BILL ANALYSIS                                                                                                                                                                                                    


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                                    THIRD READING

          Bill No:  SB 692
          Author:   Hancock (D)
          Amended:  4/23/13
          Vote:     21

           SENATE GOVERNANCE & FINANCE COMMITTEE  :  7-0, 4/17/13  
           AYES:  Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu

           SUBJECT  :    Local government:  community facilities districts

           SOURCE  :     Author

           DIGEST  :    This bill amends numerous provisions of the  
          Mello-Roos Community Facilities Act.

           ANALYSIS  :    The Mello-Roos Community Facilities Act allows  
          counties, cities, special districts, and school districts to  
          finance public works projects and a limited list of public  
          services by levying special taxes (parcel taxes).  A Mello-Roos  
          Community Facilities District (CFD) issues bonds against these  
          special taxes to finance the public works projects.  Like all  
          special taxes, Mello-Roos Act special taxes, require 2/3 - voter  
          approval.  If there are fewer than 12 registered voters, the  
          affected landowners vote.

          This bill makes the following changes to the Mello-Roos  
          Community Facilities Act and the Mark-Roos Bond Pooling Act:

           Special taxes for maintenance:   Mello-Roos Act special taxes for  
          services can pay for police protection services, fire protection  


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          and suppression services, ambulance and paramedic services,  
          recreation program services, library services, maintenance  
          services for elementary and secondary school sites and  
          structures, operation and maintenance of museums and cultural  
          facilities, maintenance and lighting of parks, parkways,  
          streets, roads, and open space, flood and storm protection  
          services, and hazardous waste cleanup services.

          This bill additionally allows Mello-Roos Act special taxes to  
          pay for maintenance and operation of any real or other tangible  
          property with an estimated useful life of five years or longer  
          that is owned by the local agency or by another local agency  
          through an agreement entered into pursuant to a specified  
          statute.  The bill defines "maintenance" as including  
          replacement and the creation and funding of a reserve to pay for  

           Marks-Roos lease financing:   The Joint Exercise of Powers Act  
          allows two or more public agencies to exercise their common  
          powers by signing joint powers agreements.  Sometimes an  
          agreement creates a joint powers authority (JPA).  The  
          Marks-Roos Local Bond Pooling Act allows public agencies to use  
          JPAs to finance infrastructure.  These JPAs issue Marks-Roos Act  
          bonds and loan the capital to local agencies for public works,  
          for working capital, and for insurance programs.  The Marks-Roos  
          Act allows a JPA to take title to, and sell, lands, structures,  
          real or personal property, rights, rights-of-way, franchises,  
          easements, and other interests in lands that are located within  
          the state that the authority determines are necessary or  
          convenient for the financing of public capital improvements.

          This bill adds leases to the list of property interests that  
          JPAs can use to finance public capital improvements.

           Joint exercise of powers:   A CFD can finance facilities to be  
          owned or operated by a public agency other than the agency that  
          created the district pursuant to a joint community facilities  
          agreement or joint exercise of powers agreement.  

          This bill declares that specified provisions in the Mello-Roos  
          Act must not be construed to limit a joint powers authority's  
          ability to exercise powers authorized by the Joint Powers Act.

           Special tax prepayment provisions  :  A local agency's legislative  



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          body can form a CFD that initially consists solely of territory  
          proposed for future annexation to the CFD, with the condition  
          that a parcel or parcels within that territory may be annexed to  
          the CFD and subjected to the special tax only with the unanimous  
          approval of the parcel owner or owners at the time of annexation  
          (SB 555, Hancock, Chapter 493, Statutes of 2011).  Under this  
          alternate CFD formation procedure, the resolution of intention  
          to form the CFD need not specify the rate or rates of special  
          tax, provided that:
          1.The resolution of intention and the resolution of formation  
            include a statement that the rate must be established in an  
            amount required to finance or refinance the authorized  
            improvements and to pay the district's administrative  

          2.The maximum rate of special tax applicable to a parcel or  
            parcels must be specified in the unanimous approval provided  
            by parcel owners when they annex to the CFD.

