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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