BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 1668
                                                                  Page  1

          Date of Hearing:   April 9, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

              AB 1668 (Wieckowski) - As Introduced:  February 12, 2014 

          Policy Committee:                              Higher  
          EducationVote:12-0

          Urgency:     Yes                  State Mandated Local Program:  
          No     Reimbursable:               

           SUMMARY  

          This bill authorizes the California Educational Facilities  
          Authority (CEFA) to accept loans from public or private sources  
          in order to finance projects under the authority's purview.

           FISCAL EFFECT  

          Any costs associated with increased workload related to the  
          availability of additional financing alternatives will be  
          absorbable. The authority is funded from administrative fees  
          charged against financed facilities projects. For 2013-14, the  
          authority's budget totals $740,000 and includes five positions.

           COMMENTS  

           Background/Purpose  . CEFA was established in 1973 within the  
          State Treasurer's Office to assist private non-profit higher  
          education institutions in the construction of educational  
          facilities. Having authorization to issue tax-exempt bonds, CEFA  
          can provide favorable conduit financing to such institutions.  
          These bonds are backed by the participating institutions rather  
          than by the state.

          Since the economic downturn in 2008, there has been a  
          significant decrease in the number of municipal bond insurers  
          and credit/liquidity providers that, coupled with federal  
          changes to lending, has led to a substantial shift toward direct  
          or private placement loans with private banks, facilitated by  
          conduit issuers. These loans have cost advantages over bonds due  
          to the absence of an underwriter and insurance fees. CEFA  
          currently lacks the authority to accept these financing  








                                                                  AB 1668
                                                                  Page  2

          instruments, and indicates that it recently has had to deny five  
          institutions seeking to do private financing.


           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081