C.A.S.H. WORKSHOP Planning for 2016 Local Bond Success September
22, 2015 Sacramento, CA Legal Requirements for School Bonds What
Public Agencies Can and Cannot Do Slide 2 Citizens Oversight
Committee Proposition 39 permits the use of local general
obligation bonds for school projects subject to certain
limitations. The limitations include the establishment of an
independent citizens oversight committee to engage in specified
activities. 2 Slide 3 Appointment Within sixty (60) days following
certification of successful school bond election results, school
board is to appoint a citizens oversight committee. 3 Slide 4
Purpose of the Oversight Committee Section 15278 of the Education
Code sets forth the pertinent provisions regarding the
responsibilities of an independent citizens oversight committee
which provides that the purpose of the citizens oversight committee
shall be to inform the public at least annually concerning the
expenditure of bond revenues. 4 Slide 5 Oversight Committees Bylaws
Establish: The committee Purpose Duties Authorized Activities
Membership Meetings of the Committee District Support Officers
Amendment of Bylaws Termination 5 Slide 6 6 Best practices: Role of
Committee is to compliment authority of School Board. Slide 7
Number and Term 7, 2, 3 Committee shall consist of at least seven
(7) members to serve two (2) year terms, without compensation, for
no more than three (3) consecutive terms. 7 Slide 8 Membership must
include: business community representative senior citizens
representative bona-fide taxpayers representative parent or
guardian of an enrolled student parent or guardian also active in
PTA 8 Slide 9 Qualification Standards Members must: be at least 18
years old and a state citizen in accordance with Govt Code Section
1020 reside within the Districts geographic boundaries No member
may be a District: Employee Vendor/contractor/consultant Relative
of an employee or official 9 Slide 10 10 Best practices: seek to
appoint members representing diversity of interest groups and
broad-based knowledge and experience. Slide 11 The Particulars The
Committee shall: 1. Actively review and report on the proper
expenditure of taxpayers money for school construction. 2. Advise
the public as to whether a school district is in compliance with
the requirements of paragraph (3) of subdivision (b) of Section 1
of Article XIII A of the California Constitution which provides: 11
Slide 12 California Constitution: Article XIII A, Section 1(b)(3)
(3) Bonds... 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, approved by 55 percent of the
voters of the district.... 12 Slide 13 Accountability Requirements:
Ballot must include: (A) A requirement that the proceeds from the
sale of the bonds be used only for the purposes specified in
Article XIIIA, Section 1(b)(3), and not for any other purpose,
including teacher and administrator salaries and other school
operating expenses. (B) 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. 13 Slide 14 14 Ballot must include:
(C) A requirement that the school district board conduct an annual,
independent performance audit to ensure that the funds have been
expended only on the specific projects listed. (D) A requirement
that the school district board 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. Slide 15 15 Best practices: Many Committees receive
frequent presentations on status of on- going projects and project
completion reports. Sometimes including site visits. Slide 16 16
Best practices: Oversight provides assurance that funds are spent
on authorized projects. Best practices: Ultimate decisions on
project priorities are school board responsibility. Slide 17
Additional Allowed Activities In furtherance of its purpose, the
citizens oversight committee may engage in any of the following
activities. Receiving & reviewing copies of the annual,
independent performance audit. Receiving and reviewing copies of
the annual, independent financial audit. Viewing school facilities
and grounds to ensure that bond revenues are expended in compliance
with requirements. Receiving and reviewing copies of any deferred
maintenance proposals or plans developed by a school district,
including any reports required by Section 17584.1.5. 17 Slide 18
Additional Allowed Activities, cont. In furtherance of its purpose,
the citizens oversight committee may also engage in any of the
following activities. Reviewing efforts by the school district to
maximize bond revenues by implementing cost-saving measures,
including, but not limited to, all of the following: a) mechanisms
designed to reduce the costs of professional fees b) Mechanisms
designed to reduce the costs of site preparation c) Recommendations
regarding the joint use of facilities d) Mechanisms designed to
reduce costs by incorporating efficiencies in school site design e)
recommendations regarding the use of cost-effective and efficient
reusable facilities plans 18 Slide 19 Responsibilities Snapshot
Overseeing Bond Expenditures Informing the public concerning the
Districts use of bond revenues 19 Slide 20 Overseeing Bond
Expenditures The committee is responsible for ensuring that the
Districts use of its bond revenues is: in compliance with the laws,
the provisions of the California Constitution, and the authority
approved by the Districts voters. 20 Slide 21 Examples May review
school facilities to monitor the Districts bond expenditures and
may review the prior years and current year annual independent
performance and financial audits to ensure bond revenues were used
for specified school facilities projects only, and not for teacher
and administrator salaries or other school operating expenditures.
