Bill Text: CA SB826 | 2009-2010 | Regular Session | Chaptered
Bill Title: General obligation bonds.
Spectrum: Slight Partisan Bill (Democrat 9-4)
Status: (Passed) 2009-10-11 - Chaptered by Secretary of State. Chapter 205, Statutes of 2009. [SB826 Detail]
Download: California-2009-SB826-Chaptered.html
BILL NUMBER: SB 826 CHAPTERED
BILL TEXT
CHAPTER 205
FILED WITH SECRETARY OF STATE OCTOBER 11, 2009
APPROVED BY GOVERNOR OCTOBER 11, 2009
PASSED THE SENATE JUNE 2, 2009
PASSED THE ASSEMBLY SEPTEMBER 1, 2009
AMENDED IN SENATE MAY 13, 2009
INTRODUCED BY Committee on Governmental Organization (Senators
Wright (Chair), Benoit, Calderon, Denham, Florez, Harman, Negrete
McLeod, Oropeza, Padilla, Romero, Wiggins, Wyland, and Yee)
MARCH 19, 2009
An act to amend Sections 16724.5, 16731, 16731.6, 16735, 16737,
16752, 16752.1, 16753, 16754, 16754.3, 16755, 16757, and 16780 of,
and to repeal Section 16736 of, the Government Code, relating to
general obligation bonds.
LEGISLATIVE COUNSEL'S DIGEST
SB 826, Committee on Governmental Organization. General obligation
bonds.
(1) The State General Obligation Bond Law generally provides for a
procedure that may be adopted by other acts, with any necessary
modifications, in authorizing the issuance and sale of state general
obligation bonds and providing for the repayment of those bonds,
including the determination of interest rates the bonds shall bear.
Existing law requires, with regard to a resolution specifying that
the bonds may pay a variable interest rate, that the aggregate
principal amount of all state general obligation bonds bearing
variable interest rates does not exceed 20 percent of the aggregate
principal amount of all outstanding general obligation bonds.
Existing law exempts, from this calculation, variable rate bonds that
have an effective fixed interest rate through a hedging contract.
This bill would require the Treasurer to determine, with regard to
those bonds that have an effective fixed interest rate through a
hedging contract, that the hedging contract either significantly
reduces variable rate risk or qualifies for integration with the
bonds in calculating the yield on the bonds under certain federal
rules.
(2) Existing law provides that certain amounts payable or
contractual obligations regarding bonds that bear a variable interest
rate under a bond act that was approved by the voters before July 1,
2002, are not backed by the full faith and credit of the state.
Existing law specifies that this contractual obligation is under a
standby bond purchase agreement or other liquidity facility.
This bill would instead provide that this contractual obligation
is to repay advances and pay interest thereon under a credit
enhancement or liquidity agreement. The bill would also provide that
those amounts payable or those contractual obligations are backed by
the full faith and credit of the state, if the bond act was approved
on or after January 1, 2002.
(3) Existing law requires, for bonds approved by the voters after
January 1, 2006, that the payment of interest include the payment of
any amounts owed by a counterparty after any offset for payments owed
to the state on a hedging contract, and prohibits the total payments
of stated interest on the bonds and payments owed by the state from
exceeding a specified maximum rate after a specified offset.
This bill would instead provide that the payment of any amounts
owed by the state, after any offset, shall be deemed to be included
within the appropriation for interest on the bonds. The bill would
allow the payments of interest on a bond and the payments on a
hedging contract that exceed the maximum rate in a fiscal year to be
paid in subsequent fiscal years, under specified conditions.
(4) Existing law requires, when the finance committee created by
the bond act determines to issue commercial paper notes, for purposes
of determining the principal amount of outstanding bonds, that the
principal amount deemed outstanding be the maximum amount authorized
in the resolution.
This bill would delete that condition.
