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SB-1067 Local agencies: refunding bonds: pension obligations.(2019-2020)

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Date Published: 05/06/2020 09:00 PM
SB1067:v98#DOCUMENT

Amended  IN  Senate  May 06, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1067

Introduced by Senator Moorlach

February 18, 2020

An act to amend Sections 53550 53552 and 53553 of the Government Code, relating to local agencies.


LEGISLATIVE COUNSEL'S DIGEST


SB 1067, as amended, Moorlach. Local agencies: refunding bonds. bonds: pension obligations.
Existing law generally authorizes local agencies to issue bonds and distinguishes between different types of bonds for this purpose. Existing law regulates the issuance of refunding bonds by a local agency, which are issued for the purpose of refunding other indebtedness, as specified. Existing law defines “bonds” for these purposes, among other things, as bonds, warrants, notes or other evidence of indebtedness of a local agency or any improvement district, the principal and interest of which are payable from the proceeds of ad valorem taxes or ad valorem assessments that may be levied, without limitation as to rate or amount, upon property in the local agency or any improvement district subject to taxation or assessment. The California Constitution prohibits a county, city, town, township, board of education, or school district from incurring a debt or liability in any manner or for any purpose exceeding in any year the income and revenue provided for the year, without approval by 2/3 of the voters of the public entity voting at an election to be held for that purpose, except for certain debts issued for public schools, as specified. Existing case law has qualified this prohibition by creating certain exceptions that have been judicially deemed not to implicate it, including for revenue bonds and for obligations imposed by law. The California Constitution generally authorizes the Legislature to provide maximum property tax rates and bonding limits for local governments. Existing law authorizes a local agency that intends to issue refunding bonds to do so without submitting the question of the issuance to a vote of the qualified electors of the local agency.

This bill would revise the definition of “bonds” in connection with issuing refunding bonds to specify that it does not mean bonds to be issued, on and after January 1, 2021, for the purpose of funding pension obligations.

This bill would require that refunding bonds to be used to refund pension obligation bonds with specified characteristics be approved by 55 percent of the voters of the local agency voting on the proposition that authorizes the indebtedness. The bill would apply this requirement to bonds issued on or after January 1, 2021, for the purpose of refunding pension obligations, and the bonds to be refunded have a maturity date of more than 36 months after the date the bonds are issued.
Existing law requires a legislative body of a local agency that determines to issue refunding bonds to adopt a resolution providing for the issuance of the bonds and prescribes the required elements of the resolution.
This bill would require require, for refunding bonds to be issued for purposes of refunding specified pension obligation bonds, that the above-described resolution be available on the internet website of the legislative body for 30 days. consecutive days prior to the issuance of the bonds. The bill would also generally prohibit the a resolution providing for the issuance of refunding bonds from being placed on the consent calendar of a public hearing.
The California Constitution requires local agencies, for the purpose of ensuring public access to the meetings of public bodies and the writings of public officials and agencies, to comply with a statutory enactment that amends or enacts laws relating to public records or open meetings and contains findings demonstrating that the enactment furthers the constitutional requirements relating to this purpose.
This bill would make legislative findings to that effect.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.Section 53550 of the Government Code is amended to read:
53550.

The following terms shall have the following meanings:

(a)“Local agency” means public district, public corporation, authority, agency, board, commission, county, city and county, city, school district, or other public entity.

(b)“Bonds” means bonds, warrants, notes or other evidence of indebtedness of a local agency or any improvement district or zone thereof payable, both principal and interest, from the proceeds of ad valorem taxes or ad valorem assessments which may be levied without limitation as to rate or amount upon property in the local agency or any improvement district or zone thereof subject to taxation or assessment, or any outstanding indebtedness payable to the State Board of Equalization as repayment of the local agency’s share of refunds made as a result of the California Court of Appeal decision in Aerospace Corporation v. State Board of Equalization, 218 Cal. App. 3d 1300, which indebtedness is hereby imposed on all the local agencies that are required to participate in the refund obligations arising from this decision and that are declared and determined to have been imposed by law. “Bonds”does not mean bonds to be issued on and after January 1, 2021, for the purpose of refunding pension obligations.

(c)“Legislative body” means the board of directors or other governing body of the local agency, unless the context otherwise requires.

(d)“Principal act” means the law under which bonds to be refunded were issued.

(e)“Costs of issuing the refunding bonds” means those of the following costs and expenses designated by the legislative body in the resolution providing for the issuance of the bonds:

(1)All expenses incident to the calling, retiring or paying of the bonds to be refunded and to the issuance of refunding bonds, including the charges of any escrow agent or trustee in connection with the issuance of the refunding bonds or in connection with the redemption or retirement of the bonds to be refunded.