21 Slide 22 Examples (cont.) May evaluate whether the District has
implemented cost savings measures to reduce professional fees and
school construction costs. 22 Slide 23 Examples (cont.) May make
recommendations on methods to maximize bond revenues. Upon
completion of a review of the Districts expenditures, projects and
activities, the oversight committee is required to prepare a public
report (at least annually) to inform the public regarding the
Districts use of bond revenues, and whether, based on its review
and findings, whether bond revenues were expended for proper
purposes. 23 Slide 24 Committee No-Nos While the law appears to
grant the oversight committee the power to review bond
expenditures, make recommendations, and prepare a public report,
the law does not convey to the committee the authority to
preapprove in advance or to override the Districts actual use of
bond revenues nor does it authorize the committee to pre-approve or
disapprove bond expenditures ordered by the Districts Board. 24
Slide 25 Conclusion The committees responsibilities in a nut shell:
1. Overseeing District expenditures, activities and projects, and
2. Informing the public regarding the use of the bond revenues
Because the committee does not have authority to approve or
disapprove of the Districts actual use of the bond revenues, as
this authority is reserved for the Districts Board, the District
shall expend the bond revenues as it deems fit. If it is later
determined that the District misused or wasted the bond revenues,
an action may be maintained to restrain or prevent the expenditure
of the bond revenues for such unauthorized purpose. 25 Slide 26
CONFLICT OF INTEREST AND PAY-to-PLAY 26 Slide 27 27 Political
Reform Act Government Code Section 81000, et seq. Regulated by Fair
Political Practices Commission (the FPPC) Slide 28 Political Reform
Act Disqualification Requirement No public official at any level of
state or local government shall make, participate in making or in
any way attempt to use his official position to influence a
governmental decision in which he knows or has reason to know he
has a financial interest. Government Code Section 87100 28 Slide 29
Points to Remember PRA applies to financial conflicts arising from
economic interests Other laws apply to other types of conflicts
Existence of a conflict is heavily fact dependent If you change the
facts, the answer may change Be proactive learn which of your
economic interests may result in a conflict 29 Slide 30 Action If
You Have a Conflict Disclose the existence and nature of the
conflict Abstain from discussion or attempting to influence Abstain
from voting Physically leave the room, unless consent item Make
certain the record reflects the above 30 Slide 31 Form 700 FPPC
Form 700 includes many economic interests FPPC Form 700 does not
include all economic interests that can cause a conflict under the
Political Reform Act Just because you did not have to disclose it
does not mean it may not cause a conflict 31 Slide 32 Economic
Interests You Must Report List from Local District Conflict of
Interest Code Real property Within the jurisdiction of your
district Within 2 miles of your district Sources of income or
investments Doing business in your jurisdiction Has business
contacts Regular distribution, manufacturing, or sales activity 32
Slide 33 Limitations on Acceptance of Gifts Maximum of $420/year
from any source, as of 1/1/2009 Adjusted every odd number year by
FPPC Persons subject to limitation: Local elected officials
Designated employees (i.e., those having to file Form 700)
Candidates for local elected office 33 Slide 34 Government Code
Section 1090 ... County, district,... and city officers or
employees shall not be... financially interested in any contact
made by them..., or by any body or board of which they are members.
Nor shall county, district... and city officers or employees be
purchasers at any sale or vendors at any purchase made by them in
their official capacity. 34 Slide 35 The Prohibition is Absolute
1090 applies regardless of whether: The contract is fair or
equitable The contract is let for bid The official abstains
Contracts in violation of 1090 are void Violation of 1090 is a
FELONY 35 Slide 36 Do Not Mess With Section 1090 No FPPC advice
available Violation is a felony Bill Honig Loss of public office
Loss of benefit of the bargain 36 Slide 37 Pay-to-Play Wikipedia
defines it as: ... when money is exchanged for services or the
privilege to engage (play) in certain activities. The common
denominator of all forms of pay-to-play is that one must play to
get in the game, with the sports analogy frequently arising. 37
Slide 38 MSRB Rule G-37 Broker or dealer of municipal securities
may not engage in business within two years after any contribution
to an official of an agency.... Certain exceptions apply but rule
may even extend to solicitation of others for contributions and
coordination. In school bond election context, rule would apply to
underwriters, brokers, dealers, contributions to board members. 38
Slide 39 Limitations on Campaign Contributions In other states,
limitations apply to contributions to bond campaigns. In
California, several legislative efforts have been made to restrict
limitations to campaigns made by potential underwriters or other
bond brokers. 39 Slide 40 40 These restrictions would prohibit an
underwriting firm from purchasing bonds from a school district, if
that firm made significant contributions to the bond campaign. Even
though no express limitations directly apply under California law,
consider: Section 1090 limitations mentioned above Campaign
ramifications Slide 41 Campaign Ramifications Opponents to campaign
may seize on pay-to-play. Despicable Pay-to-Play Culture of School
Bonds Harms Coronado Taxpayers, Vote No on Prop E. Posted on April
22, 2014 by Coronado Taxpayer 41 Slide 42 42 From the perspective
of political transparency advocates, school bond campaigns have
long been the golden goose of California pay-to- play politics. The
formula in these settings has been simple feed the government goose
with large donations to help a municipal bond campaign pass and
reap the golden egg benefits by being hired to underwrite, advise
or consult on the bond issue. Tax blog Slide 43 43 State treasurer
Bill Lockyer has requested attorney general Kamala Harris to
examine the legality of several school bond issues involving
campaign donors. Lockyer has also asked state officials to take
legislation action to institute rules to limit financial advisors,
bond underwriters and bond lawyers from giving money to body
campaigns and then working on such projects. Slide 44 44 Slide 45
45 Slide 46 46 Slide 47 Thank You! If you would like to learn more
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