BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Patricia Wiggins, Chair
BILL NO: SB 103 HEARING: 3/4/09
AUTHOR: Committee on Local GovernmentFISCAL: No
VERSION: 1/27/09 CONSULTANT: Detwiler
THIRD VALIDATING ACT OF 2009
Background and Existing Law
For nearly 70 years, the Legislature's annual Validating
Acts have boosted the stability and credit ratings of state
and local bonds. The Validating Acts cure public
officials' mistakes that might otherwise invalidate
boundary changes or bond issues. They also correct errors
or omissions by local agencies and state departments. The
Acts do not protect against fraud, corruption, or
unconstitutional actions.
Proposed Law
Senate Bill 103 validates the organization, boundaries,
acts, proceedings, and bonds of the state, counties,
cities, special districts, school districts, redevelopment
agencies, and other public agencies.
Comments
1. To err is human, to forgive is legislative . The annual
Validating Acts protect investors from the chance that a
minor error might undermine the legal integrity of a public
agency's bond. Banks, pension funds, and other investors
will not buy public agencies' securities unless they are
sound investments. Investors rely on legal opinions from
bond counsels to assure the bonds' credit worthiness.
Without legislative action to cure technical errors, bond
counsels are reluctant to certify bonds as good credit
risks. SB 103 gives legislative protection to public
agencies and private investors.
2. Which mistakes ? The Validating Acts cure
typographical, grammatical, and procedural errors. They do
not forgive fraud, corruption, or unconstitutional acts. A
local official who makes a technical error will find
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reassurance in the Validating Acts, while a corrupt
official faces prosecution regardless of the Acts.
3. Taxpayers benefit too . By insulating state and local
bonds against harmless errors, the Validating Acts save
taxpayers' money. Strong legal opinions from bond counsels
result in higher credit ratings for state and local bonds.
Higher credit ratings allow state and local officials to
pay lower interest rates to private investors. Lower
borrowing costs save money for taxpayers.
4. Why three ? Starting in the mid-1920s, the Legislature
passed separate validating acts for different types of
bonds, several classes of special districts, and various
local boundary changes. By the late 1930s, the practice
was to pass annual comprehensive validating acts (AB 2842,
Bennett, 1939). The current custom and practice is to pass
three Validating Acts that retroactively cure public
officials' mistakes. The first two measures are urgency
bills that go into effect when they are chaptered. SB 101
(First Validating Act) will probably reach Governor
Schwarzenegger's desk this spring, validating errors made
before the date on which the bill is chaptered. SB 102
(Second Validating Act) will reach Governor Schwarzenegger
in August, validating mistakes made after SB 101. The
Third Validating Act (SB 103) will take effect on January
1, 2010, covering the period between the chaptering of SB
102 and the end of 2009.
Support and Opposition (2/26/09)
Support : State Controller John Chiang, State Treasurer
Bill Lockyer, American Federation of State, County and
Municipal Employees AFL-CIO, Association of California
Water Agencies, California Association of County Treasurers
and Tax Collectors, California Association of Local Agency
Formation Commissions, California Association of Recreation
and Park Districts, California Fire Chiefs Association,
California Public Securities Association, California
Redevelopment Association, California Special Districts
Association, California State Association of Counties, East
Bay Municipal Utilities District, Fire Districts
Association of California, League of California Cities,
Midpeninsula Regional Open Space District, Mosquito and
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Vector Control Association of California, Regional Council
of Rural Counties, Urban Counties Caucus.
Opposition : Unknown.