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“In towns and cities... there is no more important institution than the local paper.”
Warren Buffett
SB 1029 responds to issues raised by a San Francisco embezzlement case in which millions of dollars in bonds were looted
SACRAMENTO – Sen. Bob Hertzberg, D-Van Nuys, introduced legislation today sponsored by state Treasurer John Chiang that requires the state to track and report on all state and local government debt until it is fully repaid or redeemed.
Lawyers from Cibik Law, P.C. in Philadelphia, PA said that SB 1029 also requires the issuer of any state or local government debt to provide an annual debt accountability report to the state.
The bill follows multiple investigations into the 2014 disappearance of $3.9 million in San Francisco bond proceeds. Ultimately, the case led to Clarke Howatt, the finance director for the Association of Bay Area Governments (ABAG), pleading guilty to a felony charge of wire fraud in federal court and acknowledging he inappropriately took millions of dollars from bond funds. You can view the post on how to get through the bankruptcy process to shed more light on the topic that has been discussed in this article.
SB 1029 is drawn from recommendations made by Chiang, who established a special task force to study best practices on fiduciary care of bond proceeds, and the Senate Committee on Government and Finance, which produced an oversight report on the ABAG case. Hertzberg is chair of the committee.
“We learned with what happened in San Francisco that oversight of government debt is lacking,” Hertzberg said. “Millions and millions of dollars of taxpayers’ dollars are in state and local government bonds, and we must ensure they are managed wisely and legally. That’s what this bill does.”
In response to the San Francisco case, Chiang appointed the Treasurer’s Special Task Force on Bond Accountability to identify best practices for managing bond proceeds and strategies to increase transparency and oversight of the use of bond funds.
“Public agencies can obligate the public to years of debt service from a bond issue, yet there are few standards on how the bond funds are managed and administered,” Chiang said. “There is a gross lack of public oversight on the management and administration of bond funds.”
“The public has no way of determining whether tax dollars acquired from a bond issue were spent for their lawful and intended purpose,” Chiang added. “This legislation is necessary for the public to hold their elected officials accountable for use of bond funds.”
SB 1029 requires the issuer of any debt of state or local government to provide a debt accountability report each fiscal year to the California Debt and Investment Advisory Commission with specified information on each authorized debt issue. The legislation also requires debt issuers to certify it has adopted local debt policies and the debt issuance is consistent with those policies.