BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 222| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 222 Author: Block (D) Amended: 4/15/15 Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 4/8/15 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Pavley NO VOTE RECORDED: Bates SUBJECT: School bonds: school facilities: statutory lien SOURCE: Author DIGEST: This bill specifies that general obligation bonds issued and sold by local governments, including school districts, are secured by a statutory lien. ANALYSIS: Existing law authorizes cities, counties, school districts, community college districts, and some special districts to issue general obligation (GO) bonds, secured by ad valorem property tax revenues, with voter approval. This bill: 1)Defines "local agency" as any city, county, city and county, school district, community college district, authority, or special district. SB 222 Page 2 2)Defines "general obligation bonds" as bonds, warrants, notes or other evidence of indebtedness of a local agency payable, both principal and interest, from the proceeds of ad valorem taxes which may be levied pursuant to Article XIIIA, Section 1(b)(2) or Section 1(b)(3) of the California Constitution. 3)Directs that GO bonds issued and sold by or on behalf of a local agency shall be secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax. The lien shall automatically arise without the need for any action or authorization by the local agency or its governing body. The lien shall be valid and binding from the time the bonds are executed and delivered. The revenues received pursuant to the levy and collection of the tax shall be immediately subject to the lien, and the lien shall immediately attach to the revenues and be effective, binding, and enforceable against the local agency, its successors, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for any physical delivery, recordation, filing, or further act. 4)Declares that the bill's provisions are intended to neither supplement nor limit a local agency's power to issue GO bonds conferred by any other law. FISCAL EFFECT: Appropriation: No Fiscal Com.:NoLocal: No SUPPORT: (Verified4/14/15) California Association of School Business Officials California Public Securities Association Coalition for Adequate School Housing Lemon Grove School District SB 222 Page 3 Riverside County School District Superintendents Riverside County Superintendent of Schools San Diego Unified School District. OPPOSITION: (Verified4/14/15) None received ARGUMENTS IN SUPPORT: According to supporters, bond rating agencies perceive that some school districts' distressed financial conditions could pose a threat to those districts' GO bond payments. As a result, districts in financial difficulty receive lower GO bond ratings than do districts in more stable financial condition. Fiscally distressed school districts are often among those districts that most need the kinds of facilities renovation or rehabilitation that can be financed through GO debt. Lower bond ratings increase those districts' borrowing costs, creating an additional obstacle to financing their facilities projects. By enacting language that unambiguously attaches statutory liens to GO bonds issued by all local governments, including school districts, SB 222 will improve some local governments' bond ratings. Higher ratings will reduce the bonds' interest rates, allowing taxpayers to finance more public improvements at lower costs. Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119 4/15/15 16:29:09 **** END *** SB 222 Page 4