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
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.
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Appointment
 Within sixty (60) days following
certification of successful school bond
election results, school board is to
appoint a citizens’ oversight committee.
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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.
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Oversight Committees’ Bylaws
Establish:
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The committee
Purpose
Duties
Authorized Activities
Membership
Meetings of the Committee
District Support
Officers
Amendment of Bylaws
Termination
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 Best practices: Role of Committee
is to compliment authority of
School Board.
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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.
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Membership must include:
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business community representative
senior citizens’ representative
bona-fide taxpayers’ representative
parent or guardian of an enrolled student
parent or guardian also active in PTA
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Qualification Standards
 Members must:
 be at least 18 years old and a state citizen in accordance
with Gov’t Code Section 1020
 reside within the District’s geographic boundaries
 No member may be a District:
 Employee
 Vendor/contractor/consultant
 Relative of an employee or official
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 Best practices: seek to appoint
members representing diversity of
interest groups and broad-based
knowledge and experience.
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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:
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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 . . . .
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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.
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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.
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 Best practices: Many Committees receive
frequent presentations on status of ongoing projects and project completion
reports. Sometimes including site visits.
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 Best practices: Oversight provides
assurance that funds are spent on
authorized projects.
 Best practices: Ultimate decisions on
project priorities are school board
responsibility.
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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.
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Additional Allowed Activities, con’t.
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
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Responsibilities Snapshot
 Overseeing Bond
Expenditures
 Informing the
public concerning
the District’s use
of bond revenues
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Overseeing Bond Expenditures
The committee is responsible for ensuring that the
District’s use of its bond revenues is:
 in compliance with the laws,
 the provisions of the California Constitution,
 and the authority approved by the District’s voters.
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Examples
 May review school facilities to monitor the
District’s 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.
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Examples
(cont.)
 May evaluate whether
the District has
implemented cost
savings measures to
reduce professional
fees and school
construction costs.
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Examples
(cont.)
 May make recommendations on
methods to maximize bond revenues.
Upon completion of a review of the
District’s expenditures, projects and
activities, the oversight committee is
required to prepare a public report
(at least annually) to inform the
public regarding the District’s use of
bond revenues, and whether, based
on its review and findings, whether
bond revenues were expended for
proper purposes.
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Committee “No-No’s”
 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
District’s actual use of bond revenues nor does it
authorize the committee to pre-approve or
disapprove bond expenditures ordered by the
District’s Board.
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Conclusion
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The committee’s 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 District’s actual
use of the bond revenues, as this authority is
reserved for the District’s 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.
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CONFLICT OF INTEREST
AND
PAY-to-PLAY
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Political Reform Act
 Government Code Section 81000, et seq.
 Regulated by Fair Political Practices
Commission (the “FPPC”)
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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
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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
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Action If You Have a Conflict
 Disclose the existence and nature of the
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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
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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
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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
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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
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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.”
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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
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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
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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.
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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.
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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.
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 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
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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
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 “From the perspective of political transparency
advocates, school bond campaigns have long
been the “golden goose” of California pay-toplay 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
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 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.
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Thank You!
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