Amended in Assembly June 15, 2016

Amended in Senate May 31, 2016

Amended in Senate April 27, 2016

Amended in Senate March 17, 2016

Senate Bill No. 1029

Introduced by Senator Hertzberg

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(Coauthor: Senator Wieckowski)

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(Coauthors: Assembly Members begin delete Dodd end delete begin insert Dodd, Gallagher, end insert and Gatto)

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 to 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 and issuance and to 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 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 on or after January 21, 2017. The bill would require the annual report to cover a reporting period of July 1 to June 30 begin insert , inclusive, end insert 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.

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

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

SECTION 1.  

The Legislature hereby finds and declares all of
the following:

(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.

(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.

(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.

(d) It is the intent of the Legislature that all debt issuance of begin delete the end delete
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.

SEC. 2.  

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.

(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) on or after January
21, 2017. The annual report shall cover a reporting period from
July 1 to June begin delete 30 end delete begin insert 30, inclusive, end insert 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 consist of
the following information:

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

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

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

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

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

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

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

(ii) Principal paid during the reporting period.

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

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

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

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

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

(2) Compliance with this subdivision shall be required for each
issue of debt with outstanding debt, debt that has been authorized
but not issued, or both during the reporting period.

(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.