BILL ANALYSIS Ó
AB 1666
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Date of Hearing: April 13, 2016
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Susan Talamantes Eggman, Chair
AB 1666
(Brough) - As Amended April 5, 2016
SUBJECT: Community facilities districts: reports.
SUMMARY: Requires the legislative body of a local agency that
has formed a Community Facilities District (CFD) that has an
Internet Web site to post specified information on their
website. Specifically, this bill:
1)Requires a legislative body of a city, county, special
district, school district, or joint powers entity that has an
Internet Web site, within 120 days after the last day of each
fiscal year of the CFD, to display prominently on their
website all of the following information:
a) A copy of an audit report, if requested pursuant to
existing law, which requires a CFD to provide an annual
report upon request of a resident or landowner of the
district;
b) A copy of the report provided to the California Debt and
Investment Advisory Commission (CDIAC), pursuant to
existing law, which requires a legislative body to annually
report specified bond information;
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c) A copy of the report provided to the State Controller's
office, pursuant to existing law, which requires the
Controller to annually publish and post specified
information on each locally assessed parcel tax;
d) The amount of moneys expended for the year, including a
summary of expenses that includes, but is not limited to,
the following:
i) Facilities, including property;
ii) Services;
iii) The costs of bonded indebtedness;
iv) The costs of collection of the special tax, pursuant
to the process in existing law for CFDs; and,
v) Other administrative and overhead costs;
e) A list of projects currently being funded by the CFD,
and the amount the CFD has committed for each project.
Requires the list to include the name and location of each
project;
f) A list of the projects that may be funded by the CFD,
but have not yet commenced and any amount committed by the
CFD for those projects. Requires the list to include the
name and location of each project if it is known;
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g) The total amount of special taxes in excess of the
amount needed to pay the bonded indebtedness, bad debt
contingencies, interest, and fees associated with the CFD,
if any; and,
h) The date on which the bonded indebtedness will mature.
2)Provides that no reimbursement is required by this bill
pursuant to the California Constitution because a local agency
or school district has the authority to levy service charges,
fees, or assessments sufficient to pay for the program or
level of service mandated by this bill, pursuant to current
law governing state mandated local costs.
EXISTING LAW:
1)Authorizes, under the Mello-Roos Community Facilities Act of
1992, a county, city, special district, and joint powers
entity to establish a CFD to finance public facilities and
certain public services through the imposition of special
taxes and the issuance of bonds.
2)Requires a CFD, formed after January 1, 1992, to prepare, if
requested by a person who resides in or owns property in the
district, an annual report within 120 days after the last day
of each fiscal year. Authorizes the CFD to charge a fee for
the report not to exceed the actual costs of preparing the
report. Requires the report to include the following
information:
a) The amount of special taxes collected for the year;
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b) The amount of other moneys collected for the year and
their sources, including interest earned;
c) The amount of moneys expended for the year;
d) A summary of the amount of moneys expended for the
following:
i) Facilities, including property;
ii) Services;
iii) The costs of bonded indebtedness;
iv) The costs of collecting the special tax; and,
v) Other administrative and overhead costs;
e) The moneys expended for facilities, including property,
an identification of the categories of each type of
facility funded with amounts expended in each category,
including the total percentage of the cost of each type of
facility that was funded with bond proceeds or special
taxes;
f) The moneys expended on services, an identification of
the categories of each type of service funded with amounts
expended in each category, including the total percentage
of cost of each type of service that was funded with bond
proceeds or special tax; and,
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g) The moneys expended for other administrative costs.
3)Requires the annual report to contain references to the
relevant sections of the resolution of formation of the
district so that interested persons may confirm that bond
proceeds and special taxes are being used for authorized
purposes. Requires the annual report to be made available to
the public upon request. Authorizes a CFD to charge a fee for
the report not to exceed the actual costs of preparing the
report.
4)Requires the chief financial officer of a county, city, or
special district levying a special tax to file an annual
report with its governing body, no later than January 1, 2002,
and at least once a year thereafter. Requires the annual
report to contain the following information:
a) The amount of funds collected and expended; and,
b) The status of any project required or authorized to be
funded as identified in a statement indicating the specific
purpose of the special tax.
