BILL ANALYSIS �
AB 1045
Page 1
ASSEMBLY THIRD READING
AB 1045 (Norby)
As Introduced February 18, 2011
Majority vote
LOCAL GOVERNMENT 5-3
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|Ayes:|Smyth, Bradford, Gordon, | | |
| |Knight, Norby | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Alejo, Campos, Hueso | | |
| | | | |
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SUMMARY : Prohibits a local agency from entering into a
financial advisory, legal advisory, underwriting, or other
similar relationship with an individual or firm, with respect to
a bond issue that requires voter approval on or after January 1,
2012, if that individual or firm, or an employee, agent or
person related to an employee or agent of the individual or
firm, provided or will provide bond campaign services to the
bond campaign. Specifically, this bill :
1)Defines, for purposes of the bill, the term "related" to
include, but not be limited to, a family relationship by blood
or marriage, a financial relationship, an affiliation between
business associations, or business associations with directors
or principals in common.
2)Defines, for purposes of the bill, the term "bond campaign
services" to include fundraising, public opinion polling,
election strategy and management, organization of campaign
volunteers, get out the vote services, development of campaign
literature, and advocacy materials.
3)Specifies that the definition of "bond campaign services" does
not include either of the following:
a) Advice and support related to the preparation of tax
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rate statements and other documentation required for
inclusion in the voter pamphlet published by the applicable
county registrar of voters; or,
b) Public opinion polling that is conducted before a bond
measure is placed on the ballot for the purposes of
gathering information regarding, and evaluating the
potential for, the adoption of the bond measure by the
electorate.
EXISTING LAW :
1)Provides that it is unlawful for any elected state or local
officer, including any state or local appointee, employee, or
consultant, to use or permit to use public resources for a
campaign activity, or personal or other purposes which are not
authorized by law, and provides for civil penalties for the
violation.
2)Allows local agencies to issue and sell general obligation
(GO) bonds through the negotiated sale method for a price at,
above, or below par value.
FISCAL EFFECT : Unknown
COMMENTS : This bill prohibits a local agency from entering into
a financial advisory, legal advisory, underwriting, or similar
relationship with an individual or firm, with respect to a bond
issue that requires voter approval on or after January 1, 2012,
if that firm or individual provided, or will provide bond
campaign services to the bond campaign. This prohibition also
applies to any employee, agent, or person related to an employee
or agent of that individual or firm. Additionally, the bill
clarifies the definition of "bond campaign services" and defines
the types of relationships that are prohibited.
Until the last few years, school districts and community college
districts were the only local agencies authorized to sell GO
bonds at a private sale using the negotiated sale method.
AB 1388 (Hernandez), Chapter 529, Statutes of 2009, changed this
by authorizing cities, counties and special districts to sell GO
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bonds at a negotiated sale, under specified conditions.
The negotiated sale method provides a means of offering
municipal bonds in which the issuing entity and a selected
underwriter negotiate the terms of the issue, as opposed to
having multiple underwriting groups competitively bidding on the
issue to establish its terms.
County treasurers report that many local agencies issue bonds at
negotiated sales using underwriters or financial advisors that
also provide campaign services to help win voter approval for
the bonds. According to the author, pre-packaged campaign and
underwriting relationships may result in higher fees and less
favorable terms in bond issuances conducted in a negotiated
sale, making tax payers the ultimate losers in these bond
campaigns. This bill aims to curb these types of relationships.
Existing law states that it is unlawful for any elected state or
local officer, including any state or local appointee, employee,
or consultant, to use or permit to use public resources for a
campaign activity, or personal or other purposes which are not
authorized by law, and provides for civil penalties for the
violation �AB 714 (Canciamilla), Chapter 154, Statutes of 2002].
The Legislature may wish to ask the author why the bill is
necessary in light of existing law.
SB 1461 (Ashburn) of 2010, a substantially similar bill, was
heard in the Senate Local Government Committee and failed
passage on May 5, 2010. SB 623 (Ashburn) of 2010 was gutted and
amended in the Assembly with virtually the same language as SB
1461. SB 623 passed the Assembly Local Government Committee on
a 5-2 vote and passed the Assembly Floor, but ultimately died in
the Senate Local Government Committee. Another similar bill,
AB 2011 (Cook) of 2008 was heard in the Assembly Local
Government Committee and also failed passage.
Support arguments: The sponsor, the California Association of
County Treasurers and Tax Collectors (CACTTC), notes that in
many cases underwriters also provide campaign-related services
pro bono to public agencies as part of the negotiated agreement,
and that tax collectors report that the higher costs of
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underwriting that they see in negotiated bond sales are
attributable to "free" campaign services that are being covered
in the bond sale. By prohibiting the bundling of these
services, this bill will help to stop an appearance of misuse of
public funds.
Opposition arguments: Existing law prohibits a local agency
from using public resources to pay for any type of campaign
services to promote the passage of a bond. It can be argued
that existing law already prohibits the type of behavior that
the author and sponsor are seeking to stop, and therefore, the
Legislature may wish to consider whether the bill is
unnecessary. Also, there is nothing inherently improper about
an agency selling bonds at a negotiated sale with an underwriter
that managed or supported the campaign to approve the bond.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN:
0000664