LOS ANGELES — California issuers won't face most new disclosure requirements until 2018 under a new state law that takes effect in January.
The law was enacted in the wake of a San Francisco case in which bond proceeds were embezzled.
Senate Bill 1029, sponsored by State Treasurer John Chiang, requires the state's issuers to step up disclosure of their bond payments and use of proceeds. The governor signed the law in September.
The California Debt Investment and Advisory Commission completed a 30-day request for comment Friday. A month ago it had released an 11-page document seeking comment that also provided details on how it expects issuers to provide disclosure.
"We have received a number of comments, which is good because it means our attempt to engage has worked," said Tim Schaefer, California's deputy treasurer for public finance.
The state has heard from counties, cities, individual issuers, the California Association of Treasurers and Tax Collectors and the California Association of School Business Officials, Schaefer said.
The biggest change will be for schools, because cities, counties and special districts already provide similar information in an annual report to the controller's office, Schaefer said. In the past, schools were completely exempt from reporting to the state controller's office.
"We were especially interested in hearing from the school folks as we wanted to make sure we could assist them in any possible way," he said.
Municipalities that already submit information to the controller's office will not just be able to make a second copy for CDIAC, because the annual report submitted to the controller's office is different.
The information submitted to the controller's office by cities and counties is not issue specific; it's aggregated and it does not focus on the expenditure of proceeds, Schaefer said.
The law is not retroactive and it will only apply to bonds sold in 2017 and the years to follow.
When SB1029 was first contemplated, it was going to be retroactive, but the treasurer's office agreed after hearing from constituent groups that that would be burdensome, Schafer said.
The main change in 2017 is that each issuer will have to check a box affirming that it has adopted local debt policies and that the proposed debt issuance will comply with those policies, Schaefer said.
The debt policies must include the purposes for which the debt may be used, the types of debt that may be issued, the relationship of the debt to the issuer's capital improvement program or budget, the policy goals, and that internal control procedures have been implemented to insure the bond proceeds will be directed to the intended use, according to the legislation.
Issuers already notify CDIAC when they sell debt and when the sale is completed. Issuers who sell debt after Jan. 21, 2017 will be required to file an annual report on or before January 31, 2018 for the fiscal year ended July 30 or July 1. The report will include how much of the debt on each bond sale was paid off and how much is being carried forward; what the proceeds were spent on and how much will be carried into the next year; and what the issuer was authorized to sell by local vote or resolution and how much bond capacity remains from that authority.
Issuers are already filing annual disclosure on the Municipal Rulemaking Board's EMMA website through its comprehensive annual financial reports; and they have already agreed to file material event notices on EMMA and the Internal Revenue Service requires issues to track how bond proceeds are spent, Schaefer said.
"The fact [issuers] have created a CAFR means they have the information," Schaefer said. "When [an issuer's] accountant sits down in the conference room, the accountant is compiling that information, we just want them to put it in an online file and send it to CDIAC."
"We don't feel like we are plowing any new earth," Schaefer said. "We are just making information that exists more accessible."