BILL ANALYSIS Ó
SB 1029
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Date of Hearing: June 29, 2016
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Susan Talamantes Eggman, Chair
SB
1029 (Hertzberg) - As Amended June 15, 2016
SENATE VOTE: 39-0
SUBJECT: California Debt and Investment Advisory Commission:
accountability reports.
SUMMARY: Requires state and local government debt issuers to
report information regarding proposed and outstanding debt to
the California Debt and Investment Advisory Commission (CDIAC).
Specifically, this bill:
1)Requires the report of proposed debt issuance submitted to
CDIAC, pursuant to existing law, to 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. Requires a local
debt policy to include all of the following:
a) The purposes for which the debt proceeds may be used;
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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; and,
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)Provides 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, on or after January 21, 2017, 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, pursuant to existing law.
4)Requires the annual report to cover a reporting period from
July 1 to June 30, inclusive, and to 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 the annual report to contain the following
information:
a) Debt authorized during the reporting period, which
includes 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; and,
iv) Debt authority that has lapsed during the reporting
period;
b) Debt outstanding during the reporting period, which
includes the following:
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i) Principal balance at the beginning of the reporting
period;
ii) Principal paid during the reporting period; and,
iii) Principal outstanding at the end of the reporting
period;
c) The use of proceeds of issued debt during the reporting
period, which includes 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; and,
iii) Debt proceeds remaining at the end of the reporting
period.
6)Requires compliance with the annual reporting requirements for
each issue of debt with outstanding debt, debt that has been
authorized but not issued, or both during the reporting
period.
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7)Authorizes CDIAC, if technology permits, to develop an
alternate reporting method, provided that any alternate
reporting method is in furtherance of the purpose of
collecting the data required by this bill.
8)Expands the list of CDIAC's responsibilities under existing
law to include tracking and reporting on all state and local
outstanding debt, until fully repaid or redeemed.
9)Deletes the existing requirement that specified information
from CDIAC must be readily available upon request by any
public official or any member of the public, and instead,
requires the information to be available to the public.
10)Makes findings and declarations, including that California's
4,200 units of local government have issued $1.5 trillion in
debt since 1984.
11)Provides that is the intent of the Legislature that all debt
issuance of state and 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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EXISTING LAW:
1)Establishes the composition of CDIAC and requires CDIAC to
fulfill a number of duties, including collecting, maintaining,
and providing comprehensive information of all state and local
debt authorization and issuance, and serving as a statistical
clearinghouse for all state and local debt. Requires this
information to be readily available upon reuqest by any public
official or any member of the public.
2)Requires a state or local government issuer of proposed debt
to submit a report, no later than 30 days prior to the sale of
any debt issue, to CDIAC by any method approved by CDIAC.
3)Requires a state or local government issuer of debt, no later
than 21 days after the sale of debt, to submit a report of
final sale to CDIAC, as specified. Requires the issuer to
provide each of the following documents, if they exist, with
the report of final sale:
a) Other disclosure document;
b) Indenture;
c) Installment sales agreement;
d) Loan agreement;
e) Promissory note;
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f) Bond purchase contract;
g) Resolution authorizing the issue; and,
h) Bond specimen.
FISCAL EFFECT: This bill is keyed fiscal.
COMMENTS:
1)Current Reporting Requirements. Under the State Treasurer,
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 contains reporting requirements on proposed debt
and following the sale of debt, which applies to any state and
local government debt issuer. State and local government debt
issuers must report to CDIAC on proposed debt 20 days prior to
the sale of debt issuance. Additionally, no later than 21
days after the sale of debt, state and local government debt
issuers must submit a report of final sale to CDIAC
accompanied by the final official statement for the issue and
specified documents.
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Some types of statutory authority for bond issuance also
contain additional reporting requirements. For example, among
the list of reports that state and local government debt
issuers are required to submit to CDIAC is a specific
requirement on all local government issuers of Mello-Ross
Community Facilities District bonds to provide a fiscal status
report containing specified information to CDIAC by October 30
of every year, until the bonds have been retired.
2)Bill Summary. This bill builds on existing reporting
requirements to CDIAC for state and local government debt
issuers. This bill adds to the report that state and local
government issuers of proposed debt must submit to CDIAC to
include a certification that the issuer has adopted local debt
policies and that the use of debt is consistent with adopted
local policies. Additionally, state and local debt issuers
that submit a report, pursuant to existing law, following the
sale of debt will also be required to submit an annual report.
This bill is sponsored by California State Treasurer, John
Chiang.
3)Author's Statement. According to the author, "SB 1029 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
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SB 1029 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."
4)Task Force. Following the controversy in 2015, when news
reports revealed that approximately $1.3 million in bond
proceeds held by the Association for Bay Area Governments'
Finance Authority were missing, State Treasurer John Chiang
created a Task Force on Bond Accountability. The Task force
developed 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.
5)Arguments in Support. State Treasurer John Chiang argues that
this bill builds on the work of the Task Force on Bond
Accountability and will give the public the information
necessary to assess whether bond proceeds were utilized for
their lawful and intended purpose.
6)Arguments in Opposition. California's Coalition for Adequate
School Housing (CASH), argues "Due to the duplicative efforts
and additional costs that the bill would make on K-12 school
districts we respectfully request that schools be excluded
from SB 1029?"
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REGISTERED SUPPORT / OPPOSITION:
Support
California State Treasurer, John Chiang [SPONSOR]
California Association of County Treasurers and Tax Collectors
California Professional Firefighters
California Taxpayers Association
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Little Hoover Commission
Opposition
Association of California School Administrators (unless amended)
California's Coalition for Adequate School Housing (unless
amended)
Analysis Prepared by:Misa Lennox / L. GOV. / (916)
319-3958