BILL NUMBER: AB 1979 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 1, 2014
AMENDED IN SENATE JUNE 18, 2014
AMENDED IN SENATE MAY 28, 2014
INTRODUCED BY Assembly Member Nazarian
FEBRUARY 19, 2014
An act to amend Sections 17173, 17199.3, and 17199.4 of, and to
repeal Section 17193.5 of, the Education Code, relating to school
facilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 1979, as amended, Nazarian. School facilities: California
School Finance Authority: definitions.
(1) Existing law authorizes the California School Finance
Authority to, among other things, determine the location and
character of any project to be financed or refinanced under the
California School Finance Authority Act. Existing law defines the
term "project" as the acquisition, construction, expansion,
remodeling, renovation, improvement, furnishing, or equipping of an
educational facility to be financed or refinanced pursuant to the
act.
This bill would provide that the term "project" may also include
reimbursement for the costs of acquisition, construction, expansion,
remodeling, renovation, improvement, furnishing, or equipping of an
education facility to be financed or refinanced pursuant to the act,
provided that reimbursement from bond proceeds is required to comply
with federal tax law in accordance with an opinion of counsel that
supports special treatment under federal tax law, as specified.
(2) Existing law authorizes a public credit provider, as defined,
to require a participating party, with regard to providing credit
enhancement for bonds, notes, certificates of participation, or other
evidences of indebtedness of a participating party, to agree to
specified conditions, including allowing the Controller to allocate
specified school district, county office of education, or charter
school apportionments to the public credit provider if the public
credit provider is required to make principal or interest payments,
or both, pursuant to the credit enhancement agreement.
This bill would delete this provision.
(3) Existing law limits the total amount of revenue bonds that may
be issued and outstanding at any time for purposes of the California
School Finance Authority Act, other than up to $4,000,000,000 in
revenue bonds issued under a specified provision of that act, to
$400,000,000.
This bill would delete the distinction between the limits of the
total amounts of revenue bonds that may be issued and outstanding at
any time for purposes of the California School Finance Authority Act
and under the specified provision of the act. The bill would instead
set the limit of the total amount of revenue bonds that may be issued
and outstanding at any time for purposes of the act at
$4,400,000,000.
(4) Existing law, the California School Finance Authority Act,
authorizes a participating party, as defined, in connection with
securing financing or refinancing of projects, as defined, to elect
to guarantee or provide for payment of the bonds and related
obligations in accordance with specified conditions.
This bill would generally revise and recast this provision of the
act to authorize participating parties to provide for the funding of
specified costs related to the issuance of the bonds, as well as the
payment of the bonds, in accordance with prescribed requirements.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17173 of the Education Code is amended to read:
17173. As used in this chapter, the following words and terms
shall have the following meanings, unless the context indicates or
requires another or different meaning or intent:
(a) "Act" means the California School Finance Authority Act.
(b) "Agent" means a county or city board of education or
superintendent of schools acting with the board's consent, on behalf
of one or more school districts for any purpose of this chapter, the
Board of Governors of the California Community Colleges or the
Chancellor of the California Community Colleges acting with the Board
of Governors' consent, on behalf of one or more community college
districts for any purpose of this chapter, and the school district,
county office of education, or other chartering entity acting with
the consent of, and on behalf of, one or more charter schools for any
purpose of this chapter.
(c) "Authority" means the California School Finance Authority, or
any board, body, commission, department, or officer succeeding to the
principal functions of the authority, or to which the powers
conferred upon the authority by this chapter shall be given by law.
(d) "Bonds" or "revenue bonds" means bonds, notes, lease
obligations, certificates of participation, commercial paper, and any
other evidences of indebtedness.
(e) "Certificate of participation" means an undivided interest in
one or more bonds, leases, loans, installment sales, or other
agreements of a participating party or parties.
(f) "Charter school" means a school established pursuant to Part
26.8 (commencing with Section 47600) of Division 4 of Title 2.
(g) "Cost," as applied to all or part of a project financed or
refinanced pursuant to this chapter, means and includes all or any
part of the cost of any of the following:
(1) Construction.
(2) Acquisition or improvement of all lands, structures, real or
personal property, rights, rights-of-way, franchises, easements, and
interests acquired or used for a project.
(3) Demolition or removal of any buildings or structures on land
acquired for a project, including the acquisition of any lands to
which the buildings or structures may be moved.
(4) All machinery and equipment.
(5) Financing or refinancing charges, including, but not limited
to, credit enhancement costs, and prepayment penalties.
(6) Interest before, during, and for a period following, the
completion of any construction or improvement determined by the
authority.
(7) Provisions for working capital.
(8) Reserves for principal and interest, and for extensions,
enlargements, additions, replacements, renovations, and improvements.
