BILL ANALYSIS Ó
SB 1232
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Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
SB 1232 (Committee on Governance and Finance) - As Introduced:
February 20, 2014
SENATE VOTE : 34-0
SUBJECT : Validations.
SUMMARY : Enacts the Third Validating Act of 2014, which would
validate the organization, boundaries, acts, proceedings, and
bonds of the state and counties, cities, and specified
districts, agencies, and entities.
EXISTING LAW allows agencies to make changes to the
organization, boundaries, acts, proceedings, and bonds of the
state, cities, counties, special districts, school districts,
and other local agencies.
FISCAL EFFECT : None
COMMENTS :
1)Background . 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. The current custom and practice is to pass
three Validating Acts that retroactively cure public
officials' mistakes. The first two measures are urgency
bills. SB 1230, the First Validating Act, will take effect
this spring. The Second Validating Act, SB 1231, will take
effect late summer, validating mistakes that occur after the
chaptering of the First Validating Act. SB 1232, the Third
Validating Act, will take effect on January 1, 2015, covering
the period between the chaptering of SB 1231 and the end of
2014.
2)Purpose of the bill . This bill would enact the Third
Validating Act of 2014, which would validate the organization,
boundaries, acts, proceedings, and bonds of the state and
counties, cities, and specified districts, agencies, and
entities.
SB 1232
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3)Author's statement . According to the author, "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
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. SB 1232 gives legislative protection to
public agencies and private investors."
4)Which mistakes ? 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.
5)Taxpayers benefit . 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.
6)Arguments in support . The Urban Counties Caucus, in support,
states that "these bills are important for the operation of
local governments . . . These validating acts help facilitate
the normal business of local governments and protect the
taxpayers as well as the bond purchasers."
7)Arguments in opposition . None on file.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Local Agency Formation Commissions
California Special Districts Association
California State Association of Counties
East Bay Municipal Utility District
Honorable John Chiang, California State Controller
Urban Counties Caucus
SB 1232
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Opposition
None on file
Analysis Prepared by : Dixie Petty / L. GOV. / (916) 319-3958