisions  
               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 the bill's provisions.
                 The financing is expected, based on available  
               information and projections, to result in lower total  
               charges to the customers of the local agency's  
               publicly owned utility compared with financing the  
               utility project through bonds payable from the  
               publicly owned utility's revenues.

          II.   Utility project charges  .  Assembly Bill 850 defines a  
          "utility project charge" as a charge imposed and adjusted  
          pursuant to specified provisions of state law which is paid  
          by a retail water utility's customers to pay financing  





          AB 850 -- 6/19/13 -- Page 4



          costs of rate reduction bonds issued to finance a utility  
          project.

          Assembly Bill 850 allows and directs a JPA financing a  
          utility project with rate reduction bonds to impose and  
          collect a utility project charge with respect to the rate  
          reduction bonds, subject to Article XIIID of the California  
          Constitution.  To impose a utility project charge, the  
          JPA's governing body must adopt a financing resolution,  
          which must include:
                 The addition of a separate charge to the bill of  
               each customer of the publicly owned utility in the  
               class or classes of customers specified in the  
               financing resolution.
                 A description of the financial calculation,  
               formula, or other method that the authority is to use  
               to determine the utility project charge. 
                 A requirement that the authority enter into a  
               servicing agreement for collecting the utility project  
               charge with the local agency for which the financing  
               is undertaken or its publicly owned utility.

          Assembly Bill 850 requires that the method for determining  
          the project utility charge must include a periodic  
          adjustment method to the then current utility project  
          charge, to be applied at least annually, that the JPA must  
          use to correct for any overcollection or undercollection of  
          financing costs from the utility project charge or any  
          other adjustment needed to ensure timely payment of rate  
          reduction bonds' financing costs, including debt service  
          coverage requirements.  Assembly Bill 850 requires that the  
          method for determining the project utility charge and the  
          allocation of utility project charges to, and among, the  
          publicly owned utility's customers must be decided solely  
          by the JPA's governing body.  The bill declares the JPA's  
          decision to be final and conclusive.  Assembly Bill 850  
          prohibits any changes to the method for determining the  
          utility project charge, and the periodic adjustment method,  
          after they have been established in the financing  
          resolution and have become final and conclusive.  Assembly  
          Bill 850 prohibits the periodic adjustment method  
          established in the financing resolution from being applied  
          less frequently than required by the financing resolution  
          and the documents relating to the applicable rate reduction  
          bonds. 






          AB 850 -- 6/19/13 -- Page 5



          Assembly Bill 850 requires that the servicing agreement for  
          collecting the utility project charge must require the  
          local agency or its publicly owned utility to act as a  
          servicing agent for purposes of collecting the utility  
          project charge as long as the servicing agreement remains  
          in effect.  Funds collected as a utility project charge by  
          the local agency or its publicly owned utility, acting as a  
          servicing agent on behalf of the JPA, must 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 must not lose their  
          character as revenues of the JPA by virtue of possession by  
          the local agency or its publicly owned utility.  The local  
          agency or its publicly owned utility must provide the JPA  
          with the information about estimated water sales and any  
          other information concerning the publicly owned utility  
          required by the JPA in connection with the utility project  
          charge.

          Assembly Bill 850 contains provisions that:
                 Define the utility project charge as a  
               non-bypassable charge.
                 Establish a customer's obligation to pay a utility  
               project charge regardless of whether or not the  
               customer has an agreement to purchase water from a  
               person or entity other than the publicly owned  
               utility.
                 Require timely and complete payment of all utility  
               project charges, specify collection procedures, and  
               prohibit withholding payment of the utility project  
               charge. 
                 Detail the manner in which a JPA must determine  
               whether adjustments to the utility project charge are  
               required and the manner in which a JPA must make such  
               adjustments.
                 Specify how revenues must be applied to the payment  
               of the financing costs of the rate reduction bonds.
                 Require a JPA to impose and collect utility project  
               charges sufficient to pay, on a timely basis, rate  
               reduction bonds' financing costs.
                 Declare the pledge of a utility project charge to  
               secure the payment of rate reduction bonds to be  
               irrevocable.
                 Prohibit the reduction, impairment, or adjustment  
               of the utility project charge, with specified  
               exceptions.





