Existing law authorizes the governing board of any school district or community college district to order an election and submit to the electors of the district the question whether the bonds of the district should be issued and sold for the purpose of raising money for specified purposes, including, among other things, the supplying of school buildings and grounds with furniture, equipment, or necessary apparatus of a permanent nature.

This bill would require the governing board of a school district and the governing board of a community college district to obtain reasonable and informed projections of assessed property valuations that take into consideration projections of assessed property valuations made by the county assessor. The bill would also delete obsolete references and make other nonsubstantive changes.

Existing law authorizes the governing board of any school district or community college district to order an election and submit to the electors of the district the question whether the bonds of the district should be issued and sold for the purpose of raising money for specified purposes, including, among other things, the supplying of school buildings and grounds with furniture, equipment, or necessary apparatus of a permanent nature.

This bill would require the governing board of a school district and the governing board of a community college district to obtain reasonable and informed projections of assessed property valuations that take into consideration projections of assessed property valuations made by the county assessor. The bill would also delete obsolete references and make other nonsubstantive changes.

Existing law authorizes the governing board of any school district or community college district to order an election and submit to the electors of the district the question whether the bonds of the district should be issued and sold for the purpose of raising money for specified purposes, including, among other things, the supplying of school buildings and grounds with furniture, equipment, or necessary apparatus of a permanent nature.

This bill would require the governing board of a school district and the governing board of a community college district to obtain reasonable and informed projections of assessed property valuations that take into consideration projections of assessed property valuations made by the county assessor. The bill would also delete obsolete references and make other nonsubstantive changes.

Existing law authorizes the governing board of any school district or community college district to order an election and submit to the electors of the district the question whether the bonds of the district should be issued and sold for the purpose of raising money for specified purposes, including, among other things, the supplying of school buildings and grounds with furniture, equipment, or necessary apparatus of a permanent nature.

This bill would require the governing board of a school district to obtain reasonable and informed projections of assessed property valuations from an independent third party not associated with the bond measure before placing a bond measure on a ballot. that take into consideration projections of assessed property valuations made by the county assessor. The bill would also delete obsolete references and make other nonsubstantive changes.

(1)Existing law authorizes the governing board of any school district or community college district to order an election and submit to the electors of the district the question whether the bonds of the district should be issued and sold for the purpose of raising money for specified purposes, including, among other things, the supplying of school buildings and grounds with furniture, equipment, or necessary apparatus of a permanent nature.

This bill would require the governing board of a school district to obtain reasonable and informed projections of assessed property valuations from an independent third party not associated with the bond measure before placing a bond measure on a ballot.

(2)Existing law requires the governing board of a school district or community college district to establish and appoint members to an independent citizens oversight committee, as specified, if a bond measure authorized pursuant to certain provisions of the California Constitution is approved by 55% of the voters. Existing law requires the citizens oversight committee to convene to at least ensure the bond revenues are expended only for specified purposes and not used for any teacher or administrative salaries or other school operating expenses.

This bill would additionally require a citizens oversight committee that is established by the governing board of a school district to annually review the school districts arrangements for issuing and repaying its bonds.

(3)Existing law authorizes an action to obtain an order restraining and preventing any expenditure of funds received by a school district or community college district through the sale of bonds described above against any officer, agent, or other person acting on behalf of, that school district or community college district, by citizens who are or were liable to pay an ad valorem tax on real property within the school or community college district if it appears by the complaint or affidavits that certain conditions are present, including, among others, that the governing board of a school district or community college district has willfully failed to appoint the citizens oversight committee. Existing law defines these actions as a School Bond Waste Prevention Action.

This bill would, in the case of a school district only, authorize a county auditor with jurisdiction over the school district to also bring a School Bond Waste Prevention Action.

(4)This bill also would delete obsolete references and make other nonsubstantive changes.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2116

Author:(Gallagher)

As Amended Ver:June 15, 2016

Majority vote

Original Committee Reference: ED.

SUMMARY: Specifies that before the governing board of a school district or the governing board of a community college district orders an election to place a general obligation bond on the ballot, it shall obtain reasonable and informed projections of assessed property valuations that take into consideration projections of assessed property valuations made by the county assessor.

