AB 1198, as amended, Dababneh. School facilities: California School Finance Authority: California Credit Enhancement Program.
The California School Finance Authority Act establishes the California School Finance 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 California School Finance Authority Fund, administered by the authority, and continuously appropriates moneys in the fund for purposes of the act.
This bill would create within the authority the California Credit Enhancement Program for the purpose of establishing a fund to insure school facility bonds issued by the authority pursuant to the act, as specified. The bill would create the California Credit Enhancement Account within the California School Finance Authority 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. By authorizing money in the California School Finance Authority Fund to be used for a new purpose, the bill would make an appropriation. 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.
Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
The Legislature finds and declares all of the
2following:
3(a) One of the biggest challenges currently faced by charter
4schools is finding suitable facilities and funding for those facilities.
5Charter schools typically do not receive local funding through
6bonds and must pay for their facilities out of general operating
7expenses. As a result, many charter schools turn to private
8financing and bond transactions to pay for a long-term facilities
9solution.
10(b) The California School Finance Authority currently operates
11several valuable programs to assist schools seeking facilities
12financing,
including its conduit revenue bond financing program.
13However, because charter schools are generally rated low or below
14investment grade, and the State of California does not directly
15guarantee or provide for payment of charter school revenue bonds
16issued through the California School Finance Authority, charter
17schools that issue revenue bonds to finance public school facilities
18face excessive interest rates.
19(c) A program that provides funds to insure or guarantee school
20facility bonds issued by the California School Finance Authority
21to assist charter schools with the acquisition, renovation, or
22construction of school facilities, or the refinancing of existing
23charter school facility debt, would lower borrowing costs for those
24schools and ensure more funds remain in California’s classrooms.
The heading of Article 1 (commencing with Section
217170) is added to Chapter 18 of Part 10 of Division 1 of Title 1
3of the Education Code, to read:
4
The heading of Article 2 (commencing with Section
817172) is added to Chapter 18 of Part 10 of Division 1 of Title 1
9of the Education Code, to read:
10
Article 3 (commencing with Section 17200) is added
14to Chapter 18 of Part 10 of Division 1 of Title 1 of the Education
15Code, to read:
16
There is hereby created the California Credit
20Enhancement Program within the authority. The purpose of the
21program is to establish a fund to be used to insure facility bonds
22issued by the authority in order to achieve lower cost alternatives
23for public school facilities financing.
Notwithstanding Section 17182, in addition to the
25powers authorized by this chapter, the authority may leverage its
26funding for the California Credit Enhancement Program so the
27amount of credit insurance provided pursuant to the California
28Credit Enhancement Program exceeds the amount of funds on
29deposit in the California Credit Enhancement Account within the
30California School Finance Authority
Fund created pursuant to
31Section 17203.
The authority shall adopt regulations to carry out the
33provisions of this article. The authority may consult with subject
34matter experts in the development of the regulations, which shall
35include, but not be limited to, all of the following:
36(a) Eligibility criteria for participating public schools, including
37financial, performance, organizational, and governance criteria.
38A public school that is fiscally sound and that has a good credit
39rating may participate in the California Credit Enhancement
40Program.
P4 1(b) Parameters and procedures for the provision of credit
2enhancement to eligible financing transactions, including, but not
3
limited to, maximum credit enhancement limits, and provisions
4necessary to accommodate federal, state, and local regulatory
5compliance.
6(c) The application process and fee schedule.
7(d) A definition of “default” for purposes of the program, and
8procedures so that, in the event of a default, funds from the
9California Credit Enhancement Account are paid out only after all
10other sources of payment and credit enhancement to an eligible
11financing transaction are exhausted.
12(e) Options, in the event of a default, to ensure that the first
13priority of the facility is the continued use for public school
14purposes. These options may include, but are not limited to, the
15relet
or sale of the facility to another public school and a
16mechanism by which the state has a right of first refusal to
17purchase the facility instead of it being sold in a foreclosure sale.
18(e)
end delete
19begin insert(end insertbegin insertf)end insert The structure and guidelines for investing in the California
20Credit Enhancement Program.
There is hereby created the California Credit
22Enhancement Account within the California School Finance
23Authority Fund, established pursuant to Section 17181. The
24authority shall deposit funds identified for the California Credit
25Enhancement Program in the California Credit Enhancement
26Account. The authority may, at its discretion, deposit fees collected
27in accordance with this chapter in the California Credit
28Enhancement Account, in addition to the funds authorized to be
29collected pursuant to Section 17181. The authority may designate
30and hold separately one or more subaccounts within the California
31Credit Enhancement Account. Nothing in this section shall be
32construed to require the authority to deposit, or the Legislature to
33appropriate,
funds for the purposes established in this article.
(a) Notwithstanding any other law, bond insurance,
35credit enhancement, or other guarantees issued under this chapter
36shall not be deemed to constitute a debt or liability of the state, or
37any political subdivision thereof, and shall not be deemed to be a
38pledge of the faith and credit of the state, or any political
39subdivision thereof, other than the authority. Bond insurance, credit
40enhancement, or other guarantees of the authority shall be payable
P5 1solely from funds available in the California Credit Enhancement
2Account.
3(b) Each bond insurance policy, credit enhancement instrument,
4or other guarantee of the authority issued under the California
5Credit
Enhancement Program shall include a statement on its face
6that neither the State of California nor the authority is obligated
7to pay the principal or interest thereon, except from revenues of
8the authority available therefor, and shall also include a statement
9that neither the faith or credit, nor the taxing power of the State of
10California, or any political subdivision thereof, is pledged to the
11payment of the principal or interest of the bonds covered by the
12California Credit Enhancement Program.
13(c) The issuance of bond insurance, credit enhancement, or other
14guarantees under this chapter shall not directly, indirectly, or
15contingently obligate the state, or any political subdivision thereof,
16to levy or pledge any form of taxation, or make any appropriation
17for their payment.
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