California Bill Would Ban Bond Firms from School Elections

SAN FRANCISCO - A California lawmaker has introduced a bill to try to curb financial firms from participating in school district bond elections.

The legislation proposed by Don Wagner, R-Irvine, would prohibit a local agency from working with an individual or firm on any bond deal if they provide services to the bond election campaign.

"Basically they are spending public dollars to advocate election results," said Wagner in a phone interview Monday. "That is a corrupting influence on these bonds."

Wagner said his bill, amended last month, is similar to unsuccessful legislation proposed in 2011 by former Assembly member Chris Norby, a Fullerton Republican who lost his re-election bid in 2012.

This time around, Wagner believes there is more interest in the issue following a number of articles related to campaign contributions and services provided by bond firms, including stories in The Bond Buyer last year.

"I am not going to say I have great optimism in it passing, but I do know there is more public and political interest in the issue this year," Wagner said.

Treasurer Bill Lockyer, a Democrat, has also expressed interest in the topic.

Lockyer sent letters last month to Attorney General Kamala Harris asking her to give an opinion on the roles of underwriters, financial advisers and bond counsels in school bond elections.

In California, an attorney general's opinion on a subject does not have the same force of law that a court ruling would have, but is still considered influential.

The treasurer's office is in the process of reaching out to Wagner about his bill, said Lockyer's spokesman Tom Dresslar, adding they have no position right now on the legislation.

Wagner said he just wants to get something done, whether it is his bill or something the treasurer favors.

Another bill related to school district bonds passed the Assembly on a 73-0 vote Monday.

AB 182, which would tighten restrictions on the use of capital appreciation bonds by school districts, now moves to the Senate.

Assembly members Joan Buchanan, D-Alamo, and Ben Hueso, D-San Diego, proposed the legislation in January. It would restrict maturities, reduce maximum interest rates, limit ratio of total debt service to principal, and require call options on older maturities.

The lawmakers' proposal comes after a flurry of bad publicity in California and a push for change by politicians over the use of what some see as very expensive CABs issued by school districts.