Amended in Senate May 28, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1979

Introduced by Assembly Member Nazarian

February 19, 2014

An act to amend begin delete Section end delete begin insert Sections end insert 17173 begin insert , 17199.3, and 17199.4 of, and to repeal Section 17193.5 end insert of begin insert , end insert the Education Code, relating to school facilities.

LEGISLATIVE COUNSEL’S DIGEST

AB 1979, as amended, Nazarian. School facilities: California School Finance Authority: definitions.

begin delete

Existing

end delete

begin insert (1) end insert begin insert   end insert begin insert Existing end insert law authorizes the California School Finance Authority to, among other things, determine the location and character of any project to be financed or refinanced under the California School Finance Authority Act. Existing law defines the term “project” as the acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, or equipping of an educational facility to be financed or refinanced pursuant to the act.

This bill would provide that the term “project” may also include reimbursement for the costs of acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, or equipping of an education facility to be financed or refinanced pursuant to the act.

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(2) Existing law authorizes a public credit provider, as defined, to require a participating party, with regard to providing credit enhancement for bonds, notes, certificates of participation, or other evidences of indebtedness of a participating party, to agree to specified conditions, including allowing the Controller to allocate specified school district, county office of education, or charter school apportionments to the public credit provider if the public credit provider is required to make principal or interest payments, or both, pursuant to the credit enhancement agreement.

end insert begin insert

This bill would delete this provision.

end insert begin insert

(3) Existing law limits the total amount of revenue bonds that may be issued and outstanding at any time for purposes of the California School Finance Authority Act, other than up to $4,000,000,000 in revenue bonds issued under a specified provision of that act, to $400,000,000.

end insert begin insert

This bill would delete the distinction between the limits of the total amounts of revenue bonds that may be issued and outstanding at any time for purposes of the California School Finance Authority Act and under the specified provision of the act. The bill would instead set the limit of the total amount of revenue bonds that may be issued and outstanding at any time for purposes of the act at $4,400,000,000.

end insert begin insert

(4) Existing law, the California School Finance Authority Act, authorizes a participating party, as defined, in connection with securing financing or refinancing of projects, as defined, to elect to guarantee or provide for payment of the bonds and related obligations in accordance with specified conditions.

end insert begin insert

This bill would generally revise and recast this provision of the act to authorize participating parties to provide for the funding of specified costs related to the issuance of the bonds, as well as the payment of the bonds, in accordance with prescribed requirements.

end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 17173 of the Education Code is amended
to read:

17173.  

As used in this chapter, the following words and terms
shall have the following meanings, unless the context indicates or
requires another or different meaning or intent:

(a) “Act” means the California School Finance Authority Act.

(b) “Agent” means a county or city board of education or
superintendent of schools acting with the board’s consent, on behalf
of one or more school districts for any purpose of this chapter, the
Board of Governors of the California Community Colleges or the
Chancellor of the California Community Colleges acting with the
Board of Governors’ consent, on behalf of one or more community
college districts for any purpose of this chapter, and the school
district, county office of education, or other chartering entity acting
with the consent of, and on behalf of, one or more charter schools
for any purpose of this chapter.

(c) “Authority” means the California School Finance Authority,
or any board, body, commission, department, or officer succeeding
to the principal functions of the authority, or to which the powers
conferred upon the authority by this chapter shall be given by law.

(d) “Bonds” or “revenue bonds” means bonds, notes, lease
obligations, certificates of participation, commercial paper, and
any other evidences of indebtedness.

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(e) “Certificate of participation” means an undivided interest
in one or more bonds, leases, loans, installment sales, or other
agreements of a participating party or parties.

end insert begin insert

(f) “Charter school” means a school established pursuant to
Part 26.8 (commencing with Section 47600) of Division 4 of Title
2.

end insert begin delete

(e)

end delete

begin insert ( end insert begin insert g) end insert  “Cost,” as applied to all or part of a project financed or
refinanced pursuant to this chapter, means and includes all or any
part of the cost of any of the following:

(1) Construction.

(2) Acquisition or improvement of all lands, structures, real or
personal property, rights, rights-of-way, franchises, easements,
and interests acquired or used for a project.