          AB 850 -- 6/19/13 -- Page 6



                 Deem revenue from a utility project charge as  
               special revenue of the JPA, not revenue of a local  
               agency or its publicly owned utility.
                 Define the conditions under which a utility project  
               charge constitutes a utility project property.
                 Apply the bill's provisions to any entity providing  
               water distribution service in lieu of a local agency  
               for which rate reduction bonds have been issued and  
               remain outstanding.

          III.  Rate reduction bonds  .  Assembly Bill 850 defines "rate  
          reduction bonds" as bonds issued by a JPA, 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, utility project property  
          as specified in state law.

          Assembly Bill 850 requires that:
                 Rate reduction bonds must be within the parameters  
               set forth by a local agency. 
                 Rate reduction bonds' proceeds must be used for the  
               utility project identified in the local agency's  
               application for financing.  
                 A JPA's governing body must, by resolution,  
               authorize the issuance of rate reduction bonds.  
                 Rate reduction bonds must be nonrecourse to the  
               credit or any assets of the local agency and the  
               publicly owned utility for which the utility project  
               is financed.
                 Rate reduction bonds must 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.

          Assembly Bill 850 defines "utility project property" as the  
          property right created pursuant to state law, including a  
          JPA's right, title, and interest:
                 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 state law.
                 To be paid the financing costs of the rate  
               reduction bonds and to all revenues, collections,  
               claims, payments, moneys, or proceeds for, or arising  





          AB 850 -- 6/19/13 -- Page 7



               from, the utility project charge relating to the rate  
               reduction bonds.
                 In and to all rights to obtain adjustments to the  
               utility project charge relating to the rate reduction  
               bonds pursuant to state law.

          Assembly Bill 850 requires a JPA issuing rate reduction  
          bonds to pledge the utility project property relating to  
          the rate reduction bonds as security for payment.  The  
          pledge must be made pursuant to, and with the effect set  
          forth in, a specified statute governing a public body's  
          pledge of collateral to secure bonds.  The bill declares  
          that all of a JPA's rights with respect to utility project  
          property pledged as security for the payment of rate  
          reduction bonds must 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.

          Assembly Bill 850 declares that utility project property  
          constitutes property for all purposes, including for  
          contracts securing rate reduction bonds, whether or not  
          specified revenues and proceeds have accrued.

          To the extent that any interest in utility project property  
          is pledged as security for the payment of rate reduction  
          bonds, Assembly Bill 850 requires a local agency or its  
          publicly owned utility to contract with the JPA 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, 
                 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 
                 Account for and remit these amounts to, or for the  
               account of, the authority.

          Assembly Bill 850 specifies that such a contract is part of  
          the utility project property.

          Assembly Bill 850 states that any requirements that a JPA  
          must take action with respect to utility project property  
          are binding upon the JPA.  The bill prohibits the JPA from  
          rescinding, altering, or amending any resolution or  
          document containing the requirement.





          AB 850 -- 6/19/13 -- Page 8




          Assembly Bill 850 declares that the recovery of the  
          financing costs for the rate reduction bonds from the  
          utility project charge is irrevocable.  The bill prohibits  
          a JPA from: 
                 Revaluing or revising for ratemaking purposes the  
               financing costs of rate reduction bonds, 
                 Determining that the financing costs for the  
               related rate reduction bonds or the utility project  
               charge is unjust or unreasonable, or 
                 Reducing or impairing the value of utility project  
               property that includes the utility project charge,  
               either directly or indirectly.

          Assembly Bill 850 prohibits any reduction, impairment,  
          postponement, or termination of the amount of revenues  
          arising with respect to the financing costs for rate  
          reduction bonds or the utility project charge until all  
          financing costs to be paid from the utility project charge  
          are fully met and discharged.  

          Assembly Bill 850 contains a pledge and agreement made by  
          the State of California that the State of California will  
          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, with specified exceptions.  The bill  
          allows a JPA to include this pledge in the governing  
          documents for rate reduction bonds. 

          Assembly Bill 850 requires a JPA to adjust the utility  
          project charge relating to rate reduction bonds 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  
          must 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.