5)Exempts a CFD preparing a report pursuant to 2), above, from
being required to comply with 4), above.
6)Requires the Controller to include in reports compiled
annually and made available on its website, information on the
imposition of each locally assessed parcel tax, including, but
not limited to, the following:
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a) The type and rate of parcel tax imposed;
b) The number of parcels subject to the parcel tax;
c) The number of parcels exempt from the parcel tax;
d) The sunset date of the parcel tax, if any;
e) The amount of revenue received from the parcel tax; and,
f) The manner in which the revenue received from the parcel
tax is being used.
1)Requires a legislative body, each year after the sale of any
bonds until the final maturity of the bonds, to supply a
fiscal status report to CDIAC, no later than October 30 of
each year, as follows:
a) Issuer name;
b) CFD number or name;
c) Name, title, and series of the bond issue;
d) Credit rating and name of the rating agency;
e) Date of the bond issue and the original principal
amount;
f) Reserve fund minimum balance required;
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g) The principal amount of bonds outstanding;
h) The balance in the bond reserve fund;
i) The balance in the capitalized interest fund, if any;
j) Number of delinquent parcels, as specified;
aa) The balance in any construction funds;
bb) The assessed value of all parcels subject to special tax
to repay the bonds, as specified;
cc) The total amount of special taxes due, the total amount
of unpaid special taxes;
dd) The reason and the date, if applicable, that the issue
was retired; and,
ee) Contact information for the party providing the
information.
FISCAL EFFECT: This bill is keyed fiscal.
COMMENTS:
1)Mello-Roos and CFD. The Mello-Roos Community Facilities Act
allows counties, cities, special districts, and school
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districts to form a CFD and levy special taxes (parcel taxes)
to finance a wide variety of facilities and services,
including parks, recreation centers, schools, libraries, child
care facilities, and utility infrastructure. Current law
establishes the process for the formation of a CFD, and
requires two-thirds voter approval for the Mello-Roos special
tax. A CFD issues bonds secured by these special taxes to
finance the facilities and services.
In order to establish a CFD, a resolution of intention must be
adopted within 90 days of a written request or petition being
filed with the legislative body of the local agency that will
form the district. Current law requires specified information
to be included in the resolution of intention, which includes
proposed boundaries, a description of the facilities or
services to be financed in a manner sufficient to allow a
taxpayer to understand which district funds may be used, any
financing plan, lease or other arrangement that will be used
to finance the facilities, any completed facilities to be
purchased, and the rate and method of collection of the
special tax. Additionally, the legislative body must direct
each officer responsible for providing one or more of the
proposed facilities or services to file a report that contains
information regarding the facilities and services required to
meet the needs of the CFD and an estimate of the cost
providing facilities or services.
If requested by a resident or landowner of the district, a CFD
must prepare an annual report within 120 days after the last
day of each fiscal year containing specified information about
the CFD. Existing law authorizes a CFD to charge a fee for
the report, not in excess of the actual costs of preparing the
report. Most of the information required to be in the annual
report is also contained in this bill.
2)Current Reporting Requirements. Under the State Treasurer,
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CDIAC collects, maintains, and provides comprehensive
information on all state and local debt authorization and
issuance, and serves as a statistical clearinghouse for all
state and local debt issues. Current law requires CDIAC to
make this information readily available upon request by any
public official or any member of the pubic. Among the list of
reports state and local government debt issuers are required
to submit to CDIAC is a specific requirement on all local
governments issuers of CFD bonds to provide a fiscal status
report containing specified information to CDIAC by October 30
of every year until the bonds have been retired.
For the 2013-14 fiscal year, CDIAC received a yearly fiscal
status report from 919 CFD bond issuers who reported 1,407
separate bond issues totaling $16.4 billion. CDIAC reports
that CFDs governed by cities and K-12 school districts
continue to be the largest issuers of Mello-Roos bonds and
account for more than 70% of outstanding debt during the
2013-14 fiscal year reporting period. Additionally, CFDs in
Southern California remain the top issuers accounting for more
than 68% or $11.3 billion of all outstanding Mello-Roos bonds.
Current law requires the State's Controller's Office to
compile and publish on its Web site annual reports summarizing
local agencies' finances, including their revenue sources.