(9) Engineering, architectural, financial, and legal services,
plans, specifications, studies, surveys, estimates, administrative
expenses, and other expenses necessary or incident to the
construction, acquisition, or improvement of any project or any
financing or refinancing under this chapter.
(h) "Educational facility" means any property, facility,
structure, equipment, or furnishings used or operated in conjunction
with one or more public schools, including charter schools, or
community colleges, including, but not limited to, all of the
following:
(1) Classrooms.
(2) Auditoriums.
(3) Student centers.
(4) Administrative offices.
(5) Sports facilities.
(6) Maintenance, storage, or utility facilities.
(7) All necessary or usual attendant and related facilities and
equipment, including streets, parking, and supportive service
facilities or structures required or useful for the effective
operation of the educational facility.
(i) "Participating party" means:
(1) A school district, charter school, county office of education,
or community college district that undertakes, itself or through an
agent, the financing or refinancing of a project or of working
capital pursuant to this chapter.
(2) Any person, company, association, state or municipal
government entity, partnership, firm, or other entity or group of
entities that undertakes the financing or refinancing of a project
pursuant to this chapter in conjunction with an entity described in
paragraph (1).
(3) "Participating party" shall also be deemed to refer to the
agent to the extent the agent is acting on behalf of the school
district, charter school, county office of education, or community
college district for any purpose of this chapter.
(4) For purposes of subdivision (d) of Section 17183, and Section
17193.5, subdivisions (a) and (b) of Section 17199.1, and Section
17199.4, "participating party" shall be deemed to refer to an entity
described in paragraph (1) in conjunction with which an entity
described in paragraph (2), if any, applied for financing from the
authority.
(j) "Project" means the acquisition, construction, expansion,
remodeling, renovation, improvement, furnishing, or equipping of an
educational facility to be financed or refinanced pursuant to this
chapter. "Project" may include reimbursement for the costs of
acquisition, construction, expansion, remodeling, renovation,
improvement, furnishing, or equipping of an educational facility to
be financed or refinanced pursuant to this chapter, provided that
reimbursement from bond proceeds is required to comply with federal
tax law in accordance with an opinion of counsel that supports
special treatment under federal tax law for the bonds issued for the
applicable financing or refinancing. "Project" may include any
combination of the foregoing undertaken jointly by any participating
party with one or more other participating parties.
(k) "Working capital" means funds to be used by, or on behalf of,
a participating party to pay maintenance or operating expenses, or
any other costs that would be treated as an expense item under
generally accepted accounting principles in connection with the
ownership or operation of an educational facility, including, but not
limited to, all of the following:
(1) Reserves for maintenance or operating expenses.
(2) Interest for a period not to exceed two years on any loan for
working capital made pursuant to this chapter.
(3) Reserves for debt service, and any other costs necessary or
incidental to, financing pursuant to this chapter.
(4) Payments made by a participating party for the rent or lease
of an educational facility.
SEC. 2. Section 17193.5 of the Education Code is repealed.
SEC. 3. Section 17199.3 of the Education Code is amended to read:
17199.3. (a) The total amount of revenue bonds that may be issued
and outstanding at any time for purposes of this chapter shall not
exceed four billion four hundred million dollars ($4,400,000,000).
(b) For purposes of subdivision (a) bonds that meet any of the
following conditions shall not be deemed to be outstanding:
(1) Bonds that have been refunded pursuant to Section 17188.
(2) Bonds for which money or securities in amounts necessary to
pay or redeem the principal, interest, or any redemption premium on
the bonds have been deposited in trust.
(3) Bonds that have been issued to finance or refinance working
capital.
SEC. 4. Section 17199.4 of the Education Code is amended to read:
17199.4. (a) Notwithstanding any other law, any participating
party, in connection with securing financing or refinancing of
projects, or working capital pursuant to this chapter, may, in
accordance with this section, elect to provide for funding, in whole
or in part, one or more of the following:
(1) Payments on authority bonds.
(2) Payments under credit enhancement or liquidity support
agreements in connection with authority bonds.
(3) Amounts pledged or assigned under one or more pledges or
assignments to pay authority bonds or obligations under these credit
enhancement or liquidity support agreements.
(4) Payments to fund reserves available to pay any of the payments
described in paragraphs (1), (2), and (3), exclusively until paid.
(5) Fees and charges contemplated by the instruments of the
authority, trustees, tender agents, remarketing agents, credit
enhancement and liquidity support providers, and service providers.
(6) Any other costs necessary or incidental to any financing or
refinancing conducted under this chapter.
(b) The payments made pursuant to subdivision (a) may be in
connection with a financing or refinancing benefiting the
participating party itself, one or more other participating parties,
or any combination thereof.
(c) To participate under this section, the participating party
shall do all of the following:
(1) Elect to participate by an action of its governing board taken
in compliance with the rules of that board.
(2) Provide written notice to the Controller , no later than
the date of the issuance of the bonds or 60 days before the next
payment, whichever is later, of all of the following:
(A) Its election to participate.
