Amended in Senate May 31, 2016

Amended in Senate April 27, 2016

Amended in Senate March 17, 2016

Senate BillNo. 1029


Introduced by Senator Hertzberg

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(Coauthors: Assembly Members Dodd and Gatto)

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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 debtbegin delete issues,end deletebegin insert issuesend insert andbegin insert toend insert assist state and local governments to prepare, market, and sell their debt issues. Existing law requires the commission to collect, maintain, and provide comprehensive information on all state and all local debt authorization andbegin delete issuance,end deletebegin insert issuanceend insert andbegin insert toend insert 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 specifiedbegin delete provisions,end deletebegin insert provisionsend insert concerning the use of debt and that the contemplated debt issuance is consistent with those local debt policies.

This bill would also require a state or local public agency to submit an annual report for any issue of debt for which it has submitted a report of finalbegin delete sale.end deletebegin insert sale on or after January 21, 2017.end insert 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.

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.

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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.

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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.

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Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: begin deleteyes end deletebegin insertnoend insert.

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

P2    1

SECTION 1.  

The Legislature hereby finds and declares all of
2the following:

3(a) California’s 4,200 units of local government have issued
4$1.5 trillion in debt since 1984. The California Debt and Investment
5Advisory Commission (CDIAC) was created in 1982 to provide
6information, education, and technical assistance on debt issuance
7and investments to local public agencies and other public finance
8professionals. Over the past three decades, CDIAC has emerged
9as a national thought leader in public finance.

10(b) Nationally, there is approximately $3.7 trillion of state and
11local government debt outstanding. Of all outstanding state and
P3    1local government debt, approximately 75 percent is held by
2households and mutual funds owned predominantly by households.
3State governments, local governments, and their stakeholders
4benefit from better data about public debt. Transparency on public
5debt promotes better government and market integrity. It is in the
6interest of the people that state and local agencies utilize
7technological opportunities to provide transparency to the public.

8(c) State and local agencies should adopt comprehensive written
9debt management policies pursuant to the recommendation of the
10Government Finance Officers Association, a professional
11organization of over 18,000 public officials united to enhance and
12promote the professional management of governmental financial
13resources. These policies should reflect local, state, and federal
14laws and regulations.

15(d) It is the intent of the Legislature that all debt issuance of the
16state and of local governments be published in a single, transparent
17online database that allows the citizens of California to analyze,
18interpret, and understand how debt authorized by the public is
19utilized to finance facilities and services at the state and local level.

20

SEC. 2.  

Section 8855 of the Government Code is amended to
21read:

22

8855.  

(a) There is created the California Debt and Investment
23Advisory Commission, consisting of nine members, selected as
24follows:

25(1) The Treasurer, or his or her designee.

26(2) The Governor or the Director of Finance.

27(3) The Controller, or his or her designee.

28(4) Two local government finance officers appointed by the
29Treasurer, one each from among persons employed by a county
30and by a city or a city and county of this state, experienced in the
31issuance and sale of municipal bonds and nominated by
32associations affiliated with these agencies.

33(5) Two Members of the Assembly appointed by the Speaker
34of the Assembly.

35(6) Two Members of the Senate appointed by the Senate
36Committee on Rules.

37(b) (1) The term of office of an appointed member is four years,
38but appointed members serve at the pleasure of the appointing
39power. In case of a vacancy for any cause, the appointing power
P4    1shall make an appointment to become effective immediately for
2the unexpired term.

3(2) Any legislators appointed to the commission shall meet with
4and participate in the activities of the commission to the extent
5that the participation is not incompatible with their respective
6 positions as Members of the Legislature. For purposes of this
7chapter, the Members of the Legislature shall constitute a joint
8 interim legislative committee on the subject of this chapter.

9(c) The Treasurer shall serve as chairperson of the commission
10and shall preside at meetings of the commission.

11(d) Appointed members of the commission shall not receive a
12salary, but shall be entitled to a per diem allowance of fifty dollars
13($50) for each day’s attendance at a meeting of the commission
14not to exceed three hundred dollars ($300) in any month, and
15reimbursement for expenses incurred in the performance of their
16duties under this chapter, including travel and other necessary
17expenses.

18(e) The commission may adopt bylaws for the regulation of its
19affairs and the conduct of its business.

20(f) The commission shall meet on the call of the chairperson,
21at the request of a majority of the members, or at the request of
22the Governor. A majority of all nonlegislative members of the
23commission constitutes a quorum for the transaction of business.

24(g) The office of the Treasurer shall furnish all administrative
25assistance required by the commission.

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

27(1) Assist all state financing authorities and commissions in
28carrying out their responsibilities as prescribed by law, including
29assistance with respect to federal legislation pending in Congress.

30(2) Upon request of any state or local government units, to assist
31them in the planning, preparation, marketing, and sale of debt
32issues to reduce cost and to assist in protecting the issuer’s credit.

