BILL ANALYSIS Ó
SB 181
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Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Brian Maienschein, Chair
SB
181 (Committee on Governance and Finance) - As Introduced
February 9, 2015
SENATE VOTE: 37-0
SUBJECT: Validations.
SUMMARY: Validates the organization, boundaries, acts,
proceedings, and bonds of the state government, counties,
cities, special districts, and school districts, among other
public bodies.
EXISTING LAW allows agencies to make changes to the
organization, boundaries, acts, proceedings, and bonds of the
state, cities, counties, special districts, school districts,
and other local agencies.
FISCAL EFFECT: None
COMMENTS:
SB 181
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1)Bill Summary and Background on Validating Acts. The annual
Validating Acts protect investors from the chance that a minor
error might undermine the legal integrity of a public agency's
bond. Banks, pension funds, and other investors will not buy
public agencies' securities, unless they are sound
investments. Investors rely on legal opinions from bond
counsels to assure the bonds' credit worthiness. Without
legislative action to cure technical errors, bond counsels are
reluctant to certify bonds as good credit risks. SB 181 gives
legislative protection to public agencies and private
investors.
The three Validating Acts cure typographical, grammatical, and
procedural errors. They do not forgive fraud, corruption, or
unconstitutional acts. A local official who makes a technical
error will find reassurance in the Validating Acts, while a
corrupt official faces prosecution regardless of the Acts.
By insulating state and local bonds against harmless errors,
the Validating Acts save taxpayers' money. Strong legal
opinions from bond counsels result in higher credit ratings
for state and local bonds. Higher credit ratings allow state
and local officials to pay lower interest rates to private
investors. Lower borrowing costs save money for taxpayers.
Starting in the mid-1920s, the Legislature passed separate
validating acts for different types of bonds, several classes
of special districts, and various local boundary changes. By
the late 1930s, the practice was to pass annual validating
acts (AB 2842, Bennett, 1939). The current custom and
practice is to pass three Validating Acts that retroactively
cure public officials' mistakes. The first two measures are
urgency bills that go into effect when they are chaptered.
The First Validating Act (SB 181) will probably reach Governor
Brown's desk this spring, validating errors made before the
date on which the bill is chaptered. The Second Validating
Act (SB 182) will reach Governor Brown in August, validating
SB 181
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mistakes made after SB 181. The Third Validating Act (SB 183)
will take effect on January 1, 2016, covering the period
between the chaptering of SB 182 and the end of 2015.
2)Urgency Clause. This bill contains an urgency clause and
requires a two-thirds vote of each house.
REGISTERED SUPPORT / OPPOSITION:
Support
Association of California Water Agencies
California Association of Local Agency Formation Commissions
California Special Districts Association
California State Treasurer John Chiang
California State Association of Counties
Rural County Representatives of California.
Opposition
SB 181
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None on file
Analysis Prepared by:Debbie Michel / L. GOV. / (916)
319-3958