BILL ANALYSIS �
AB 276
Page 1
ASSEMBLY THIRD READING
AB 276 (Alejo)
As Amended April 4, 2011
Majority vote
LOCAL GOVERNMENT 8-0 APPROPRIATIONS 16-0
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|Ayes:|Smyth, Alejo, Bradford, |Ayes:|Fuentes, Harkey, |
| |Campos, Davis, Hueso, | |Blumenfield, Bradford, |
| |Knight, Norby | |Charles Calderon, Campos, |
| | | |Davis, Gatto, Hall, Hill, |
| | | |Lara, Mitchell, Nielsen, |
| | | |Norby, Solorio, Wagner |
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SUMMARY : Increases penalties for local agencies, including
specified joint powers agencies (JPAs), that fail to file their
annual financial transaction reports with the California State
Controller's Office (Controller) in a timely manner, and makes
other specified changes to local agency financial reporting
requirements. Specifically, this bill :
1)Requires the Controller to compile and publish reports of the
financial transactions of each 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 agency and a JPA, who fails or refuses
to make and file his or her report within 20 days after receipt
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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
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 this 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 provisions of
this bill.
6)Provides that an agency that makes a forfeiture or payment
pursuant to the provisions of this bill shall still file the
financial transactions report.
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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 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
20 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,
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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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, the Controller's office estimates that there will be
administrative costs of approximately $30,000 to implement this
bill.
COMMENTS : 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.
Under current law, the 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 Controller's office, in some cases
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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 Controller's office 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.
The Legislature recently passed another measure to increase
oversight over JPAs and conduit financing, in response to a
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 (Local Government Committee), Chapter 557,
Statutes of 2009, imposes additional transparency and
accountability requirements on conduit financing providers in
California.
The Assembly Local Government Committee's analysis of SB 99 noted
that according to the author:
"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."
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This bill builds on the provisions of SB 99 (Local Government
Committee) to increase reporting requirements for JPAs.
Support arguments: The Controller's office asserts that
currently there is very limited oversight of the activities of
JPAs that 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.
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 file, not just those that provide conduit financing.
Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958
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