BILL ANALYSIS Ó
SB 1029
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SENATE THIRD READING
SB
1029 (Hertzberg)
As Amended August 15, 2016
Majority vote
SENATE VOTE: 39-0
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Local |9-0 |Eggman, Waldron, | |
|Government | |Alejo, Bonilla, Chiu, | |
| | |Cooley, | |
| | | | |
| | | | |
| | |Beth Gaines, Gordon, | |
| | |Linder | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |20-0 |Gonzalez, Bigelow, | |
| | |Bloom, Bonilla, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, Eduardo | |
| | |Garcia, Holden, | |
| | |Jones, Obernolte, | |
| | |Quirk, Santiago, | |
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| | |Wagner, Weber, Wood, | |
| | |McCarty | |
| | | | |
| | | | |
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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;
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
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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
method approved by CDIAC. Requires the annual report to
contain the following information:
a) Debt authorized during the reporting period, as
specified;
b) Debt outstanding during the reporting period, as
specified; and,
c) The use of proceeds of issued debt during the reporting
period, as specified.
5)Requires CDIAC, before approving any annual reporting method
of reporting, to consult with the appropriate state and local
debt issuers, as specified, for purposes which include, but
are not limited to making proposed reporting methods more
efficient and less burdensome for debt issuers.
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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.
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. Requires CDIAC,
before approving an alternate reporting method, to consult
with appropriate state and local debt issuers and
organizations representing debt issuers for purposes which
include, but not limited to making a proposed reporting method
more efficient and less burdensome for debt issuers.
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)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.
FISCAL EFFECT: According to the Assembly Appropriations
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Committee:
1)CDIAC administrative costs of approximately $132,000 in the
first two years (1 Personnel Year (PY)), $261,000 in years
three and four (2 PY), and $393,000 annually thereafter (3 PY)
for new positions to receive, review, process, and include
reported data on new debt issuances in its database. (CDIAC
Fund); and,
2)CDIAC indicates that any one-time costs for systems upgrades
would be minor and absorbable. Staff notes that there could
be future cost pressures to the extent the bill authorizes
CDIAC to develop alternative reporting methods for data
collection. CDIAC indicates it would absorb any future costs
for these upgrades (CDIAC Fund).
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. State and local government debt
issuers must report to CDIAC on proposed debt 20 days prior to
the sale of debt issuance, and a report no later than 21 days
after the sale of debt. 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-Roos bonds to provide a fiscal status report every year
until the bonds have been retired.
2)Bill Summary. This bill builds on existing reporting
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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
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, the State Treasurer created a
Task Force on Bond Accountability (Task Force). The Task
Force developed best practice guidelines for how bond proceeds
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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. The State Treasurer argues that this
bill builds on the work of the Task Force 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?"
Analysis Prepared by:
Misa Lennox / L. GOV. / (916) 319-3958 FN:
0004192