Existing law prescribes the instruments in, and criteria by which, a local agency, as defined, may invest and deposit its funds, including its surplus funds. Existing law, until January 1, 2017, authorizes, under certain conditions, a local agency to invest up to a certain percentage of its surplus funds in deposits at specified types of financial institutions that use a private sector entity to assist in the placement of deposits, whether those investments are certificates of deposit or in another form. With respect to investments other than a certificate of deposit, existing law limits the percentage of local agency funds that may be invested by any one private sector entity. Existing law, on and after January 1, 2017, limits this authority to invest surplus funds to investments in certificates of deposit.

This bill would extend the existing temporary authority for a local agency to invest its surplus funds, in certificates of deposit or in another form of investment, until January 1, 2021, and for that time period, would remove a limitation on the percentage of local agency funds that may be invested in certificates of deposit. This bill would, on and after January 1, 2021, indefinitely authorize a local agency to invest surplus funds to investments in certificates of deposit, as specified. This bill would also remove the limit on the percentage of local agency funds that may be invested by any one private sector entity, as specified.

Existing law prescribes the instruments in, and criteria by which, a local agency, as defined, may invest and deposit its funds, including its surplus funds. Existing law, until January 1, 2017, authorizes, under certain conditions, a local agency to invest up to a certain percentage of its surplus funds in deposits at specified types of financial institutions that use a private sector entity to assist in the placement of deposits, whether those investments are certificates of deposit or in another form. With respect to investments other than a certificate of deposit, existing law limits the percentage of local agency funds that may be invested by any one private sector entity. Existing law, on and after January 1, 2017, limits this authority to invest surplus funds to investments in certificates of deposit.

This bill would extend the existing temporary authority for a local agency to invest its surplus funds, in certificates of deposit or in another form of investment, until January 1, 2021, and for that time period, would remove a limitation on the percentage of local agency funds that may be invested in certificates of deposit. This bill would, on and after January 1, 2021, indefinitely authorize a local agency to invest surplus funds to investments in certificates of deposit, as specified. This bill would also remove the limit on the percentage of local agency funds that may be invested by any one private sector entity, as specified.

Existing law prescribes the instruments in, and criteria by which, a local agency, as defined, may invest and deposit its funds, including its surplus funds. Existing law, until January 1, 2017, authorizes, under certain conditions, a local agency to invest up to a certain percentage of its surplus funds in deposits at specified types of financial institutions that use a private sector entity to assist in the placement of deposits, whether those investments are certificates of deposit or in another form. With respect to investments other than a certificate of deposit, existing law limits the percentage of local agency funds that may be invested by any one private sector entity. Existing law, on and after January 1, 2017, limits this authority to invest surplus funds to investments in certificates of deposit.

This bill would eliminate the limitation that would become operative on January 1, 2017, and thus would indefinitely continue extend the existing temporary authority for a local agency to invest its surplus funds, in certificates of deposit or in another form of investment. investment, until January 1, 2021, and for that time period, would remove a limitation on the percentage of local agency funds that may be invested in certificates of deposit. This bill would, on and after January 1, 2021, indefinitely authorize a local agency to invest surplus funds to investments in certificates of deposit, as specified. This bill would also remove the limit on the percentage of local agency funds that may be invested by any one private sector entity. entity, as specified.

Existing law prescribes the instruments in, and criteria by which, a local agency, as defined, may invest and deposit its funds, including its surplus funds. Existing law, until January 1, 2017, authorizes, under certain conditions, a local agency to invest up to a certain percentage of its surplus funds in deposits at specified types of financial institutions that use a private sector entity to assist in the placement of deposits, whether those investments are certificates of deposit or in another form. With respect to investments other than a certificate of deposit, existing law limits the percentage of local agency funds that may be invested by any one private sector entity. Existing law, on and after January 1, 2017, limits this authority to invest surplus funds to investments in certificates of deposit.

This bill would eliminate the limitation that would become operative on January 1, 2017, and thus would indefinitely continue the existing authority for a local agency to invest its surplus funds, in certificates of deposit or in another form of investment. This bill would also remove the limit on the percentage of local agency funds that may be invested by any one private sector entity.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 283

Author:(Dababneh)

As Amended Ver:June 23, 2015

Majority vote

Original Committee Reference: L. GOV.

SUMMARY:

Extends the sunset date on the authority granted to local agencies to use a private sector deposit placement service to invest up to 30% of surplus funds into deposits other than certificates of deposits, and removes the cap on funds that may be invested in any single private sector deposit placement service.

The Senate amendments delete the permanent authority for local agencies to use a private sector deposit placement service to invest surplus funds other than certificates of deposits (CDs) granted by this bill, as passed by the Assembly, and instead, extend the authority by four years to sunset on January 1, 2021.

EXISTING LAW:

1. Authorizes a local agency, until January 1, 2017, to invest a portion of its surplus funds in deposits 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 non-CD deposits, provided that the purchases of deposits, in total, do not exceed 30% of the agency's funds.

2. Prohibits a local agency from investing more than 10% of its surplus funds in any single non-CD placement service.

3. Provides that the following conditions apply for a local agency to invest its surplus funds in deposits:

   1. The local agency shall choose a nationally or state chartered commercial bank, savings bank, savings and loan association, or credit union in California to invest the funds, which shall be known as the "selected" depository institution;

   2. The selected depository institution may use a private sector entity to help place local agency deposits with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States and within the network used by the private sector entity for this purpose;

   3. Any private sector entity used by a selected depository institution to help place its local agency deposits shall maintain policies and procedures that require the following:

1. The full amount of each deposit placed, including interest, shall at all times be insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA); and,

2. Every depository institution where funds are placed shall be capitalized at a sufficient level to receive deposits pursuant to FDIC or NCUA.

1. The selected depository institution shall serve as a custodian for each deposit; and,

2. At the same time the local agency's funds are deposited, the selected depository institution shall receive an amount of insured 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.