(3) Demolition or removal of any buildings or structures on land
acquired for a project, including the acquisition of any lands to
which the buildings or structures may be moved.

(4) All machinery and equipment.

(5) Financing or refinancing charges, including, but not limited
to, credit enhancement costs, and prepayment penalties.

(6) Interest before, during, and for a period following, the
completion of any construction or improvement determined by the
authority.

(7) Provisions for working capital.

(8) Reserves for principal and interest, and for extensions,
enlargements, additions, replacements, renovations, and
improvements.

(9) Engineering, architectural, financial, and legal services,
plans, specifications, studies, surveys, estimates, administrative
expenses, and other expenses necessary or incident to the
construction, acquisition, or improvement of any project or any
financing or refinancing under this chapter.

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(f)

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begin insert ( end insert begin insert h) end insert  “Educational facility” means any property, facility, structure,
equipment, or furnishings used or operated in conjunction with
one or more public schools, including charter schools, or
community colleges, including, but not limited to, all of the
following:

(1) Classrooms.

(2) Auditoriums.

(3) Student centers.

(4) Administrative offices.

(5) Sports facilities.

(6) Maintenance, storage, or utility facilities.

(7) All necessary or usual attendant and related facilities and
equipment, including streets, parking, and supportive service
facilities or structures required or useful for the effective operation
of the educational facility.

begin delete

(g)

end delete

begin insert ( end insert begin insert i) end insert  “Participating party” means:

(1) A school district, charter school, county office of education,
or community college district that undertakes, itself or through an
agent, the financing or refinancing of a project or of working capital
pursuant to this chapter.

(2) Any person, company, association, state or municipal
government entity, partnership, firm, or other entity or group of
entities that undertakes the financing or refinancing of a project
pursuant to this chapter in conjunction with an entity described in
paragraph (1).

(3) “Participating party” shall also be deemed to refer to the
agent to the extent the agent is acting on behalf of the school
district, charter school, county office of education, or community
college district for any purpose of this chapter.

(4) For purposes of subdivision (d) of Section 17183, and
Section 17193.5, subdivisions (a) and (b) of Section 17199.1, and
Section 17199.4, “participating party” shall be deemed to refer to
an entity described in paragraph (1) in conjunction with which an
entity described in paragraph (2), if any, applied for financing from
the authority.

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(h)

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begin insert ( end insert begin insert j) end insert  “Project” means the acquisition, construction, expansion,
remodeling, renovation, improvement, furnishing, or equipping
of an educational facility to be financed or refinanced pursuant to
this chapter. “Project” may include reimbursement for the costs
of acquisition, construction, expansion, remodeling, renovation,
improvement, furnishing, or equipping of an educational facility
to be financed or refinanced pursuant to this chapter. “Project”
may include any combination of the foregoing undertaken jointly
by any participating party with one or more other participating
parties.

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(i)

end delete

begin insert ( end insert begin insert k) end insert  “Working capital” means funds to be used by, or on behalf
of, a participating party to pay maintenance or operating expenses,
or any other costs that would be treated as an expense item under
generally accepted accounting principles in connection with the
ownership or operation of an educational facility, including, but
not limited to, all of the following:

(1) Reserves for maintenance or operating expenses.

(2) Interest for a period not to exceed two years on any loan for
working capital made pursuant to this chapter.

(3) Reserves for debt service, and any other costs necessary or
incidental to, financing pursuant to this chapter.

(4) Payments made by a participating party for the rent or lease
of an educational facility.

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(j) “Certificate of participation” means an undivided interest in
one or more bonds, leases, loans, installment sales, or other
agreements of a participating party or parties.

end delete begin delete

(k) “Charter school” means a school established pursuant to
Part 26.8 (commencing with Section 47600) of Division 4 of Title
2.

end delete

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 17193.5 of the end insert begin insert Education Code end insert begin insert is repealed. end insert

begin delete

17193.5.  

