Amended in Senate July 1, 2014

Amended in Senate June 18, 2014

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 Sections 17173, 17199.3, and 17199.4 of, and to repeal Section 17193.5 of, the Education Code, relating to school facilities.

LEGISLATIVE COUNSEL’S DIGEST

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

(1) Existing 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, provided that reimbursement from bond proceeds is required to comply with federal tax law in accordance with an opinion of counsel that supports special treatment under federal tax law, as specified.

(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.

This bill would delete this provision.

(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.

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.

(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.

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.

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.

(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.

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

(g) “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.

(h) “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.

(i) “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.

(j) “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, provided that
reimbursement from bond proceeds is required to comply with
federal tax law in accordance with an opinion of counsel that
supports special treatment under federal tax law for the bonds
issued for the applicable financing or refinancing. “Project” may
include any combination of the foregoing undertaken jointly by
any participating party with one or more other participating parties.

(k) “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.

SEC. 2.  

Section 17193.5 of the Education Code is repealed.

SEC. 3.  

Section 17199.3 of the Education Code is amended to
read:

17199.3.  

(a) The total amount of revenue bonds that may be
issued and outstanding at any time for purposes of this chapter
shall not exceed four billion four hundred million dollars
($4,400,000,000).

(b) For purposes of subdivision (a) 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.

SEC. 4.  

Section 17199.4 of the Education Code is amended to
read:

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, in
accordance with this section, elect to provide for funding, in whole
or in part, one or more of the following:

(1) Payments on authority bonds.

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

(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.

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

(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.

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

(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.

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

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

(2) Provide written notice to the Controller begin insert , no later than the
date of the issuance of the bonds or 60 days before the next
payment, whichever is later, end insert of all of the following:

(A) Its election to participate.

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

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

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

begin insert

(E) If the method of payment delivery is wire transfer, complete
and submit the appropriate authorization form as prescribed by
the Controller.

end 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.

(e) Upon receipt of the notice required by paragraph (2) of
subdivision (c), the Controller shall make an apportionment to the
indicated recipient on the date, or during the period, shown in the
schedule in accordance with the following:

(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).

(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).

begin insert

(3) To the extent funds available for an apportionment are
insufficient to pay the amount set forth in a schedule in any period,
the Controller shall, if and as requested in the notice, reschedule
the payment of all or a portion of the deficiency to a subsequent
period.

end insert begin delete

(3)

end delete

begin insert ( end insert begin insert 4) end insert  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.

(f) The Controller shall make an apportionment under this
section only from moneys designated for apportionment to the
participating party delivering the notice, and only from one or
more of the following:

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

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

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

(g) (1) 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.

(2) The participating party and its creditors do not have a claim
to funds apportioned or anticipated to be apportioned by the
Controller pursuant to this section.

(h) (1) The authority may require participation under this section
under the terms of any financing or refinancing under this chapter
to provide for one or more of the payments described in paragraphs
(1), (2), (3), and (4) of subdivision (a). The authority may impose
limits on new participation under this section. The authority may
require participating parties to apply to the authority for
participation. If the authority limits participation under this section,
the authority shall consider each of the following priorities in
making participation available:

(A) First priority shall be given to participating parties that apply
for funding for instructional classroom space under this chapter.

(B) Second priority shall be given to participating parties that
apply for funding of modernization of instructional classroom
space under this chapter.

(C) Third priority shall be given to participating parties that
apply for funding under this chapter for any 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).

(i) 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.

(j) 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.

(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.