BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 103|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
CONSENT
Bill No: SB 103
Author: Senate Local Government Committee
Amended: As introduced
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 5-0, 3/4/09
AYES: Wiggins, Cox, Aanestad, Kehoe, Wolk
SUBJECT : Third Validating Act of 2009
SOURCE : Author
DIGEST : This bill enacts the Third Validating Act of
2009 which validates the organization, boundaries, acts,
proceedings, and bonds of the state, counties, cities,
special districts, school districts, redevelopment
agencies, and other public agencies.
ANALYSIS : 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.
This bill enacts the Third Validating Act of 2009 which
validates the organization, boundaries, acts, proceedings,
and bonds of the state, counties, cities, special
CONTINUED
SB 103
Page
2
districts, school districts, redevelopment agencies, and
other public agencies.
Comments
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. This bill gives
legislative protection to public agencies and private
investors.
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 reassurance in the Validating
Acts, while a corrupt official faces prosecution regardless
of the Acts.
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.
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
SB 103
Page
3
(Second Validating Act) will reach Governor Schwarzenegger
in August, validating mistakes made after SB 101. SB 103
(Third Validating Act) will take effect on January 1, 2010,
covering the period between the chaptering of SB 102 and
the end of 2009.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 3/5/09)
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 Vector Control Association of California
Regional Council of Rural Counties
Urban Counties Caucus
AGB:nl 3/5/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****