BILL ANALYSIS                                                                                                                                                                                                    



                                                                            



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                                       CONSENT


          Bill No:  SB 182
          Author:   Senate Governance and Finance Committee
          Amended:  As introduced
          Vote:     27 - Urgency

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  6-0, 3/13/13
          AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Liu
          NO VOTE RECORDED:  Hernandez

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8


           SUBJECT  :    Second Validating Act of 2013

           SOURCE  :     Author


           DIGEST  :    This bill enacts the Second Validating Act of 2013  
          which validates the organization, boundaries, acts, and bonds of  
          state and local agencies.

           ANALYSIS  :    For more than 70 years, the Legislature's annual  
          Validating Acts have boosted the stability and credit ratings of  
          state and local bonds.  The Validating Acts cure public  
          officials' mistakes that might otherwise invalidate boundary  
          changes or bond issues.  They also correct errors or omissions  
          by local agencies and state departments.  The Acts do not  
          protect against fraud, corruption, or unconstitutional actions.

          This bill validates the organization, boundaries, acts,  
          proceedings, and bonds of the state government, counties,  
          cities, special districts, and school districts, among other  
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          public bodies.

           

          Comments
           
          The annual Validating Acts protect investors from the chance  
          that a minor error might undermine the legal integrity of a  
          public agency's bond.  Banks, pension funds, and other investors  
          will not buy public agencies' securities unless they are sound  
          investments.  Investors rely on legal opinions from bond  
          counsels to assure the bonds' credit worthiness.  Without  
          legislative action to cure technical errors, bond counsels are  
          reluctant to certify bonds as good credit risks.  This bill  
          gives legislative protection to public agencies and private  
          investors.

          The three Validating Acts cure typographical, grammatical, and  
          procedural errors.  They do not forgive fraud, corruption, or  
          unconstitutional acts.  A local official who makes a technical  
          error will find reassurance in the Validating Acts, while a  
          corrupt official faces prosecution regardless of the Acts.

          By insulating state and local bonds against harmless errors, the  
          Validating Acts save taxpayers' money.  Strong legal opinions  
          from bond counsels result in higher credit ratings for state and  
          local bonds.  Higher credit ratings allow state and local  
          officials to pay lower interest rates to private investors.   
          Lower borrowing costs save money for taxpayers.

          Starting in the mid-1920s, the Legislature passed separate  
          validating acts for different types of bonds, several classes of  
          special districts, and various local boundary changes.  By the  
          late 1930s, the practice was to pass annual validating acts (AB  
          2842, Bennett, 1939).  The current custom and practice is to  
          pass three Validating Acts that retroactively cure public  
          officials' mistakes.  The first two measures are urgency bills  
          that go into effect when they are chaptered.  SB 181 (First  
          Validating Act) will probably reach Governor Brown's desk this  
          spring, validating errors made before the date on which the bill  
          is chaptered.  SB 182 (Second Validating Act) will reach  
          Governor Brown in August, validating mistakes made after SB 181.  
           The Third Validating Act (SB 183) will take effect on January  
          1, 2014, covering the period between the chaptering of SB 182  

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          and the end of 2013.

           FISCAL EFFECT :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT  :   (Verified  4/8/13)

          State Controller John Chiang
          State Treasurer Bill Lockyer
          American Federation of State County and Municipal Employees,  
          AFL-CIO
          Association of California Water Agencies
          California Association of County Treasurers and Tax Collectors
          California Association of Local Agency Formation Commissions
          California Special Districts Association
          California State Association of Counties
          East Bay Municipal Utility District
          Rural County Representatives of California



          AB:d  4/9/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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