1. Authorizes a local agency to invest a portion of its surplus funds in CDs 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 CDs, provided that the purchases of CDs, in total, do not exceed 30% of the agency's funds.

AS PASSED BY THE ASSEMBLY, this bill:

1. Deleted the January 1, 2017, sunset date that allows a local agency to invest up to 30% of surplus funds in deposits other than certificates of deposits (CDs) at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity to assist in the placement of deposits.

2. Repealed a code section that prohibits a local agency from investing more than 10% of its surplus funds in any one private sector entity that assists in non-CD deposit placement service, thereby allowing a local agency to invest up to 30% of surplus funds in one private sector entity that provides deposit placement service.

FISCAL EFFECT:

None

COMMENTS:

1. Background. The authorization for local agencies to invest surplus funds in CDs was put into place by AB 2011 (Vargas), Chapter 459, Statutes of 2006. Existing law requires local agency funds to either be protected by federal deposit insurance or secured by collateral. Prior to AB 2011, if a local agency wanted to make a deposit of over $100,000, the FDIC insurance limit at the time, the bank had to pledge collateral to secure the deposit. This collateralization requirement was a barrier to most small community banks accepting deposits of local agency funds, which were generally in amounts much greater than $100,000.

AB 2011 allowed local agencies to use a deposit placement service which takes a bank customer's large deposit and breaks it into amounts of less than the $100,000 FDIC insurance limit. These amounts are then placed in CDs at other banks within its network, ensuring FDIC protection on the customer's full deposit. The other banks then simultaneously send an equal amount of funds back to the original bank, enabling it to have the full amount of the original deposit available for lending or other purposes. SB 1344 (Kehoe), Chapter 112, Statutes of 2010, eliminated the sunset date contained in AB 2011 and permanently authorized local agencies to use a deposit placement service.

When AB 2011 became law, only one national network, the Certificate of Deposit Account Registry Service (CDARS), Promontory Interfinancial Network, LLC, offered a qualifying CD placement service. In 2010, Promontory Interfinancial introduced Insured Cash Sweep (ICS), similar to CDARS, but allows for more liquid types of deposits like money market accounts, in amounts that qualify for FDIC insurance. These cash sweep services utilizing demand deposit and money market accounts are offered by other private sector entities (including Charity Deposits Corporation, Money Market Account Xtra; and Reich and Tang, Demand Deposit Marketplace).

Most recently AB 279 (Dickinson), Chapter 228, Statutes of 2013, extends a local government's authority to access these types of cash sweep services. AB 279 expands the types of deposits local agencies can invest surplus funds into, beyond CDs, to include money market or demand deposit accounts. AB 279 also contains several safeguards to require that a private sector deposit placement service adheres to the federal rules governing FDIC pass-through insurance.

2. Bill Summary. The expanded authority granted by AB 279 contained a January 1, 2017, sunset date and prohibited local agencies from investing more than 10% of the agency's fund to any one private sector entity that assists in deposit placement service. Senate amendments reinstated a sunset date, instead of granting the permanent authority, by extending the current sunset date from January 1, 2017, to January 1, 2021. This bill extends the authority granted in AB 279 to allow local agencies to invest up to 30% of surplus funds into non-CD deposits at depository institutions that use a private sector entity that assists in the placement of deposits, until January 1 2021. This bill removes the limitation on investing authority which prohibited local agencies from investing more than 10% of funds to any one private sector entity that assists in deposit placement service. The overall cap of 30% of surplus funds as well as several other safeguards in current law would not be impacted by this bill.

This bill is co-sponsored by the California Bankers Association and the California Independent Bankers.

3. Author's Statement. According to the author, "This bill accomplishes two goals: 1) aligns the statutory treatment of demand deposit accounts to certificates of deposit relative to the maximum percentage of surplus funds that may be deposited with a depository institution using a placement service so that each deposit product shall not exceed 30% of the local agency's surplus funds; and, 2) eliminates the sunset provision on the code sections permitting a local agency's deposit into a demand deposit account with a depository institution using a placement service."

4. Arguments in Support. Supporters argue that this bill would statutorily align the treatment of CDs and other types of deposits and create more avenues for public fund investments. Additionally, supporters argue that local agencies can use placement services for both CDs and demand deposits in more than 30 states.

5. Arguments in Opposition. None on file.

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958 FN: 0001155

Date of Hearing: April 8, 2015

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Maienschein, Chair

ABPCA Bill Id:AB 283

Author:(Dababneh) – As Introduced Ver:February 11, 2015

SUBJECT:

Financial affairs.

SUMMARY:

Makes permanent provisions of law that expand the authority granted to local agencies to use a private sector deposit placement service to invest up to 30% of surplus funds into deposits other than certificates of deposits, as specified. Specifically, this bill:

1. Deletes the January 1, 2017, sunset date that allows a local agency to invest up to 30% of surplus funds in deposits other than certificates of deposits (CDs) at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity to assist in the placement of deposits.

2. Repeals a code section that prohibits a local agency from investing more than 10% of its surplus funds in any one private sector entity that assists in non-CD deposit placement service, thereby allowing a local agency to invest up to 30% of surplus funds in one private sector entity that provides deposit placement service.

EXISTING LAW:

1. Authorizes a local agency, until January 1, 2017, to invest a portion of its surplus funds in deposits 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 non-CD deposits, provided that the purchases of deposits, in total, do not exceed 30% of the agency's funds.

2. Prohibits a local agency from investing more than 10% of its surplus funds in any single non-CD placement service.

3. Provides that the following conditions apply for a local agency to invest its surplus funds in deposits:

1. The local agency shall choose a nationally or state chartered commercial bank, savings bank, savings and loan association, or credit union in California to invest the funds, which shall be known as the "selected" depository institution;

2. The selected depository institution may use a private sector entity to help place local agency deposits with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States and within the network used by the private sector entity for this purpose;

3. Any private sector entity used by a selected depository institution to help place its local agency deposits shall maintain policies and procedures that require the following:
   
   

1. The full amount of each deposit placed, including interest, shall at all times be insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA); and,
   
   

2. Every depository institution where funds are placed shall be capitalized at a sufficient level to receive deposits pursuant to FDIC or NCUA.