(5) Existing law authorizes the Treasurer, when the finance
committee created by the bond act deems it in the best interests of
the state, to issue notes, on a negotiated or a competitive-bid
basis, maturing within a period not to exceed 2 years, in
anticipation of the sale of bonds.
This bill would increase the maturation date of those notes to 5
years and make related changes.
(6) Existing law specifies the manner in which the Treasurer may
sell bonds.
This bill would revise these provisions regarding the competitive
sale of bonds and the conditions for bidding in a competitive sale or
purchasing in a negotiated sale. The bill would make other
conforming and nonsubstantive changes to the bond law.
(7) Existing law allows a finance committee to also provide for
the issuance and sale or exchange of refunding bonds for the purpose
of redeeming, retiring, or purchasing for retirement, outstanding
bonds at or before their maturity, if the committee determines, among
other things, that refunding is necessary or advisable to effect a
saving in debt service cost to the state.
This bill would require the committee, when making this
determination, to include, as interest on a refunded bond, the
interest, if any, that will result from a related hedging contract
and would authorize the committee, when determining debt service
savings, to base the interest of a refunding bond upon the effective
fixed interest rate under a hedging contract.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 16724.5 of the Government Code is amended to
read:
16724.5. (a) (1) For purposes of this section, "revolving fund"
means the General Obligation Bond Expense Revolving Fund created
pursuant to this section.
(b) There is in the State Treasury the General Obligation Bond
Expense Revolving Fund, which shall consist of all money appropriated
by the Legislature into that fund or payable into that fund in
accordance with this section.
(c) All money in the revolving fund is hereby appropriated and
shall be available without regard to fiscal years for all of the
following:
(1) The payment of the expenses incurred by the State Treasurer in
having the bonds prepared and in advertising their sale or their
prior redemption, and of the other costs described in subdivision (e)
of Section 16727.
(2) For expenses incurred by the committee pursuant to Section
16758.
(3) For payment for legal services pursuant to Section 16760.
(d) Whenever bonds are sold, out of the first money realized from
their sale, there shall be redeposited in the revolving fund the sums
that have been expended for the purposes specified in subdivision
(c), which may be used for the same purposes and repaid in the same
manner whenever additional sales are made.
SEC. 2. Section 16731 of the Government Code is amended to read:
16731. Whenever the committee determines that the sale of all or
any part of the bonds authorized to be issued is necessary or
desirable, it shall adopt a resolution to that effect. The resolution
shall specify all of the following as to the bonds then to be sold:
(a) The aggregate number, aggregate par value, denominations, and
the date of the bonds to be then sold. The denominations shall be in
the sum of one thousand dollars ($1,000) or multiples of that sum.
The date appearing on the bonds shall be deemed to be the date of
issuance for all purposes of this chapter, irrespective of the actual
date of delivery of the bonds and the payment of the purchase price
of the bonds.
(b) The dates of maturity and the amount of the bonds maturing at
each date of maturity, which amounts need not be equal. The last
dates of maturity shall be not more than 45 years after the date of
the bonds.
(c) Whether or not the bonds are to be subject to redemption or
tender prior to maturity, and, if so, the provisions for the
redemption or tender, the manner of the call or notice thereof, and
the price or prices at which the bonds shall be subject to redemption
or tender.
(d) (1) (A) The annual rate, or rates, of interest that the bonds
to be issued shall bear, which shall be in the increments determined
by the Treasurer, but not in excess of 11 percent. The rate or rates
may be determined at the time of the sale of the bonds.
(B) As an alternative to subparagraph (A), the resolution may
specify that the bonds may pay a variable interest rate or rates, as
prescribed in the resolution, but not in excess of 11 percent per
annum, and in accordance with the requirements of this subparagraph.
(i) At the time and as the result of the issuance of any bonds
bearing a variable interest rate, the aggregate principal amount of
all state general obligation bonds bearing variable interest rates
may not exceed 20 percent of the aggregate principal amount of all
state general obligation bonds then outstanding.
