BILL ANALYSIS �
AB 794
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 794 (Wieckowski)
As Amended June 19, 2012
Majority vote
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|ASSEMBLY: | |(May 31, 2011) |SENATE: |25-10|(August 9, |
| | | | | |2012) |
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(vote not relevant)
Original Committee Reference: NAT. RES.
SUMMARY : Authorizes the interest on bond anticipation notes
(BANs) to be paid from a property tax levied for that purpose if
authorized by the resolution of the governing board of a school
district or community college district. Specifies that the tax
for payment of the interest on the BANs is a tax authorized by
law for payment of the bonds in anticipation of which the BANs
are issued. Specifies that interest on the BANs may be payable
from proceeds of the sale of bonds in anticipation of which the
BANs are issued, including any premium received on the sale of
those bonds.
The Senate amendments delete the Assembly version of this bill,
and instead insert the language described in the summary above.
EXISTING LAW :
1)Authorizes a governing board of a school district or a
community college district to, when it deems that it is in the
best interests of the district, issue notes, on a negotiated
or competitive-bid basis, maturing within a five year period,
in anticipation of the sale of bonds. Requires the proceeds
from the sale of the notes to be used only for authorized
purposes of the bonds or to repay outstanding notes.
2)Requires all notes issued and any renewal to be payable at a
fixed time not more than five years from the date of the
original issuance of the note. Specifies that if the sale of
the bonds does not occur prior to the maturity of the notes
issued in anticipation of the sale, the fiscal officer of the
school district or community college district, in order to
meet the notes then maturing, shall issue renewal notes.
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3)Requires every note and any renewal of the notes to be payable
from the proceeds of the sale of bonds or of any renewal of
notes or from other funds of the school district or community
college district lawfully available for the purpose of
repaying the notes, including state grants.
4)Specifies that interest on the notes shall be payable from
proceeds of the sale of bonds, or from the tax lawfully levied
to pay principal of and interest on the bonds.
AS PASSED BY THE ASSEMBLY , this bill imposed civil liability
against a covered electronic waste (CEW) recycler or collector
who makes a false statement or representation for purposes of
compliance with the Electronic Waste Recycling Act, codified
regulations that describe the type of CEW that may receive
payment under the Act, and codified regulations authorizing the
Department of Resources Recycling and Recovery to conduct
reviews and audits related to the operations of CEW recyclers
and collectors.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS : This bill clarifies that interest on BANs may be paid
from a property tax authorized by voters through the passage of
a local general obligation (G.O.) bond if a local governing
board or community college district board makes the
authorization through the adoption of a resolution.
School facilities are funded predominantly by local G.O. bonds,
along with state bond funds, and other local funds, such as
developer's fees. A BAN is a short-term debt that is commonly
used by local government entities, such as water districts or
utility districts. School districts and community college
districts are authorized to use BANs to fund facility projects
prior to and in anticipation of the sale of G.O. bonds.
Districts may issue BANs as interim financing if, for example,
the sale of a G.O. bond is not timely (e.g., the assessed
valuation is low and will not yield the amount of revenues a
district needs).
BANs may be authorized for no more than five years and have
lower interest rates and payments than G.O. bonds. Proceeds
from the sale of the G.O. bonds are used to repay the BANs.
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Existing law also authorizes the interest of BANs to be paid
from the "tax lawfully levied to pay principal of and interest
on the bond." According to the author, this last clause has led
to multiple interpretations. Some county governments, charged
with levying taxes, interpret the provision to mean
authorization to use taxes already collected, which limits the
ability to use this revenue source if the taxes collected are
already committed for other use. Others have concluded that
taxes are not allowed to be used to pay interest of BANs, even
though the statute clearly references a tax used to pay the
principal and interest of a bond. The confusion has limited a
district's ability to make interest payments on a semi-annual
basis - versus waiting until the maturity of a BAN - which
results in higher costs for a district. This is because BANs
that pay at maturity have higher interest rates and when accrued
over time, leads to higher total interest costs. If a tax
approved by voters to pay a G.O. bond can be used to make
ongoing payments (prior to the issuance of the G.O. bond), the
overall interest costs for school facility projects will likely
be lower than the accrued interest to pay the BAN at maturity.
This bill clarifies that the tax authorized by voters to pay for
the issuance of a G.O. bond can be used to pay the interest of
BANs. This bill does not increase the amount of taxes
authorized by voters. The amount of taxes authorized to be
levied will continue to be governed by Proposition 39 of 2000,
which, among others, lowered the threshold for passage of local
G.O. bonds to 55% and limits the amount of taxes that can be
levied for every $100,000 in assessed valuation (property value)
to $60 for a unified school district, $30 for a school district
and $25 for a community college district.
Data provided by the State Treasurer's Office shows 94 BANs
issued by kindergarten through grade 12 and community college
districts over the last five years, 15 of which were to refund
previously issued BANs. The data also shows property/special
tax revenues as the source of payment for only 10 out of the 94
BANs. Bond proceeds and other sources constituted the remaining
payment source. A BAN is a useful tool during a housing
downturn, by allowing a district to proceed with a school
facility project while waiting for improvement of the housing
market before selling a G.O. bond.
The California Public Securities Association, the sponsor of the
bill, states, "The ambiguity of Education Code Section 15150(d)
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and the decision by several counties to prohibit the levy of a
tax for the payment of interest on BANs results in higher
overall repayment costs for BANs or the bonds that used to pay
off the BANs. This is because not having the ability to levy a
tax for payment of interest on BANs necessitates issuing the
BANs with sufficient original issue premium to provide the
source of interest payments to investors in the form of
'capitalized' interest (which result in higher borrowing costs),
or issuing the BANs as capital appreciation bonds which are
payable at maturity at a higher interest cost than if the BANs
were issued instead as current interest bonds which have
semi-annual interest payments that require a tax levy."
This bill was substantially amended in the Senate and has not
been heard in an Assembly policy committee.
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087
FN: 0004170