BILL NUMBER: AB 1198	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 18, 2015
	AMENDED IN ASSEMBLY  MAY 6, 2015
	AMENDED IN ASSEMBLY  MARCH 26, 2015

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.
   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:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (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.
   (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.
   (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.
  SEC. 2.  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


  SEC. 3.  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


  SEC. 4.  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 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 lower cost alternatives for public
school facilities financing.
   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 so 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 Fund created pursuant to Section 17203.
   17202.  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) Options, in the event of a default, to ensure that the first
priority of the facility is the continued use for public school
purposes. These options may include, but are not limited to, the
relet or sale of the facility to another public school and a
mechanism by which the state has a right of first refusal to purchase
the facility instead of it being sold in a foreclosure sale. 

   (e) 
    (   f)  The structure and guidelines for
investing in the California Credit Enhancement Program.
   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 identified for the California Credit Enhancement Program in the
California Credit Enhancement Account. The authority may, at its
discretion, deposit fees collected in accordance with this chapter in
the California Credit Enhancement Account, in addition to the funds
authorized to be collected pursuant to Section 17181. The authority
may designate and hold separately one or more subaccounts within the
California Credit Enhancement Account. 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.
   17204.  (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.