(a) For purposes of this section, “public credit
provider” means any financial institution or combination of
financial institutions, that consists either solely, or has as a member
or participant, a public retirement system. Notwithstanding any
other law, a public credit provider, in connection with providing
credit enhancement for bonds, notes, certificates of participation,
or other evidences of indebtedness of a participating party, may
require the participating party to agree to the following conditions:

(1) If a participating party adopts a resolution by a majority vote
of its board to participate under this section, it shall provide notice
to the Controller of that election. The notice shall include a
schedule for the repayment of principal and interest on the bonds,
notes, certificates of participation, or other evidence of
indebtedness and identify the public credit provider that provided
credit enhancement. The notice shall be provided not later than
the date of issuance of the bonds.

(2) If, for any reason, a public credit provider is required to
make principal or interest payments, or both, pursuant to a credit
enhancement agreement, the public credit provider shall
immediately notify the Controller of that fact and of the amount
paid out by the public credit provider.

(3) Upon receipt of the notice required by paragraph (2), the
Controller shall make an apportionment to the public credit
provider in the amount of the payments made by the public credit
provider for the purpose of reimbursing the public credit provider
for its expenditures made pursuant to the credit enhancement
agreement. The Controller shall make that apportionment only
from moneys designated for apportionments to a participating
party, provided that such moneys are from one or more of the
following:

(A) Any revenue limit apportionments to a school district or
county office of education without regard to the specific funding
source of the apportionment.

(B) Any general apportionments to a community college district
without regard to the specific funding source of the apportionment.

(C) Any charter school block grant apportionments to a charter
school without regard to the specific funding source of the
apportionment.

(D) Any charter school categorical block grant apportionments
to a charter school without regard to the specific funding source
of the apportionment.

(b) The amount apportioned for a participating party pursuant
to this section shall be deemed to be an allocation to the
participating party and shall be included in the computation of
allocation, limit, entitlement, or apportionment for the participating
party. The participating party and its creditors do not have a claim
to funds apportioned or anticipated to be apportioned to the trustee
by the Controller pursuant to paragraph (3) of subdivision (a).

end delete

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 17199.3 of the end insert begin insert Education Code end insert begin insert is amended to
read: end insert

17199.3.  

(a) The total amount of revenue bonds that may be
issued and outstanding at any time for purposes of this chapter begin delete ,
other than those revenue bonds issued under Section 17199.4, end delete shall
not exceed begin insert four billion end insert four hundred million dollars begin delete ($400,000,000) end delete
begin insert ($4,400,000,000) end insert .

begin delete

(b) The total amount that may be outstanding at any time under
this chapter, for purposes of Section 17199.4 only, shall not exceed
four billion dollars ($4,000,000,000).

end delete begin delete

(c)

end delete

begin insert ( end insert begin insert b) end insert  For purposes of begin delete subdivisions (a) and (b), end delete begin insert subdivision (a) end insert
bonds that meet any of the following conditions shall not be
deemed to be outstanding:

(1) Bonds that have been refunded pursuant to Section 17188.

(2) Bonds for which money or securities in amounts necessary
to pay or redeem the principal, interest, or any redemption premium
on the bonds have been deposited in trust.

(3) Bonds that have been issued to finance or refinance working
capital.

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 17199.4 of the end insert begin insert Education Code end insert begin insert is amended to
read: end insert

17199.4.  

(a) Notwithstanding any other law, any participating
party, in connection with securing financing or refinancing of
projects, or working capital pursuant to this chapter, may begin insert , in
accordance with this section, end insert elect to begin delete guarantee or end delete provide for
begin delete payment of the bonds and related obligations in accordance with
the following conditions end delete begin insert funding, in whole or in part, one or more
of the following end insert :

begin insert

(1) Payments on authority bonds.

end insert begin insert

(2) Payments under credit enhancement or liquidity support
agreements in connection with authority bonds.

end insert begin insert

(3) Amounts pledged or assigned under one or more pledges
or assignments to pay authority bonds or obligations under these
credit enhancement or liquidity support agreements.

end insert begin insert

(4) Payments to fund reserves available to pay any of the
payments described in paragraphs (1), (2) and (3), exclusively
until paid.

end insert begin insert

(5) Fees and charges contemplated by the instruments of the
authority, trustees, tender agents, remarketing agents, credit
enhancement and liquidity support providers, and service
providers.

end insert begin insert

(6) Any other costs necessary or incidental to any financing or
refinancing conducted under this chapter.