          Assembly Bill 850 declares that 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  





          AB 850 -- 6/19/13 -- Page 9



          obligation of the JPA, 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 JPA.  The bill  
          specifies that this provision does not preclude guarantees  
          or credit enhancements in connection with rate reduction  
          bonds.   

          Assembly Bill 850 states that the issuance of rate  
          reduction bonds does not obligate the State of California  
          or any political subdivision to levy or to pledge any form  
          of taxation to pay the rate reduction bonds or to make any  
          appropriation for their payment.

          Assembly Bill 850 requires all rate reduction bonds to  
          contain 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."

          IV.   Statutory lien  .  Assembly Bill 850 declares that upon  
          the effective date of the financing resolution relating to  
          rate reduction bonds, a first priority statutory lien  
          exists on all utility project property to secure the  
          payment of the rate reduction bonds.  The lien arises  
          pursuant to state law automatically, without any action on  
          the part of the authority, the local agency or its publicly  
          owned utility, or any other person.  Assembly Bill 850  
          contains additional provisions relating to property secured  
          by the lien and the lien's validity and enforceability.

          Assembly Bill 850 allows a JPA's financing resolution to  
          require the JPA, upon application by the beneficiaries of  
          the statutory lien, and without limiting any other remedies  
          available, to order the sequestration and payment to the  
          beneficiaries of revenues arising with respect to utility  
          project property in the event of default by the local  
          agency or its publicly owned utility.

          V.   Applicability of federal bankruptcy law  .  Assembly Bill  
          850 states that, notwithstanding any other law, a JPA 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  
          JPA, to become a debtor in a case under the United States  
          Bankruptcy Code or to become the subject of any similar  





          AB 850 -- 6/19/13 -- Page 10



          case or proceeding under any other law as long as any  
          payment obligation from utility project property remains  
          with respect to rate reduction bonds.

          VI.   Limited liability company financing  .   Assembly Bill  
          850 allows a JPA to elect to effect a financing of a  
          utility project through a single member limited liability  
          company formed by the authority by authorizing the company  
          to adopt the financing resolution and the JPA's issuing  
          rate reduction bonds payable from, and secured by a pledge  
          of, amounts paid by the company to the JPA from the  
          applicable utility project property pursuant to an  
          agreement.  The bill specifies statutory provisions that  
          must 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.   The bill provides that specified statutory  
          references to the JPA mean or include the company as  
          necessary to implement the bill's provisions.

          VII.  Definitions  .  Assembly Bill 850 defines the following  
          terms:

          "Conservation or reclamation purposes" means 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.

          "Customer" means a person or entity receiving water through  
          facilities of a publicly owned utility.

          "Financing costs" means any of the following:
                 Interest and redemption premiums that are payable  
               on rate reduction bonds.
                 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.
                 A cost related to issuing or servicing rate  
               reduction bonds, including, but not limited to,  
               servicing fees, trustee fees, legal fees,  
                                                   




          AB 850 -- 6/19/13 -- Page 11



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

          "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 a specified statute.  A  
          financing resolution may be separate from a resolution  
          authorizing the issuance of the rate reduction bonds.

          "Mandate" means a requirement, imposed by a mandating  
          entity by any means, including 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.

          "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.  "Mandating entity" does  
          not include a local agency that owns the publicly owned  
          utility.





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          "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.

          VIII.   Other changes and declarations  .  Assembly Bill 850  
          makes additional conforming and clarifying changes to state  
          law.  Assembly Bill 850 declares that its provisions must  
          be liberally construed to effectuate their purposes, and  
          that all incidental powers necessary to carry into effect  
          its provisions are expressly granted to, and conferred  
          upon, public entities.  Assembly Bill 850 declares that its  
          provisions are severable. 


                               State Revenue Impact
           
          No estimate.


