BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1029|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: SB 1029
Author: Hertzberg (D), et al.
Amended: 5/31/16
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 3/30/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/27/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
SUBJECT: California Debt and Investment Advisory Commission:
accountability reports
SOURCE: California State Treasurer John Chiang
DIGEST: This bill requires state and local government debt
issuers to report to the California Debt and Investment Advisory
Commission (CDIAC) specified information about proposed and
outstanding debt.
ANALYSIS:
Existing law:
1)Requires CDIAC to collect, maintain, and provide comprehensive
information on all state and local debt authorization and
issuance, and serve as a statistical clearinghouse for all
state and local debt issues.
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2)Requires state and local government debt issuers to submit
several types of reports containing information about debt
issuance to CDIAC:
a) Any state or local government that proposes to issue
debt must submit a report of proposed debt issuance at
least 30 days before the debt issue is sold. CDIAC may
require information that it considers appropriate to be
submitted in the report of proposed debts issuance.
b) Any state or local government debt issuer must submit a
report of final sale not more than 21 days after the sale
of the debt. The report of final sale must be accompanied
by a copy of the final official statement for the issue or
if there is no official statement, by other specified
documents. State law allows CDIAC information that it
considers appropriate to be submitted in the report of
final sale.
c) All local governments issuing Mello-Roos Community
Facilities District bonds must provide a fiscal status
report containing specified information to CDIAC by October
30 of every year until the bonds have been retired.
d) All joint powers authorities issuing bonds pursuant to
the Marks-Roos Bond Pooling Act must provide a fiscal
status report containing specified information to CDIAC by
October 30 of every year until the final maturity of the
bonds.
This bill:
1)Requires that a report of proposed debt issuance submitted to
CDIAC must include a certification by the issuer that it has
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adopted local debt policies concerning the use of debt and
that the contemplated debt issuance is consistent with those
local debt policies. Specifically, this bill requires that a
local debt policy must include:
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) 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)Directs that a bond issuer that issues bonds on behalf of
another governmental entity may rely upon a certification by
that other governmental entity that it has adopted specified
debt policies.
3)Requires any state or local government debt issuer to provide
an annual report to CDIAC for any issue of debt for which the
issuer has submitted a report of final sale on or after
January 21, 2017.
4)Requires that the annual report must cover a reporting period
from July 1 to June 30 and must be submitted no later than
seven months after the end of the reporting period by any
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method approved by CDIAC.
5)Requires that the annual report must consist of the following
information:
a) Debt authorized during the reporting period, which must
include:
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 must
include:
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.
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c) The use of proceeds of issued debt during the reporting
period, which must include:
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.
6)Directs that compliance with the annual reporting requirement
is required for each issue of debt with outstanding debt, debt
that has been authorized but not issued, or both during the
reporting period.
7)Expands the statutory list of CDIAC's responsibilities to
include tracking and reporting on all state and local
outstanding debt that is not fully repaid or redeemed.
8)Replaces a current statutory requirement that specified
information from CDIAC must be readily available upon request
by any public official or any member of the public with a
requirement that the information must be "available to the
public."
Background
The CDIAC provides information, education, and technical
assistance on debt issuance and public fund investments to
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public agencies. CDIAC, which operates as a part of the State
Treasurer's Office, has nine members, including the State
Treasurer, the Governor or the Director of Finance, the State
Controller, two local government finance officials, two Assembly
Members, and two Senators.
CDIAC collects, maintains, and provides comprehensive
information on all state and local debt authorization and
issuance, and serves as a statistical clearinghouse for all
state and local debt issues. Existing law requires CDIAC to make
this information readily available upon request by any public
official or any member of the public. State and local
government debt issuers must submit several types of reports
containing information about debt issuance to CDIAC.
The information that CDIAC collects from reports submitted by
bond issuers helps policymakers and members of the public
monitor and assess the results of state and local debt issuance.
However, the information that CDIAC currently collects is not
sufficient to determine whether bond issuers are managing and
spending bond proceeds properly.
In January, 2015, news reports revealed that millions of dollars
in bond proceeds held by the Association for Bay Area
Governments' Finance Authority were missing. A former employee
of the authority subsequently admitted to taking the missing
proceeds. In response to these disclosures, State Treasurer
John Chiang created the Task Force on Bond Accountability. The
Treasurer's task force worked to develop best practice
guidelines for how bond proceeds should be managed to reduce the
risk of fraud, waste, and abuse and to identify strategies to
increase transparency and oversight of the use of bond funds.
To assess whether bond proceeds are spent for their intended
purposes and to make bond proceeds' disposition more transparent
to the public, the State Treasurer wants the Legislature to
expand the reporting requirements that apply to state and local
bond issuers.
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Comments
Purpose of the bill. The State Treasurer's recent effort to
review how debt issuers manage and spend debt proceeds suggests
that current debt reporting requirements provide insufficient
transparency and accountability for how some governments handle
their debt proceeds. This bill imposes some additional
reporting requirements on debt issuers that will benefit
taxpayers, investors, and public agencies. Taxpayers deserve to
have enough information to determine, with confidence, that
public officials are being good stewards of public funds.
Investors will benefit from having more knowledge about the
types of internal controls that governments have in place to
ensure that debt proceeds are used as promised. Following
broadly-accepted best-practices, like adopting debt policies,
will benefit government debt issuers by reducing the potential
for incidents of fraud or mismanagement, thereby improving
fiscal outcomes for public agencies. The enhanced transparency
requirements imposed by this bill are similar to requirements
that already apply to some types of debts, including Mello-Roos
districts' bonds and school districts' general obligation bonds.
Applying similar standards to all types of state and local debt
is a common-sense response to concerns about how debt proceeds
are being managed in California.
Workload. This bill places new and potentially unnecessary
administrative burdens on state and local governments that issue
debt. City, county and special district officials note that
some information they would provide to CDIAC in the annual
reports required by this bill will duplicate information that
state law already requires them to provide in annual financial
transactions reports submitted to the State Controller's Office.
Rather than performing additional work that reproduces
information that's already available, city, county, and special
district officials would prefer to continue submitting a single
annual financial transactions report to the State Controller
with some additional information about outstanding debt issues
that could be shared with the State Treasurer's Office.
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified5/31/16)
California State Treasurer John Chiang
California Professional Firefighters
California Taxpayers Association
Little Hoover Commission
OPPOSITION: (Verified5/31/16)
Coalition for Adequate School Housing
ARGUMENTS IN SUPPORT: Proponents argue that this bill's
enhanced transparency requirements will help ensure that debt
proceeds are spent as intended and will reduce the potential for
incidents of fraud or mismanagement.
ARGUMENTS IN OPPOSITION: Opponents argue that this bill will
require some local debt issuers to engage in duplicative
reporting activities which will generate unnecessary costs.
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
5/31/16 20:45:40
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