In the interest of improving debt transparency, on September 12, 2016 Governor Brown signed Senate Bill No. 1029 (Hertzberg) which requires local agencies, including school and community college districts, to certify that they have adopted local debt policies and that each contemplated debt issuance is consistent with those adopted policies.  The certification will be a required element of the Report of Proposed Debt Issuance that is filed with the California Debt & Investment Advisory Commission (CDIAC) prior to a bond issuance.  In addition, the new law will require local agencies to prepare an annual report for any debt issue for which it has filed a CDIAC Report of Final Sale on or after January 21, 2017.

Many school districts currently lack debt issuance and management policies, and all districts, especially those with existing general obligation bond authorization or who may be successful with bond elections in November, should consider the adoption of such policies in the next few months.  To meet legal requirements, the debt policy must address:

• The purposes for which the debt proceeds may be used;
• The types of debt that may be issued;
• The relationship of the debt to, and integration with, the issuer’s capital improvement program or budget, if applicable;
• Policy goals related to the issuer’s planning goals and objectives;
• The internal control procedures that the issuer has implemented, or will implement, to ensure that the proceeds of the proposed debt issuance will be directed to the intended use.

With regard to the annual report requirement, CDIAC is directed to consult with issuers to determine the most efficient and least burdensome reporting method, but reports must contain specified information about authorized, issued and outstanding debt during the reporting period.

SB 1029 contains a declaration of the California Legislature in uncodified portions of the bill that state and local agencies should adopt comprehensive written debt management policies pursuant to the recommendation of the Government Finance Officers Association (GFOA).  GFOA is a national association of government finance professionals with a shared mission to promote excellence in state and local government financial management.

DWK has developed debt management policies that meet the criteria specified in this new law and can work with you to develop or customize policies to meet your specific needs.  If you would like help with the development of your district’s policy, please contact us.