4. The selected depository institution shall serve as a custodian for each deposit; and,

5. At the same time the local agency's funds are deposited, the selected depository institution shall receive an amount of insured 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.

4. Authorizes a local agency to invest a portion of its surplus funds in CDs 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 CDs, provided that the purchases of CDs, in total, do not exceed 30% of the agency's funds.

FISCAL EFFECT:

None

COMMENTS:

1. Background. The authorization for local agencies to invest surplus funds in CDs was put into place by AB 2011 (Vargas), Chapter 459, Statutes of 2006. Existing law requires local agency funds to either be protected by federal deposit insurance or secured by collateral. Prior to the bill, if a local agency wanted to make a deposit of over $100,000, the FDIC insurance limit at the time, the bank had to pledge collateral to secure the deposit. This collateralization requirement was a barrier to most small community banks accepting deposits of local agency funds, which were generally in amounts much greater than $100,000.

AB 2011 (Vargas) allowed local agencies to use a deposit placement service which takes a bank customer's large deposit and breaks it into amounts of less than the $100,000 FDIC insurance limit. These amounts are then placed in CDs at other banks within its network, ensuring FDIC protection on the customer's full deposit. The other banks then simultaneously send an equal amount of funds back to the original bank, enabling it to have the full amount of the original deposit available for lending or other purposes. SB 1344 (Kehoe), Chapter 112, Statutes of 2010, eliminated the sunset date contained in AB 2011 (Vargas) and permanently authorized local agencies to use a deposit placement service.

When AB 2011 became law, only one national network, the Certificate of Deposit Account Registry Service (CDARS), Promontory Interfinancial Network, LLC, offered a qualifying CD placement service. In 2010, Promontory Interfinancial introduced Insured Cash Sweep (ICS), similar to CDARS, but allows for more liquid types of deposits like money market accounts, in amounts that qualify for FDIC insurance. These cash sweep services utilizing
demand deposit and money market accounts are offered by other private sector entities (including Charity Deposits Corporation, Money Market Account Xtra; and Reich and Tang, Demand Deposit Marketplace).

Most recently AB 279 (Dickinson), Chapter 228, Statutes of 2013, extends a local government's authority to access these types of cash sweep services. AB 279 expands the types of deposits local agencies can invest surplus funds into, beyond CDs, to include money market or demand deposit accounts. AB 279 also contains several safeguards to require that a private sector deposit placement service adheres to the federal rules governing FDIC pass-through insurance.

2. Bill Summary. The expanded authority granted by AB 279 (Dickinson) contained a
   January 1, 2017, sunset date and prohibited local agencies from investing more than 10% of the agency's fund to any one private sector entity that assists in deposit placement service. This bill repeals those two provisions, therefore, permanently extending the authority granted in AB 279 to allow local agencies to invest up to 30% of surplus funds into non-CD deposits at depository institutions that use a private sector entity that assists in the placement of deposits. This bill also removes the limitation on investing authority which prohibited local agencies from investing more than 10% of funds to any one private sector entity that assists in deposit placement service. The overall cap of 30% of surplus funds as well as several other safeguards in current law would not be impacted by this bill.

When this Committee unanimously passed AB 279 (Dickinson) on April 3, 2013, it did not contain the sunset date or 10% cap, both of which were subsequently amended into the bill in the Senate.

This bill is co-sponsored by the California Bankers Association and the California Independent Bankers.

3. Author's Statement. According to the author, "This bill accomplishes two goals: 1) aligns the statutory treatment of demand deposit accounts to certificates of deposit relative to the maximum percentage of surplus funds that may be deposited with a depository institution using a placement service so that each deposit product shall not exceed 30 percent of the local agency’s surplus funds; and, 2) eliminates the sunset provision on the code sections permitting a local agency’s deposit into a demand deposit account with a depository institution using a placement service."

4. Arguments in Support. Supporters argue that this bill would statutorily align the treatment of CDs and other types of deposits and create more avenues for public fund investments. Additionally, supporters argue that local agencies can use placement services for both CDs and demand deposits in more than 30 states.

5. Arguments in Opposition. None on file.

6. Double-Referral. This bill is double-referred to the Banking and Finance Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

California Bankers Association [CO-SPONSOR]

California Independent Bankers [CO-SPONSOR]

Opposition

None on file

Analysis Prepared by:

Misa Lennox / L. GOV./(916) 319-3958

 CONSENT  

Bill No: AB 283

Author: Dababneh (D)

Amended: 6/23/15 in Senate

Vote: 21

SENATE BANKING & F.I. COMMITTEE: 7-0, 6/17/15

AYES: Block, Vidak, Galgiani, Hall, Hueso, Lara, Morrell

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/1/15

AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley

ASSEMBLY FLOOR: 80-0, 4/20/15 (Consent) - See last page for vote

SUBJECT: Financial affairs

SOURCE: California Bankers Association

California Independent Bankers

DIGEST: This bill deletes the restriction on local agencies’ ability to invest their surplus funds in deposits other than certificates of deposit (CDs), as specified, and extends the authority of local agencies to make these investments until January 1, 2021.

ANALYSIS:

Existing law:

1. Authorizes local agencies that have the authority to invest surplus funds at their discretion to invest up to 30% of those funds in deposits at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity which assists in the placement of deposits (Government Code Sections 53601.8 and 53635.8). This authority applies to investments in two different types of deposits, as follows:
   
   

1. The full 30% of an agency’s surplus funds may be invested in CDs at depository institutions that use a private sector entity which assists in the placement of deposits. This authority does not sunset.
   
