Amended in Assembly May 6, 2015

Amended in Assembly March 26, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 1198

Introduced by Assembly Member Dababneh

February 27, 2015

An act to add the headings of Article 1 (commencing with Section 17170) and Article 2 (commencing with Section 17172) to, and to add Article 3 (commencing with Section 17200) to, Chapter 18 of Part 10 of Division 1 of Title 1 of the Education Code, relating to school facilities, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 1198, as amended, Dababneh. School facilities: California School Finance Authority: California Credit Enhancement Program.

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Existing law, the

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begin insert The end insert California School Finance Authority begin delete Act, end delete begin insert Act end insert establishes the California School Finance begin delete Authority and authorizes it to administer the continuously appropriated end delete begin insert Authority, and authorizes the authority to, among other things, issue revenue bonds to finance or refinance educational facility projects for school districts, charter schools, county offices of education, and community college districts. Existing law establishes the end insert California School Finance Authority begin delete Fund for the purpose of, among other things, assisting school districts and community college districts by providing financing for working capital and capital improvements. Existing law authorizes the authority to divide the fund into separate accounts. end delete begin insert Fund, administered by the authority, and continuously appropriates moneys in the fund for purposes of the act. end insert

This bill would create within the authority the California Credit Enhancement Program begin delete to provide lower cost alternatives for public school facilities financing through a leveraged public-private partnership program. The bill would authorize the authority to leverage its funding for the California Credit Enhancement Program, as specified. The bill would create the California Credit Enhancement Program Advisory Board to be appointed by the authority and to be made up of specified subject matter experts. end delete begin insert for the purpose of establishing a fund to insure school facility bonds issued by the authority pursuant to the act, as specified. end insert The bill would create the California Credit Enhancement Account within the California School Finance Authority begin delete Fund, as specified. end delete begin insert Fund, would authorize the authority to deposit fees collected pursuant to the program in that account, and would specify that bond insurance, credit enhancement, or other guarantees of the authority shall be payable solely from funds available in that account. end insert By authorizing money in the California School Finance Authority Fund to be used for a new purpose, the bill would make an appropriation. begin insert The bill would require the authority to adopt regulations to carry out the program, including, but not limited to, regulations establishing eligibility criteria and a definition of “default” for purposes of the program. end insert

Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert The Legislature finds and declares all of the
following: end insert

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(a) One of the biggest challenges currently faced by charter
schools is finding suitable facilities and funding for those facilities.
Charter schools typically do not receive local funding through
bonds and must pay for their facilities out of general operating
expenses. As a result, many charter schools turn to private
financing and bond transactions to pay for a long-term facilities
solution.

end insert begin insert

(b) The California School Finance Authority currently operates
several valuable programs to assist schools seeking facilities
financing, including its conduit revenue bond financing program.
However, because charter schools are generally rated low or
below investment grade, and the State of California does not
directly guarantee or provide for payment of charter school
revenue bonds issued through the California School Finance
Authority, charter schools that issue revenue bonds to finance
public school facilities face excessive interest rates.

end insert begin insert

(c) A program that provides funds to insure or guarantee school
facility bonds issued by the California School Finance Authority
to assist charter schools with the acquisition, renovation, or
construction of school facilities, or the refinancing of existing
charter school facility debt, would lower borrowing costs for those
schools and ensure more funds remain in California’s classrooms.

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begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

The heading of Article 1 (commencing with Section
17170) is added to Chapter 18 of Part 10 of Division 1 of Title 1
of the Education Code, to read:

 

Article 1.  General Provisions

 

begin delete SEC. 2. end delete
begin insert SEC. 3. end insert   

The heading of Article 2 (commencing with Section
17172) is added to Chapter 18 of Part 10 of Division 1 of Title 1
of the Education Code, to read:

 

Article 2.  California School Finance Authority

 

begin delete SEC. 3. end delete
begin insert SEC. 4. end insert   

Article 3 (commencing with Section 17200) is added
to Chapter 18 of Part 10 of Division 1 of Title 1 of the Education
Code, to read:

 

Article 3.  California Credit Enhancement Program

 

17200.  

