BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 182|
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CONSENT
Bill No: SB 182
Author: Senate Governance and Finance Committee
Amended: As introduced
Vote: 27 - Urgency
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-0, 3/13/13
AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Liu
NO VOTE RECORDED: Hernandez
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Second Validating Act of 2013
SOURCE : Author
DIGEST : This bill enacts the Second Validating Act of 2013
which validates the organization, boundaries, acts, and bonds of
state and local agencies.
ANALYSIS : For more than 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 unconstitutional actions.
This bill validates the organization, boundaries, acts,
proceedings, and bonds of the state government, counties,
cities, special districts, and school districts, among other
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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 effect when they are chaptered. SB 181 (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 182 (Second Validating Act) will reach
Governor Brown in August, validating mistakes made after SB 181.
The Third Validating Act (SB 183) will take effect on January
1, 2014, covering the period between the chaptering of SB 182
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and the end of 2013.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/8/13)
State Controller John Chiang
State Treasurer Bill Lockyer
American Federation of State County and Municipal Employees,
AFL-CIO
Association of California Water Agencies
California Association of County Treasurers and Tax Collectors
California Association of Local Agency Formation Commissions
California Special Districts Association
California State Association of Counties
East Bay Municipal Utility District
Rural County Representatives of California
AB:d 4/9/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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