(ii) For purposes of the calculation made pursuant to clause (i),
variable rate bonds shall not include commercial paper notes issued
pursuant to Section 16731.6 or bonds that have an effective fixed
interest rate through a hedging contract, as specified in
subparagraph (C), but shall include bonds that have an effective
variable interest rate through a hedging contract.
(iii) Notwithstanding any other provision of this chapter, if the
committee decides to issue state general obligation bonds bearing
variable interest rates, the committee is not required to comply with
Section 16732.
(iv) Notwithstanding any other provision of law, if bonds are
issued bearing a variable interest rate under a bond act approved by
the voters on or after January 1, 2002, and if the variable interest
rate bonds provide a right of tender, then any amount payable by the
state as a result of the tender with respect to principal of and
interest on the bonds prior to the regularly scheduled principal or
interest payment dates, or payable by the state pursuant to
redemption or call initiated as a means to repay the obligation of
the state resulting from the tender, is backed by the full faith and
credit of the state and shall be payable under the bond act.
(v) A contractual obligation of the state to repay advances and
pay interest thereon under a credit enhancement or liquidity
agreement entered into in connection with variable interest rate
bonds providing a right of tender and issued under a bond act
approved by the voters on or after January 1, 2002, shall be backed
by the full faith and credit of the state and shall be payable under
the bond act, except to the extent bond interest paid with an advance
and interest on the advance would exceed the maximum interest rate
specified in this subdivision.
(C) For the purposes of clause (ii) of subparagraph (B), bonds
that have an "effective fixed interest rate through a hedging
contract" means bonds for which the Treasurer determines the hedging
contract meets either of the following conditions:
(i) Significantly reduces variable rate risk by providing changes
in fair values or cashflows that substantially offset the changes in
fair value or cashflows of the bonds.
(ii) Qualifies for integration with the bonds in calculating the
yield on the bonds under the rules prescribed in Section 148 of the
United States Internal Revenue Code (26 U.S.C. Sec. 148).
(D) The Treasurer's determination specified in subparagraph (C)
shall be made at the time the hedging contract is entered into and
shall apply through the maturity of the bonds, unless the hedging
contract is terminated prior to maturity.
(2) (A) (i) Notwithstanding any other provision of law, for bonds
approved by the voters after January 1, 2006, payment of any amounts
owed by the state to a counterparty, after any offset for payments
owed to the state on any hedging contract described in Section 5922
in connection with those bonds, shall be deemed to be included within
the appropriation for interest on the bonds contained in the
applicable bond act.
(ii) The total payments of stated interest on the bonds together
with payments owed by the state after any offset for payments owed to
the state on a hedging contract shall not exceed the maximum
interest rate set forth in this subdivision.
(iii) To the extent payments of interest on a bond, together with
payments on a hedging contract, would, in any fiscal year, exceed the
maximum interest rate specified in this subdivision, the excess
amounts may be paid in subsequent fiscal years, if the aggregate
amount of interest and that excess amount paid in any year does not
exceed the maximum interest rate specified in this subdivision.
(B) The Treasurer may not enter into any hedging contract
described by subparagraph (A) unless the committee has approved
policies developed by the Treasurer relating to the entering into and
managing of those hedging contracts that shall include both of the
following:
(i) A requirement that any hedging contract or program of
contracts is designed to reduce the amount or duration of payment,
currency, rate, spread, or similar risk or result in a lower cost of
borrowing when used in combination with the issuance or carrying of
bonds.
(ii) A description of the criteria to be used to evaluate the
potential risks and benefits to the state of entering into a
particular hedging contract or program of contracts and to evaluate
the performance of outstanding hedging contracts in comparison to the
objectives for which the hedging contract was executed.
(C) The policies approved pursuant to subparagraph (B) are exempt
from the requirements of Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3.
(e) The interest payment dates.
(f) The technical form and language of the bonds.
