Amended in Senate April 27, 2016

Amended in Senate March 17, 2016

Senate Bill No. 1029

Introduced by Senator Hertzberg

February 12, 2016

An act to amend Section 8855 of the Government Code, relating to state government.

LEGISLATIVE COUNSEL’S DIGEST

SB 1029, as amended, Hertzberg. California Debt and Investment Advisory Commission: accountability reports.

Existing law establishes the California Debt and Investment Advisory Commission to, among other things, maintain contact with state and municipal bond issuers, underwriters, investors, and credit rating agencies to improve the market for state and local government debt issues, and assist state and local governments to prepare, market, and sell begin delete its end delete begin insert their end insert debt issues. Existing law requires the commission to collect, maintain, and provide comprehensive information on all state and all local debt authorization and issuance, and serve as a statistical clearinghouse for all state and local debt issuance.

This bill would additionally require the commission to track and report on all state and local outstanding debt until fully repaid or redeemed.

Existing law requires the issuer of debt of state or local government to submit reports to the commission, within specified timeframes, of the proposed issuance of debt and of final sale, as provided.

This bill would require that the report of proposed debt include a certification by the issuer that it has adopted local debt policies, which include specified provisions, concerning the use of debt and that the contemplated debt issuance is consistent with those local debt policies.

This bill would also require begin delete the issuer of any debt issue of state or local government that has either outstanding debt or debt that has been authorized by voter approval or by action of the issuer but not yet issued as of the end of the prior fiscal year to, no later than January 1 of each year, provide a debt accountability report to the commission that includes specified information with respect to each authorized debt issue as of the end of the prior fiscal year. end delete begin insert a state or local public agency to submit an annual report for any issue of debt for which it has submitted a report of final sale. The bill would require the annual report to cover a reporting period of July 1 to June 30 and to include specified information about debt issued and outstanding and the use of proceeds from debt during the reporting period. The bill would require that the report be submitted within 7 months after the end of the reporting period by any method approved by the commission. end insert

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This bill would make various findings and declarations regarding its provisions.

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By adding to the duties of local officials with respect to reports to the commission, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert The Legislature hereby finds and declares all of
the following: end insert

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(a) California’s 4,200 units of local government have issued
$1.5 trillion in debt since 1984. The California Debt and Investment
Advisory Commission (CDIAC) was created in 1982 to provide
information, education, and technical assistance on debt issuance
and investments to local public agencies and other public finance
professionals. Over the past three decades, CDIAC has emerged
as a national thought leader in public finance.

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(b) Nationally, there is approximately $3.7 trillion of state and
local government debt outstanding. Of all outstanding state and
local government debt, approximately 75 percent is held by
households and mutual funds owned predominantly by households.
State governments, local governments, and their stakeholders
benefit from better data about public debt. Transparency on public
debt promotes better government and market integrity. It is in the
interest of the people that state and local agencies utilize
technological opportunities to provide transparency to the public.

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(c) State and local agencies should adopt comprehensive written
debt management policies pursuant to the recommendation of the
Government Finance Officers Association, a professional
organization of over 18,000 public officials united to enhance and
promote the professional management of governmental financial
resources. These policies should reflect local, state, and federal
laws and regulations.

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(d) It is the intent of the Legislature that all debt issuance of
the state and of local governments be published in a single,
transparent online database that allows the citizens of California
to analyze, interpret, and understand how debt authorized by the
public is utilized to finance facilities and services at the state and
local level.

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begin delete SECTION 1. end delete

begin insert SEC. 2. end insert   

Section 8855 of the Government Code is amended to
read:

8855.  

(a) There is created the California Debt and Investment
Advisory Commission, consisting of nine members, selected as
follows:

(1) The Treasurer, or his or her designee.

(2) The Governor or the Director of Finance.

(3) The Controller, or his or her designee.

