BILL ANALYSIS Ó
AB 2551
Page 1
Date of Hearing: May 6, 2014
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
AB 2551 (Wilk) - As Amended: March 28, 2014
SUBJECT : Local ballot measures: bond issues.
SUMMARY : Makes modifications to the bond issue statement
mailed to voters with the sample ballot for a local bond
election. Specifically, this bill requires each bond issue
proposed by a county, city and county, district, or other
political subdivision, or any agency, department, or board
thereof, to include the best estimate from official sources of
the total debt service, including the principal and interest
that would be required to be repaid if all the bonds are issued
and sold, and permits the estimate to include information about
the assumptions used to determine the estimate.
EXISTING LAW :
1)Requires all bond issues proposed a county, city and county,
district, or other political subdivision, or any agency,
department, or board thereof, to be submitted to the voters
for approval.
2)Requires a statement for each bond issue described above to be
mailed to the voters with the sample ballot for the bond
election. Requires the statement to be filed with the
elections official conducting the election not later than the
88th day prior to the election. Requires the statement to
include the following:
a) The best estimate from official sources of the tax rate
that would be required to be levied to fund that bond issue
during the first fiscal year after the first sale of the
bonds based on assessed valuations available at the time on
the election or a projection based on experience within the
same jurisdiction of other demonstrable factors;
b) The best estimate from official sources of the tax rate
that would be required to be levied to fund that bond issue
during the first fiscal year after the last sale of the
bonds if the bonds are proposed to be sold in series, and
an estimate of the year in which that rate will apply,
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based on assessed valuations available at the time of the
election of a projection based on experience within the
same jurisdiction or other demonstrable factors; and,
c) The best estimate from official sources of the highest
tax rate that would be required to be levied to fund that
bond issue, and an estimate of the year in which that rate
will apply, based on assessed valuations available at the
time of the election or a projection based on experience
within the same jurisdiction or other demonstrable factors.
3)Permits the statement to contain any declaration of policy of
the legislative or governing body of the applicable
jurisdiction, proposing to utilize revenues other than ad
valorem taxes for purposes of funding the bond issue, and the
best estimate from official sources of these revenues and the
reduction in the tax rate levied to fund the bond issue
resulting from the substitution of revenue.
4)Defines "tax rate" to mean a tax rate per one hundred dollars
($100) of assessed valuation on all property to be taxed to
fund any bond issue described above.
5)Requires the Legislative Analyst to prepare an impartial
analysis of each proposed measure describing the measure and
including a fiscal analysis of the measure showing the amount
of any increase or decrease in revenue or cost to state or
local government. Provides that if a proposed measure is
estimated to result in increased costs to the state, the
estimate of those costs shall be set out in boldface print in
the ballot pamphlet.
FISCAL EFFECT : Keyed non-fiscal by Legislative Counsel.
COMMENTS :
1)Purpose of the Bill : According to the author:
Since 1997, the non-partisan Legislative Analyst's Office
(LAO) has been required to include the "fiscal effect" of
any costs related to the approval of a statewide General
Obligation Bond in the ballot pamphlet presented to voters.
Per existing law (Elections Code 9087) the LAO is required
to follow a list of criteria which includes: the amount of
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the cost to state or local government, and utilizing a
uniform method in each analysis to describe the estimated
increase or decrease in revenue or cost of a measure.
AB 2551 updates the tax rate statement (over 100 years old)
to ensure that voters understand how the estimate of the
tax rate was reached and what the costs will be throughout
the 30-40 year length of the bond.
The purpose is to establish minimum standard of
transparency for the fiscal analysis of local bond measures
that is very similar to what the LAO already does for state
General Obligation bond measures.
2)Background : In 1968, the Legislature passed and the Governor
signed SB 838 (Petris), Chapter 813, Statutes of 1968, which
required the elections official to mail to voters with the
sample ballot a tax rate statement for local bond measures.
Aside from a few technical changes that have been made, the
information included in this statement has mostly been
unchanged since it was signed into law in 1968. This bill
adds a new requirement to the information already required to
be included in the tax rate statement. Specifically, this
bill requires each bond issue proposed by a county, city and
county, district, or other political subdivision, or any
agency, department of board thereof, to also include the best
estimate from official sources, including the principal and
interest that would be required to be repaid if all the bonds
are issued and sold. According to the author, the tax rate
statement needs to be updated to ensure voters understand how
the estimate of the tax rate was reached and what the costs
will be throughout the 30-40 year period of the bond. In
addition the author argues that the Legislative Analyst's
Office already includes the "fiscal effect" of any costs
related to the approval of a statewide General Obligation Bond
in the statewide ballot pamphlet sent to voters. According to
the author, this bill adds similar language into the "tax
rate" statement required to be sent with the sample ballot for
all local bond measures.