There is hereby created the California Credit
Enhancement Program within the begin delete authority to provide end delete begin insert authority.
The purpose of the program is to establish a fund to be used to
insure facility bonds issued by the authority in order to achieve end insert
lower cost alternatives for public school facilities begin delete financing through
a leveraged public-private partnership program. end delete begin insert financing. end insert

17201.  

Notwithstanding Section 17182, in addition to the
powers authorized by this chapter, the authority may leverage its
funding for the California Credit Enhancement Program begin delete in such
a way that end delete begin insert so end insert the amount of credit insurance provided pursuant to
the California Credit Enhancement Program exceeds the amount
of funds on deposit in the California Credit Enhancement Account
within the California School Finance Authority begin delete Fund, which
account is end delete begin insert Fund end insert created pursuant to Section 17203.

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17202.  

There is hereby created the California Credit
Enhancement Program Advisory Board, which shall be appointed
by the authority and shall be made up of subject matter experts,
including, but not limited to, in the fields of municipal bond
insurance, municipal finance, and charter school law to advise the
authority on the creation and administration of the California Credit
Enhancement Program.

end delete begin insert

begin insert 17202. end insert   

The authority shall adopt regulations to carry out the
provisions of this article. The authority may consult with subject
matter experts in the development of the regulations, which shall
include, but not be limited to, all of the following:

(a) Eligibility criteria for participating public schools, including
financial, performance, organizational, and governance criteria.
A public school that is fiscally sound and that has a good credit
rating may participate in the California Credit Enhancement
Program.

(b) Parameters and procedures for the provision of credit
enhancement to eligible financing transactions, including, but not
limited to, maximum credit enhancement limits, and provisions
necessary to accommodate federal, state, and local regulatory
compliance.

(c) The application process and fee schedule.

(d) A definition of “default” for purposes of the program, and
procedures so that, in the event of a default, funds from the
California Credit Enhancement Account are paid out only after
all other sources of payment and credit enhancement to an eligible
financing transaction are exhausted.

(e) The structure and guidelines for investing in the California
Credit Enhancement Program.

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17203.  

There is hereby created the California Credit
Enhancement Account within the California School Finance
Authority Fund, established pursuant to Section 17181. The
authority shall deposit funds begin insert identified end insert for the California Credit
Enhancement Program in the California Credit Enhancement
begin delete Account, and, in addition to the funds authorized to be collected
pursuant to Section 17181, may end delete begin insert Account. The authority may, at
its discretion, end insert deposit fees collected in accordance with this chapter
in the California Credit Enhancement begin delete Account. end delete begin insert Account, in addition
to the funds authorized to be collected pursuant to Section 17181. end insert
The authority may designate and hold separately one or more
subaccounts within the California Credit Enhancement Account.
begin insert Nothing in this section shall be construed to require the authority
to deposit, or the Legislature to appropriate, funds for the purposes
established in this article. end insert

begin insert

begin insert 17204. end insert   

(a) Notwithstanding any other law, bond insurance,
credit enhancement, or other guarantees issued under this chapter
shall not be deemed to constitute a debt or liability of the state, or
any political subdivision thereof, and shall not be deemed to be a
pledge of the faith and credit of the state, or any political
subdivision thereof, other than the authority. Bond insurance,
credit enhancement, or other guarantees of the authority shall be
payable solely from funds available in the California Credit
Enhancement Account.

(b) Each bond insurance policy, credit enhancement instrument,
or other guarantee of the authority issued under the California
Credit Enhancement Program shall include a statement on its face
that neither the State of California nor the authority is obligated
to pay the principal or interest thereon, except from revenues of
the authority available therefor, and shall also include a statement
that neither the faith or credit, nor the taxing power of the State
of California, or any political subdivision thereof, is pledged to
the payment of the principal or interest of the bonds covered by
the California Credit Enhancement Program.

(c) The issuance of bond insurance, credit enhancement, or
other guarantees under this chapter shall not directly, indirectly,
or contingently obligate the state, or any political subdivision
thereof, to levy or pledge any form of taxation, or make any
appropriation for their payment.

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