end insert begin insert

(b) The payments made pursuant to subdivision (a) may be in
connection with a financing or refinancing benefiting the
participating party itself, one or more other participating parties,
or any combination thereof.

end insert begin insert

(c) To participate under this section, the participating party
shall do all of the following:

end insert begin insert

(1) Elect to participate by an action of its governing board taken
in compliance with the rules of that board.

end insert begin insert

(2) Provide written notice to the Controller of all of the
following:

end insert begin insert

(A) Its election to participate.

end insert begin insert

(B) A schedule of the payments subject to that election.

end insert begin insert

(C) The payee or payees of those payments, or the trustee or
agent on their behalf to receive those payments.

end insert begin insert

(D) Payment delivery instructions, which may be by wire
transfer or other method approved by the Controller.

end insert begin insert

(d) The participating party may amend, supplement, or restate
the notice required pursuant to paragraph (2) of subdivision (c)
for any reason, including, but not necessarily limited to, providing
for new or increased payments. The participating party shall certify
in the notice and in any amendment, supplement, or restatement
of the notice that each and every payment reflected in the schedule
is a payment described in subdivision (a) and the amounts
scheduled do not exceed the actual or reasonably estimated
payment obligations to be funded pursuant to this section. The
participating party shall also represent in the notice that it is not
submitting the notice for the purpose of accelerating a participating
party’s receipt of its apportionments. Nothing in this section
prohibits transfer by the recipient of an apportionment under this
section to the participating party submitting the notice of the excess
apportionment above the amount needed to fund actual payments
where the excess resulted from erroneous estimation of scheduled
payments or otherwise.

end insert begin delete

(1) If a participating party adopts a resolution by a majority vote
of its board to participate under this section, it shall provide notice
to the Controller of that election. The notice shall include a
schedule for the repayment of principal and interest on the bonds,
and any other costs necessary or incidental to financing pursuant
to this chapter, and identify a trustee appointed by the participating
party or the authority for purposes of this section. If payment of
all or a portion of the principal and interest on the bond is secured
by a letter of credit or other instrument of direct payment, the
notice may provide for reimbursements to the provider of the
instrument in lieu of payment of that portion of the principal and
interest of the bonds. The notice shall be provided not later than
the date of issuance of the bonds or 60 days before the next
payment, whichever date is later. The participating party shall
update the notice at least annually if there is a change in the
required payment for any reason, including, but not limited to,
providing for new or increased costs necessary or incidental to the
financing.

(2) If, for any reason, the participating party will not make a
payment at the time the payment is required, the participating party
shall notify the trustee of that fact and of the amount of the
deficiency. If the trustee receives this notice from the participating
party, or does not receive any payment by the date that payment
becomes due, the trustee shall immediately communicate that
information to the Controller.

(3)

end delete

begin insert ( end insert begin insert e) end insert  Upon receipt of the notice required by paragraph (2) begin insert of
subdivision (c) end insert , the Controller shall make an apportionment to the
begin delete trustee end delete begin insert indicated recipient end insert on the date begin insert , or during the period, end insert shown
in the schedule in begin delete the amount of the deficiency for the purpose of
making the required payment. The end delete begin insert accordance with end insert begin insert the following: end insert

begin insert

(1) If the participating party requests transfers in full as
scheduled, in the amount of the scheduled transfer or such lesser
amount as is available from the sources indicated in subdivision
(f).

end insert begin insert

(2) If the participating party does not request transfers in full
as scheduled, in the amount of the anticipated deficiency for the
purpose of making the required payment indicated in a written
request of the participating party to the Controller and in the
amount of the actual shortfall in payment indicated in a written
request of the recipient or the participating party to the Controller
or the lesser amount that is available from the sources indicated
in subdivision (f).

end insert begin insert

(3) In making apportionments under this section, the Controller
may rely conclusively and without liability on any notice or request
delivered under this section, including any delivered prior to
enactment of the act that adds this paragraph. The Controller may
make, but is not obligated to make, apportionments not reflected
on a notice or amended, supplemented, or restated notice delivered
under this section that the Controller receives less than 20 days
prior to when the apportionment would otherwise be required.