   

2. No more than 10% of an agency’s surplus funds that are invested in deposits other than CDs may be submitted to any single private sector entity that assists in the placement of deposits. Authority to invest in deposits other than CDs sunsets on January 1, 2017.
   
   

This bill:

1. Deletes the provision of existing law, which states that no more than 10% of an agency’s surplus funds that are invested in deposits other than CDs may be submitted to any one private sector entity that assists in the placement of deposits.
   
   

2. Extends, to January 1, 2021, the sunset date on the provision of existing law granting local agencies the authority to invest surplus funds in deposits other than CDs at depository institutions that use a private sector entity to assist in the placement of deposits.

Background

This bill builds upon authority first granted to local agencies in California in 2006. In 2006, the California Independent Bankers sponsored legislation intended to help community banks attract deposits from local government agencies (AB 2011, Vargas, Chapter 459, Statutes of 2006). Prior to the 2006 legislation, community banks struggled to attract local agency deposits, because of the requirement that local agency deposits above the Federal Deposit Insurance Corporation (FDIC) deposit insurance limit be fully collateralized. Unlike their larger counterparts, small banks lack the necessary collateral to accept large deposits.

Recognizing that smaller banks would benefit from the ability to accept multiple deposits in increments up to, but not exceeding the FDIC deposit insurance limit, a private sector entity (Promontory Interfinancial LLC) created a CD placement service. Promontory’s CD placement service is based upon the premise that FDIC insurance is institution-based, and not depositor-based. Thus, if a local agency with $2 million to deposit places that money in a single depository institution, only $250,000 of that deposit is insured by the FDIC. However, if that local agency splits up its $2 million into eight slices of $250,000 each, and deposits each of those eight $250,000 slices into a different depository institution, the whole $2 million will be insured. Promontory devised a way to save local agencies the need to manually split their deposits into slices up to, but not exceeding the FDIC insurance limit, while simultaneously giving relatively small banks an opportunity to receive public funds in insured increments of $250,000 or less.

Promontory’s CD placement service works, in part because of its large network of member banks, and in part because of the FDIC’s willingness to insure deposits that are parceled out by Promontory in amounts up to, but not exceeding the FDIC’s deposit insurance limit. The service works as follows: a local agency with an amount of surplus funds to invest that exceeds the FDIC insurance limit (now $250,000) goes to a local California bank (the “selected” bank), which belongs to the CD placement service. At the request of the selected bank, the CD placement service splits up the local agency’s deposit into slices, each of which is valued at $250,000 or less. Each of these slices is then parceled out to banks throughout the country, which are also members of the placement service, and which issue CDs. In that way, the full amount of the local agency’s deposit is FDIC-insured.

At the same time the local agency’s funds are deposited with the selected bank, and then parceled out to banks across the country that are members of the CD placement network in amounts of $250,000 or less, the selected bank receives deposits from other members of the placement service network, which are equal to, or greater than, the full amount of the principal the local agency initially deposited with the selected bank. Thus, the selected bank ends up with at least the same amount of money on deposit that it received from the local agency; however, the full value of that money is insured, because it is held in increments of $250,000 or less for depositors that originally deposited their money with other selected banks.

The CD placement service has proven quite effective to date. Through the end of Q1 2015, approximately $5.8 billion in deposits have been made by California local agencies into depository institutions using a private sector CD placement service.

In 2013, AB 279 (Dickinson, Chapter 228, Statutes of 2013) authorized local agencies to invest surplus funds in deposits other than CDs at depository institutions that use private sector placement services to distribute those non-CD deposits. Non-CD deposits include demand deposit accounts and money market accounts.

The logic behind the non-CD depository authority is identical to the CD deposit authority (i.e., an amount of money above the FDIC’s deposit insurance limit is deposited with a California bank, a private sector entity facilitates the distribution of amounts in excess of the deposit insurance limit to other banks in its network, the same private sector entity facilitates the distribution of money deposited into those other banks into the California bank in increments up to, but not exceeding the FDIC’s deposit limit). The only difference between the two different types of authority is that the money is held in demand deposit accounts or money market accounts, and not in CDs.

Comments

Unlike the CD placement service, which is only offered by Promontory, cash sweep services utilizing demand deposit and money market accounts are offered by multiple private sector entities. Promontory Interfinancial Network offers an Insured Cash Sweep product, Anova Financial Corporation offers a Reciprocal Exchange Deposit program, Charity Deposits Corporation offers a Money Market Account Xtra product, and Reich and Tang offers a Demand Deposit Marketplace.

The 10% limitation that applies to these types of deposits has proven problematic for depository institutions and local agencies. Depository institutions are unwilling to advertise the existence of their non-CD placement services, because of the relatively small amounts of money the 10% limit allows them to accept. Most banks have relationships with only one private sector placement service due to the cost and expense of vendor management due diligence; thus, the 10% per private sector placement service has the effect of being a 10% per depository institution limit. Because depository institutions are not advertising the existence of non-CD placement services, no local agency has used the authority granted under AB 279.

AB 283 seeks to delete the 10% limit, with the aim of encouraging depository institutions and local agencies to use the authority granted pursuant to AB 279. If AB 283 is enacted, the 30% cap that applies to deposits in CDs which are placed using a private sector placement service will also apply to non-CD deposits that are placed using a private sector placement service.

Related/Prior Legislation

AB 279 (Dickinson, Chapter 228, Statutes of 2013) authorized local agencies to invest surplus funds in deposits other than CDs at depository institutions that use a private sector entity to assist in the placement of deposits. This authority sunsets on January 1, 2017.

SB 1344 (Kehoe, Chapter 112, Statutes of 2010) deleted the sunset date contained in AB 2011, thus permanently extending the ability of local agencies to use private sector, CD placement services.