(g) Whether or not the right is reserved to make delivery in the
form of temporary or interim bonds, certificates, or receipts,
exchangeable for definitive bonds when executed and available for
delivery. If the right is reserved, the denominations and form of the
temporary securities shall be stated.
(h) Provisions for the registration and exchange of bonds and for
the use of a depository to hold book-entry bonds after issuance.
(i) All other terms and conditions of the bonds and of the
execution, issuance, and sale of the bonds, which shall be consistent
with all of this chapter.
SEC. 3. Section 16731.6 of the Government Code is amended to read:
16731.6. (a) Notwithstanding any other provision of this chapter,
and as an alternative to the procedures set forth in Section 16731,
the committee may provide for the issuance of all or part of the
bonds authorized to be issued as commercial paper notes. The
committee shall adopt a resolution finding that issuance of the bonds
in the form of commercial paper notes is necessary and desirable,
directing the Treasurer to arrange for preparation of the requisite
number of suitable notes, and specifying other provisions relating to
the commercial paper notes, including all of the following:
(1) For each program of commercial paper notes authorized, the
resolution shall contain the final date of maturity and the total
aggregate principal amount of the commercial paper notes authorized
to be outstanding at any one time up to the maturity date, in
accordance with all of the following:
(A) The resolution may provide that the commercial paper notes may
be issued and renewed from time to time until the final maturity
date, and that the amount issued from time to time may be set by the
Treasurer up to the maximum amount authorized to be outstanding at
any one time.
(B) The resolution shall include methods of setting the dates,
numbers, and denominations of the commercial paper notes.
(C) The determination of the final maturity date and total amount
by the committee shall be made upon recommendation of the Treasurer
to meet the needs of the state for funds, to provide the maximum
benefit to potential purchasers, and to respond to the expected
demand for the commercial paper notes.
(D) Notwithstanding any other provision of this chapter, whenever
the committee determines to issue commercial paper notes, the
committee is not required to comply with the requirements of Section
16732.
(2) The method of setting the interest rates and interest payment
dates applicable to the commercial paper notes, in accordance with
the following:
(A) Commercial paper notes may bear a stated rate of interest
payable only at maturity, which rate or rates may be determined at
the time of sale of each unit of commercial paper notes.
(B) The rate of interest borne by the commercial paper notes shall
not exceed 11 percent per annum.
(C) Notwithstanding any other provision of this chapter, whenever
the committee determines to issue commercial paper notes, the
committee is not required to comply with the requirements of Section
16733.
(3) Any provisions for the redemption of the commercial paper
notes prior to stated maturity.
(4) The technical form and language of the commercial paper notes.
(5) All other terms and conditions of the commercial paper notes
and of their execution, issuance, and sale, deemed necessary and
appropriate by the committee.
(b) Notwithstanding any other provision of this chapter, when the
committee determines to issue commercial paper notes, all of the
following shall apply:
(1) The commercial paper notes may be sold at negotiated sale at a
price below the par value in a manner consistent with paragraph (2)
of subdivision (a).
(2) During the term of any program of commercial paper notes, the
renewal and reissuance from time to time of the commercial paper
notes in an amount up to the maximum amount authorized by the
resolution shall be deemed to be a refunding of the previously
maturing amount, permitted by and consistent with Article 6
(commencing with Section 16780).
(3) Consistent with the intent for the General Fund to realize a
savings in debt service costs when commercial paper notes are issued
in place of bonds without shifting or adding financing and debt
service costs to the bond funds, the state administrative costs of
commercial paper and interest payable and other costs associated with
commercial paper notes shall be paid for as follows:
(A) The proceeds of commercial paper notes are, notwithstanding
Section 13340, continuously appropriated to pay the state
administrative costs of commercial paper including, but not limited
to, costs of the Treasurer's office, the Controller's office, and the
Department of Finance.