These reports are based on the financial data submitted to the
Controller by counties, cities, and special districts and
provide detail on the aggregate amount of various taxes
collected by each local agency. In 2014, the Legislature
expanded the information required in the annual report to
include specified information on the imposition of each
locally assessed parcel tax.
3)Bill Summary. This bill requires the legislative body of a
city, county, special district, school district, or joint
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powers entity that formed a CFD that has an Internet Website
to post specified information within 120 days after the last
day of each fiscal year. The list of information that must be
posted on the local agency's website includes: a) a copy of
the yearly fiscal status report provided to CDIAC; b) a copy
of the report on parcel taxes provided to the Controller; c) a
copy of an audit report, if requested by a resident or
landowner of the district; d) a summary of expenses, including
but not limited to, facilities, services, costs of bonded
indebtedness, costs of collection of special tax, and other
administrative and overhead costs; e) a list of projects
currently being funded by the CFD or that may be funded by the
CFD; f) the amount of special taxes in excess of the amount
needed to pay the bonded indebtedness, bad debt contingencies,
interest, and fees; and, g) the date when the bonded
indebtedness will mature. This bill is author-sponsored.
4)Author's Statement. According to the author, "The bill is
being presented to require transparency in agencies who issue
Community Facility District bonds. Currently, it is very
difficult or nearly impossible for taxpayers to access and
understand information about the original bond amount, the
taxes collected, the funds collected in excess of bond
payments and expenses, projects funded, the end date of the
bond and when CFD tax assessments will expire. The phone
number on the tax bill is generally that of the bond
consultants who provide little information and refer the
caller back to the bond issuing agency. In many cases the
taxpayer is forced to file public records requests in an
attempt to locate information or to scour hundreds of pages of
agendas and board packets as well as to decipher annual
audits. Even then all the information is not readily made
available.
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"The CFD issuing agencies often bring in legal counsel to
respond to basic public records requests and charge the fees
back to the CFDs, taking money from the original intended
purpose - facilities. In some cases simple questions are
answered by requiring taxpayers to attend in person meetings
with agency staff, attorneys, and consultants resulting in
tens of thousands of dollars being charged back to the CFD.
Many taxpayers have been forced to form unofficial taxpayer
groups to work as a united front to gather information which
can take years. An Orange County Grand Jury Report (June
2015) was issued titled Mello-Roos: Perpetual Debt
Accumulation and Tax Assessment Obligation. The grand jury
found that many documents and reports about the tax districts
"use general, vague language that does not meet the
requirements and intent."
"Taxpayers have a right to know how funds are being collected
and spent and when their obligations end. The bill is not
asking any agencies to provide any information that they
should not already have readily available in summary reports.
This bill seeks to close gaps in current law by requiring
agencies to make the information available online, in a clear,
concise and easy to find format. In fact, the bill could save
agencies money as it would reduce the requests for public
information and consultant and attorney fees currently
incurred to address the records requests."
5)Related Legislation. This Committee has heard several bills
seeking to provide the public with more information regarding
parcel taxes and outstanding debt. AB 237 (Daly) of 2015
would have required local agencies to provide specified
notification to property owners before the adoption of any new
parcel tax. AB 2476 (Daly), pending in this Committee, is
substantially similar to AB 237. AB 892 (Daly) of 2013, which
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was held on suspense in the Assembly Appropriations Committee,
would have required the Board of Equalization to report
annually to the Governor on the imposition of each locally
assessed parcel tax. Most recently, AB 2109 (Daly), Chapter
781, Statutes of 2014, required the State Controller to report
annually on the imposition of each locally assessed parcel
tax, and required each county, city, and special district to
provide any information required by the Controller in order to
complete the report.
Additionally, in an effort to ensure local government
financial transactions information is more accurate and
accessible when it is made available to the public, AB 341
(Achadjian), Chapter 37, Statutes of 2015, made several
changes to the statutes requiring local governments to report
annual financial information to the Controller's Office. AB
341 extends, to seven months after the close of each fiscal
year, the deadline for submitting the annual report of a local
agency's financial transactions.
