BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 623
Author: Ashburn (R)
Amended: 8/9/10
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : 61-7, 8/16/10 - See last page for vote
SUBJECT : Local government: bonds
SOURCE : California Association of County Treasurers and
Tax
Collectors
DIGEST : This bill prohibits a local agency from entering
into an 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.
Assembly Amendments delete the Senate version dealing with
extending limited term appointments. This bill now relates
to campaign services provided to a bond ballot election by
professional services firms.
ANALYSIS :
CONTINUED
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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.
This bill:
1. Prohibits a local agency from entering into an
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, 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
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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.
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.
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, changes 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's
office, 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
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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).
Related Legislation
SB 1461 (Ashburn), failed passage in the Senate Local
Government.
AB 2011 (Cook) failed passage in Assembly Local Government
Committee in 2008.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/17/10) (unable to reverify)
California Association of County Treasurers and Tax
Collectors (source)
Delano Unified School District
Greater Bakersfield Chamber of Commerce
Kern County Superintendent of Schools
Kern County Taxpayers Association
OPPOSITION : (Verified 8/17/10) (unable to reverify)
Community College League
ARGUMENTS IN SUPPORT : 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
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services, this bill will help to stop in appearance of
misuse of public funds.
ARGUMENTS IN OPPOSITION : Opposition arguments states,
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.
ASSEMBLY FLOOR
AYES: Adams, Anderson, Beall, Bill Berryhill, Tom
Berryhill, Blumenfield, Buchanan, Carter, Chesbro,
Conway, Cook, Coto, De La Torre, De Leon, DeVore, Evans,
Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,
Galgiani, Garrick, Gatto, Gilmore, Hagman, Hall, Harkey,
Hayashi, Hill, Huber, Jeffries, Jones, Knight, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Nava,
Nestande, Niello, Nielsen, V. Manuel Perez, Portantino,
Ruskin, Salas, Saldana, Silva, Smyth, Solorio, Audra
Strickland, Torlakson, Torres, Torrico, Tran, Villines,
John A. Perez
NOES: Arambula, Caballero, Huffman, Monning, Skinner,
Swanson, Yamada
NO VOTE RECORDED: Ammiano, Bass, Blakeslee, Block,
Bradford, Brownley, Charles Calderon, Davis, Eng,
Hernandez, Norby, Vacancy
AGB:do 8/17/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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