BILL ANALYSIS
SB 623
Page 1
SENATE THIRD READING
SB 623 (Ashburn)
As Amended May 24, 2010
Majority vote
SENATE VOTE :Vote not relevant
LOCAL GOVERNMENT 5-2
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|Ayes:|Smyth, Coto, Davis, | | |
| |Knight, Logue | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Caballero, Arambula | | |
| | | | |
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SUMMARY : Prohibits a local agency from entering into a
financial advisory, legal advisory, underwriting, or similar
relationship with an individual or firm, with respect to a bond
issue that requires voter approval on or after January 1, 2011,
if that individual or firm, or an employee, agent or person
related to an employee or agent of the individual or firm,
provided or will provide bond campaign services to the bond
campaign. Specifically, this bill :
1)Prohibits a local agency from entering into a financial
advisory, legal advisory, underwriting, or similar
relationship with an individual or firm, with respect to a
bond issue that requires voter approval on or after January 1,
2011, if that individual or firm, or an employee, agent, or
person related to an employee or agent of the individual or
firm, provided or will provide bond campaign services to the
bond campaign.
2)Defines, for purposes of the bill, the term "related" to
include, but is not limited to, a family relationship by blood
or marriage, a financial relationship, an affiliation between
business structures, or the sharing of one or more common
principals.
3)Defines, for purposes of the bill, the term "bond campaign
services" to include fundraising, public opinion polling,
SB 623
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election strategy and management, organization of campaign
volunteers, get out the vote services, development of campaign
literature, and advocacy materials.
4)Specifies that the definition of "bond campaign services" does
not include either of the following:
a) Advice and support related to the preparation of tax
rate statements and other documentation required for
inclusion in the voter pamphlet published by the applicable
county registrar of voters; or,
b) Public opinion polling that is conducted before a bond
measure is placed on the ballot for the purposes of
gathering information regarding, and evaluating the
potential for, the adoption of the bond measure by the
electorate.
EXISTING LAW :
1)Provides that it is unlawful for any elected state or local
officer, including any state or local appointee, employee, or
consultant, to use or permit to use public resources for a
campaign activity, or personal or other purposes which are not
authorized by law, and provides for civil penalties for the
violation.
2)Allows local agencies to issue and sell general obligation
(GO) bonds through the negotiated sale method for a price at,
above, or below par value
FISCAL EFFECT : Unknown
COMMENTS : This bill prohibits a local agency from entering
into a financial advisory, legal advisory, underwriting, or
similar relationship with an individual or firm, with respect to
a bond issue that requires voter approval on or after January 1,
2011, if that firm or individual provided, or will provide bond
campaign services to the bond campaign. This prohibition also
applies to any employee, agent, or person related to an employee
or agent of that individual or firm. Additionally, the bill
clarifies the definition of "bond campaign services" and defines
the types of relationships that are prohibited.
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Until this year, school districts and community college
districts were the only local agencies authorized to sell GO
bonds at a private sale using the negotiated sale method. AB
1388 (Hernandez), Chapter 529, Statutes of 2009, changed this by
authorizing cities, counties and special districts to sell GO
bonds at a negotiated sale, under specified conditions.
County treasurers report that many local agencies issue bonds at
negotiated sales using underwriters or financial advisors that
also provide campaign services to help win voter approval for
the bonds. According to the author, pre-packaged campaign and
underwriting relationships may result in higher fees and less
favorable terms in bond issuances conducted in a negotiated
sale, making tax payers the ultimate losers in these bond
campaigns. This bill aims to curb these types of relationships.
Existing law provides that it is unlawful for any elected state
or local officer, including any state or local appointee,
employee, or consultant, to use or permit to use public
resources for a campaign activity, or personal or other purposes
which are not authorized by law, and provides for civil
penalties for the violation [AB 714 (Canciamilla), Chapter 154,
Statutes of 2002]. The Legislature may wish to ask the author
why the bill is necessary in light of existing law.
SB 1461 (Ashburn), a substantially similar bill, was heard in
Senate Local Government and failed passage on May 5, 2010.
Another similar bill, AB 2011 (Cook) was heard in the Assembly
Local Government Committee in 2008 and also failed passage.
Support arguments: The sponsor, the California Association of
County Treasurers and Tax Collectors (CACTTC), notes that in
many cases underwriters also provide campaign-related services
pro bono to public agencies as part of the negotiated agreement,
and that tax collectors report that the higher costs of
underwriting that they see in negotiated bond sales are
attributable to "free" campaign services that are being covered
in the bond sale. CACCTC states that this means that taxpayers
are paying for political campaigns. When firms provide both
bond campaign services and underwriting or financial services
under no-bid agreements with local agencies, it may appear that
public officials are spending public funds on bond campaigns.
By prohibiting the bundling of these services, this bill will
help to stop in appearance of misuse of public funds.
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Opposition arguments: Existing law prohibits a local agency
from using public resources to pay for any type of campaign
services to promote the passage of a bond. It can be argued
that existing law already prohibits the type of behavior that
the author and sponsor are seeking to stop, and therefore, the
Legislature may wish to consider whether the bill is
unnecessary. Also, there is nothing inherently improper about
an agency selling bonds at a negotiated sale with an underwriter
that managed or supported the campaign to approve the bond.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0005162