The Senate amendments clarify that references to the governing board include the governing board of a community college district in addition to the governing board of a school district.

EXISTING LAW: Authorizes, under California Constitution Article XIII A, Section 1, school districts, community college districts, or county offices of education to pass a general obligation bond by 55% vote, provided that the local initiative includes the following accountability measures:

1. A requirement that the proceeds from the sale of the bonds be used only for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities, and not for any other purpose;
2. Provide a list of the specific school facilities projects to be funded and certification that the school district board, community college board, or county office of education has evaluated safety, class size reduction, and information technology needs in developing that list;
3. A requirement that the school district board, community college board, or county office of education conduct an annual, independent performance audit to ensure that the funds have been expended only on the specified projects; and,
4. A requirement that the school district board, community college board, or county office of education conduct an annual, independent financial audit of the proceeds from the sale of the bonds until all of those proceeds have been expended for the school facilities projects.

FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS: In 2000, voters passed Proposition 39, a Constitutional Amendment which, among others, gave school and community college districts the opportunity to seek approval of a local school facilities bond based on 55% vote rather than 2/3 vote, provided that the local bond initiative meets specified accountability measures, including identifying the projects to be funded by the bond measure and conducting annual independent financial and performance audits.

Local bonds are paid by an ad valorem tax (up to $60 per $100,000 for a unified school district) based on property values. Higher assessed valuations would yield higher revenues to pay for a bond. According to the author, bond advisors may present overly positive revenue projections when presenting a proposed bond measure to a governing board. The author states that this bill would improve school bond oversight, accountability, and fiscal responsibility by requiring the school district governing board to consider the county assessor's projections prior to ordering an election to authorize school facilities construction bonds.

Analysis Prepared by: Sophia Kwong Kim / ED. / (916) 319-2087 FN: 0003597

 CONSENT  

Bill No: AB 2116

Author:

: 6/15/16 Senate

Vote:

SENATE EDUCATION COMMITTEE: 9-0, 6/8/16

AYES: Liu, Block, Hancock, Huff, Leyva, Mendoza, Monning, Pan, Vidak

ASSEMBLY FLOOR: 79-0, 4/21/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill requires a school district or community college district governing board to consider the county assessor’s projections for property valuations prior to ordering an election to authorize bonds for school facilities construction related purposes.

ANALYSIS:

Existing law authorizes the governing board of any school district or community college district and requires a district, upon a petition of the majority of the qualified electors residing in the district, to order an election and submit to the electors of the district the question whether the bonds of the district shall be issued and sold for the purpose of raising money for specified purposes, including the purchase of school lots, the building or purchase of school buildings, and other facilities and equipment related costs, as well as refunding of facilities related debt, as specified. (Education Code § 15100)

This bill:

1. Requires a school or community college district to consider the county assessor’s projections of assessed property valuations prior to ordering an election to authorize bonds for school facilities construction related purposes, as specified.
2. Makes a number of technical and clarifying changes applicable to both school and community college districts.

Comments

Source of the bill. In July 2015, the California Policy Center, an educational nonprofit focused on how to improve California’s democracy and economy, issued a report, For the Kids: CA Voters Must Become Way of Borrowing Billions More from Wealthy Investors for Educational Construction. Among other things, the report highlighted the need for adequate and effective oversight and accountability for bond measures. The report recommended that districts be required to obtain reasonable and informed projections of assessed property valuation from an independent source (not from their bond advisors and consultants) before placing a bond measure on the ballot. According to the author, this bill would improve school bond oversight, accountability, and fiscal responsibility by requiring the school district governing board to consider the county assessor’s projections prior to ordering an election to authorize school facilities construction bonds.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/14/16)

Howard Jarvis Taxpayers Association

Salinas Taxpayers Association

OPPOSITION: (Verified 6/14/16)

None received

ASSEMBLY FLOOR: 79-0, 4/21/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Ridley-Thomas

Prepared by:

6/15/16 17:24:39

**** END ****

SENATE COMMITTEE ON EDUCATION

Senator Carol Liu, Chair

2015 - 2016 Regular

Bill No: AB 2116

Subject: School bonds: projections of assessed property valuations

SUMMARY

This bill requires a school district governing board to consider the county assessor’s projections for property valuations prior to ordering an election to authorize bonds for school facilities construction related purposes.

