California governor takes no position yet on legislation to expand local GO options.

LOS ANGELES - California Gov. Pete Wilson has yet to take a stance on state legislation designed to broaden local governments' financing options when they issue general obligation bonds.

A Wilson spokeswoman said yesterday that the governor has until midnight next Monday, Oct. 11, to sign, veto, or allow Senate Bill 872 to become law without his signature.

Jan Dana, Wilson's assistant press secretary, said he "has not taken a position" on the measure, authored by state Sen. Quentin L. Kopp, I-San Francisco.

The bill revises a turn-of-the-century California statute on general obligation bonds. The old law hamstrings local governments that want to use up-to-date financing methods with GO bond sales.

S.B. 872 allows localities to issue zero-coupon bonds, variable-rate bonds, and detachable call options under the GO bond statute, said Stephen Shea, director of policy research for the California Debt Advisory Commission.

"The GO bond statute now allows only traditional, plain-vanilla deals," Shea said.

An amendment added by the Legislature expanded the list of localities that could take advantage of the statute revisions. As originally drafted, the bill applied to cities and counties only. Now included are school districts and some special districts if they are able to issue GO bonds payable from the proceeds of property taxes.

The bill does not alter a state constitutional requirement that local GO bond issues receive approval by a two-thirds vote of the electorate. Several California market participants speculated that because of the two-thirds requirement GO bonds would not be issued with greater frequency, even with the more flexible financing techniques.

Voters will decide next month whether to lower the approval threshold to a simple majority for local school GO bonds.

GO bond issuance in California accounted for only 4.1% of the total dollar volume of local government long-term financings in the first eight months of 1993. debt advisory commission figures show. In contrast, public enterprise revenue bonds accounted for 18.1% of bond issuance volume in the same period.

Last year, 92 issues of local GO, bonds totaling $1.02 billion were sold, representing only 2.3% of local government public debt issuance in California.

The law firms of Brown & Wood and Orrick, Herrington & Sutcliffe helped draft the proposed legislation on a pro bono basis.

Richard Salladin, an Orrick Herrington partner, said S.B. 872 is designed to harmonize the GO debt statute with existing revenue bond statutes. Revenue bond laws have been revised several times since they first took effect in the mid-1940s, Salladin said.

S.B. 872 contains "basically benign provisions" and has no known opposition, Salladin said. The bill sailed through the state legislature, winning Senate approval June 10 on a 38-0 vote and garnering Assembly approval Aug. 19 on a 76-0 vote.

A debt advisory commission analysis of S.B. 872 says the bill would give localities "modern procedures for issuing GO bonds." The report says the procedures would allow "slight variations [up to 10%] in annual debt service payments, permit issuers to sell their mandatory tender or redemption rights, and allow local GO bonds to be sold at discount and to be refunded."

San Francisco was instrumental in pushing for the bill and expects to use the modified statute if it becomes law. The city has a $746 million backlog of voter-approved, but unsold, GO bonds.

Jack Pizza, a city deputy attorney, said the bill would allow the city to offer GO bonds to the market with different investment products and maturities. The extra options would make the bonds more desirable to investors and lower the city's interest costs, Pizza said.

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