BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1979| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- CONSENT Bill No: AB 1979 Author: Nazarian (D) Amended: 7/1/14 in Senate Vote: 21 SENATE EDUCATION COMMITTEE : 7-0, 6/11/14 AYES: Liu, Wyland, Block, Correa, Hancock, Huff, Monning SENATE GOVERNANCE & FINANCE COMMITTEE : 6-0, 6/25/14 AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Walters NO VOTE RECORDED: Liu SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 73-0, 5/8/14 (Consent) - See last page for vote SUBJECT : School facilities: California School Finance Authority SOURCE : State Treasurer, Bill Lockyer DIGEST : This bill expands the definition of project, for purposes of the California School Finance Authority Act (Act), to include reimbursement of specified educational facility costs to be financed or refinanced, expands the authority to use the intercept repayment method beyond payments for debt service to include other bond-related costs, and consolidates the caps on the total amount of revenue bonds that may be issued and outstanding at any time under the Act. CONTINUED AB 1979 Page 2 ANALYSIS : Existing law establishes the California School Finance Authority (CSFA) to oversee the statewide system for the sale of revenue bonds to reconstruct, remodel or replace existing school buildings, acquire new school sites and buildings to be made available to public school districts (K-12), charter schools, and California Community College (CCC) districts, and to assist school and CCC districts by providing access to financing for working capital and capital improvements. Existing law defines a "project" for purposes of the Act to mean the acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, or equipping of an educational facility to be financed or refinanced. Existing law authorizes a school district, charter school, county office of education, or CCC district, to guarantee or provide for payment of bonds and related obligations under the Act through an intercept repayment mechanism, under specified conditions. These include requirements that notice of such action be provided to the State Controller, and that a trustee (appointed by the school district, charter school, county office of education, or CCC district, or by the CSFA) to interface between the party and the Controller for purposes of repayment through the interception of revenue limit, or charter school block grant apportionments. Existing law caps the total amount of revenue bonds which may be issued and outstanding under the Act, at $400 million, other than those revenue bonds issued for purposes of guaranteeing or providing for repayment of bonds and related obligations on behalf of local educational agencies, charter schools, and CCC districts. Current law caps the total amount that may be outstanding at any time under the Act for this purpose at $4 billion. This bill: 1.Expands the definition of "project," under the Act, to include the use of revenue bonds issued by the CSFA to reimburse for specified costs related to the financing or refinancing of educational facilities under the Act. 2.Repeals provisions that authorize a public credit provider CONTINUED AB 1979 Page 3 (defined as financial institutions which include a public retirement system) to require a school district, charter school, CCC district, or county office of education to use a specified process for repayment through the interception of revenue limit apportionments, CCC general apportionments, or charter school block grant apportionments. 3.Modifies provisions that outline conditions to be met by a school district, charter school, county office of education, or CCC district electing to guarantee or provide for payment of bonds and related obligations through the intercept repayment mechanism under the Act. More specifically it: A. Expands the costs which may be covered via the intercept repayment method to include payment on authority bonds, payments under credit enhancement or liquidity support agreements and amounts pledged or assigned under these agreements, payments to fund reserves for these items, fees and charges, and any other costs necessary or incidental to financing or refinancing activity under the Act. B. Modifies the process to be followed by a borrower in order to initiate the intercept repayment method to reflect current practice. C. Establishes the rules by which the Controller shall conduct the intercept and provides that the Controller may rely on the requests for intercept made by investors, bondholders, trustees, borrowers, and credit providers without liability if these requests are made in compliance with the bill's provisions. D. Establishes the following new authorities for the CSFA: 1) Authorizes the CSFA to require participation in the intercept repayment under the terms of financing/refinancing under the Act. 2) Authorizes the CSFA to impose limits on new participation in the intercept repayment process. 3) Authorizes the CSFA to require school districts, county offices of education, charter schools, and CCC districts to apply to CSFA in order to participate in the intercept repayment process. CONTINUED AB 1979 Page 4 A. Declares that these provisions do not obligate the State of California to provide additional appropriations to fund debt service obligations beyond those specifically designated for apportionment to the participating school district, charter school, county office of education, or CCC district. 1.Eliminates the distinction in the cap between revenue bonds issued and outstanding under the Act and the cap on the total amount outstanding for purposes of the intercept repayment mechanism, and consolidates these caps into a single total amount of revenue bonds that may be issued and outstanding at any time under the Act. Specifically it: A. Eliminates the $4 billion cap on the amount of bonds outstanding for purpose of the intercept repayment mechanism. B. Eliminates the $400 million cap on the total amount of revenue bonds that may be issued and outstanding at any time for any purpose under the Act. C. Caps the total amount of revenue bonds that may be issued and outstanding under the Act at $4.4 billion. 1.Requires the Controller to the extent funds available for an apportionment are insufficient to pay the amount set forth in a schedule in any period, if and as requested in the notice, reschedule the payment of all or a portion of the deficiency to a subsequent period. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 7/30/14) State Treasurer, Bill Lockyer (source) California Charter Schools Association Advocates ARGUMENTS IN SUPPORT : According to the author's office, the CSFA Authority was created in 1985 to finance educational facilities and working capital for school and community college districts. Since 2002, its primary focus has been on assisting charter schools to meet their facility and working capital CONTINUED AB 1979 Page 5 needs. According to the Treasurer's Office, this bill makes several statutory changes in order to facilitate charter school access to financing and working capital for school facility construction projects. These changes include the authorization to reimburse for project costs incurred prior to bond issuance, the expansion of bond related costs which may be repaid through the intercept process, and the consolidation of caps on the allowable amount of revenue bonds outstanding for the CSFA. ASSEMBLY FLOOR : 73-0, 05/08/14 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, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Grove, Hagman, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Eggman, Gorell, Gray, Hall, Mansoor, V. Manuel Pérez, Vacancy PQ:nl 8/4/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED