BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 826
                                                                  Page  1

          Date of Hearing:   July 8, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

            SB 826 (Committee on Governmental Organization) - As Amended:   
                                    May 13, 2009 

          Policy Committee:                             Banking and  
          Finance      Vote:                            11-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill makes a number of technical changes to the State  
          General Obligation Bond Law.  Key provisions of the bill: 

          1)Clarify circumstances under which variable rate bonds with  
            hedging contracts may be considered fixed rate bonds for  
            purposes of determining the share of bonds outstanding that  
            have fixed versus variable rates. (This is relevant because  
            current law limits the percentage of bonds outstanding that  
            may have variable interest rates to 20%.)

          2)Clarify that contractual obligations related to variable rate  
            bonds are backed by the full faith and credit of the state if  
            the bond act was approved by the voters after January 1, 2002.  
             

          3)Delete existing law provisions that require reports of bonds  
            outstanding to include commercial paper that has been  
            authorized by a bond committee, but not yet issued.

          4)Clarify circumstances where existing provisions apply to  
            competitive versus negotiated sales, ensuring that certain  
            provisions will not be interpreted as placing unnecessary  
            requirements on negotiated sales.

          5)Increase the maximum maturity period for short-term bond  
            anticipation notes from two to five years, and makes other  
            changes that give the state treasurer greater flexibility to  
            structure the terms of a bond anticipation note.









                                                                  SB 826
                                                                  Page  2

           FISCAL EFFECT  

          No significant impact on state administrative costs.  Potential  
          significant GF debt-service related savings to the extent the  
          changes provide the treasurer with greater flexibility to  
          structure bond sales in ways that minimize interest costs.
           
          COMMENTS  

           Rationale . This bill is sponsored by the state treasurer for the  
          purpose of updating general obligation bond law to reflect  
          changes that have taken place in the municipal bond markets in  
          recent years.  It also incorporates changes suggested by the  
          Attorney General's Office and bond counsel to clarify existing  
          law and provide the treasurer with greater flexibility in  
          administering sales of general obligation bonds.
           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081