AB 2107 restores an expired financial tool for special districts called Securitized Limited Obligations Notes (SLONs), which allows for securitized debt with certain limitations.
On December 31, 2019, the authorization for special districts to use this particular financing tool expired. This unique financing tool offered a pragmatic, cost-effective, medium-term financing method for a variety of projects.
AB 2107 was introduced on February 6, 2020 by Assembly members Rodriguez and Gray to restore this statutory authority.
Requirements of a SLON include:
- Approval by four-fifths of a district board
- A stated purpose for the debt which could be for either the acquisition/improvement of land, facilities, or equipment
- A revenue source identified as dedicated to paying off the loan
- A maturation date of no more than 10 years
- A maximum borrowing limit of $2 million
To acquire or improve real property, facilities or equipment in order to serve the need of their constituents, most special districts have access to handful of financing options including general obligation bonds, lease financing, installment sale financing, temporary borrowing statutes, and SLONs.
For many special districts, especially for smaller districts with limited resources, SLONs may be the only pragmatic and cost-effective medium-term financing method available to fund variety of more modest projects (less than $2 million), with a four-fifths vote of the district board.
SLONS permit a public agency to issue a note to finance lower-cost acquisitions or improvements of land, facilities, or equipment. SLONs may not exceed $2 million outstanding at any given time, and the terms may not exceed 10 years. SLONs are secured by a pledge of any available revenue and approved by a four-fifths vote of the governing body. Unfortunately, on December 31, 2019, the authorization for special districts to use this financing tool expired. AB 2107 simply restores this authority for another five years.
In summary: SLONS permit a public agency to issue a lower cost note to finance acquisitions or improvements of land, facilities, or equipment with a four-fifths vote of the governing body and an identified revenue source for repayment. AB 2107 reauthorizes the use of these notes.
Please help CSDA in getting this bill signed into law by sending in a letter of support. Should you have any questions about the bill, please contact CSDA Legislative Representative Anthony Tannehill at firstname.lastname@example.org.