BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1668|
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THIRD READING
Bill No: AB 1668
Author: Wieckowski (D)
Amended: As introduced
Vote: 27 - Urgency
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/11/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 4/24/14 (Consent) - See last page for
vote
SUBJECT : Educational facilities: California Educational
Facilities Authority
SOURCE : State Treasurer Bill Lockyer
DIGEST : This bill allows the California Educational Financing
Authority (CEFA) to accept loan proceeds or issue other
evidences of indebtedness necessary to allow for private
placement loans. This bill also makes several technical and
conforming changes to CEFA's conduit bond.
ANALYSIS : Existing law allows several authorities within the
State Treasurer's Office to issue conduit bonds, whereby a
public agency sells a bond, then loans the proceeds to a
nongovernmental borrower, such as a hospital or factory. Only
the nongovernmental borrower's loan repayments secure the bond;
the state does not guarantee the bond in any way.
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AB 1668
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One such authority, CEFA, issues conduit bonds on behalf of
private, nonprofit, postsecondary degree-granting institutions
located in California, or institutions that have educational
facilities in California that are regionally accredited and do
not factor race or ethnicity into their admissions process.
CEFA's governing board includes the Treasurer as Chair, the
Controller, the Director of Finance, and two appointees from the
Governor. Institutions must apply to CEFA, and can use proceeds
to purchase land, construct or remodel buildings, purchase or
lease equipment, and/or refinance existing debt. Religious
schools are not precluded from applying. Successful applicants
include Pepperdine University, University of Southern
California, Claremont University Consortium, and Chapman
University.
Education institutions choose between CEFA and private banks
when seeking project finance. However, while CEFA can issue
bonds, notes, or other securities on behalf of issuers, it
cannot accept loan proceeds or issue other evidences of
indebtedness necessary to allow for private placement loans,
whereby an intermediary identifies an investor who directly
funds the loan to the institution. Private placement loans are
generally less costly because the issuer doesn't have to pay the
costs to issue a bond, but can have higher interest rates
because they can be modified more easily than bonds. Generally,
pension funds and insurance companies invest in private
placement loans.
This bill:
1. Defines the term "bond" to mean bonds, notes, debentures,
securities, or other evidences of indebtedness of the CEFA.
2. Authorizes CEFA to receive and accept, from any source,
loans, contributions, or grants for, or in aid of, the
acquisition, construction, financing or refinancing of a
project, or any portion of a project, in money, property,
labor, or other things of value.
3. Authorizes CEFA to issue notes and bonds for corporate
purposes and bond anticipation notes in anticipation of the
sale of bonds; and, specifies that negotiable bonds and notes
shall be and be deemed to be, for all purposes, negotiable
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AB 1668
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instruments, notwithstanding the fact that the negotiable
bonds or notes may be payable from a special fund subject
only to the provisions of the bonds or notes for
registration.
4. Specifies that any provision CEFA may include in a trust
agreement of or resolution providing for the issuance of
bonds may also be included in a bond and the provision shall
have the same effect.
5. Allows that the mandated statement CEFA must inscribe on all
their issued bonds no longer shall be solely contained on the
face of the bond.
6. Requires that all funds received by CEFA whether as proceeds
from selling or incurring bonds, or as revenue, shall be
deemed to be trust funds to be held and applied solely as
specified.
7. Makes numerous technical and clarifying changes to current
law.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/24/14)
State Treasurer Bill Lockyer (source)
Association of Independent California Colleges and Universities
ARGUMENTS IN SUPPORT : According to the author, "AB 1668 would
give CEFA statutory authority for the issuance of direct or
private placement loans. This will enable CEFA to meet the
needs of its borrowers in the evolving field of tax-exempt
financing."
ASSEMBLY FLOOR : 75-0, 4/24/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Grove, Hagman, Hall, Roger Hernández, Holden, Jones,
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AB 1668
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Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Medina, Melendez, Mullin, Muratsuchi, Nestande, Olsen, Pan,
Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.
Pérez
NO VOTE RECORDED: Gray, Harkey, Mansoor, Nazarian, Vacancy
AB:d 6/25/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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