BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2274 HEARING: 6/18/14
AUTHOR: Gordon FISCAL: Yes
VERSION: 5/1/14 TAX LEVY: No
CONSULTANT: Grinnell
CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION
Makes several changes to the California Debt and Investment
Advisory Commission's authorizing statute.
Background and Existing Law
Created in 1981, the California Debt and Investment
Advisory Commission (CDIAC) provides information, education
and technical assistance on debt issuance and public fund
investments to local public agencies and other public
finance professionals. CDIAC is the clearinghouse for
public debt issuance information and it generally monitors
the issuance and management of public debt. CDIAC charges
an underwriter or a purchaser a fee equal to 1/40th of one
percent of the principal amount of the issue to fund its
operations.
Additionally, CDIAC:
Provides technical assistance and continuing
education to state and local government officials on
the practices and strategies for public debt issuance
and investing public funds,
Undertakes or commissions studies on methods to
reduce the costs of debt and improve credit ratings,
Collects reports of annual fiscal status, bond
reserve draws and bond defaults for Mello-Roos
Community Facilities Districts and Marks-Roos Bond
Pools.
A local agency or other issuer of debt must give written
notice to CDIAC 30 days before a new debt sale. Failure to
provide the notice doesn't affect the validity of the sale.
The notice must include:
The proposed sale date,
The name of the issuer,
The type of debt, and
AB 2274 - 5/1/14 -- Page 2
Estimated principal amount of the debt.
Within 21 days of the sale, the issuer must provide a
report to CDIAC with the final statement of the sale. If
there's no official statement, the issuer must provide each
of the following:
Other disclosure document,
Indenture,
Installment sale agreement,
Loan agreement or promissory note,
Bond purchase contract,
Resolution authorizing the issue,
Bond specimen.
CDIAC also may require additional information as it deems
appropriate.
Proposed Law
Assembly Bill 2274 enacts several changes to CDIAC's
authorizing statute to assist in its monitoring of state
and local debt issues, such as:
Deleting the word "new" and "at public and private
sale" to expand the types of debt for which issuers
must report to CDIAC,
Removes the requirement that notice and the final
report be sent by mail, postage prepaid, defaulting to
methods CDIAC prescribes,
Erases the specific information that must be
included as part of the notice, defaulting to the
information CDIAC deems appropriate,
Requires issuers to send CDIAC the final report or
other information within 21 days of the sale, instead
of current law's 45 days.
Allows CDIAC to charge fees of lenders, not just
issuers and purchasers.
The measure also makes technical and conforming changes.
State Revenue Impact
No estimate.
Comment
AB 2274 - 5/1/14 -- Page 3
Purpose of the bill . According to the author, "The
municipal industry has seen an increasing trend of
municipal issuers taking on non-traditional financing for
projects in the form of direct loans from banks. This new
type of borrowing allows public officials to obtain new
debt without full disclosure to municipal bondholders.
This is problematic because bondholders and rating agencies
do not have a full scope of the entity's total
indebtedness.
AB 2274 would clarify the types of debt reported to the
California Debt and Investment Advisory Commission (CDIAC)
and improve the timeliness of the reporting by making
legislative changes to its statute by defining debt in a
manner that is all inclusive of different forms of state
and local debt."
Assembly Actions
Assembly Floor 76-0
Assembly Appropriations 16-0
Assembly Banking and Finance 10-0
Support and Opposition (06/12/14)
Support : State Treasurer Bill Lockyer.
Opposition : None received.