BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: AB 2429
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|Author: |Thurmond |
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|Version: |March 18, 2016 Hearing |
| |Date: June 8, 2016 |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Kathleen Chavira |
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Subject: School district and community college district bonds
NOTE: This measure has been referred to the Committees on
Education and
Governance and Finance. A "do pass" motion should
include referral to the
Governance and Finance Committee.
SUMMARY
This bill increases the cap on bonded indebtedness for school
districts and community college districts.
BACKGROUND
Existing law 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. Existing law also
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 § 15100, et seq. and Government Code § 53506, et
seq.)
Existing law cap the total amount of bonds issued by a school
district at 1.25% of the taxable property of the district and
caps the tax rate at $30 per $100,000 of taxable property. (EC §
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15102 and § 15268)
Existing law caps the total amount of bonds issued by a unified
school district and a community college district at 2.5% of the
taxable property of the district and caps the tax rate at $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 § 15106 and § 15270)
ANALYSIS
This bill increases the level of bonded indebtedness for school
districts and community college districts. Specifically, it:
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.
STAFF COMMENTS
1) Intent of the bill. Current law grants any school district
governing board the authority to request a waiver of all or
part of any section of the Education Code or any regulation
adopted by the Board to implement state law, with specified
exceptions (Education Code Section 33050-33053). Under
these provisions, school districts can and do apply for
waivers of the existing statutory bond indebtedness caps.
According to the author, this bill is intended to reduce
administrative costs to applicant school districts and the
State Board while also increasing the ability to generate
revenue for school facilities construction and renovations
at the local level.
2) Is there a statewide need? K-12 districts have sought and
received waivers to increase their percentage of bonded
indebtedness beyond the statutory limits. From 2001-2015,
the State Board received and approved 52 such waiver
requests. While the State Board has not denied any
requests, it has established conditions for the approvals,
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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
cap. There is currently no process for waiver of these
Education Code provisions for community colleges.
It is unclear how many districts have reached their cap for
bond indebtedness under current law. It is also unclear
whether districts could use the expanded authority since
any increased issuance of bonds would still be subject to
voter approval.
Given the existence of a waiver process that appears to be
working, as well as the limited number of districts that
have requested such waivers, is a permanent statutory
change necessary?
3) Related Governor's Actions. Amid concerns about the
complexity and structure of the current program and the
state's increasing debt service obligations, the Governor's
2015 and 2016 budget proposals discussed significant
changes to the way school facilities are funded. Among
other things, the Governor proposed to expand revenue
generation tools at the local level by expanding local
funding capacity and increasing caps on local bond
indebtedness. The Governor also proposed to restructure
developer fees to set one level for all projects at a level
between existing Level II and Level III fees subject to
local negotiation. The Governor has also noted that he is
prepared to engage with the Legislature and education
stakeholders to shape a future state program that is
focused on districts with the greatest need, including
communities with low property values and few borrowing
options, as well as overcrowded schools.
4) One leg of a three-legged stool? Under current law,
funding for new construction and modernization of school
facilities comes from both state and local sources.
Current law establishes the School Facility Program (SFP)
under which the state provides general obligation bond
funding for various school construction projects. Local
funding comes from a variety of sources including local
general obligation bonds, Mello-Roos bonds and developer
fees. This bill would make changes to facilitate the
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ability to generate revenue from local general obligation
bonds.
State bond funds are essentially exhausted. Since 2009, the
State Allocation Board (SAB) has been making "unfunded
approvals" which represented approved projects waiting to
convert to funding apportionments when bonds are sold and
cash becomes available. In addition, since November 1,
2012, the SAB has maintained an "Applications Received
Beyond Bond Authority" list. At its May 25th meeting, the
SAB took action to declare that new construction
funds/apportionments were no longer available, thereby
authorizing districts to impose Level 3 developer fees.
The same day, the California Building Industry Association
(CBIA) filed a legal challenge to the SAB action in
Sacramento Superior Court. A temporary restraining order
(TRO) was imposed until the court holds a hearing
(currently scheduled for July 1, 2016) to decide whether a
preliminary injunction should be issued.
Additionally, as noted in staff comment #3, this
administration has proposed significant changes to the
state's role in funding school facilities.
Should a change in the capacity to incur local bond debt be
authorized absent a broader discussion of the need for
accompanying changes to developer fees or the role of state
general obligation bond revenues?
SUPPORT
Alameda County Office of Education
Albany Unified School District Board of Education
OPPOSITION
California Charter Schools Association Advocates
Howard Jarvis Taxpayers Association
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