AB 2011 (Vargas, Chapter 459, Statutes of 2006) authorized local agencies to invest surplus funds in a private sector, CD placement service until January 1, 2012.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 7/1/15)

California Bankers Association (co-source)

California Independent Bankers (co-source)

OPPOSITION: (Verified 7/1/15)

None received

ASSEMBLY FLOOR: 80-0, 4/20/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

Prepared by: Eileen Newhall / B. & F.I. / (916) 651-4102

7/2/15 11:41:58

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

INVESTMENT OF SURPLUS FUNDS

Repeals a cap on the share of local agency funds that may be invested through a private sector deposit placement service and extends the sunset date on the statutes authorizing those deposits.

Background and Existing Law

Since 1913, state law has authorized local officials to invest a portion of local governments’ temporarily idle funds in a variety of financial instruments. Originally, state law limited the instruments to government bonds, but over time the laws governing local agency investments have been amended to keep pace with changing investment opportunities and current market offerings.

California law allows local officials to deposit money in state or national banks, savings associations, federal associations, credit unions, or federally insured industrial loan companies in the State of California. These public deposits, which include funds placed into certificates of deposit (CDs), are subject to restrictions, including a requirement that deposits must be insured by the Federal Deposit Insurance Corporation (FDIC) or, to the extent not insured, collateralized with certain types of securities in specified amounts. FDIC insurance usually covers only $250,000 per depositor per institution. As a result, to secure large public deposits, depository institutions must hold significant amounts of collateral.

In 2006, the Legislature authorized local agencies to invest up to 30% of their surplus funds in CDs issued through a private sector deposit placement service (AB 2011, Vargas, 2006). Subsequent legislation deleted a sunset date from the statutes authorizing local agencies to invest in CDs using a deposit placement service (SB 1344, Kehoe, 2010).

A deposit placement service splits the funds deposited at a single financial institution into increments of less than $250,000 and trades deposits through a network of participating institutions. Network members provide simultaneous reciprocal deposits on a dollar-for-dollar basis, so that the equivalent of the original deposit comes back to the bank that received the original deposit. Each of the incremental deposits is less than $250,000 to ensure that both the principal and interest are fully insured by the FDIC, eliminating the need for collateralization.

In 2013, the Legislature expanded local governments’ statutory authority to invest surplus funds through a deposit placement service to allow surplus funds to be placed not just in CDs but also in other types of deposits, including money market accounts and demand deposit accounts (AB 279, Dickinson, 2013). No more than 10% of an agency’s surplus funds that are invested in deposits other than CDs may be submitted to any single private sector entity that assists in the placement of deposits. The authority to invest in deposits other than CDs using a deposit placement service sunsets on January 1, 2017.

Some California bankers suggest that the 10% cap on investments in deposits other than CDs that was enacted as part of the Dickinson bill in 2013 is too low to allow the new investment authority to be worthwhile for banks and local governments. They want the Legislature to repeal the 10% cap and extend the sunset date on the statutes authorizing those deposits.

Proposed Law

Assembly Bill 283 deletes a requirement that no more than 10% of an agency’s surplus funds that are invested in deposits other than certificates of deposit may be submitted to any one private sector entity that assists in the placement of deposits.

AB 283 extends, until January 1, 2021, the sunset date in the statutes granting local agencies the authority to invest surplus funds in deposits other than certificates of deposit at depository institutions that use a private sector entity to assist in the placement of deposits.

AB 283 repeals a requirement that no more than 30% of a local agency’s surplus funds can be invested, in total, in negotiable CDs and CDs using a private sector entity that assists in the placement of deposits.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. Statutory collateralization requirements limit small community banks’ capacity to accept large public deposits. Many local agencies’ treasurers want to be able to make deposits with community banks, but don’t want the administrative and monitoring burdens of maintaining multiple $250,000 deposits at separate institutions to ensure FDIC insurance coverage. Deposit placement services address both of these concerns. Two years ago, the Legislature sought to expand California statutes that govern local agencies’ use of deposit placement services to include deposits other than certificates of deposit. However, the requirement that no more than 10% of an agency’s funds can be invested through a particular deposit placement service reportedly is preventing local governments from taking advantage of the new authority granted by AB 279 (Dickinson, 2013). Existing law already requires that no more than 30% of a local agency’s surplus funds may be invested in CDs or any other type of deposit through a private sector deposit placement service. AB 283 leaves that cap in place. By repealing the 10% cap, AB 283 benefits public agencies and local communities by giving California local officials greater flexibility to place non-CD deposits in community banks without the difficulties of complying with securitization requirements.

2. Double-referred. The Senate Rules Committee ordered a double-referral of AB 283 --- first to the Senate Banking & Financial Institutions Committee, which has jurisdiction over bills regulating banking activities like deposit placement services, and then to the Senate Governance & Finance Committee, which has jurisdiction over bills relating to local agencies’ authority to invest public funds. The Senate Banking & Financial Institutions Committee passed the bill, with amendments, at its June 17 hearing on a 7-0 vote.

Assembly Actions

Assembly Local Government Committee: 9-0

Assembly Banking & Finance Committee: 11-0

Assembly Floor: 80-0

Support and Opposition

(6/25/15)

Support: California Bankers Association; California Independent Bankers.

Opposition: Unknown.

-- END --

SENATE COMMITTEE ON

BANKING AND FINANCIAL INSTITUTIONS

Senator Marty Block, Chair

2015 - 2016 Regular

Bill No: AB 283 Hearing Date: June 17, 2015

Subject: Financial affairs.

SUMMARY

Deletes the provision of existing law, which states that no more than 10% of an agency’s surplus funds that are invested in deposits other than certificates of deposit may be submitted to any one private sector entity that assists in the placement of deposits, and deletes the sunset date on the provision authorizing these types of deposits.

DESCRIPTION

1. Deletes the provision of existing law, which states that no more than 10% of an agency’s surplus funds that are invested in deposits other than certificates of deposit may be submitted to any one private sector entity that assists in the placement of deposits.
   
   

2. Deletes the sunset date on the provision of existing law granting local agencies the authority to invest surplus funds in deposits other than certificates of deposit at depository institutions that use a private sector entity to assist in the placement of deposits.
   