end insert

begin insert (f) end insert begin insert   end insert begin insert The end insert Controller shall make begin delete that end delete begin insert an end insert apportionment begin insert under this
section end insert only from moneys designated for apportionment to begin delete a end delete begin insert the end insert
participating begin delete party, provided that such moneys are end delete begin insert party delivering
the notice, and only end insert from one or more of the following:

begin delete

(A)

end delete

begin insert ( end insert begin insert 1) end insert  Any revenue limit apportionments to a school district or
county office of education without regard to the specific funding
source of the apportionment.

begin delete

(B)

end delete

begin insert ( end insert begin insert 2) end insert  Any charter school block grant apportionments to a charter
school without regard to the specific funding source of the
apportionment.

begin delete

(C)

end delete

begin insert ( end insert begin insert 3) end insert  Any charter school categorical block grant apportionments
to a charter school without regard to the specific funding source
of the apportionment.

begin delete

(4) As an alternative to the procedures set forth in paragraphs
(2) and (3), the participating party may provide a transfer schedule
in its notice to the Controller of its election to participate under
this section. The transfer schedule shall set forth amounts to be
transferred to the trustee and the date for the transfers. The
Controller, subject to the limitation in paragraph (3), shall make
apportionments to the trustee of those amounts on the specified
date for the purpose of making those transfers. The authority may
require a participating party to proceed under this subdivision.

end delete begin delete

(b)

end delete

begin insert ( end insert begin insert g) end insert   begin insert (1) end insert begin insert   end insert The amount apportioned for a participating party
pursuant to this section shall be deemed to be an allocation to the
participating party and shall be included in the computation of
allocation, limit, entitlement, or apportionment for the participating
party.

begin delete

The

end delete

begin insert (2) end insert begin insert   end insert begin insert The end insert participating party and its creditors do not have a claim
to funds apportioned or anticipated to be apportioned begin delete to the trustee end delete
by the Controller pursuant to begin delete paragraph (3) and (4) of subdivision
(a), or to the funds apportioned to by the Controller to the trustee
under any other provision of end delete this section.

begin delete

(c) (1)  Participating parties that elect to participate under this
section shall apply to the authority. The

end delete

begin insert (h) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert begin insert The authority may require participation under this
section under the terms of any financing or refinancing under this
chapter. The authority may impose limits on new participation
under this section. The authority may require end insert begin insert participating parties end insert
begin insert to apply to the authority for participation. If the authority limits
participation under this section, end insert begin insert the end insert authority shall consider each
of the following priorities in making begin delete funds end delete begin insert participation end insert available:

(A) First priority shall be given to begin delete school districts, charter
schools, or county offices of education end delete begin insert participating parties end insert that
apply for funding for instructional classroom space begin insert under this
chapter end insert .

(B) Second priority shall be given to begin delete school districts, charter
schools, or county offices of education end delete begin insert participating parties end insert that
apply for funding of modernization of instructional classroom
space begin insert under this chapter end insert .

(C) Third priority shall be given to begin delete all end delete begin insert participating parties that
apply for funding under this chapter for any end insert other eligible costs,
as defined in Section 17173.

(2) The authority shall prioritize applications at appropriate
intervals.

(3) A school district electing to participate under this section
that has applied for revenue bond moneys for purposes of joint
venture school facilities construction projects, pursuant to Article
5 (commencing with Section 17060) of Chapter 12, shall not be
subject to the priorities set forth in paragraph (1).

begin delete

(d)

end delete

begin insert ( end insert begin insert i) end insert  This section shall not be construed to make the State of
California liable for any payments within the meaning of Section
1 of Article XVI of the California Constitution begin delete or otherwise, except
as expressly provided in this section end delete .

begin delete

(e)

end delete

begin insert ( end insert begin insert j) end insert  A school district that has a qualified or negative certification
pursuant to Section 42131, or a county office of education that has
a qualified or negative certification pursuant to Section 1240, may
not participate under this section.

begin insert

(k) This section does not obligate the State of California to make
available the sources of apportionment under subdivision (f) in
any amount or any time or, except as provided in this section, to
fund any payment described in this section. The addition of this
subdivision is intended solely to clarify existing law.

end insert