BILL ANALYSIS �
AB 276
Page 1
Date of Hearing: April 27, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 276 (Alejo) - As Amended: April 4, 2011
SUBJECT : Local government: financial reports
SUMMARY : Increases penalties for local agencies, including
specified joint powers agencies, that fail to file their annual
financial transaction reports with the State Controller's
Officer in a timely manner, and makes other specified changes to
local agency financial reporting requirements. Specifically,
this bill :
1)Requires the State Controller to compile and publish reports
of the financial transactions of each joint powers agency
(JPA) that issues conduit revenue bonds and is formed pursuant
to the Joint Exercise of Powers Act.
2)Adds, to the definition of "local agency," JPAs that issue
conduit revenue bonds, for purposes of requirements for local
agencies and reporting of their financial transactions, which
gives the following new duties to JPAs and the Controller:
a) Requires the officer of each JPA who has charge of the
financial records to furnish to the Controller a report of
all the financial transactions during the next preceding
fiscal year; and,
b) Requires the Controller to prescribe uniform accounting
and reporting procedures which shall be applicable to JPAs.
3)Increases fines for an officer of a local agency, including a
community redevelopment agencies and a JPA, who fails or
refuses to make and file his or her report within 20 days
after receipt of a written notice of the failure from the
Controller, as follows:
a) Increases, from $1,000 to $2,500, in the case of a local
agency with total revenue, in the prior year, of less than
$100,000, as reported in the Controller's annual financial
reports;
b) Increases, from $2,500 to $5,000, in the case of a local
AB 276
Page 2
agency with total revenue, in the prior year, of at least
$100,000 but less than $250,000, as reported in the
Controller's annual financial reports;
c) Increases, from $5,000 to $10,000, in the case of a
local agency with total revenue, in the prior year, of at
least $250,000, as reported in the Controller's annual
financial reports;
d) Requires, if an officer of a local agency fails or
refuses to make and file his or her report within 20 days
after receipt of a written notice for two consecutive
years, that the fines specified above shall be doubled in
the second year; and,
e) Requires, if an officer of a local agency fails or
refuses to make and file his or her report within 20 days
after receipt of a written notice for three consecutive
years, that the fines specified above shall be tripled in
the third year, and requires the Controller to also conduct
or cause to be conducted an independent financial audit
report.
4)Requires that the agency reimburse the Controller for the cost
of complying with the provisions of the bill.
5)Prohibits a community redevelopment agency from using any of
the funds in the Low and Moderate Income Housing Fund to fund
any forfeiture or fine assessed because of the provision of
the bill.
6)Provides that an agency that makes a forfeiture or payment
pursuant to the provisions of the bill shall still file the
financial transactions report.
7)Makes other conforming changes by repealing outdated sections
of law related to financial reporting of schools, and deletes
findings and declarations language related to JPAs that issue
conduit revenue bonds.
EXISTING LAW :
1)Requires the officer of each local agency who has charge of
the financial records to furnish to the Controller a report of
AB 276
Page 3
all the financial transactions of the local agency during the
next preceding fiscal year.
2)Defines local agency to mean "any city, county, any district,
and any community redevelopment agency required to furnish
financial reports" pursuant to specified sections of existing
law.
3)Requires the report to be furnished within 90 days after the
close of each fiscal year and to be in the form required by
the Controller
4)Requires the report to contain specified contents and requires
the report to contain additional information for cities.
5)Provides that an officer of a local agency, including a JPA,
who fails or refuses to make and file his or her report within
twenty days after receipt of a written notice of the failure
from the Controller shall forfeit to the state:
a) $1,000 in the case of a local agency with total revenue,
in the prior year, of less than $100,000, as reported in
the Controller's annual financial reports;
b) $2,500 in the case of a local agency with total revenue,
in the prior year, of at least $100,000 but less than
$250,000, as reported in Controller's annual financial
reports; and,
c) $5,000 in the case of a local agency with total revenue,
in the prior year, of at least $250,000, as reported in the
Controller's annual financial reports
6)Requires, on or before May 1 of each year, the Controller to
compile and publish annually reports of the financial
transactions of each specified community redevelopment agency
and requires the Controller to make the data available to the
Legislature and its agents upon request, on or before April 1
of each year.