(B) The interest payable on maturing commercial paper notes and
other costs associated with commercial paper notes not specified in
paragraph (A), including, but not limited to, remarketing fees,
issuing and paying agent fees, the letter or line of credit provider
fees, the rating agency fees, and bond counsel fees, shall be paid
from the General Fund which, notwithstanding Section 13340, is
continuously appropriated to pay the interests and costs.
SEC. 4. Section 16735 of the Government Code is amended to read:
16735. Each bond shall contain a reference to the bond act, and
if subject to call, tender, or redemption prior to maturity, a
recital to that effect.
SEC. 5. Section 16736 of the Government Code is repealed.
SEC. 6. Section 16737 of the Government Code is amended to read:
16737. (a) When the committee deems it in the best interests of
the state, it may authorize the Treasurer, upon those terms and
conditions that may be fixed by the committee or determined by the
Treasurer, to issue notes, on a negotiated or a competitive-bid
basis, maturing within a period not to exceed five years, in
anticipation of the sale of bonds duly authorized at the time the
notes are issued. The proceeds from the sale of those notes shall be
deposited in the related fund and used only for the purposes for
which may be used the proceeds of the sale of bonds in anticipation
whereof the notes were issued or as additionally authorized by this
section.
(b) The notes authorized by this section may be sold at a price
at, above, or below the principal amount thereof, at the discretion
of the Treasurer.
(c) Any premium received from the sale of notes authorized by this
section may be applied to pay costs of issuance of the notes or
interest accruing on the notes.
(d) The notes authorized by this section may bear a fixed or
variable rate or rates of interest.
(e) In connection with the sale of notes pursuant to this section,
the Treasurer may engage the services of legal and financial
advisers, credit enhancers, trustees or paying agents, and other
professionals that the Treasurer deems necessary, and may enter into
contracts for these services, to be paid from proceeds of the notes
or any duly enacted appropriation.
(f) When the committee deems it in the best interests of the
state, it may authorize the Treasurer to deliver the notes in payment
for work or material furnished to the state for a public
improvement, pursuant to a contract awarded in the manner prescribed
by law. The notes shall be so delivered only for the purposes for
which may be used the proceeds of the sale of bonds in anticipation
whereof the notes were issued.
(g) All notes issued pursuant to this section and any renewals
thereof shall be payable at a fixed time, solely from the proceeds of
the sale of the bonds and not otherwise, except if the sale of the
bonds did not occur prior to the maturity of the notes issued in
anticipation of the sale, the Treasurer shall, in order to meet the
notes or the renewals thereof then maturing, issue renewal notes for
this purpose. No renewal of a note or a renewal note shall be issued
after the sale of bonds in anticipation of which the original note
was issued.
(h) Every note issued pursuant to this section and any renewal
thereof shall, unless paid from a renewal note, be payable from the
proceeds of the sale of bonds and not otherwise. The total amount of
the notes or renewals thereof issued and outstanding shall not exceed
the total amount of the unsold bonds.
(i) Interest on the notes issued pursuant to this section shall be
payable from any appropriation made for that purpose or from
proceeds of the sale of the notes.
SEC. 7. Section 16752 of the Government Code is amended to read:
16752. The Treasurer may from time to time, by electronic means
or by public announcement at the place and at or before the time
fixed for a competitive sale of bonds, continue the sale to the time
and place the Treasurer may select.
SEC. 8. Section 16752.1 of the Government Code is amended to read:
16752.1. The Treasurer may cancel or postpone a competitive sale
of bonds to an indefinite date by public announcement, including by
electronic means, made prior to or at the time and place fixed for
the sale of the bonds. The Treasurer may give notice of the new time
and place of the sale of the bonds that the Treasurer may deem
advisable.
SEC. 9. Section 16753 of the Government Code is amended to read:
16753. (a) Each bid at a competitive sale shall be submitted to
the Treasurer in the form and by the means specified by the Treasurer
by public announcement.
(b) Each proposal for purchase of bonds in a negotiated sale shall
be made in a bond purchase contract or similar agreement approved by
the Treasurer.
