BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 973|
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CONSENT
Bill No: SB 973
Author: Committee on Governance and Finance
Introduced:2/8/16
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 3/30/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SUBJECT: Validations
SOURCE: Author
DIGEST: This bill enacts the Third Validating Act of 2016 which
validates the organization, boundaries, acts, and bonds of state
and local agencies.
ANALYSIS: For more than 70 years, the Legislature's annual
Validating Acts (Acts) have boosted the stability and credit
ratings of state and local bonds. The Acts cure public
officials' mistakes that might otherwise invalidate boundary
changes or bond issues. They also correct errors or omissions
by local agencies and state departments. The Acts do not
protect against fraud, corruption, or unconstitutional actions.
This bill validates the organization, boundaries, acts,
proceedings, and bonds of the state government, counties,
cities, special districts, and school districts, among other
public bodies.
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Comments
The annual 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. This bill gives legislative
protection to public agencies and private investors.
The three 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 Acts, while a corrupt
official faces prosecution regardless of the Acts.
By insulating state and local bonds against harmless errors, the
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 971) 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 972)
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will become operative in September, validating mistakes made
after SB 971. The Third Validating Act (SB 973) will take
effect on
January 1, 2017, covering the period between the chaptering of
SB 972 and the end of 2016.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified3/30/16)
California State Treasurer John Chiang
Alameda County LAFCO
Association of California Healthcare Districts
Association of California Water Agencies
California Association of Local Agency Formation Commissions
California Special Districts Association
California State Association of Counties
Contra Costa County LAFCO
East Bay Municipal Utility District
Rural County Representatives of California
San Mateo County LAFCO
Urban Counties of California
Yolo County LAFCO
OPPOSITION: (Verified3/30/16)
None received
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
3/31/16 15:45:57
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