(2)Either of the following:

(A)Interest upon the refunding bonds from the date of sale thereof to the date of payment of the bonds to be refunded out of the proceeds of the sale of the refunding bonds, or to the date upon which the bonds to be refunded will be paid pursuant to call or agreement with the holders of the bonds.

(B)Interest upon the bonds to be refunded from the date of sale of the refunding bonds to the date of payment of the bonds to be refunded or to the date upon which the bonds to be refunded will be paid pursuant to call or agreement with the holders of the bonds.

(3)Any premium necessary in the calling or retiring of the bonds to be refunded.

(f)“Designated costs of issuing the refunding bonds” means whichever of the items specified in subdivision (e) that are designated by the legislative body in the resolution providing for the issuance of refunding bonds.

(g)“Federal securities” means those securities described in Sections 1360 and 1360.1 of the Financial Code.

SECTION 1.

 Section 53552 of the Government Code is amended to read:

53552.
 (a) Whenever the legislative body of a local agency determines that prudent management of the fiscal affairs of the local agency requires that it issue refunding bonds under the provisions of this article, except as required by subdivision (b), it may do so without submitting the question of the issuance of the refunding bonds to a vote of the qualified electors of the local agency, unless the legislative body determines to submit the question to a vote, in which case the election shall be held in accordance with the principal act pursuant to which the bonds to be refunded were issued. Refunding bonds shall not be issued if the total net interest cost to maturity on the refunding bonds plus the principal amount of the refunding bonds exceeds the total net interest cost to maturity on the bonds to be refunded plus the principal amount of the bonds to be refunded, provided that this limitation shall not apply to bonds issued to refund indebtedness imposed by subdivision (b) of Section 53550 as a result of the court decision in Aerospace Corporation v. State Board of Equalization, 218 Cal. App. 3d 1300. Subject to this limitation, the principal amount of the refunding bonds may be more than, less than, or the same as the principal amount of the bonds to be refunded.
(b) Notwithstanding any other law, if the refunding bonds are used to refund bonds issued on or after January 1, 2021, for the purpose of refunding pension obligations and the maturity date of the bonds to be refunded is more than 36 months after the date the bonds are issued, the refunding bonds shall be approved by 55 percent of the voters of the local agency voting on the proposition that is issuing the indebtedness.

SEC. 2.

 Section 53553 of the Government Code is amended to read:

53553.
 When the legislative body determines to issue refunding bonds pursuant to this article, it shall adopt a resolution providing for the issuance of such bonds. The resolution shall not be placed on the consent calendar of a public hearing. The resolution shall:
(a) Describe the bonds being refunded; and the date on which it is anticipated that the exchange, purchase or call and redemption necessary to effect the refunding shall occur;
(b) Fix the date of such refunding bonds;
(c) Designate the denomination or denominations thereof;
(d) Fix the rate or rates of interest to be borne by such refunding bonds, which rate or rates shall not exceed 8 percent per annum, payable semiannually, except that interest for the first year from date of issuance may be payable at the end of said year;
(e) Fix the maturity dates of such refunding bonds, which shall not exceed 40 years from the date of such refunding bonds, or the latest maturity date of the bonds being refunded, whichever occurs earlier;
(f) Designate the place or places of payment of both principal and interest;
(g) Prescribe the form of such refunding bonds; and
(h) State the designated costs of issuing the refunding bonds.
(i) (1) Be available on the internet website of the legislative body for 30 days. consecutive days prior to the issuance of the bonds.
(2) The requirement prescribed by paragraph (1) shall apply to bonds issued on and after January 1, 2021, for the purpose of refunding pension obligations, if the final maturity date of the bonds is more than 36 months after the date the bonds are issued.

SEC. 3.

 The Legislature finds and declares that Section 2 of this act, which amends Section 53553 of the Government Code, furthers, within the meaning of paragraph (7) of subdivision (b) of Section 3 of Article I of the California Constitution, the purposes of that constitutional section as it relates to the right of public access to the meetings of local public bodies or the writings of local public officials and local agencies. Pursuant to paragraph (7) of subdivision (b) of Section 3 of Article I of the California Constitution, the Legislature makes the following findings:
By requiring that resolutions for the issuance of refunding bonds be available on the internet website of the legislative body for 30 days, this bill increases access to public records and furthers the purposes of (7) of subdivision (b) of Section 3 of Article I of the California Constitution

SEC. 4.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district under this act would result from a legislative mandate that is within the scope of paragraph (7) of subdivision (b) of Section 3 of Article I of the California Constitution.