          This bill similarly provides that a resolution of intention need  
          not specify the conditions under which a special tax obligation  
          may be prepaid and permanently satisfied if the prepayment  
          provisions are included in the unanimous approval by parcel  
          owners when they annex to the CFD.

           Eliminating facilities and services:   A local agency's  
          legislative body, after conducting a public hearing, can  
          eliminate one or more types of facilities and services specified  
          in a CFD's resolution of formation.  

          For a CFD formed under the alternate procedure, consisting  
          solely of territory proposed for future annexation to the CFD,  
          this bill allows facilities and services to be eliminated with  
          the unanimous approval of affected parcel owners and written  
          consent of the local agency.  No additional hearing or  
          procedures are required.

          The bill requires that the unanimous approval must contain  
          specified provisions if the unanimous approval relates to the  
          reduction of the special tax rate and the special tax proceeds  
          are being used to retire debt.

           Special tax rate ordinances:   This bill allows a local agency's  
          legislative body, after creating a CFD that includes territory  



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          proposed for annexation in the future by unanimous approval, to  
          provide by ordinance for the levy of special taxes on parcels  
          that will be annexed to the CFD at the rate or rates to be  
          approved unanimously by parcel owners and for apportionment and  
          collection of the special taxes in the manner specified in the  
          resolution of formation.

           Improvement areas  :  Existing law allows a local agency's  
          legislative body to designate, by resolution, a portion or  
          portions of a CFD as one or more improvement areas. After the  
          designation of an improvement area, all proceedings for purposes  
          of a bond election and for the purpose of levying special taxes  
          for payment of the bonds, or for any other specified changes  
          apply only to the improvement area.

          This bill, in connection with the annexation by unanimous  
          approval to a community facilities district of a parcel that was  
          included in territory proposed for annexation in the future to  
          the community facilities district, allows a local agency to  
          designate a parcel or parcels as an improvement area within the  
          CFD.  Designation of a parcel or parcels as an improvement area  
          shall be specified and approved by the unanimous approval of the  
          owner/owners of each parcel or parcels at the time that the  
          parcel or parcels are annexed to the community facilities  
          district.  After the designation of a parcel or parcels as an  
          improvement area, all proceedings for approval of the  
          appropriations limit, the rate and method of apportionment and  
          manner of collection of special taxes, and the authorization to  
          incur bonded indebtedness for the parcel or parcels apply only  
          to the improvement area.

           Continuing disclosure notice:   Federal law requires some  
          property owners in a CFD to disclose certain information on a  
          continuous basis through an information clearinghouse  
          established by the Municipal Securities Rulemaking Board.

          This bill allows a local agency to execute and record in a  
          County Recorder's office a notice of the owner's disclosure  
          agreement for the purpose of providing notice to a subsequent  
          transferee.  The owner's written consent must be attached to the  
          notice. The County Recorder's office must accept the notice.   
          This bill requires a subsequent transferee of the property to be  
          subject to the disclosure obligation.  Upon the termination of  
          the disclosure obligation, this bill allows a local agency to  



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          record a notice of termination with the office of the county  
          recorder in which the original notice was recorded.  The County  
          Recorder's office must accept the notice of termination.

           Bond refunding requirements  :  A certified public accountant must  
          certify that proceeds and investment kept in a fund for a CFD's  
          refunding bonds are sufficient to meet specified statutory  

          This bill provides that an accountant's certification is not  
          required if:  

          1.The proceeds and any other cash in the refunding fund are held  
            uninvested, or shall be invested, in noncallable obligations  
            of, or obligations guaranteed as to principal and interest by,  
            the U.S. government or any agency or instrumentality thereof,  
            when those obligations are backed by the full faith and credit  
            of the U.S. government.

          2.The amount invested is sufficient to pay the principal,  
            interest, and redemption premiums, if any, on the refunded  
            bonds as they become due or at designated dates prior to  

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

          AB:ej  4/23/13   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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