ATTORNEY GENERAL OPINION JANUARY 26, 2016 - PRACTICES RE SCHOOL CONSTRUCTION BOND FINANCING

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I®]® BEST BEST & KRIEGER ATTORNEYS AT LAW d Memorandum To: PUBLIC AGENCY CLIENTS From: BEST BEST & KRIEGER LLP Date: FEBRUARY 17, 2016 Re: ATTORNEY GENERAL OPINION JANUARY 26, 2016 — PRACTICES RE SCHOOL CONSTRUCTION BOND FINANCING SUMMARY Late last month, the California Attorney General issued an Opinion concerning the legality of certain practices common to bond financing of school construction. Specifically, the Opinion analyzed whether these practices, most of which relate to contingent -compensation arrangements, are acceptable uses of public funds. The Attorney General's Office determined that they are not acceptable uses of public funds and provided guidance for public agencies on how to avoid running afoul of the law. Even though the Attorney General's Opinion was written in the context of school bond measures, its conclusions regarding limits on the use of public resources in connection with campaign activity apply equally to all public agencies. DISCUSSION In California, citizens vote on ballot measures to authorize bond issuances. Frequently, the bonds finance capital projects for schools. Public resources, either monetary or in -kind contributions, cannot be used to promote passage of a bond ballot initiative. See Ed. Code § 7054(a); Stanson v. Mott (1976) 17 Cal.3d 206, 209-211, 217-218. The Opinion clarifies that "a school district violates prohibitions against using public funds to advocate passage of a bond measure by contracting for services related to a bond election campaign if those services may be fairly characterized as campaign activity." (_ Ops.Cal.Atty.Gen._(2016); No. 13-304.); 2016 Cal. AG LEXIS 4, at *15 (Jan. 26, 2016). But bond elections generally involve a host of pre -election activities, including, for example, polling about a potential bond issue. Consequently, issue committees are formed to support passage of the bond measure. It is commonly asserted that: "[a] substantial portion of the contributions to these issue committees comes from parties that may receive financial benefits from the referendum's approval[,]" and these parties include underwriters and bond counsel. Todd L. Ely and Thad D. Calabrese, To Give is To Get: The Promotional Role of Investment Bankers in Local Bond Elections, American Review of Public Administration 1, 1-2 (2014). The propriety of these financial interests is at the heart of the recent Opinion. This product is provided under the Public Policy & Ethics Program. 93939.00002\24437112.5