(4) Two local government finance officers appointed by the
Treasurer, one each from among persons employed by a county
and by a city or a city and county of this state, experienced in the
issuance and sale of municipal bonds and nominated by
associations affiliated with these agencies.

(5) Two Members of the Assembly appointed by the Speaker
of the Assembly.

(6) Two Members of the Senate appointed by the Senate
Committee on Rules.

(b) (1) The term of office of an appointed member is four years,
but appointed members serve at the pleasure of the appointing
power. In case of a vacancy for any cause, the appointing power
shall make an appointment to become effective immediately for
the unexpired term.

(2) Any legislators appointed to the commission shall meet with
and participate in the activities of the commission to the extent
that the participation is not incompatible with their respective
positions as Members of the Legislature. For purposes of this
chapter, the Members of the Legislature shall constitute a joint
interim legislative committee on the subject of this chapter.

(c) The Treasurer shall serve as chairperson of the commission
and shall preside at meetings of the commission.

(d) Appointed members of the commission shall not receive a
salary, but shall be entitled to a per diem allowance of fifty dollars
($50) for each day’s attendance at a meeting of the commission
not to exceed three hundred dollars ($300) in any month, and
reimbursement for expenses incurred in the performance of their
duties under this chapter, including travel and other necessary
expenses.

(e) The commission may adopt bylaws for the regulation of its
affairs and the conduct of its business.

(f) The commission shall meet on the call of the chairperson,
at the request of a majority of the members, or at the request of
the Governor. A majority of all nonlegislative members of the
commission constitutes a quorum for the transaction of business.

(g) The office of the Treasurer shall furnish all administrative
assistance required by the commission.

(h) The commission shall do all of the following:

(1) Assist all state financing authorities and commissions in
carrying out their responsibilities as prescribed by law, including
assistance with respect to federal legislation pending in Congress.

(2) Upon request of any state or local government units, to assist
them in the planning, preparation, marketing, and sale of debt
issues to reduce cost and to assist in protecting the issuer’s credit.

(3) Collect, maintain, and provide comprehensive information
on all state and all local debt authorization and issuance, track and
report on all state and local outstanding debt until fully repaid or
redeemed, and serve as a statistical clearinghouse for all state and
local debt. This information shall be available to the public.

(4) Maintain contact with state and municipal bond issuers,
underwriters, credit rating agencies, investors, and others to
improve the market for state and local government debt issues.

(5) Undertake or commission studies on methods to reduce the
costs and improve credit ratings of state and local issues.

(6) Recommend changes in state laws and local practices to
improve the sale and servicing of state and local debts.

(7) Establish a continuing education program for local officials
having direct or supervisory responsibility over municipal
investments and debt issuance. The commission shall undertake
these and any other activities necessary to disclose investment and
debt issuance practices and strategies that may be conducive for
oversight purposes.

(8) Collect, maintain, and provide information on local agency
investments of public funds for local agency investment.

(9) Publish a monthly newsletter describing and evaluating the
operations of the commission during the preceding month.

(i) (1) The issuer of any proposed debt issue of state or local
government shall, no later than 30 days prior to the sale of any
debt issue, submit a report of the proposed issuance to the
commission by any method approved by the commission. This
subdivision shall also apply to any nonprofit public benefit
corporation incorporated for the purpose of acquiring student loans.
The commission may require information to be submitted in the
report of proposed debt issuance that it considers appropriate.
Failure to submit the report shall not affect the validity of the sale.
The report of proposed debt issuance shall include a certification
by the issuer that it has adopted local debt policies concerning the
use of debt and that the contemplated debt issuance is consistent
with those local debt policies. A local debt policy shall include all
of the following:

(A) The purposes for which the debt proceeds may be used.

(B) The types of debt that may be issued.

(C) The relationship of the debt to, and integration with, the
issuer’s capital improvement program or budget, if applicable.

(D) Policy goals related to the issuer’s planning goals and
objectives.

(E) The internal control procedures that the issuer has
implemented, or will implement, to ensure that the proceeds of the
proposed debt issuance will be directed to the intended use.

