BILL NUMBER: AB 2500 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Hueso
FEBRUARY 24, 2012
An act to add Part 9.5 (commencing with Section 17750) to Division
4 of Title 2 of the Government Code, relating to state government,
and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 2500, as introduced, Hueso. State government: California
Investment Trust: state bank.
Existing law authorizes the Infrastructure and Economic
Development Bank to enter into loan agreements with a sponsor or a
participating party in order to finance a project related to
infrastructure or economic development. Existing law provides that
all money in the possession of, or collected by, any state agency or
department is state money and is subject to provisions governing its
deposit and handling in trust accounts. Existing law authorizes the
Pooled Money Investment Board to invest surplus state money held in
the Pooled Money Investment Account in accordance with certain
procedures.
This bill would establish the California Investment Trust within
state government, and would authorize the trust to exercise various
powers and duties relating to banking, including, among others,
receiving and managing deposits from public funds, loaning money,
engaging in financial transactions, and buying and selling federal
funds. The bill would require all state money, as defined, to be
deposited into the California Investment Trust. The bill would
establish a California Investment Trust Board to be chaired by the
Treasurer, and would establish an advisory board for purposes of
advising the board. The bill would establish the California
Investment Trust Fund for deposit of all state moneys, and would
continuously appropriate those moneys to the board for expenditure,
thereby making an appropriation of General Fund moneys. The bill
would require the State Auditor to make specified audits of the
trust, and require the State Auditor, Department of Finance, and the
Controller to make specified reports to the Legislature with regard
to the trust. The bill would exempt certain documents of the trust
from public disclosure.
Existing constitutional provisions require that a statute that
limits the right of access to the meetings of public bodies or the
writings of public officials and agencies be adopted with findings
demonstrating the interest protected by the limitation and the need
for protecting that interest.
This bill would make legislative findings to that effect.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Part 9.5 (commencing with Section 17750) is added to
Division 4 of Title 2 of the Government Code, to read:
PART 9.5. California Investment Trust
CHAPTER 1. FINDINGS AND DECLARATIONS
17750. The Legislature finds and declares all of the following:
(a) California communities have suffered greatly since the
financial crisis of 2007. During the last several years, monthly
unemployment levels have remained above 10 percent leaving millions
of Californians out of work. Bankruptcies among small businesses and
individuals are up, capital markets are tight, and local communities
have limited resources to address their economic and community
development challenges.
(b) Independent analysis has shown that a state bank can do all of
the following:
(1) Support in-state economic development by increasing access to
capital for businesses in the state.
(2) Support job creation and retention through increased and
sustained business lending.
(3) Provide stability to the local financial sector.
(4) Reduce the cost paid by state government for banking services.
CHAPTER 2. DEFINITIONS
17751. For the purposes of this part, the following terms have
the following meanings:
(a) "Advisory board" means the advisory board of the trust.
(b) "Board" means the board of directors of the trust.
(c) "California Investment Trust" or "trust" means the California
Investment Trust established pursuant to this part.
(d) "California Investment Trust Fund" or "fund" means the fund
established by Section 11757 for the deposit and appropriation of
state money.
(e) "Financial institutions" means banking or savings
organizations, including, but not limited to, banks, savings and loan
associations, and credit unions authorized to conduct business in
California, and state-chartered commercial banks, trust companies,
and savings and loan associations.
(f) "Public funds" means public funds of any local entity or
financial bank.
(g) "State-chartered bank" means a corporation incorporated under
Division 1 (commencing with Section 100) of Title 1 of the
Corporations Code that is, with the approval of the commissioner,
incorporated for the purpose of engaging in, or that is authorized by
the commissioner to engage in, the commercial or industrial banking
business, and, in that capacity, may carry out various powers and
duties, including, among others, the receipt of private deposits, and
the loaning and investment of money.
(h) "State money" means all general fund money in the possession
of, or collected by, any state agency or department that is not
otherwise restricted for expenditure by the California Constitution.
.
CHAPTER 3. THE CALIFORNIA INVESTMENT TRUST
17752. (a) The California Investment Trust is hereby established
within state government as an independent entity.
(b) The purposes of the California Investment Trust are all of the
following:
(1) Supporting the economic development of the state by increasing
access to capital for businesses and farms within the state in
partnership with local financial institutions.
