BILL ANALYSIS Ó SB 183 Page 1 Date of Hearing: June 17, 2015 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT Brian Maienschein, Chair SB 183 (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: 1)Bill Summary and Background on Validating Acts. The annual SB 183 Page 2 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 183 gives legislative protection to public agencies and private investors. 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 (Committee on Governance and Finance), Chapter 4, Statutes of 2015, validates errors made before the date on which the bill was chaptered. The Second Validating Act (SB 182) will reach Governor Brown in August, validating 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. SB 183 Page 3 REGISTERED SUPPORT / OPPOSITION: Support Association of California Water Agencies California Association of Local Agency Formation Commissions California State Association of Counties California Special Districts Association California State Controller Betty Yee California State Treasurer John Chiang California State Association of Counties East Bay Municipal Utility District SB 183 Page 4 Imperial Local Agency Formation Commission Rural County Representatives of California Santa Clara Valley Water District Opposition None on file Analysis Prepared by:Debbie Michel / L. GOV. / (916) 319-3958