BILL ANALYSIS �
AB 612
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 612 (Gordon)
As Amended June 23, 2011
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |78-0 |(May 19, 2011) |SENATE: |39-0 |(July 5, 2011) |
-----------------------------------------------------------------
Original Committee Reference: L. GOV.
SUMMARY : Provides that indebtedness that is incurred by the
Midpeninsula Regional Open Space District (MROSD), on or after
January 1, 2012, be repaid during a period that does not exceed
30 years.
The Senate amendments require MROSD to formally pledge the
revenue that will repay the indebtedness.
EXISTING LAW :
1)Provides that indebtedness that is incurred in that manner on
or after July 1, 1982, is generally required to be repaid
during a period that does not exceed 20 years from the date on
which it is incurred.
2)Provides that all indebtedness for acquisition of lands and
facilities designated in the East Bay Regional Park District's
master plan shall be repaid during a period not to exceed
30 years.
3)Requires each indebtedness to be authorized by a resolution
adopted by the affirmative votes of at least two-thirds of the
members of the district board.
4)Requires each indebtedness to be evidenced by a promissory
note or contract signed by the president of the board and
attested by the secretary or treasurer.
5)Requires each indebtedness to be sold at not less than 95% of
the principal amount in the manner determined by the board at
a discount that equals the underwriter's spread.
6)Requires the board to determine that the discount reflects an
underwriter's spread that is both reasonable and customary
AB 612
Page 2
under the prevailing market.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required MROSD to identify the source of revenue to be used to
repay the indebtedness.
2)Specified that the interest rate on indebtedness not exceed
the rate allowable under provisions governing issuance of
local general obligation bonds for all regional park
districts, regional park and open-space districts, and
regional open-space districts.
FISCAL EFFECT : None
COMMENTS : Under existing law, many kinds of special districts
are authorized to borrow money by issuing promissory notes.
Currently, regional park and open-space districts can issue
promissory notes for the acquisition of land and facilities.
These districts can borrow up to five years of anticipated
property tax revenues or 20 years of anticipated special tax
revenues, or both. The district must repay the promissory note
within 20 years.
MROSD was established to permanently protect and restore lands,
preserve wilderness, wildlife habitat, watershed, and fragile
ecosystems, and provide opportunities for public recreation and
environmental education. Over nearly 40 years, MROSD has
permanently preserved nearly 60,000 acres of open space and
created 26 open space preserves. MROSD covers an area of 550
square miles in San Mateo, Santa Clara, and Santa Cruz Counties.
This bill would extend the term from 20 to 30 years that MROSD
has to repay promissory notes authorized under existing law. It
would not increase the property taxes paid by property owners.
Allowing MROSD to amortize borrowing costs of promissory notes
over a 30-year period rather than a 20-year period would provide
approximately 20% more in funds to purchase and save open space
each time the district issues notes. According to the author,
being able to use existing revenues to accelerate the purchase
of open space is the goal of the proposed change and consistent
with the wishes of residents for more open space and recreation.
However, if terms are not favorable for long term issuance, the
district would still have the flexibility to issue shorter term
notes. Because MROSD buys land that the public owns in
AB 612
Page 3
perpetuity, the change provides a benefit for residents today as
well as future generations.
Support arguments: Supporters, including the MROSD, state that
this bill would greatly help the MROSD use taxpayer money more
effectively and increase resources to purchase and preserve
vital public natural open space lands.
Opposition arguments: Opposition could argue that it may be
more prudent to just expand the debt limit on securitized
limited obligation notes instead of increasing the promissory
note debt capacity on individual special districts.
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958
FN: 0001409