PHOENIX - Legislation to require California issuers to provide significantly more information about their bond payments and uses of proceeds appears to be marching toward passage.
Senate Bill 1029, sponsored by Sen. Bob Hertzberg, D-Los Angeles, would require issuers to submit an annual debt accountability report showing adherence to bond payments and also that the money was spent on what voters intended.
Issuers would also be required to certify they have adopted local debt policies and that their debt issuance is consistent with those policies. The bill passed out of the California Senate by a 39-0 vote, and will now work its way through the Assembly where it is not expected to meet any major roadblocks.
Andrew LaMar, Hertzberg's communications director, said that the Assembly's Committee on Local Government would likely hold a hearing on the bill later this month, and after passage there will need to go to the Appropriations Committee and then to the Assembly floor for approval.
"We don't expect any significant opposition in the Assembly, and the bill remains on track," LaMar said.
S.B. 1029 emerged from a task force Treasurer John Chiang formed after bond funds were embezzled from the ABAG Finance Authority For Nonprofit Corporations, a Northern California conduit issuer, in 2014.
Jay Goldstone, a managing director at Mitsubishi UFJ Financial Group who was co-chair of the treasurer's task force, said the committee knew that there would likely be some inclination to create legislation in response to the ABAG incident.
"There was a sense among the task force, myself included, that we did not want to recommend legislation," said Goldstone, who has also served as Municipal Securities Rulemaking Board chair and as chief operating officer of San Diego.
Goldstone said he and other task force members were sensitive to the idea of recommending that the state impose a one-size-fits-all mandate on local issuers, which vary widely in their size and sophistication.
If the bill becomes law, issuers would also be required to certify they have adopted local debt policies and that their debt issuance is consistent with those policies.
"Will this improve the situation?" asked Goldstone. "I don't know."
Goldstone added that he would not be surprised to see the bill pass, but added that he was less certain that sufficient state funding will be allocated to support it, possibly making it an unfunded mandate.
Under Proposition 1A, adopted by California voters in 2004, the state must either fund legislative mandates imposed on local governments or suspend the requirement that local governments adhere to them.
Besides an increased burden on local governments, Goldstone said, the bill would likely also demand more of the Treasurer's office and of the California Debt and Investment Advisory Commission.
Chiang is a supporter of the measure and wanted it introduced, though Goldstone said Chiang did not explicitly tell the task force that he favored a legislative solution.
Final passage of the bill could happen in August, LaMar said.
