BILL ANALYSIS
AB 1492
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1492 (Evans)
As Amended August 29, 2005
Majority vote
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|ASSEMBLY: | |(May, 5, 2005) |SENATE: |37-3 |(September 7, |
| | | | | |2005) |
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(vote not relevant)
Original Committee Reference: ED.
SUMMARY : Authorizes the sale-sale back or lease-leaseback of
energy efficient community college facilities, and authorizes an
apportionment intercept for the payment of debt service
obligations for bonds or short-term loans. The overall purpose
is to allow the California Community Colleges (CCC) to utilize a
facilities financing mechanism that is currently utilized by
K-12 school districts.
The Senate amendments delete the Assembly version of this bill,
and instead seek to allow the California Community Colleges
(CCC) to utilize a facilities financing mechanism that is
currently used by K-12 school districts. Specifically, these
amendments:
1)Provide that current requirements relative to the sale or
lease of surplus property do not apply to the sale or lease
of CCC real property, together with any personal property
located thereon, if all of the following conditions are met:
a) The property is sold or leased for the purpose of
assisting a local governmental agency in obtaining
financing for a qualified CCC facility;
b) In the case of a sale, the CCC district simultaneously
repurchases the same property (sale-sale back);
c) In the case of a lease, the CCC district simultaneously
leases back the same property (lease-leaseback); and,
d) The financing proceeds are used solely for capital
outlay relating to a qualified CCC facility.
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2)Define "qualified community college facility" as real and
personal property, improvements and related facilities that
are determined by the governing board of the CCC district to
satisfy each of the following:
a) The facilities will assist the CCC district in reducing
energy and resource consumption and to operate as energy
and resource efficient buildings, as specified; and,
b) The facilities are affordable, as specified.
3)Require the district, when a CCC district enters into a sale
or lease as described above, to authorize the Chancellor of
the CCC and the Controller to withhold from its annual
apportionment the amount of funds necessary to satisfy its
annual payment obligation under the sale contract or lease.
EXISTING LAW provides that:
1)current requirements relative to the sale or lease of K-12
school district surplus property do not apply to the sale or
lease of a school district's real property, together with any
personal property located thereon, if all of the following
conditions are met:
a) The property is sold or leased for the purpose of
assisting a local governmental agency in obtaining
financing;
b) In the case of a sale, the school district
simultaneously repurchases the same property (sale-sale
back);
c) In the case of a lease, the school district
simultaneously leases back the same property
(lease-leaseback); and,
d) The financing proceeds are used solely for capital
outlay purposes.
1)K-12 public schools that request an emergency apportionment
currently have the option to ask the State Controller to
withhold from apportionments an amount of funds necessary to
satisfy its annual bond payment obligation. This process,
whereby school funding is diverted to the Controller, who
directly pays the bond holders, can assist districts in
securing better interest rates on bonds and loans.
AS PASSED BY THE ASSEMBLY , this bill permitted school districts
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to provide instruction in economics courses related to the
understanding of personal finances, including budgeting, savings
and credit.
FISCAL EFFECT : Unknown. This bill has not been heard by either
the Assembly or the Senate Appropriations Committee.
COMMENTS : An "intercept" is a well-established mechanism for
improving the credit quality of bonds in California, presently
available to state agencies. It is also available to K-12
schools on a case by case basis (Education Code 17456).
However, it is not presently available for CCC districts that
are paying for the bonds out of energy savings and enrollment
growth apportionments. The use of the "intercept" should help
to reduce loan interest rates for the CCC.
Construction of several billion dollars for expansion of CCC is
currently underway. This bill would allow lease-revenue
financing for sustainable energy projects to assist with this
expansion, and permit the best available credit rates on the
bonds used to refurbish current energy plants and expand energy
facilities to meet enrollment growth. According to the author,
the potential cost savings for a CCC could be substantial. A
$100 million bond measure could save between $8-12 million in
costs of issuance and interest.
The Senate Education Committee heard this bill on Tuesday,
September 6. Some of the members of this Committee expressed
concerns because the total contents of this bill were amended
into the bill during the previous week, and therefore inadequate
opportunity exists to consider thoroughly all of the possible
implications of this bill. The author agreed to introduce
legislation in 2006 to provide: 1) a three year sunset review
provision for the contents of this bill; and, 2) a requirement
for a report back from the community colleges regarding the
impact of this legislation, if the bill is enacted into statute.
Policy issues to be considered : Should Proposition 98 funds be
used to finance capital outlay projects? Proposition 98 funds
are currently used only for instruction and student services.
Authorizes CCC apportionments (off the top) to be diverted to
the State Controller for payment of debt obligations. During
tough budget years, when the level of state apportionments to
the CCC may be reduced, this apportionment intercept could
compromise instruction and student services on the campuses.
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This bill allows financing proceeds to be used for design,
planning and acquisition (in addition to construction,
reconstruction and renovation), whereas provisions for K-12
districts do not specifically authorize the use of financing
proceeds for design, planning or acquisition. To be consistent,
should this bill be amended to strike reference to design,
planning and acquisition?
This bill authorizes the use of the proposed financing mechanism
only for the purpose of constructing or renovating energy
efficient buildings. Are energy efficient buildings the greatest
or the only priority for the CCC? Should this optional
financing mechanism also be available for other construction or
renovation purposes?
This bill requires the State Controller to withhold certain
amounts of funds from CCC apportionments for the payment of the
debt service obligation for bonds or loans issued on behalf of
the CCC districts. California has 72 CCC districts. What would
be the fiscal and management impact on the State Controller to
manage apportionment intercepts for up to 72 separate bonds or
loans?
Analysis Prepared by: Bruce Hamlett / HED / (916) 319-3454
FN: 0013209