33(3) Collect, maintain, and provide comprehensive information
34on all state and all local debt authorization and issuance, track and
35report on all state and local outstanding debt until fully repaid or
36redeemed, and serve as a statistical clearinghouse for all state and
37local debt. This information shall be available to the public.

38(4) Maintain contact with state and municipal bond issuers,
39underwriters, credit rating agencies, investors, and others to
40improve the market for state and local government debt issues.

P5    1(5) Undertake or commission studies on methods to reduce the
2costs and improve credit ratings of state and local issues.

3(6) Recommend changes in state laws and local practices to
4improve the sale and servicing of state and local debts.

5(7) Establish a continuing education program for local officials
6having direct or supervisory responsibility over municipal
7investments and debt issuance. The commission shall undertake
8these and any other activities necessary to disclose investment and
9debt issuance practices and strategies that may be conducive for
10oversight purposes.

11(8) Collect, maintain, and provide information on local agency
12investments of public funds for local agency investment.

13(9) Publish a monthly newsletter describing and evaluating the
14operations of the commission during the preceding month.

15(i) (1) The issuer of any proposed debt issue of state or local
16government shall, no later than 30 days prior to the sale of any
17debt issue, submit a report of the proposed issuance to the
18commission by any method approved by the commission. This
19subdivision shall also apply to any nonprofit public benefit
20corporation incorporated for the purpose of acquiring student loans.
21The commission may require information to be submitted in the
22report of proposed debt issuance that it considers appropriate.
23Failure to submit the report shall not affect the validity of the sale.
24The report of proposed debt issuance shall include a certification
25by the issuer that it has adopted local debt policies concerning the
26use of debt and that the contemplated debt issuance is consistent
27with those local debt policies. A local debt policy shall include all
28of the following:

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

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

31(C) The relationship of the debt to, and integration with, the
32issuer’s capital improvement program or budget, if applicable.

33(D) Policy goals related to the issuer’s planning goals and
34objectives.

35(E) The internal control procedures that the issuer has
36implemented, or will implement, to ensure that the proceeds of the
37proposed debt issuance will be directed to the intended use.

38(2) In the case of an issue of bonds the proceeds of which will
39be used by a governmental entity other than the issuer, the issuer
40may rely upon a certification by that other governmental entity
P6    1that it has adopted the policies described in subparagraphs (C),
2(D), and (E) of paragraph (1), and references to the “issuer” in
3those subparagraphs shall be deemed to refer instead to the other
4governmental entity.

5(j) The issuer of any debt issue of state or local government,
6not later than 21 days after the sale of the debt, shall submit a report
7of final sale to the commission by any method approved by the
8commission. A copy of the final official statement for the issue
9shall accompany the report of final sale. If there is no official
10statement, the issuer shall provide each of the following documents,
11if they exist, along with the report of final sale:

12(1) Other disclosure document.

13(2) Indenture.

14(3) Installment sales agreement.

15(4) Loan agreement.

16(5) Promissory note.

17(6) Bond purchase contract.

18(7) Resolution authorizing the issue.

19(8) Bond specimen.

20The commission may require information to be submitted in the
21report of final sale that it considers appropriate. The issuer may
22redact confidential information contained in the documents if the
23redacted information is not information that is otherwise required
24to be reported to the commission.

25(k) (1) A public agency, whether state or local, shall submit an
26annual report for any issue of debt for which it has submitted a
27report of final sale pursuant to subdivisionbegin delete (j).end deletebegin insert (j) on or after
28January 21, 2017.end insert
The annual report shall cover a reporting period
29from July 1 to June 30 and shall be submitted no later than seven
30months after the end of the reporting period by any method
31approved by the commission. The annual report shallbegin delete be required
32for each issue of debt that is outstanding at any time during the
33reporting period and shallend delete
consist of the following information:

34(A) Debt authorized during the reporting period, which shall
35include the following:

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

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

38(iii) Debt authorized but not issued at the end of the reporting
39period.

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

P7    1(B) Debt outstanding during the reporting period, which shall
2include the following:

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

4(ii) Principal paid during the reporting period.

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

6(C) The use of proceeds of issued debt during the reporting
7period, which shall include the following:

8(i) Debt proceeds available at the beginning of the reporting
9period.

10(ii) Proceeds spent during the reporting period and the purposes
11for which it was spent.

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

13(2) Compliance with this subdivision shall bebegin delete limited toend deletebegin insert required
14for each issue ofend insert
debtbegin delete issuanceend delete withbegin delete proceeds remaining unspentend delete
15begin insert outstanding debt, debt that has been authorized but not issued, or
16bothend insert
during the reporting period.

17(3) The commission may, if technology permits, develop an
18alternate reporting method, provided that any alternate reporting
19method is in furtherance of the purpose of collecting the data
20required by this subdivision.

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SEC. 3.  

If the Commission on State Mandates determines that
22this act contains costs mandated by the state, reimbursement to
23local agencies and school districts for those costs shall be made
24pursuant to Part 7 (commencing with Section 17500) of Division
254 of Title 2 of the Government Code.

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