BILL ANALYSIS Ó
AB 2116
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Date of Hearing: April 6, 2016
ASSEMBLY COMMITTEE ON EDUCATION
Patrick O'Donnell, Chair
AB 2116
(Gallagher) - As Introduced February 17, 2016
SUBJECT: School bonds: citizens' oversight committees: school
bond waste prevention actions
SUMMARY: Adds new requirements to the election and oversight of
local general obligation education bonds. Specifically, this
bill:
1)Requires the governing board of a school district to obtain
reasonable and informed projections of assessed property
valuations from an independent third party not associated with
the bond measure prior to ordering a bond election.
2)Requires a citizens' oversight committee established by the
governing board of a school district to annually review the
school district's arrangements for issuing and repaying its
bonds.
3)Authorizes, in the case of a school district only, a county
auditor with jurisdiction over the school district to commence
an action to obtain an order restraining and preventing any
expenditure of bond proceeds if it appears by the complaint or
affidavits that governing board of the school district has
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failed to meet specified conditions.
EXISTING LAW:
1)Authorizes, under Section 1 of Article XIII A of the
California Constitution, school districts, community college
districts, or county offices of education to pass a general
obligation bond by 55% vote, provided that the local
initiative includes the following accountability measures:
a) A requirement that the proceeds from the sale of the
bonds be used only for the construction, reconstruction,
rehabilitation, or replacement of school facilities,
including the furnishing and equipping of school
facilities, or the acquisition or lease of real property
for school facilities, and not for any other purpose;
b) Provide a list of the specific school facilities
projects to be funded and certification that the school
district board, community college board, or county office
of education has evaluated safety, class size reduction,
and information technology needs in developing that list;
c) A requirement that the school district board, community
college board, or county office of education conduct an
annual, independent performance audit to ensure that the
funds have been expended only on the specified projects;
and,
d) A requirement that the school district board, community
college board, or county office of education conduct an
annual, independent financial audit of the proceeds from
the sale of the bonds until all of those proceeds have been
expended for the school facilities projects.
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2)Requires the governing board of a school district or community
college district to establish and appoint members to an
independent citizens' oversight committee within 60 days of
the date that the governing board enters the election results
on its minutes. (Education Code (EC) Section 15278(a))
3)Specifies that the purpose of the citizens' oversight
committee shall be to inform the public concerning the
expenditure of bond revenues, including advising the public as
to whether a school district or community college district is
in compliance with the authorized uses of bond funds pursuant
to Proposition 39 (2000). (EC Section 15278(b))
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS: Proposition 39. In 2000, voters passed Proposition
39, a Constitutional Amendment which, among others, gave school
and community college districts the opportunity to seek approval
of a local school facilities bond based on 55% vote rather than
2/3 vote, provided that the local bond initiative meets
specified accountability measures, including identifying the
projects to be funded by the bond measure and conducting annual
independent financial and performance audits. AB 1908
(Lempert), Chapter 44, Statutes of 2000, a companion bill to
Proposition 39, requires each district, within 60 days of the
passage of a local bond with 55% to appoint a citizens'
oversight committee (oversight committee) to monitor and review
expenditures to ensure compliance with Proposition 39
requirements, and to keep the public informed about bond
expenditures. The oversight committee must be comprised of a
minimum of seven members. For school districts, they must
include representatives of the business community, a bona fide
taxpayers' organization, and a senior citizens' organization; a
parent of a student attending the school district; and a parent
active in a school's parent-teacher organization.
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According to the author, current law is "not enough to protect
the public from dodgy bond practices." This bill contains three
proposals.
Assessed valuations. This bill requires a governing board of a
school district to obtain "reasonable and informed" projections
of assessed property valuations from an independent third party
not associated with the bond measure prior to ordering a bond
election. According to the author, bond advisors may present
overly positive revenue projections when presenting a proposed
bond measure to a governing board. Bonds are paid by an ad
valorem tax (up to $60 per $100,000 for a unified school
district) based on property values. Higher assessed valuations
would yield higher revenues to pay for a bond. The author
states that an independent third party would better inform a
governing board in determining the amount of a bond to submit to
voters. Staff notes that predicting future assessed valuations
cannot be guaranteed due to sudden changes to market conditions
and the economy. Moreover, bond issuance may be years after
voters approve a bond. By the time a school district issues a
bond, assessed valuations may be very different than that
predicted prior to a bond election. Rather than requiring a
school district to pay for an additional report, which may or
may not result in more accurate projections, staff recommends
requiring projections of assessed valuations to take into
consideration projections made by the county assessor.
Citizens' oversight committee. The bill requires an oversight
committee to annually review the school district's arrangements
for issuing and repaying its bonds. Bonds are not always issued
frequently. Once an issuance is made, payments are made on a
regular schedule. It is unclear why oversight committees should
be required to review bond arrangements on an annual basis.
Education Code Section 15141 requires bond issuances to be
approved through passage of a resolution at a governing board
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meeting containing specified information. There is nothing
prohibiting oversight committee members from attending governing
board meetings or reviewing bond issuance documents currently.
Staff recommends striking this provision.
Bond accountability. Under current law, a citizen residing in
the school or community college district who is assessed an ad
valorem tax may initiate an action to obtain an order
restraining or preventing expenditure of bond funds if the
expenditure or purpose for the funds are not used in accordance
with authorized uses of funds prescribed by Proposition 39 or if
a school district has not appointed an oversight committee.
This bill authorizes a county auditor with jurisdiction over the
school district to initiate an action. Current law already
establishes accountability measures, including requiring the
establishment of citizens' oversight committees and the
requirement for the district to perform an annual performance
audit and an annual financial audit (both of which must be
provided to the bond oversight committee). Current law, under
bond issuance statutes, also prohibits the proceeds of bond
funds to be used for any other purpose other than for which the
bond was issued. The purpose of the provision allowing an
action to be initiated is to give individuals paying the taxes
recourse and should be preserved as such. Staff recommends
striking this provision.
The author states, "Borrowing for school construction has
exploded in the last decade. As borrowing hits record highs, it
is more important than ever that school construction bond funds
be fiscally sound, and their financing mechanisms transparent.
AB 2116 ensures that future school construction bonds are
subject to stricter scrutiny and transparency."
REGISTERED SUPPORT / OPPOSITION:
AB 2116
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Support
Howard Jarvis Taxpayers Association
Opposition
None on file
Analysis Prepared by:Sophia Kwong Kim / ED. / (916) 319-2087