AB 276
Page 4
FISCAL EFFECT : Unknown
COMMENTS :
1)Existing law requires the officer of each local agency, who
has charge of the financial records of the agency, to furnish
to the Controller a report of all the financial transactions
of the local agency during the next preceding fiscal year,
within 90 days of the close of each fiscal year. "Local
agency," for purposes of these financial reports includes any
city, county, district, and specified community redevelopment
agencies.
This bill expands the definition of "local agency" to include
a JPA that issues conduit revenue bonds. This means that the
reporting requirements for financial transactions in existing
law would be extended to additionally cover certain types of
JPAs. This bill also requires the Controller to prescribe
uniform accounting and reporting procedures for specified
types of JPAs, in addition to those requirements that are
already in place for cities, counties and special districts.
2)Under current law, the State Controller's Office can assess
penalties of up to $5,000 for local governmental agencies that
file late annual financial transactions reports or agencies
who fail to file the report at all. The Controller's office
maintains a list of both those that do not file, and those
that file late, including both cities and special districts.
According to the sponsor, the State Controller's Office, in
some cases local agencies have been content to pay the fines
rather than file the required reports. This bill aims to stop
that sort of behavior by increasing penalties to a more
meaningful level. In addition to increasing the amount of
fines in existing law, this bill also doubles these fines if
the agency fails to submit the report to the SCO for two
consecutive years, and triples the fines if the agency fails
to report after three consecutive years. After the third
violation, this bill gives the Controller the authority to
also conduct an independent financial audit report of that
agency. The increased penalties apply to cities, counties,
special districts, JPAs and community redevelopment agencies.
4)The Legislature has passed another measure to increase
oversight over JPAs and conduit financing, in response to a
AB 276
Page 5
February 2008 informational hearing held by the Senate Local
Government Committee during which a number of concerns about
the transparency and accountability of state and local
government entities that issue conduit revenue bonds were
brought to light. That bill, SB 99 (Committee on Local
Government), Chapter 557, Statutes of 2009, imposed additional
transparency and accountability requirements on conduit
financing providers in California.
The Assembly Local Government Committee analyses of SB 99
noted the following:
According to the author's office, "by providing tax-exempt
financing to non-governmental entities through conduit revenue
bonds, the State General Fund annually forgoes income tax
revenues to help the private sector build projects that create
public benefits. In exchange for this significant tax
expenditure, the state and the public deserve sufficient
opportunities to participate in conduit financing providers'
public deliberations and get meaningful information about
their financial transactions. Testimony and information
provided to the Senate Local Government Committee suggests
that statutory ambiguities and discrepancies make it difficult
to determine whether all conduit financing providers comply
with audit, annual financial reporting, and other public
accountability requirements. By imposing enhanced Internet
posting, meeting notice, audit, and annual reporting
requirements on all conduit financing providers in California,
SB 99 takes an important step towards ensuring that the
public's interests in conduit financing transactions are
protected."
This bill builds on the provisions of SB 99 to increase
reporting requirements for JPAs.
1)Support arguments: The State Controller's office asserts that
currently there is very limited oversight of the activities of
JPAs, which provide conduit financing that annually provides
billions of dollars of tax-exempt financing to the private
sector. By requiring JPAs to file these financial reports,
the Controller's Office will be better able to determine that
conduit financing providers are complying with audit, annual
financial reporting and other public accountability
requirements.
AB 276
Page 6
Opposition arguments: Increasing the fines and penalties may
not get at the crux of the issue especially since the person
failing to file is probably not paying the bill because the
local jurisdiction is. Additionally, it may make more sense
to require all JPAs to have to file, not just those that
provide conduit financing.
REGISTERED SUPPORT / OPPOSITION :
Support
State Controller's Office �SPONSOR]
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958