LOS ANGELES -- A bill enabling California's Richmond Unified School District to repay its defaulted $9.8 million certificate of participation issue could reach the state Senate this week, after clearing a key committee by an unanimous vote Monday.
AB 2595, introduced by Assemblyman Tom Bates, D-Berkeley, would allow the district to pay off its $29 million of outstanding loans from the state by selling some surplus property to the state and using the proceeds to retire the loans. This would free funds to pay $1.4 million annual principal and interest payments on the 10-year certificates sold in 1988. The district defaulted on the COP issue last year.
"We started out wanting to help a district in our area, but what we've learned is that Richmond's default has had ramifications throughout the entire state," said Rachel Richman, legislative aide to Mr. Bates.
The legislation allows the district to refinance the COPs with a bank loan, according to Ms. Richman. If the district misses a loan payment, state apportionment payments to the district would be immediately diverted to the bank, she said.
The action on the bill comes before a court hearing set for Friday in California Superior Court of Contra Costa County. In a lawsuit, the state has argued the COPs are invalid because they created debt without the approval of voters and financed an operating deficit.
If approved by the Senate, the bill could reach the governor by month's end.