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)
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|COMMITTEE VOTE: |6-0 |(September 8, 2005) |RECOMMENDATION: | Concur |
|(Higher | | | | |
|Education) | | | | |
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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);
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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.
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
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holders, can assist districts in securing better interest rates
on bonds and loans.
AS PASSED BY THE ASSEMBLY , this bill permitted school districts 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
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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.
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: 0013297