BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 191|
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UNFINISHED BUSINESS
Bill No: SB 191
Author: Senate Governance and Finance Committee
Amended: As introduced
Vote: 27 - Urgency
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-0, 3/16/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
La Malfa, Liu
NO VOTE RECORDED: Kehoe
SUBJECT : First Validating Act of 2011
SOURCE : Author
DIGEST : This bill enacts the First Validating Act which
validates the organization, boundaries, acts, proceedings,
and bonds of the state government, counties, cities,
special districts, and school districts, among other public
bodies.
Assembly Amendments delete redevelopment agencies from this
bill's provisions.
ANALYSIS : For over 70 years, the Legislature's annual
Validating Acts have boosted the stability and credit
ratings of state and local bonds. The Validating Acts cure
public officials' mistakes that might otherwise invalidate
boundary changes or bond issues. They also correct errors
or omissions by local agencies and state departments. The
Acts do not protect against fraud, corruption, or
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unconstitutional actions.
This bill enacts the First Validating Act which validates
the organization, boundaries, acts, proceedings, and bonds
of the state government, counties, cities, special
districts, and school districts, among other public bodies.
Comments
The annual Validating Acts protect investors from the
chance that a minor error might undermine the legal
integrity of a public agency's bond. Banks, pension funds,
and other investors will not buy public agencies'
securities unless they are sound investments. Investors
rely on legal opinions from bond counsels to assure the
bonds' credit worthiness. Without legislative action to
cure technical errors, bond counsels are reluctant to
certify bonds as good credit risks. This bill gives
legislative protection to public agencies and private
investors.
The three Validating Acts cure typographical, grammatical,
and procedural errors. They do not forgive fraud,
corruption, or unconstitutional acts. A local official who
makes a technical error will find reassurance in the
Validating Acts, while a corrupt official faces prosecution
regardless of the Acts.
By insulating state and local bonds against harmless
errors, the Validating Acts save taxpayers' money. Strong
legal opinions from bond counsels result in higher credit
ratings for state and local bonds. Higher credit ratings
allow state and local officials to pay lower interest rates
to private investors. Lower borrowing costs save money for
taxpayers.
Starting in the mid-1920s, the Legislature passed separate
validating acts for different types of bonds, several
classes of special districts, and various local boundary
changes. By the late 1930s, the practice was to pass
annual validating acts (AB 2842, Bennett, 1939). The
current custom and practice is to pass three Validating
Acts that retroactively cure public officials' mistakes.
The first two measures are urgency bills that go into
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effect when they are chaptered. SB 191 (First Validating
Act) will probably reach Governor Brown's desk this spring,
validating errors made before the date on which the bill is
chaptered. SB 192 (Second Validating Act) will reach
Governor Brown in August, validating mistakes made after SB
191. The Third Validating Act (SB 193) will take effect on
January 1, 2012, covering the period between the chaptering
of SB 192 and the end of 2011.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/23/11)
State Controller John Chiang
State Treasurer Bill Lockyer
American Federation of State, County and Municipal
Employees
Association of California Water Agencies
California Association of Local Agency Formation
Commissions
California Association of Recreation and Park Districts
California Association of Sanitation Agencies
California Municipal Utilities Association
California Special Districts Association
California State Association of Counties
County of Sacramento
East Bay Municipal Utility District
Fire Districts Association of California
Midpeninsula Regional Open Space District
Mosquito and Vector Control Association of California
Regional Council of Rural Counties
State Association of County Auditors
Urban Counties Caucus
OPPOSITION : (Verified 5/23/11)
California Redevelopment Association
City of San Jose
League of California Cities
San Jose Redevelopment Agency
AGB:kc 5/24/11 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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