   

EXISTING LAW

1. Defines a local agency as a county, city, city and county, school district, community college district, public district, county board of education, county superintendent of schools, or any public or municipal corporation (Government Code Section 53600).
   
   

2. Authorizes local agencies that do not pool their money in deposits or investments with other local agencies with separate governing bodies, and that have money in their treasuries that is not required for their immediate needs, to invest any portion of the money they deem wise or expedient in selected investments specified in law, and places limitations on the percentage of a local agency’s surplus that may be invested in some of those investments (Government Code Section 53601).
   
   

3. Includes negotiable certificates of deposit (CDs) among allowable investments, provided they are issued by a state- or nationally-chartered depository institution, and the local agency’s investment in the CDs does not exceed 30% of the agency’s surplus (Government Code Section 53601).
   
   

4. Authorizes local agencies that have the authority to invest surplus funds at their discretion to invest up to 30% of those funds in deposits at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity which assists in the placement of deposits (Government Code Sections 53601.8 and 53635.8). This authority applies to investments in two different types of deposits, as follows:
   
   

1. The full 30% of an agency’s surplus funds may be invested in CDs at depository institutions that use a private sector entity which assists in the placement of deposits. This authority does not sunset.
   
   

2. No more than 10% of an agency’s surplus funds that are invested in deposits other than CDs may be submitted to any single private sector entity that assists in the placement of deposits. Authority to invest in deposits other than certificates of deposit sunsets on January 1, 2017.
   
   

1. Places several restrictions on the local agencies and depository institutions that take advantage of the authority described in Existing Law Number 4 above, as follows:
   
   

   1. The local agency must use a nationally or state-chartered commercial bank, savings bank, savings and loan association, or credit union in California to invest its funds.
      
      

   2. The depository institution used by the local agency may use a private sector entity to help place local agency deposits with one or more commercial banks, savings banks, savings and loan associations, or credit unions in the United States, which are within the network used by the private sector entity.
      
      

   3. Any private sector entity used by a depository institution to help place its local agency deposits must maintain policies and procedures requiring both of the following:
      
      

      1. The full amount of each deposit placed using the private sector entity and the interest that may accrue on each deposit must at all times be insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA).
         
         

      2. Every depository institution where funds are placed must be capitalized at a level that is sufficient, and be otherwise eligible to receive such deposits pursuant to FDIC or NCUA regulations.
         
         

   4. On the same date the local agency’s funds are placed by the private sector entity, the depository institution used by the local agency must receive an amount of insured deposits from other financial institutions that, in total, are equal to or greater than the full amount of the principal the local agency initially deposited with that institution.

COMMENTS

1. Purpose: AB 283 is co-sponsored by the California Independent Bankers (CIB) and the California Bankers Association (CBA) to increase banks’ access to local agency deposits.
   
   

2. Background: This bill builds upon authority first granted to local agencies in California in 2006 (AB 2011 (Vargas), Chapter 459, Statutes of 2006). In 2006, CIB sponsored legislation intended to help community banks attract deposits from local government agencies. Prior to the 2006 legislation, community banks struggled to attract local agency deposits, because of the requirement that local agency deposits above the FDIC deposit insurance limit be fully collateralized. Unlike their larger counterparts, small banks lack the necessary collateral to accept large deposits.
   
   Recognizing that smaller banks would benefit from the ability to accept multiple deposits in increments up to, but not exceeding the FDIC deposit insurance limit, a private sector entity (Promontory Interfinancial LLC) created a CD placement service. Promontory’s CD placement service is based upon the premise that FDIC insurance is institution-based, and not depositor-based. Thus, if a local agency with $2 million to deposit places that money in a single depository institution, only $250,000 of that deposit is insured by the FDIC. However, if that local agency splits up its $2 million into eight slices of $250,000 each, and deposits each of those eight $250,000 slices into a different depository institution, the whole $2 million will be insured. Promontory devised a way to save local agencies the need to manually split their deposits into slices up to, but not exceeding the FDIC insurance limit, while simultaneously giving relatively small banks an opportunity to receive public funds in insured increments of $250,000 or less.
   
   Promontory’s CD placement service works, in part because of its large network of member banks, and in part because of the FDIC’s willingness to insure deposits that are parceled out by Promontory in amounts up to, but not exceeding the FDIC’s deposit insurance limit. The service works as follows: a local agency with an amount of surplus funds to invest that exceeds the FDIC insurance limit (now $250,000) goes to a local California bank (the “selected” bank), which belongs to the CD placement service. At the request of the selected bank, the CD placement service splits up the local agency’s deposit into slices, each of which is valued at $250,000 or less. Each of these slices is then parceled out to banks throughout the country, which are also members of the placement service, and which issue CDs. In that way, the full amount of the local agency’s deposit is FDIC-insured.
   
   At the same time the local agency’s funds are deposited with the selected bank, and then parceled out to banks across the country that are members of the CD placement network in amounts of $250,000 or less, the selected bank receives deposits from other members of the placement service network, which are equal to, or greater than, the full amount of the principal the local agency initially deposited with the selected bank. Thus, the selected bank ends up with at least the same amount of money on deposit that it received from the local agency; however, the full value of that money is insured, because it is held in increments of $250,000 or less for depositors that originally deposited their money with other selected banks.
   
   The CD placement service has proven quite effective to date. Through the end of Q1 2015, approximately $5.8 billion in deposits have been made by California local agencies into depository institutions using a private sector CD placement service.
   
   In 2013, AB 279 (Dickinson), Chapter 228, Statutes of 2013, authorized local agencies to invest surplus funds in deposits other than CDs at depository institutions that use private sector placement services to distribute those non-CD deposits. Non-CD deposits include demand deposit accounts and money market accounts.
   
