California's SB 222 - What a Statutory Lien Means for California School and Community College District GO Bonds

March.30.2015

New legislation, drafted by Orrick, improves the security for California School and Community College District General Obligation Bonds.

General Obligation bonds for school and community college districts are repaid from a dedicated ad valorem property tax that can't be used for any other purpose. Due to bankruptcy concerns, rating agencies currently analyze school and community college districts' general fund credits as part of their ratings evaluation.

SB 222 would strengthen school and community college district GO bondholders' rights in bankruptcy by granting them a statutory lien on the taxes collected to pay the bonds, which should result in better ratings, lower interest rates and simpler disclosure.