BILL ANALYSIS Ó
AB 2429
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Date of Hearing: April 13, 2016
ASSEMBLY COMMITTEE ON EDUCATION
Patrick O'Donnell, Chair
AB 2429
(Thurmond) - As Amended March 18, 2016
[Note: This bill is double-referred to the Revenue & Taxation
Committee and will be heard by that Committee as it relates to
issues under its jurisdiction.]
SUBJECT: School district and community college district bonds
SUMMARY: Increases the level of bonded indebtedness for school
districts and community college districts. Specifically, this
bill:
1)Increases the cap on bonded indebtedness for elementary and
high school districts from 1.25% to 2% of the taxable property
of the district.
2)Increases the cap on bonded indebtedness for unified and
community college districts from 2.5% to 4% of the taxable
property of the district.
EXISTING LAW:
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1)Authorizes school districts and community college districts to
issue general obligation (GO) bonds upon approval by voters
and establishes a process and guidelines for such issuances
under the Education Code. Authorizes any city, county, city
and county, school district, community college district, or
special district to issue GO bonds, secured by the levy of ad
valorem taxes, and establishes a process for such issuances
under the Government Code. (Education Code (EC) Section 15100
et seq. and Government Code Section 53506 et seq.)
2)Specifies that the total amount of bonds issued by a school
district shall not exceed 1.25% of the taxable property of the
district and that the tax rate shall not exceed $30 per
$100,000 of taxable property. (EC Sections 15102 and 15268)
3)Specifies that the total amount of bonds issued by a unified
school district and a community college district shall not
exceed 2.5% of the taxable property of the district and that
the tax rate shall not exceed $60 per $100,000 of taxable
property for a unified school district and $25 per $100,000 of
taxable property for a community college district. (EC
Sections 15106 and 15270)
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS: Background. School districts and community college
districts pay for the construction and rehabilitation of school
and community college facilities through a combination of state
education bond funds, developer fees, and local bond funds. GO
bonds must be approved by voters, who agree to an ad valorem
(per assessed value of property) tax to pay for the bonds.
Prior to 2001, passage of a local bond required a 2/3
supermajority vote. In 2000, voters approved Proposition 39,
which provided an option for approval of a local education bond
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based on a 55% vote rather than a 2/3 vote. Concurrent to the
initiative, the Legislature passed AB 1908 (Lempert), Chapter
44, Statutes of 2000, an accountability measure that required
school districts to appoint a local bond citizens' oversight
committee to oversee bond expenditures and imposed limitations
on bonded indebtedness and tax rates as follows:
--------------------------------------------------------------
| |Limit on Bonded |Limit on Tax |
| |Indebtedness |Rate per |
| | |Assessed |
| | |Valuation |
| | | |
| | | |
|--------------------------+------------------+----------------|
|Elementary and High |1.25% of taxable |$30/$100,000 |
|School Districts |property | |
| | | |
| | | |
|--------------------------+------------------+----------------|
|Unified School Districts |2.5% of taxable |$60/$100,000 |
| |property | |
| | | |
| | | |
|--------------------------+------------------+----------------|
|Community College |2.5% of taxable |$25/$100,000 |
|Districts |property | |
| | | |
| | | |
--------------------------------------------------------------
Once bonds are authorized or approved by voters, districts can
issue or sell the bonds. The amount of bonds a district can
sell at any given time is limited by the caps on bonded
indebtedness and the limits on tax rates. These limits affect
the amount of revenue that can be generated because they are
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based on the assessed valuation of the properties in the
district. When the economy is good and property values are
high, a district is able to sell more bonds. When property
values are depressed, the amount that can be generated is less.
Therefore, bonds approved by voters can sometimes take a number
of years to issue. Smaller districts and districts with lower
assessed valuations are more likely to reach the caps before
larger school districts and/or districts with higher assessed
valuations.
State Board of Education (SBE) waivers. K-12 school districts
can seek a waiver from the SBE to waive the limits. Since 2001,
the SBE has approved approximately 60 waiver requests to
increase a school district's level of bonded indebtedness. The
SBE has not denied a request, but has established conditions for
the approvals, such as limiting the waiver for a specified
number of years. The approved waivers are generally within
those proposed by this bill, although some exceed the proposed
caps. The SBE has never approved a waiver to increase a school
district's tax rate.
What does this bill do? This bill increases the statutory
bonded indebtedness limits from 1.25% to 2% for an elementary
and high school district and from 2.5% to 4% for a unified
school district and a community college district. This bill
does not alter the limits on tax rates. If enacted, this bill
will enable districts to generate revenue up to the new limits
for bonds approved by voters without seeking a SBE waiver,
thereby reducing administrative costs for the SBE and for
districts.
Governor's budget. Over the past two budget cycles, the
Governor has indicated unwillingness to support a state bond and
has instead expressed support for expanding a district's ability
to generate funds locally. One of the tools identified by the
Governor is to increase the caps by the rate of inflation since
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they were established in 2000. The proposed adjustments in this
bill are consistent with an inflation adjustment from 2000.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
None on file
Analysis Prepared by:Sophia Kwong Kim / ED. / (916) 319-2087
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