   The logic behind the non-CD depository authority is identical to the CD deposit authority (i.e., an amount of money above the FDIC’s deposit insurance limit is deposited with a California bank, a private sector entity facilitates the distribution of amounts in excess of the deposit insurance limit to other banks in its network, the same private sector entity facilitates the distribution of money deposited into those other banks into the California bank in increments up to, but not exceeding the FDIC’s deposit limit). The only difference between the two different types of authority is that the money is held in demand deposit accounts or money market accounts, and not in CDs.
   
   

3. Discussion: Unlike the CD placement service, which is only offered by Promontory, cash sweep services utilizing demand deposit and money market accounts are offered by multiple private sector entities. Promontory Interfinancial Network offers an Insured Cash Sweep product, Anova Financial Corporation offers a Reciprocal Exchange Deposit program, Charity Deposits Corporation offers a Money Market Account Xtra product, and Reich and Tang offers a Demand Deposit Marketplace. Recognizing the existence of multiple placement services for non-CD deposits, the Senate Governance and Finance Committee amended AB 279 to cap, at 10%, the maximum percentage of a local agency’s surplus funds that could be allocated by any single private sector placement service.
   
   This 10% limitation has proven problematic for depository institutions and local agencies. Depository institutions are unwilling to advertise the existence of their non-CD placement services, because of the relatively small amounts of money the 10% limit allows them to accept. Most banks have relationships with only one private sector placement service due to the cost and expense of vendor management due diligence; thus, the 10% per private sector placement service has the effect of being a 10% per depository institution limit. Because depository institutions are not advertising the existence of non-CD placement services, no local agency has used the authority granted under AB 279.
   
   AB 283 seeks to delete the 10% limit, with the aim of encouraging depository institutions and local agencies to use the authority granted pursuant to AB 279. If AB 283 is enacted, the 30% cap that applies to deposits in CDs which are placed using a private sector placement service will also apply to non-CD deposits that are placed using a private sector placement service.
   
   

4. Summary of Arguments in Support: CBA and CIB are sponsoring AB 283 to remove the 10% cap which has discouraged use of the non-CD placement services banks would like to offer to local agencies in California, and to ensure that this non-CD placement authority is a permanent part of California law.

5. Summary of Arguments in Opposition: None received.

6. Amendments:
   
   

   1. As noted above, no local agency has utilized the authority to invest surplus funds in non-CD deposits at depository institutions that use a private sector placement service to place those deposits. It would therefore appear premature to delete the sunset date on that authority. In lieu of deleting the sunset date on the non-CD placement service authority, staff suggests extending the sunset date in existing law, to give the Legislature the opportunity to see whether deleting the 10% limitation has its desired effect of encouraging these types of deposits.
      
      Page 3, after line 21, insert the following: (i) This section shall remain in effect only until January 1, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2021, deletes or extends that date.
      
      Page 6, after line 26, insert the following: (i) This section shall remain in effect only until January 1, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2021, deletes or extends that date.
      
      

7. Prior and Related Legislation:
   
   

   1. AB 279 (Dickinson), Chapter 228, Statutes of 2013: Authorized local agencies to invest surplus funds in deposits other than CDs at depository institutions that use a private sector entity to assist in the placement of deposits. This authority sunsets on January 1, 2017.
      
      

   2. SB 1344 (Kehoe), Chapter 112, Statutes of 2010: Deleted the sunset date contained in AB 2011, thus permanently extending the ability of local agencies to use private sector, CD placement services.
      
      

   3. AB 2011 (Vargas), Chapter 459, Statutes of 2006: Until January 1, 2012, authorized local agencies to invest surplus funds in a private sector, CD placement service.

LIST OF REGISTERED SUPPORT/OPPOSITION

Support

California Bankers Association (co-sponsor)

California Independent Bankers (co-sponsor)

Opposition

None received

-- END --

Date of Hearing: April 13, 2015

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Matthew Dababneh, Chair

ABPCA Bill Id:AB 283

Author:(Dababneh) – As Introduced Ver:February 11, 2015

SUBJECT: Financial affairs

SUMMARY: Makes permanent, provisions of law that expands the authority granted to local agencies to use a private sector deposit placement service to invest up to 30% of surplus funds into deposits other than certificates of deposits (CDs). Specifically, this bill:

1. Deletes the January 1, 2017 sunset date that allows a local agency to invest up to 30% of surplus funds in deposits other than CDs at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity to assist in the placement of deposits.

2. Repeals a code section that prohibits a local agency from investing more than 10% of its surplus funds in any one private sector entity that assists in non-CD deposit placement service, thereby allowing a local agency to invest up to 30% of surplus funds in one private sector entity that provides deposit placement service.

EXISTING LAW:

1. Authorizes a local agency, until January 1, 2017, to invest a portion of its surplus funds in deposits 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 non-CD deposits, provided that the purchases of deposits, in total, do not exceed 30% of the agency's funds. (Government Code, Sections 53601.8 & 53635.8)

2. Prohibits a local agency from investing more than 10% of its surplus funds in any single non-CD placement service.

3. Provides that the following conditions apply for a local agency to invest its surplus funds in deposits:

1. The local agency shall choose a nationally or state chartered commercial bank, savings bank, savings and loan association, or credit union in California to invest the funds, which shall be known as the "selected" depository institution;

2. The selected depository institution may use a private sector entity to help place local agency deposits with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States and within the network used by the private sector entity for this purpose;

3. Any private sector entity used by a selected depository institution to help place its local agency deposits shall maintain policies and procedures that require the following:

1. The full amount of each deposit placed, including interest, shall at all times be insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA); and,
   
   

2. Every depository institution where funds are placed shall be capitalized at a sufficient level to receive deposits pursuant to FDIC or NCUA.

4. The selected depository institution shall serve as a custodian for each deposit; and,

5. At the same time the local agency's funds are deposited, the selected depository institution shall receive an amount of insured 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.

4. Authorizes a local agency to invest a portion of its surplus funds in CDs 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 CDs, provided that the purchases of CDs, in total, do not exceed 30% of the agency's funds.

FISCAL EFFECT: None.

