General Bond Provisions - - CA Government

Section § 5850

This law defines key terms related to the issuance of bonds by public entities in California. It explains that "bonds" include various forms of debt that public bodies can issue. The term "public body" refers to governmental entities such as counties, cities, or specific public organizations that have the authority to issue bonds. The "governing body" is the group, like a city council or board of supervisors, that manages these public bodies.

As used in this chapter:

(a) “Bonds” means any bonds, notes, certificates of indebtedness or other evidences of indebtedness issued after January 1, 1989, by a public body which is authorized to issue bonds, notes, certificates of indebtedness or other evidence of indebtedness.

(b) “Public body” means the county, city, city and county, public district, public authority, public corporation, nonprofit corporation or other statutorily constituted public entity which is authorized to issue bonds.

(c) “Governing body” means the governing board, commission, city council, board of supervisors, board of directors or similar multimember body which exercises authority over a public body.

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(Added by Stats. 1988, Ch. 1055, Sec. 3.)

Section § 5851

This law section states that even if other laws say bond interest must be paid twice a year, the actual payment times for bond interest are determined by the specific terms laid out in the bond's issuing documents.

Notwithstanding any other provision of law specifying that interest on bonds is payable semiannually, interest on bonds is payable at the times established in the resolution, indenture, agreement or other instrument providing for the issuance of the bonds.

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(Added by Stats. 1988, Ch. 1055, Sec. 3.)

Section § 5852

This law allows governing bodies, like city councils, to issue bonds not just through resolutions, but also through other legal documents like agreements or indentures. It gives them flexibility in how bonds can be issued.

Notwithstanding any other provision of law specifying that bonds shall be issued pursuant to a resolution of a governing body of a public body, a governing body of a public body may authorize the issuance of bonds pursuant to a resolution, indenture, agreement or other instrument providing for the issuance of bonds.

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(Added by Stats. 1988, Ch. 1055, Sec. 3.)

Section § 5852.1

Before a public body can issue long-term bonds, they have to disclose certain financial details in a public meeting. This includes the true interest cost, finance charges, net proceeds from the bond sale, and the total payment amount of the bonds.

This information should come from reliable estimates made by experts like underwriters or financial advisers.

If the bonds are issued through a conduit (a third-party that issues bonds on behalf of the borrower), the necessary financial information must be shared with and approved by the third party's governing body or officials.

These requirements don't apply to state entities, and not following these rules doesn't affect the bond's validity.

(a)

(1) Prior to authorization of the issuance of bonds with a term greater than 13 months pursuant to this chapter, the governing body of a public body shall obtain and disclose all of the following information in a meeting open to the public:

(A) The true interest cost of the bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the new issue of bonds.

(B) The finance charge of the bonds, which means the sum of all fees and charges paid to third parties.

(C) The amount of proceeds received by the public body for sale of the bonds less the finance charge of the bonds described in subparagraph (B) and any reserves or capitalized interest paid or funded with proceeds of the bonds.

(D) The total payment amount, which means the sum total of all payments the borrower will make to pay debt service on the bonds plus the finance charge of the bonds described in subparagraph (B) not paid with the proceeds of the bonds. The total payment amount shall be calculated to the final maturity of the bonds.

(2) The information in paragraph (1) shall be obtained as follows:

(A) As a good faith estimate from an underwriter, financial adviser, or private lender.

(B) From a third-party borrower pursuant to subdivision (b).

(b)

(1) If the public body issuing bonds is a conduit financing provider, as defined in subdivision (b) of Section 5870, issuing bonds on behalf of a third-party borrower, the information in paragraph (1) of subdivision (a) shall be presented to the third-party borrower as a good faith estimate by an underwriter, financial adviser, or private lender engaged by the third-party borrower.

(2) If the third-party borrower has a governing board, the information shall be presented to the governing board or the official or officials or committee designated by the governing board to obligate the third-party borrower in connection with the financing. If the third-party borrower does not have a governing board, the information shall be presented to the official or officials of the third-party borrower who has the authority to obligate the third-party borrower in connection with the financing.

(3) The third-party borrower shall provide the information received pursuant to this subdivision to the public body prior to the disclosure of the information as required pursuant to subdivision (a).

(c) The requirements of this section shall not apply to any public body that is a state entity. For purposes of this subdivision, “state entity” means any agency, department, bureau, board, or commission of any kind.

(d) This section, including the failure to comply with the requirements of this section, shall not affect the validity of the bonds or the authorization of the bonds by the public body.

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(Added by Stats. 2017, Ch. 625, Sec. 1. (SB 450) Effective January 1, 2018.)

Section § 5853

This law says that the authority given in this chapter for issuing bonds, notes, or other types of debt is additional to any specific legal provisions that allow for such actions. It also stands on its own as a complete authority, meaning it does not rely on other laws to be valid.

The general authority provided in this chapter is intended to be in addition to, and not limited by, specific provisions authorizing the issuance of bonds, notes or other evidences of indebtedness and is separate and complete authority for the actions authorized in this chapter.

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(Added by Stats. 1988, Ch. 1055, Sec. 3.)

Section § 5854

This law states that people who own municipal bonds, whether bought before or after November 5, 1996, are not automatically agreeing to or risking any changes made through public votes that would damage their contractual rights. These rights are protected by the U.S. Constitution. So, bondholders retain their protection against such changes, despite any state measures.

Section 3 of Article XIII C of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution.

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(Added by Stats. 1997, Ch. 38, Sec. 3. Effective July 1, 1997.)