AB 630

Under current law, with certain limitations, two or more political subdivisions

may create a commission that is authorized, among other things, to 1) raise moneys

by issuing municipal bonds; and 2) convey these moneys to qualifying private entities

to finance certain types of capital improvement projects. A commission's bonds are

known as conduit bonds — the commission acts, in effect, as a conduit between the

purchaser of the bonds and the actual borrower of the moneys raised from the bonds.

In general, the borrower pays a lower interest rate for financing a project this way

than it would pay for financing on the open market, because the interest that the

bond purchaser earns from the conduit bonds is exempt from federal or state

taxation.

This bill makes two changes related to these conduit bonding commissions. The

bill specifies that the Legislative Audit Bureau must conduct an audit of each

commission every two years and at the direction of the Joint Legislative Audit

Committee. The bill also requires the commission to pay a fee of 1 percent of the

amount of any bonds it issues and to pay these fees to the Department of Revenue

to fund a property tax credit that is calculated in the same manner as the school levy

credit.