COMMENTS:

Background

The authorization for local agencies to invest surplus funds in CDs was put into place by AB 2011 (Vargas), Chapter 459, Statutes of 2006. Existing law requires local agency funds to either be protected by federal deposit insurance or secured by collateral. Prior to the bill, if a local agency wanted to make a deposit of over $100,000, the FDIC insurance limit at the time, the bank had to pledge collateral to secure the deposit. This collateralization requirement was a barrier to most small community banks accepting deposits of local agency funds, which were generally in amounts much greater than $100,000.

AB 2011 (Vargas) allowed local agencies to use a deposit placement service which takes a bank customer's large deposit and breaks it into amounts of less than the $100,000 FDIC insurance limit. These amounts are then placed in CDs at other banks within its network, ensuring FDIC protection on the customer's full deposit. The other banks then simultaneously send an equal amount of funds back to the original bank, enabling it to have the full amount of the original deposit available for lending or other purposes. SB 1344 (Kehoe), Chapter 112, Statutes of 2010, eliminated the sunset date contained in AB 2011 (Vargas) and permanently authorized local agencies to use a deposit placement service.

(On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, in part, permanently raises the current standard maximum deposit insurance amount to $250,000. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until December 31, 2013. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category.)

When AB 2011 became law, only one national network, the Certificate of Deposit Account Registry Service (CDARS), Promontory Interfinancial Network, LLC, offered a qualifying CD placement service. In 2010, Promontory Interfinancial introduced Insured Cash Sweep (ICS), similar to CDARS, but allows for more liquid types of deposits like money market accounts, in amounts that qualify for FDIC insurance. These cash sweep services utilizing demand deposit and money market accounts are offered by other private sector entities (including Charity Deposits Corporation, Money Market Account Xtra; and Reich and Tang, Demand Deposit Marketplace).

Most recently, AB 279 (Dickinson), Chapter 228, Statutes of 2013, extended a local government's authority to access these types of cash sweep services. AB 279 expanded the types of deposits local agencies can invest surplus funds into, beyond CDs, to include money market or demand deposit accounts. AB 279 also contains several safeguards to require that a private sector deposit placement service adheres to the federal rules governing FDIC pass-through insurance.

Existing law allows, but does not mandate, a local agency to deposit up to 30 % of their overall surplus funds with a depository institution that uses a private sector placement service. These local agency funds may be deposited into a CD or a demand deposit account. Utilization of a placement service allows the depository institution to accept a deposit from a local agency exceeding the FDIC standard insurance limit of $250,000 (per depositor) while maintaining full insurance coverage over the entirety of the local agency’s deposit. Typically, depository institutions utilizing a placement service are community banks operating within the geographical region of the local agency.

Procedurally, the depository institution selected by the local agency (the “selected depository institution”) serves as the custodian of the funds and may use a placement service to place deposits in excess of the FDIC insurance limit with other participating depository institutions within the placement service’s network. Existing law mandates that the full amount of each deposit must be insured at all times and that every depository institution where funds are placed must be sufficiently capitalized.

Participating depository institutions receiving a portion of the local agency’s deposit from the selected depository institution reciprocate to the selected depository institution deposits equal to that placed with the participating depository institution. This process, memorialized in California statute, provides full insurance coverage for the local agency’s surplus funds and allows the local agency to identify one depository institution for which they wish to do business. Without this process, a local agency with surplus funds exceeding the FDIC insurance limit would have the obligation to identify multiple depository institutions to participate out their deposit in order to achieve full FDIC insurance coverage.

For CDs, no more than 30 % of the local agency’s overall surplus funds may be deposited into a depository institution where a placement service is used relative to the local agency’s deposit. However, for demand deposit accounts, existing law limits the deposit of a local agency’s overall surplus funds to no more than 10 % of the agency’s funds into any one placement service used by a depository institution relative to the local agency’s deposit.

Need for the Bill:

The expanded authority granted by AB 279 (Dickinson) contained a January 1, 2017, sunset date and prohibited local agencies from investing more than 10% of the agency's fund to any one private sector entity that assists in deposit placement service. This bill repeals those two provisions, therefore, permanently extending the authority granted in AB 279 to allow local agencies to invest up to 30% of surplus funds into non-CD deposits at depository institutions that use a private sector entity that assists in the placement of deposits. This bill also removes the limitation on investing authority which prohibited local agencies from investing more than 10% of funds to any one private sector entity that assists in deposit placement service. The overall cap of 30% of surplus funds as well as several other safeguards in current law would not be impacted by this bill.

The changes proposed in AB 283 accomplish two goals: aligns the statutory treatment of demand deposit accounts to certificates of deposit relative to the maximum percentage of surplus funds that may be deposited with a depository institution using a placement service so that each deposit product shall not exceed 30 % of the local agency’s surplus funds and eliminates the sunset provision on the code sections permitting a local agency’s deposit into a demand deposit account with a depository institution using a placement service.

Previous Legislation:

AB 279 (Dickinson, Chapter 228, Statutes of 2013) authorized local agencies, until January 1, 2017, to invest up to 30% of their surplus funds through a private sector deposit placement service, as specified.

SB 1344 (Kehoe, Chapter 112 Statutes of 2010) deleted the sunset date on current law provisions that allow local agencies to invest up to 30% of surplus funds in CDs with a commercial bank, savings bank, or credit union. Additionally, provides that only a local agency with existing legal authority to make investments may invest surplus funds in CDs.

AB 2011(Vargas, Chapter 459, Statutes of 2006) allowed a local agency to invest specified funds into multiple CDs under certain circumstances.

Double Referral:

This measure previously passed out of the Assembly Local Government Committee on Consent.

REGISTERED SUPPORT / OPPOSITION:

Support

California Bankers Association (Co-Sponsor)

California Independent Bankers (CIB)

Opposition

None on file.

Analysis Prepared by: Kathleen O'Malley / B. & F. / (916) 319-3081