(B) A schedule of the payments subject to that election.
(C) The payee or payees of those payments, or the trustee or agent
on their behalf to receive those payments.
(D) Payment delivery instructions, which may be by wire transfer
or other method approved by the Controller.
(E) If the method of payment delivery is wire transfer, complete
and submit the appropriate authorization form as prescribed by the
Controller.
(d) The participating party may amend, supplement, or restate the
notice required pursuant to paragraph (2) of subdivision (c) for any
reason, including, but not necessarily limited to, providing for new
or increased payments. The participating party shall certify in the
notice and in any amendment, supplement, or restatement of the notice
that each and every payment reflected in the schedule is a payment
described in subdivision (a) and the amounts scheduled do not exceed
the actual or reasonably estimated payment obligations to be funded
pursuant to this section. The participating party shall also
represent in the notice that it is not submitting the notice for the
purpose of accelerating a participating party's receipt of its
apportionments. Nothing in this section prohibits transfer by the
recipient of an apportionment under this section to the participating
party submitting the notice of the excess apportionment above the
amount needed to fund actual payments where the excess resulted from
erroneous estimation of scheduled payments or otherwise.
(e) Upon receipt of the notice required by paragraph (2) of
subdivision (c), the Controller shall make an apportionment to the
indicated recipient on the date, or during the period, shown in the
schedule in accordance with the following:
(1) If the participating party requests transfers in full as
scheduled, in the amount of the scheduled transfer or such lesser
amount as is available from the sources indicated in subdivision (f).
(2) If the participating party does not request transfers in full
as scheduled, in the amount of the anticipated deficiency for the
purpose of making the required payment indicated in a written request
of the participating party to the Controller and in the amount of
the actual shortfall in payment indicated in a written request of the
recipient or the participating party to the Controller or the lesser
amount that is available from the sources indicated in subdivision
(f).
(3) To the extent funds available for an apportionment are
insufficient to pay the amount set forth in a schedule in any period,
the Controller shall, if and as requested in the notice, reschedule
the payment of all or a portion of the deficiency to a subsequent
period.
(3)
( 4) In making apportionments under this
section, the Controller may rely conclusively and without liability
on any notice or request delivered under this section, including any
delivered prior to enactment of the act that adds this paragraph. The
Controller may make, but is not obligated to make, apportionments
not reflected on a notice or amended, supplemented, or restated
notice delivered under this section that the Controller receives less
than 20 days prior to when the apportionment would otherwise be
required.
(f) The Controller shall make an apportionment under this section
only from moneys designated for apportionment to the participating
party delivering the notice, and only from one or more of the
following:
(1) Any revenue limit apportionments to a school district or
county office of education without regard to the specific funding
source of the apportionment.
(2) Any charter school block grant apportionments to a charter
school without regard to the specific funding source of the
apportionment.
(3) Any charter school categorical block grant apportionments to a
charter school without regard to the specific funding source of the
apportionment.
(g) (1) The amount apportioned for a participating party pursuant
to this section shall be deemed to be an allocation to the
participating party, and shall be included in the computation of
allocation, limit, entitlement, or apportionment for the
participating party.
(2) The participating party and its creditors do not have a claim
to funds apportioned or anticipated to be apportioned by the
Controller pursuant to this section.
(h) (1) The authority may require participation under this section
under the terms of any financing or refinancing under this chapter
to provide for one or more of the payments described in paragraphs
(1), (2), (3), and (4) of subdivision (a). The authority may impose
limits on new participation under this section. The authority may
require participating parties to apply to the authority for
participation. If the authority limits participation under this
section, the authority shall consider each of the following
priorities in making participation available:
(A) First priority shall be given to participating parties that
apply for funding for instructional classroom space under this
chapter.
(B) Second priority shall be given to participating parties that
apply for funding of modernization of instructional classroom space
under this chapter.
(C) Third priority shall be given to participating parties that
apply for funding under this chapter for any other eligible costs, as
defined in Section 17173.
(2) The authority shall prioritize applications at appropriate
intervals.
(3) A school district electing to participate under this section
that has applied for revenue bond moneys for purposes of joint
venture school facilities construction projects, pursuant to Article
5 (commencing with Section 17060) of Chapter 12, shall not be subject
to the priorities set forth in paragraph (1).
(i) This section shall not be construed to make the State of
California liable for any payments within the meaning of Section 1 of
Article XVI of the California Constitution.
(j) A school district that has a qualified or negative
certification pursuant to Section 42131, or a county office of
education that has a qualified or negative certification pursuant to
Section 1240, may not participate under this section.
(k) This section does not obligate the State of California to make
available the sources of apportionment under subdivision (f) in any
amount or any time or, except as provided in this section, to fund
any payment described in this section. The addition of this
subdivision is intended solely to clarify existing law.