Governor Approves AB 2107 to Allow for Securitized Limited Obligation Notes by Special Districts
Assembly Bill 2107 re-establishes Securitized Limited Obligation Notes, or SLONs, as financing tools for California’s special districts. Prior to AB 2107’s passage, Government Code section 53839 authorized special districts to issue SLONs for the acquisition or improvement of land, facilities or equipment until Dec. 31, 2019. Signed by Gov. Gavin Newsom on Sept. 28, AB 2107 extends that authorization to Dec. 31, 2024.
SLONs are one of several financing options that special districts may utilize to acquire or improve real property, facilities or equipment. SLONs permit a public agency to issue a note to finance lower-cost acquisitions or improvements of land, facilities or equipment. SLONs are viewed as practical and cost-effective and do not require voter approval.
When issuing a SLON, special districts must adopt a resolution containing specified information. A four-fifths vote of the governing body is required as well. SLONs may not exceed a 10-year term and may not exceed $2 million outstanding. The California Special Districts Association states that, “[f]or many special districts, especially for smaller districts with limited resources, SLONs may be the only pragmatic and cost-effective medium-term financing method available to fund a variety of modest projects.”