(c) (1) The Treasurer shall require that each bidder in a
competitive sale or underwriter in a negotiated sale provide a good
faith deposit of at least one-half of 1 percent of the principal
amount of the bonds for which the bidder or underwriter submits a bid
or proposal. The good faith deposit shall be based upon the
principal amount of bonds offered for sale in the amount that has
been publicly announced at least one day prior to receipt of bids for
a competitive sale, or in the amount that is reasonably determined
by the Treasurer at least one day prior to a negotiated sale of
bonds. The Treasurer shall specify the form of the deposit, which may
be a cashier's check, a surety bond, a wire transfer of funds, or a
combination thereof. The deposit shall not bear interest.
(2) This subdivision shall apply only to bonds sold with a fixed
interest rate.
SEC. 10. Section 16754 of the Government Code is amended to read:
16754. (a) The bonds specified in the resolution shall be sold by
the Treasurer, at the time fixed by the Treasurer, and upon the
notice that the Treasurer may deem advisable, or at the time to which
the sale shall have been so continued, at a competitive sale to the
bidder whose bid will result in the lowest interest cost on account
of those bonds.
(b) The Treasurer shall reject any and all bids for the bonds
that shall be below the par value thereof plus the interest that
shall have accrued thereon from the date thereof or, if any past due
coupon or coupons have been detached from the bonds prior to the
delivery thereof, then from the due date of the latest coupon so
detached, to the date of the purchaser's payment for the bond.
(c) The method of determining the lowest interest cost bid shall
be prescribed in the bond resolution and shall be limited to either
the net interest cost method or the present worth basis method, also
referred to as the true interest cost, bond book basis, and Canadian
interest cost method.
(1) The net interest cost of each bid shall be determined by
ascertaining the total amount of interest that the state would be
required to pay under that bid, from the date of the bonds to the
respective maturity dates of the bonds then offered for sale, at the
coupon rate or rates specified in the bid, less the total amount of
the premium, if any, offered by the bid. The bid under which the
amount so ascertained is the least shall be deemed to be the bid
resulting in the lowest net interest cost.
(2) Under the present worth basis method, the bonds shall be
awarded to the bidder submitting the lowest interest rate bid, which
shall be determined by doubling the semiannual interest rate,
compounded semiannually, necessary to discount the debt service
payments to the specified interest computation date and to the price
bid.
(d) Under either method specified in subdivision (c), the sale
shall be for cash, payable upon the delivery of the bonds in
definitive form, or if the right to deliver temporary securities has
been reserved, then upon the delivery of the temporary securities.
SEC. 11. Section 16754.3 of the Government Code is amended to
read:
16754.3. (a) The bonds specified in the resolution shall be sold
by the Treasurer, at the time fixed by the Treasurer, and upon the
notice that the Treasurer may deem advisable, or at the time to which
the sale shall have been so continued, either at a competitive sale
to the bidder whose bid will result in the lowest interest cost on
account of those bonds or by a negotiated sale if the Treasurer
determines it will result in a lower interest cost. With respect to
bonds sold by the Treasurer by negotiated sales, the Treasurer shall
make a finding on the public record as to why a competitive sale was
not used. The Treasurer may sell the bonds at a price below the par
value thereof, but the discount on bonds so sold shall not exceed 3
percent of the par value. The interest, if any, accrued to the date
of delivery of, and payment for, the bonds shall be added to the sale
price of the bonds in any case.
(b) (1) The method of determining the lowest interest cost bid
shall be prescribed in the bond resolution and shall be limited to
either the net interest cost method or the true interest cost method.
(A) The net interest cost of each bid shall be determined by
ascertaining the total amount of interest that the state would be
required to pay under that bid, from the date of the bonds to the
respective maturity dates of the bonds then offered for sale, at the
interest rate or rates specified in the bid, less the total amount of
the premium, if any, or plus the total amount of the discount, if
any, offered by the bid. The bid under which the amount so
ascertained is the least shall be deemed to be the bid resulting in
the lowest net interest cost.