(2) In the case of an issue of bonds the proceeds of which will
be used by a governmental entity other than the issuer, the issuer
may rely upon a certification by that other governmental entity
that it has adopted the policies described in subparagraphs (C),
(D), and (E) of paragraph (1), and references to the “issuer” in
those subparagraphs shall be deemed to refer instead to the other
governmental entity.

(j) The issuer of any debt issue of state or local government,
not later than 21 days after the sale of the debt, shall submit a report
of final sale to the commission by any method approved by the
commission. A copy of the final official statement for the issue
shall accompany the report of final sale. If there is no official
statement, the issuer shall provide each of the following documents,
if they exist, along with the report of final sale:

(1) Other disclosure document.

(2) Indenture.

(3) Installment sales agreement.

(4) Loan agreement.

(5) Promissory note.

(6) Bond purchase contract.

(7) Resolution authorizing the issue.

(8) Bond specimen.

The commission may require information to be submitted in the
report of final sale that it considers appropriate. The issuer may
redact confidential information contained in the documents if the
redacted information is not information that is otherwise required
to be reported to the commission.

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(k) (1) The issuer of any debt issue of state or local government
that has either outstanding debt or debt that has been authorized
by voter approval or by action of the issuer but not yet issued as
of the end of the prior fiscal year shall, no later than January 1 of
each year, provide a debt accountability report to the commission
that includes the following information with respect to each
authorized debt issue as of the end of the prior fiscal year:

(A) The principal amount of the issue then outstanding.

(B) The amount of proceeds of the issue that remain unspent.

(C) The amount of debt authorized by the bond act or other
appropriate authorization relevant to the issue that remains
authorized but not issued.

(D) A list of the purposes for which the debt has been issued
and the amounts expended for each purpose in the prior fiscal year
from the proceeds of the issue.

(E) Any additional information the commission deems
appropriate to fulfill its statutory duties, to be provided in a format
prescribed by the commission.

(2) The requirements of subparagraphs (A) to (C), inclusive, of
paragraph (1) may be satisfied by submitting to the commission a
certified copy of the issuer’s annual report of financial transactions
for the immediately preceding fiscal year submitted to the
Controller, as required by Section 12463, in the form and manner
prescribed by the commission.

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(k) (1) A public agency, whether state or local, shall submit an
annual report for any issue of debt for which it has submitted a
report of final sale pursuant to subdivision (j). The annual report
shall cover a reporting period from July 1 to June 30 and shall be
submitted no later than seven months after the end of the reporting
period by any method approved by the commission. The annual
report shall be required for each issue of debt that is outstanding
at any time during the reporting period and shall consist of the
following information:

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(A) Debt authorized during the reporting period, which shall
include the following:

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(i) Debt authorized at the beginning of the reporting period.

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(ii) Debt authorized and issued during the reporting period.

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(iii) Debt authorized but not issued at the end of the reporting
period.

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(iv) Debt authority that has lapsed during the reporting period.

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(B) Debt outstanding during the reporting period, which shall
include the following:

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(i) Principal balance at the beginning of the reporting period.

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(ii) Principal paid during the reporting period.

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(iii) Principal outstanding at the end of the reporting period.

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(C) The use of proceeds of issued debt during the reporting
period, which shall include the following:

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(i) Debt proceeds available at the beginning of the reporting
period.

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(ii) Proceeds spent during the reporting period and the purposes
for which it was spent.

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(iii) Debt proceeds remaining at the end of the reporting period.

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(2) Compliance with this subdivision shall be limited to debt
issuance with proceeds remaining unspent during the reporting
period.

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(3) The commission may, if technology permits, develop an
alternate reporting method, provided that any alternate reporting
method is in furtherance of the purpose of collecting the data
required by this subdivision.

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begin delete SEC. 2. end delete

begin insert SEC. 3. end insert   

If the Commission on State Mandates determines that
this act contains costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.