                                     Comments  

          1.   Purpose of the bill  .  To comply with federal and state  
          clean drinking water standards, remediate groundwater  
          contamination, and address the constant challenge of water  
          scarcity, public water utility operators anticipate  
          investing billions of dollars in vital water infrastructure  
          projects over the coming years.  For example, just to  
          comply with two primary drinking water standards under the  
          Safe Drinking Water Act, the Los Angeles Department of  
          Water and Power expects to spend $1.4 billion between  
          2011-12 and 2015-16 to complete its water quality  
          improvement program.  Financing water infrastructure  
          projects with rate reduction bonds will produce lower  
          borrowing costs for public agencies.  These cost savings  
          reduce the rates that water customers will pay compared to  
          the rates they would pay if the water infrastructure had  
          been financed using more traditional financing mechanisms,  
          like revenue bonds.  LADWP estimates that ratepayers would  
          save as much as $3 million per year for each $100 million  
          of financing under this bill's provisions.  Given its  
          planned spending for water quality and local water supply  
          projects, LADWP projects that rate reduction bond financing  
          would lower rates by 2-4% during the course of the next  





          AB 850 -- 6/19/13 -- Page 13



          five years.  In addition to lower borrowing costs, rate  
          reduction bonds also can, under certain conditions, qualify  
          for off balance-sheet accounting treatment that benefits  
          the public utility.  AB 850 will allow communities  
          throughout California to realize the benefits of making  
          critical water project investments at lower costs.

          2.   Shifting risk  .  AB 850's use of a bankruptcy-remote  
          special purpose entity to issue rate reduction bonds  
          insulates bondholders from potential insolvency of the  
          public agency that receives the bond proceeds.  This  
          structure allows for higher bond ratings and lower costs of  
          debt issuance.  However, by protecting rate reduction  
          bondholders from becoming creditors if a public agency  
          files for bankruptcy protection, the bill may increase the  
          risks borne by vendors, employees, investors holding other  
          forms of debt, and other potential creditors in a municipal  
          bankruptcy proceeding.  Municipal bankruptcies are rare  
          events and it is unlikely that AB 850's  
          bankruptcy-remoteness provisions will ever be necessary to  
          shield rate reduction bondholders from a bankruptcy case.   
          However, in the event that a publicly owned utility does  
          become insolvent, it is unclear whether state law should  
          shield some potential creditors, leaving a smaller pool of  
          remaining creditors to bear the costs of restructuring.  

          3.   Don't overlook oversight  .  Government programs start  
          with the best intentions but, if no one pays attention,  
          they can sometimes go awry.  Recent experiences in the  
          financial markets demonstrate that complex  
          structured-financing mechanisms that receive AAA ratings  
          don't always work as expected and can harbor unanticipated  
          risks.  The type of securitization financing AB 850  
          authorizes has never been used by public agencies to  
          finance the types projects described in the bill.   
          Fundamental assumptions underlying an JPA's decision to  
          issue rate reduction bonds may prove to be flawed.  A  
          projection that ratepayers will pay lower overall rates as  
          a result of rate reduction bond financing is no guarantee  
          that ratepayers will actually realize those savings.   
          Allowing local utilities to use off balance-sheet  
          accounting for assets involved in rate reduction bond  
          financing may distort measures of a public utilities fiscal  
          condition.  Legislators sometimes use sunset clauses,  
          evaluations, reports, and oversight hearings to make sure  
          that new programs stay on track and function properly.   





          AB 850 -- 6/19/13 -- Page 14



          However, imposing a sunset clause on provisions authorizing  
          long-term financing can be counter-productive, sometimes  
          creating uncertainty among investors about the long-term  
          security of the debt.  As an alternative approach to  
          oversight, the Committee may wish to consider amending AB  
          850 to: 
                 Authorize rate reduction bonds to be used to  
               finance a fixed number of projects statewide.
                 Require a state entity, such as the I-Bank or the  
               State Treasurer's Office, to review and approve the  
               use of rate reduction bond financing for each project.
                 Require the California Debt and Advisory Commission  
               to evaluate the results of the financing used for the  
               authorized projects.


                                 Assembly Actions  

          Assembly Local Government Committee:  9-0
          Assembly Banking and Finance Committee:12-0
          Assembly Floor:                    72-0


                         Support and Opposition  (6/20/13)

           Support  :  City of Los Angeles Department of Water and  
          Power; Association of California Water Agencies; California  
          Municipal Utilities Association; California Special  
          Districts Association.

           Opposition  :  Unknown.