(B) Under the true interest cost method, the bonds shall be
awarded to the bidder submitting the lowest interest rate bid
determined by the nominal interest rate that, when compounded
semiannually and used to discount the debt service payments on the
bonds to the date of the bonds, results in an amount equal to the
price bid for the bonds, excluding interest accrued to the date of
delivery.
(2) Under either method specified in this subdivision, the sale
shall be for cash, payable upon the delivery of the bonds in
definitive form, or if the right to deliver temporary securities has
been reserved, then upon the delivery of the temporary securities.
(c) Notwithstanding subdivision (a) or (b), if the resolution
prescribes that the bonds may pay a variable interest rate, as
specified in subdivision (d) of Section 16731, the Treasurer may sell
the bonds by negotiated sales if the Treasurer determines that it is
in the best interest of the state to do so.
(d) This section shall apply to any bonds authorized at any
statewide election held at any time after the effective date of this
section. Section 16754 shall apply only to bonds authorized at
elections held before the effective date of this section.
SEC. 12. Section 16755 of the Government Code is amended to read:
16755. (a) The deposit of each unsuccessful bidder shall be
returned to the bidder promptly upon the rejection of the bidder's
bid or the acceptance of another bid.
(b) The deposit of the successful bidder or underwriter in a
negotiated sale shall, immediately upon the acceptance of the bid or
proposal, become and be the property of the state, be placed in the
State Treasury to the credit of the fund, and be credited to the
successful bidder or underwriter upon the purchase price of the bonds
when the purchase price is paid in full within the time mutually
agreed upon between the successful bidder or underwriter and the
Treasurer.
(c) If the purchase price is not paid in accordance with
subdivision (b), the successful bidder or underwriter shall have no
right in and to the bonds by reason of the bid or purchase contract
and the successful bidder or underwriter shall not have any right to
the recovery of the deposit accompanying the bid or purchase contract
or to any allowance or credit by reason of that deposit unless it
shall appear that the bonds cannot be validly issued or delivered, or
unless the return of the good faith deposit to the underwriter is
provided for in the purchase contract.
SEC. 13. Section 16757 of the Government Code is amended to read:
16757. (a) The proceeds of each sale of bonds, and the amount
that may have been paid as accrued interest on the bonds, shall be
forthwith paid over by the Treasurer into the fund.
(b) All money deposited in the fund pursuant to this section that
is derived from premium and accrued interest on bonds sold shall be
reserved in the fund and shall be available for transfer to the
General Fund as provided in the bond act, except that amounts derived
from premium on the bonds may be used to pay costs of issuance of
the bonds, as provided in Section 16724.5, and in subdivisions (d)
and (e) of Section 16727, prior to transfer to the General Fund.
SEC. 14. Section 16780 of the Government Code is amended to read:
16780. (a) The committee may provide for the issuance and sale or
exchange of refunding bonds for the purpose of redeeming, retiring,
or purchasing for retirement, outstanding bonds at or before their
maturity, if the committee determines that refunding is necessary or
advisable in order to do either of the following:
(1) To effect a favorable reorganization of the debt structure of
the state.
(2) To effect a saving in debt service cost to the state, as
measured by the present value of that saving.
(b) When determining debt service savings for purposes of
paragraph (2) of subdivision (a), the committee shall include, as
interest on a refunded bond, the interest, if any, that will result
from a related hedging contract, as described in subparagraph (A) of
paragraph (2) of subdivision (d) of Section 16731. The committee may,
when determining debt
service savings, for purposes of paragraph (2) of subdivision (a),
base the interest of a refunding bond upon the effective fixed
interest rate under a hedging contract described in clause (ii) of
subparagraph (B) of paragraph (1) of subdivision (d) of Section
16731.