3)State vs Local Process : Current law requires all bond issues
proposed by a county, city and county, district, or other
political subdivision, or any agency, department, or board
thereof, to be submitted to the voters for approval. A
statement for each bond issue is mailed to the voters with the
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sample ballot for the bond election and includes the
following: 1) the best estimate of the tax rate that would be
required to be levied to fund that bond issue during the first
fiscal year after the first sale of the bonds, as specified,
2) the best estimate of the tax rate that would be required to
be levied to fund that bond issue during the first fiscal year
after the last sale of the bonds if the bonds are proposed to
be sold in series, and an estimate of the year in which that
rate will apply, and 3) the best estimate of the highest tax
rate that would be required to be levied to fund that bond
issue, and an estimate of the year in which that rate will
apply.
However, the process for statewide measures is different.
Current law requires the Legislative Analyst to prepare an
impartial fiscal analysis of each statewide measure, including
a bond measure, which includes the amount of any increase or
decrease in revenue or cost to state or local government
provided for statewide and, if it is estimated that a measure
would result in increased cost to the state, an analysis of
the measure's estimated impact on the state, including an
estimate of the percentage of the General Fund that would be
expended due to the measure, as specified. Existing law
requires this information to be included in the statewide
ballot pamphlet sent to voters. In addition, at each
statewide election at which a state bond measure will be
submitted to voters for their approval or rejection, the
ballot pamphlet for that election is required to include a
discussion, prepared by the Legislative Analyst, of the
state's current bonded indebtedness situation. This
discussion must include information as to the dollar amount of
the state's current authorized and outstanding bonded
indebtedness, the approximate percentage of the state's
General Fund revenues which are required to service this
indebtedness, and the expected impact of the issuance of the
bonds to be approved at the election on the items specified.
Furthermore, the Legislature has taken steps recently to improve
voter clarity on statewide bond measures and their future
fiscal implications. In 2009, the Little Hoover Commission
(LHC) released a report entitled, "Bond Spending: Expanding
and Enhancing Oversight." In the report, the LHC made several
recommendations to the Legislature aimed at increasing the
oversight and accountability of bond measures that have
already passed, as well as increasing the clarity and
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transparency for bond measures that will be proposed to voters
in the future. One of the recommendations included in the
report was for the state to establish fundamental criteria for
ballot measures and to have the criteria evaluated and
included as a simple and easy-to-understand report card in the
voter guide for all bond measures placed on the ballot. In
response to those concerns, the Legislature passed and the
Governor signed AB 732 (Buchanan), Chapter 453, Statutes of
2011, which requires the summary prepared by the Attorney
General for state bond measures that are submitted to the
voters for their approval or rejection to include an
explanatory table summarizing the Legislative Analyst's
estimate of the net state and local government fiscal impact.
This bill makes modifications to the bond issue statement mailed
to voters with the sample ballot for a local bond election and
requires local bond issues, as specified, to include the best
estimate from official sources of the total debt service,
including the principal and interest that would be required to
be repaid if all the bonds are issued and sold. According to
the author, current law is inadequate for local bond measures
as it does not include information similar to statewide bond
measures that details the "fiscal effect" of the measure.
This bill will update the tax rate statement to ensure that
voters understand how the estimate of the tax rate was reached
and what the costs will be throughout the 30-40 year period of
the bond.
4)Arguments in Support : Howard Jarvis Taxpayers Association
writes in support:
When voters review local bond measures, all they have to
analyze is the tax rate statement, which usually consists
of a sentence or two. There is no requirement in current
law that the tax rate statement includes some language
pertaining to the fiscal effect of the measure. AB 2551
updates the requirements of this statement, over 100 years
old, to educate voters on how the estimate of the tax rate
was reached and what the costs will be throughout the 30-40
year length of the bond. This simple transparency
provision will ensure that taxpayers better understand the
implications of long-term debt at the local level.
REGISTERED SUPPORT / OPPOSITION :
AB 2551
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Support
California League of Bond Oversight Committees (co-sponsor)
Howard Jarvis Taxpayers Association (co-sponsor)
Opposition
None on file.
Analysis Prepared by : Nichole Becker / E. & R. / (916)
319-2094