Named after its legislative sponsors, the Marks-Roos Local Bond Pooling Act (California Government Code §6584-6599.1) is a law enacted by the
California Legislature
The California State Legislature is a bicameral state legislature consisting of a lower house, the California State Assembly, with 80 members; and an upper house, the California State Senate, with 40 members. Both houses of the Legisla ...
in 1985.
The main purpose of this statute is to allow local California governments to work together to get financing in a way that will conceivably lower borrowing costs. Underlying this concept is the belief that money can be saved through
economies of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ...
by selling one large bond issue to finance several small projects. Through this legislation, local municipalities and other political subdivisions can join together by signing a Joint Powers Agreement, which creates a
Joint Powers Authority
A joint powers authority (JPA) is an entity permitted under the laws of some U.S. states, whereby two or more public authorities (e.g. local governments, or utility or transport districts), not necessarily located in the same state, may jointly ex ...
("JPA"). In its broadest terms, the Marks-Roos Act authorizes JPAs to issue Marks-Roos bonds and loan the proceeds to local governmental agencies and non-profit corporations to finance public capital improvements, working capital or insurance programs. Alternatively, JPAs can purchase the bonds of local agencies with the proceeds of Marks-Roos bonds. Marks-Roos bonds do not require voter approval. Instead they are approved by resolution of the JPAs. However, there is a requirement for the JPA to make the finding that the financing would result in significant public benefit prior to bond.
Background
In 1978 Californians enacted
Proposition 13
Proposition 13 (officially named the People's Initiative to Limit Property Taxation) is an amendment of the Constitution of California enacted during 1978, by means of the initiative process. The initiative was approved by California voters on J ...
, which limited the ability of local public agencies to increase property taxes based on a property’s assessed value. This change in law, combined with sharp cuts in federal aid to state and local governments, severely limited local government’s ability to fund public infrastructure. The Marks-Roos Bond Pooling Act was thus created with the intent of providing a flexible alternative method of financing needed improvements, along with the benefit of reduced borrowing costs through the use of bond pools.
[{{cite web, title=What is Marks-Roos?, url=http://www.californiataxdata.com/pdf/MarkRoos.pdf, publisher=California Tax Data, Inc., accessdate=18 March 2011]
References
California law