The state, as required by the constitution, must repay local agencies within three years with interest.
In order to offset the fiscal impact to local government, districts, along with cities and counties, have the option of joining CA Communities, a joint powers authority that is responsible for administering the Prop 1A loan securitization program. Under this program, any local entity affected by the suspension of Prop 1A, may sell their Prop 1A receivables to CA Communities. CA Communities, in turn, will issue bonds and remit the cash proceeds to the participating local entities. The state has agreed to pay the cost of the Prop 1A loan securitization program along with the interest to bondholders, so there should be no cost to districts who want to participate in the program.
The timeline for making this program successful and to allow enough time for CA Communities to sell the bonds before the first property tax shift occurs in December 2009, which means that the application period will be short.
The key to districts surviving the suspension of Prop 1A this fiscal year is planning ahead. Know your options and ask questions now so that your district is prepared to make a decision by early November of this year.
If your district decides to join CA Communities and participate in the Prop 1A loan securitization program, then your application must be received no later than November 6, 2009. CA Communities expects to conduct informational webinars and regional workshops in September and October of this year to provide more details about the program. For more information, visit CA Communities’ Web site and don’t forget to read their FAQ.
If your district decides not to participate in the loan securitization program, then your district can expect to be repaid with interest directly by the state by June 30, 2013. The interest rate for those local entities that choose not to securitize will be determined by the Department of Finance no later than September 28, 2009.
CSDA has created a Frequently Asked Questions (FAQ) sheet that answers all your Prop 1A questions, including other options to participating in the loan securitization program. In addition, CSDA is working with the League of CA Cities, CSAC and CA Communities on a set of amendments to the codes that detail the loan securitization mechanism and the payback requirements. If these amendments are approved by the Legislature and governor, a few details may change. CSDA will update you when and if any changes to deadlines, payback timeline or anything else related to Prop 1A are approved.