BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                       AB 1979|
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                                       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.

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           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  

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            (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.


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             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  

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          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

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