BACKGROUND

Existing law authorizes the governing board of any school district or community college district and requires a district, upon a petition of the majority of the qualified electors residing in the district, to order an election and submit to the electors of the district the question whether the bonds of the district shall be issued and sold for the purpose of raising money for specified purposes, including the purchase of school lots, the building or purchase of school buildings, and other facilities and equipment related costs, as well as refunding of facilities related debt, as specified. (Education Code § 15100)

ANALYSIS

This bill:

1. Requires a school district to consider the county assessor’s projections of assessed property valuations prior to ordering an election to authorize bonds for school facilities construction related purposes, as specified.
2. Makes a number of technical and clarifying changes applicable to both school and community college districts.

STAFF COMMENTS

1. Source of the bill. In July 2015, the California Policy Center, an educational nonprofit focused on how to improve California’s democracy and economy, issued a report, For the Kids: CA Voters Must Become Way of Borrowing Billions More from Wealthy Investors for Educational Construction. Among other things, the report highlighted the need for adequate and effective oversight and accountability for bond measures. The report recommended that districts be required to obtain reasonable and informed projections of assessed property valuation from an independent source (not from their bond advisors and consultants) before placing a bond measure on the ballot. According to the author, this bill would improve school bond oversight, accountability, and fiscal responsibility by requiring the school district governing board to consider the county assessor’s projections prior to ordering an election to authorize school facilities construction bonds.
2. Applicability to all districts? As currently drafted the requirement that county assessor property valuations be considered prior to ordering an election are applicable only to school districts. Staff recommends the bill be amended on page 3, subdivision (c) to make the new requirement applicable to community college districts as well.

SUPPORT

Howard Jarvis Taxpayers Association

Salinas Taxpayers Association

OPPOSITION

None received.

-- END --

Date of Hearing: April 6, 2016

ASSEMBLY COMMITTEE ON EDUCATION

Patrick O'Donnell, Chair

ABPCA Bill Id:AB 2116 (

Author:Gallagher) – As Introduced Ver:February 17, 2016

SUBJECT: School bonds: citizens’ oversight committees: school bond waste prevention actions

SUMMARY: Adds new requirements to the election and oversight of local general obligation education bonds. Specifically, this bill:

1. Requires the governing board of a school district to obtain reasonable and informed projections of assessed property valuations from an independent third party not associated with the bond measure prior to ordering a bond election.
2. Requires a citizens' oversight committee established by the governing board of a school district to annually review the school district's arrangements for issuing and repaying its bonds.
3. Authorizes, in the case of a school district only, a county auditor with jurisdiction over the school district to commence an action to obtain an order restraining and preventing any expenditure of bond proceeds if it appears by the complaint or affidavits that governing board of the school district has failed to meet specified conditions.

EXISTING LAW:

1. Authorizes, under Section 1 of Article XIII A of the California Constitution, school districts, community college districts, or county offices of education to pass a general obligation bond by 55% vote, provided that the local initiative includes the following accountability measures:
   1. A requirement that the proceeds from the sale of the bonds be used only for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities, and not for any other purpose;
   2. Provide a list of the specific school facilities projects to be funded and certification that the school district board, community college board, or county office of education has evaluated safety, class size reduction, and information technology needs in developing that list;
   3. A requirement that the school district board, community college board, or county office of education conduct an annual, independent performance audit to ensure that the funds have been expended only on the specified projects; and,
   4. A requirement that the school district board, community college board, or county office of education conduct an annual, independent financial audit of the proceeds from the sale of the bonds until all of those proceeds have been expended for the school facilities projects.
2. Requires the governing board of a school district or community college district to establish and appoint members to an independent citizens' oversight committee within 60 days of the date that the governing board enters the election results on its minutes. (Education Code (EC) Section 15278(a))
3. Specifies that the purpose of the citizens' oversight committee shall be to inform the public concerning the expenditure of bond revenues, including advising the public as to whether a school district or community college district is in compliance with the authorized uses of bond funds pursuant to Proposition 39 (2000). (EC Section 15278(b))

FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS: Proposition 39. In 2000, voters passed Proposition 39, a Constitutional Amendment which, among others, gave school and community college districts the opportunity to seek approval of a local school facilities bond based on 55% vote rather than 2/3 vote, provided that the local bond initiative meets specified accountability measures, including identifying the projects to be funded by the bond measure and conducting annual independent financial and performance audits. AB 1908 (Lempert), Chapter 44, Statutes of 2000, a companion bill to Proposition 39, requires each district, within 60 days of the passage of a local bond with 55% to appoint a citizens' oversight committee (oversight committee) to monitor and review expenditures to ensure compliance with Proposition 39 requirements, and to keep the public informed about bond expenditures. The oversight committee must be comprised of a minimum of seven members. For school districts, they must include representatives of the business community, a bona fide taxpayers' organization, and a senior citizens' organization; a parent of a student attending the school district; and a parent active in a school's parent-teacher organization.

According to the author, current law is "not enough to protect the public from dodgy bond practices." This bill contains three proposals.

Assessed valuations. This bill requires a governing board of a school district to obtain "reasonable and informed" projections of assessed property valuations from an independent third party not associated with the bond measure prior to ordering a bond election. According to the author, bond advisors may present overly positive revenue projections when presenting a proposed bond measure to a governing board. Bonds are paid by an ad valorem tax (up to $60 per $100,000 for a unified school district) based on property values. Higher assessed valuations would yield higher revenues to pay for a bond. The author states that an independent third party would better inform a governing board in determining the amount of a bond to submit to voters. Staff notes that predicting future assessed valuations cannot be guaranteed due to sudden changes to market conditions and the economy. Moreover, bond issuance may be years after voters approve a bond. By the time a school district issues a bond, assessed valuations may be very different than that predicted prior to a bond election. Rather than requiring a school district to pay for an additional report, which may or may not result in more accurate projections, staff recommends requiring projections of assessed valuations to take into consideration projections made by the county assessor.

Citizens' oversight committee. The bill requires an oversight committee to annually review the school district's arrangements for issuing and repaying its bonds. Bonds are not always issued frequently. Once an issuance is made, payments are made on a regular schedule. It is unclear why oversight committees should be required to review bond arrangements on an annual basis. Education Code Section 15141 requires bond issuances to be approved through passage of a resolution at a governing board meeting containing specified information. There is nothing prohibiting oversight committee members from attending governing board meetings or reviewing bond issuance documents currently. Staff recommends striking this provision.

Bond accountability. Under current law, a citizen residing in the school or community college district who is assessed an ad valorem tax may initiate an action to obtain an order restraining or preventing expenditure of bond funds if the expenditure or purpose for the funds are not used in accordance with authorized uses of funds prescribed by Proposition 39 or if a school district has not appointed an oversight committee. This bill authorizes a county auditor with jurisdiction over the school district to initiate an action. Current law already establishes accountability measures, including requiring the establishment of citizens' oversight committees and the requirement for the district to perform an annual performance audit and an annual financial audit (both of which must be provided to the bond oversight committee). Current law, under bond issuance statutes, also prohibits the proceeds of bond funds to be used for any other purpose other than for which the bond was issued. The purpose of the provision allowing an action to be initiated is to give individuals paying the taxes recourse and should be preserved as such. Staff recommends striking this provision.

The author states, "Borrowing for school construction has exploded in the last decade. As borrowing hits record highs, it is more important than ever that school construction bond funds be fiscally sound, and their financing mechanisms transparent. AB 2116 ensures that future school construction bonds are subject to stricter scrutiny and transparency."

REGISTERED SUPPORT / OPPOSITION:

Support

Howard Jarvis Taxpayers Association

Opposition

None on file

Analysis Prepared by: Sophia Kwong Kim / ED. / (916) 319-2087