6)Pending Legislation. SB 1029 (Hertzberg), pending in the
Senate Appropriations Committee, requires state and local
government debt issuers to report to CDIAC specified
information about proposed and outstanding debt, including a
list of the purposes for which the debt has been issued and
the amounts expended for each purpose in the prior fiscal year
from the proceeds of the issuance.
7)Policy Considerations. Proponents of this bill point to the
findings of a 2015 Orange County Grand Jury report. The
report states "It is important that the property owners in
Orange County be aware of the consequences of the Mello-Roos
Act used by the local government agencies that govern them.
Many homeowners, especially in south Orange County, are in a
CFD, but the Grand Jury suspected that few understood how and
why they were formed, how long they lasted, and how the funds
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were spent." The grand jury report did not list all the
reporting required under existing law. The report mainly
focuses on lack of compliance with current law that is
"compounded by a lack of information available to the public
on how CFD funds are being used." This bill does not address
issues with compliance.
8)Committee Amendments. The Committee may wish to consider the
following:
a) Transparency vs. Duplicative Requirements. The
Committee may wish to consider how to strike the right
balance between transparency and ensuring that the bill
does not create duplicative requirements in existing law.
Any additional administrative costs required to comply with
this bill would take away from services or facilities the
special tax would otherwise fund. Ensuring there are no
duplicative requirements benefits both local agencies and
the taxpayers; therefore, the Committee may wish to
consider the following amendments:
i) Existing law requires a CFD to provide an annual
report upon request, which must include specified
information that is also contained in this bill under
subdivision (d). The annual report must also contain
information and specific categories of the moneys
expended on facilities and services. Given the
information required in the annual report, which is
available upon the request of residents and landowners of
the CFD, and the existing reports to CDIAC and the
Controller the Committee may wish to ask the author to
remove subdivisions (d), (e), and (f), and (h) from the
bill.
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ii) Existing law authorizes a special tax to be levied
only so long as it is needed to pay the principal and
interest on debt incurred in order to construct
facilities or pay the costs and incidental expenses of
services or construction of facilities authorized by the
Mello Roos Community Facilities Act. In light of the
restrictions in current law, the Committee may wish to
consider removing subdivision (g) from the bill that
would require the total amount of special taxes collected
in excess of the amount needed to pay bonded
indebtedness.
b) Timeline. This bill requires the legislative agency to
post specified information within 120 days after the last
day of each fiscal year. Existing law provides local
agencies with seven months after the close of the fiscal
year to report financial transactions to the Controller's
office. The Committee may wish to consider aligning the
deadline in this bill with the deadline in existing law by
replacing the 120 days with seven months.
c) Technical Correction. Additionally, the Committee may
wish to ask the author to correct the reference in
subdivision (a) to an "audit report" and use the correct
term per the cross reference to existing law which is an
"annual report".
9)Arguments in Support. Supporters argue that there is little
oversight of CFD revenue, expenditures, and debt management by
the public. CFD funding and usage is not readily transparent,
and therefore, not generally understood. Additionally,
supporters argue that districts of all types that issue
long-term debt should be held to a higher level of scrutiny.
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10)Arguments in Opposition. The California State Association of
Counties argues, "We believe many of the reporting
requirements in AB 1666 should and can be simplified to better
reflect existing reports?Making the most of existing reports
that are already posted on publicly accessible local and state
agency websites will reduce the burden on counties while
promoting the goals of AB 1666. Unfortunately, our concerns
also extend to the request for data not captured in the CDIAC
or [State Controller's Office] SCO reports. In some instances
local agencies are unable to comply due to a project funding
arrangement with property owners or due to prohibitions in
state law."
REGISTERED SUPPORT / OPPOSITION:
Support
California Association of County Treasurers and Tax Collectors
California Taxpayers Association
Cities of Mission Viejo, San Clemente, and San Juan Capistrano
Honorable L. Anthony Beall, Mayor, City of Rancho Santa
Margarita
Honorable Laurie Davies, Mayor, City of Laguna Niguel
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Howard Jarvis Taxpayers Association
Orange County Auditor-Controller, Eric Wollery
Orange County Assessor Department
Orange County Association of Realtors
Orange County Taxpayers Association
Talega Residents for Fair Taxation
Opposition
California State Association of Counties (unless amended)
Analysis Prepared by:Misa Lennox / L. GOV. / (916) 319-3958
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