BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                       SB 1230|
          |Office of Senate Floor Analyses   |                              |
          |1020 N Street, Suite 524          |                              |
          |(916) 651-1520         Fax: (916) |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 
           
                                           
                                       CONSENT


          Bill No:  SB 1230
          Author:   Senate Governance and Finance Committee 
          Amended:  As introduced
          Vote:     27 - Urgency


           SENATE GOVERNANCE & FINANCE COMMITTEE  :  7-0, 4/2/14
          AYES:  Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Vidak


           SUBJECT  :    First Validating Act of 2014

           SOURCE  :     Author


           DIGEST  :    This bill enacts the First Validating Act of 2014  
          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  
          public bodies.

          Comments
                                                                CONTINUED





                                                                   SB 1230
                                                                     Page  
          2


           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 1230 (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 1231 (Second Validating Act) will reach  
          Governor Brown in August, validating mistakes made after SB  
          1230.  The Third Validating Act (SB 1232) will take effect on  
          January 1, 2015, covering the period between the chaptering of  
          SB 1231 and the end of 2014.

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








                                                                    SB 1230
                                                                     Page  
          3

           SUPPORT  :   (Verified  4/3/14)

          California Special Districts Association
          California State Association of Counties
          East Bay Municipal Utility District

          AB:e  4/3/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

                                   ****  END  ****