Bill Text: CA AB1156 | 2009-2010 | Regular Session | Amended
Bill Title: State and local surplus funds: investments.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2010-02-02 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB1156 Detail]
Download: California-2009-AB1156-Amended.html
BILL NUMBER: AB 1156 AMENDED BILL TEXT AMENDED IN ASSEMBLY APRIL 23, 2009 AMENDED IN ASSEMBLY MARCH 27, 2009 INTRODUCED BY Assembly Member Nava (Principal coauthor: Assembly Member Bass) FEBRUARY 27, 2009 An act to amend Section 53601.8 of, and to add Section 16430.1 to, the Government Code, relating to state funds. LEGISLATIVE COUNSEL'S DIGEST AB 1156, as amended, Nava.Surplus funds: local agencies:State and local surplus funds: investments. (1) Existing law specifies the types of securities that are eligible for the investment of surplus state funds. This bill would require that the first priority for the investment of surplus moneys in negotiable certificates of deposit under specified provisions be given to time deposits in an eligible community bank, as defined, or a credit union operating in this state to the maximum extent consistent with liquidity requirements and prudent management of surplus moneys. (2) Existing law prescribes the instruments in, and criteria by, which local agencies, as defined, may invest surplus funds. Existing law authorizes, until January 1, 2012, the investment of up to 30% of those funds in certificates of deposit at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of certificates of deposit, as specified. This bill would provide that a local agency, when it chooses to invest surplus funds in certificates of deposit,togive priority to an eligible community bank or a credit union operating in this state . Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 16430.1 is added to the Government Code, to read: 16430.1. (a) Notwithstanding Section 16430 or any other provision of law, with regard to making investments pursuant to subdivision (h) of Section 16430, the first priority for the investment of surplus moneys shall be, to the maximum extent consistent with liquidity requirements and prudent management of surplus moneys, time deposits in an eligible community bank or credit union operating in this state , if the time deposits of surplus funds and all other investments of surplus moneys made pursuant to this section are in compliance with all other requirements established by state law. (b) For purposes of this section "eligible community bank" means a state or national bank located in this state that meets all of the following requirements and conditions: (1) Has five billion dollars ($5,000,000,000) or less in assets. (2) The bank is selected by the Treasurer for the safekeeping of money belonging to or in the custody of the state. (3) The bank has received an overall rating of not less than "satisfactory" in its most recent evaluation by the appropriate federal financial supervisory agency of the bank's record of meeting the credit needs of the state's communities, including low- and moderate-income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code. (4) The bank is eligible to receive deposits only to the extent that it complies with the requirements of Chapter 4 (commencing with Section 16500). SEC. 2. Section 53601.8 of the Government Code is amended to read: 53601.8. Notwithstanding Section 53601 or any other provision of this code, a local agency, at its discretion, may invest a portion of its surplus funds in certificates of deposit at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of certificates of deposit, if the purchases of certificates of deposit pursuant to this section, Section 53635.8, and subdivision (h) of Section 53601 do not, in total, exceed 30 percent of the agency's funds that may be invested for this purpose. The following conditions shall apply: (a) The local agency shall choose a nationally or state chartered commercial bank, savings bank, savings and loan association, or credit union in this state to invest the funds, which shall be known as the "selected" depository institution. (b) The selected depository institution may submit the funds to a private sector entity that assists in the placement of certificates of deposit with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States, for the local agency's account. (c) The full amount of the principal and the interest that may be accrued during the maximum term of each certificate of deposit shall at all times be insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. (d) The selected depository institution shall serve as a custodian for each certificate of deposit that is issued with the placement service for the local agency's account. (e) At the same time the local agency's funds are deposited and the certificates of deposit are issued, the selected depository institution shall receive an amount of deposits from other commercial banks, savings banks, savings and loan associations, or credit unions that, in total, are equal to, or greater than, the full amount of the principal that the local agency initially deposited through the selected depository institution for investment. (f) A local agency may not invest surplus funds with a selected depository institution for placement as certificates of deposit pursuant to this section on or after January 1, 2012. A local agency' s surplus funds, invested pursuant to this section before January 1, 2012, may remain invested in certificates of deposit issued through a private sector entity for the full term of each certificate of deposit. (g) Notwithstanding subdivisions (a) to (f), inclusive, no credit union may act as a selected depository institution under this section or Section 53635.8 unless both of the following conditions are satisfied: (1) The credit union offers federal depository insurance through the National Credit Union Administration. (2) The credit union is in possession of written guidance or other written communication from the National Credit Union Administration authorizing participation offederally-insuredfederally insured credit unions in one or more certificate of deposit placement services and affirming that the moneys held by those credit unions while participating in a deposit placement service will at all times be insured by the federal government. (h) (1) The local agency shall give priority, with regard to making investments in certificates of deposit pursuant to this section, to eligible community banks or credit unions operating in this state . (2) For purposes of this section "eligible community bank" means a state or national bank located in this state that meets both of the following requirements and conditions: (A) The bank has five billion dollars ($5,000,000,000) or less in assets. (B) The bank has received an overall rating of not less than "satisfactory" in its most recent evaluation by the appropriate federal financial supervisory agency of the bank's record of meeting the credit needs of the state's communities, including low- and moderate-income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code. (i) It is the intent of the Legislature that nothing in this section shall restrict competition among private sector entities that provide placement services pursuant to this section.