Governor Brown Signs School Bond Reform Bill Supported by Salinas Taxpayers Association

The Salinas Taxpayers Association supported Assembly Bill 2116, introduced by Assemblyman Jim Gallagher, to give taxpayer groups and the public more leverage from state law to curtail abuses in bond finance for California school and community college facilities construction. The bill was also supported by the Howard Jarvis Taxpayers Association. Governor Brown signed the bill into law on August 17, 2016.

The bill was amended over time but in its final form remains a way for the Salinas Taxpayers Association and other groups and individuals to force school and college boards to seek an independent evaluation of projected assessed valuation of property. For example, in 2015 a bond advisor projected 4% annual property value growth with the Salinas Union High School District from 2017 and after as the basis for considering bond sales. While this projection may justify the amount of borrowing desired by the bond advisor and the school district, it seems absurd to expect that kind of growth in Salinas based on current economic circumstances. But how does a member of the public make the district accountable for excessively high projections of assessed property valuation?

In its final form, AB 2116 requires the governing boards of school districts and community college districts to obtain reasonable and informed projections of assessed property valuations that take into consideration projections of assessed property valuations made by the county assessor. If a ridiculous projection from a bond advisor is cited as the basis for an excessively high amount of bonds to be sold, the public can point out that the district obviously did not consider reasonable and informed projections of the county assessor. This new law can prevent the district from borrowing more money than it can afford to pay back over time.

During the legislative process, a provision was removed from AB 2116 that would have given Citizens Bond Oversight Committees authority to review bond issues as well as the actual facilities construction. That power would have been helpful to the public when the Hartnell Community College District sold Capital Appreciation Bonds at irresponsible ratios of principal to interest in the late 2000s.

Assembly Bill 2116 was inspired by recommendations in a massive study of California educational bond finance practices published in July 2015 by the California Policy Center, a policy institute. The problem of school and college districts issuing bonds based on excessive projections of assessed valuation of property was identified and evaluated in a 2014 report from the Orange County Grand Jury.

Assembly Bill 2116 Text and Legislative History

Press Release from Assemblyman Jim Gallagher on Signing of AB 2116

Press Release from California Policy Center on Signing of AB 2116

April 4, 2016 Salinas Taxpayers Association Supports AB 2116 as Introduced by Assemblyman Jim Gallagher

May 6, 2016 Salinas Taxpayers Association Supports AB 2116 as Amended by Assemblyman Jim Gallagher

For the Kids: California Voters Must Become Wary of Borrowing Billions from Wealthy Investors for Educational Construction – California Policy Center – July 2015

School Bonds – The Untold Story of Assessed Values: An Overview of Orange County School District Bonded Debt – Orange County Grand Jury 2013-2014