(2) Providing stability to the local financial sector without
entering into competition with community banks, credit unions, or
other financial institutions.
(3) Reducing the cost paid by state government for banking
services.
(4) To return profits, beyond those necessary to accomplish the
mission and sound operations of the trust, to the General Fund.
CHAPTER 4. THE CALIFORNIA INVESTMENT TRUST BOARD
17753. (a) The California Investment Trust Board is hereby
established within the trust. The board shall operate, manage, and
control the California Investment Trust. The board shall locate and
maintain places of business of the trust. The board shall adopt and
enforce orders, rules, and bylaws for the transaction of the trust's
business.
(b) The board shall consist of all of the following:
(1) The Governor or his or her designee.
(2) The Treasurer.
(3) The Controller or his or her designee.
(4) One member appointed by the Senate Committee on Rules and
having a background in one or more areas of finance, including, but
not limited to, individuals working in for-profit and nonprofit
financial and academic institutions and economic development
practitioners.
(5) One member appointed by the Speaker of the Assembly and having
a background in one or more areas of finance, including, but not
limited to, individuals working in for-profit and nonprofit financial
and academic institutions and economic development practitioners.
(c) The Treasurer shall act as chairperson of the board. The board
shall establish rules requiring the holding of regular meetings and
specifying the means for providing notice of the meetings consistent
with Article 9 (commencing with Section 11120) of Chapter 9 of Part 1
of Division 3.
(d) The powers of the board and the functions of the trust shall
be implemented through actions taken and policies and rules adopted
by the board, subject to Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3 and Section 11758.
(e) Three members of the board shall constitute a quorum to
transact business and exercise all rights, duties, and powers of the
board.
(f) The board shall appoint a president of the trust. The person
appointed as president shall have extensive experience in banking.
The board may appoint and employ any subordinate officers, employees,
and agents as the board considers necessary, and shall define the
duties, designate the titles, and fix the compensation of all those
persons. The board may designate the president or other officers or
employees as its agent in respect to the functions of the trust,
subject to the supervision, limitation, and control of the board.
(g) The board may remove and discharge any and all persons under
subdivision (f) or Section 11754.
CHAPTER 5. ADVISORY BOARD
17754. (a) To enlist the help of private enterprise and to
encourage more active use of the purposes for which the California
Investment Trust is established, the board shall appoint an advisory
board of directors that consists of seven members.
(b) The members of the advisory board shall include:
(1) One representative of this state's financial industry sector.
(2) One representative of this state's small business sector.
(3) One representative of this state's agricultural sector.
(4) One representative of this state's labor groups.
(5) At least two members shall be officers of state-chartered
banks who do not maintain offices outside the boundaries of this
state.
(c) The board shall appoint a chairman, vice chairman, and
secretary of the advisory board. The term of office of directors
shall be set by the board, but may not exceed four years.
(d) The advisory board shall do all of the following:
(1) Meet regularly with the management of the trust to review the
trust's operations and finances to determine whether recommendations
should be made by the advisory board to the board relating to
improved management performance, better customer service and overall
improvement in internal methods, procedures and operating policies of
the trust.
(2) Make recommendations to the board relating to the
establishment of additional objectives for the operation of the
trust.
(3) Make recommendations to the board concerning the appointment
of officers of the trust.
(4) Meet every annual quarter with the board to present
recommendations concerning the trust.
(5) Participate on loan committees, if created by the board.
CHAPTER 6. STATE MONEYS
17755. (a) The California Investment Trust may accept deposits of
public funds. The trust may not accept deposits of private funds.
(b) All state moneys shall be deposited in the California
Investment Trust Fund. All income earned by the trust for its own
account on state moneys that are deposited in, or invested with, the
trust to the credit of the state shall be credited to, and become a
part of, the revenues and income of the trust.
(c) Whenever any public funds are deposited in the trust, the
official having control of the public funds and the sureties on the
bond of the official shall be exempt from all liability by reason of
loss of any of the funds deposited in the trust.
(d) The trust shall pay interest on public deposits at a rate
comparable to average statewide rates paid by private depositories of
public funds and may offer other financial products to state
entities on a competitive basis.
CHAPTER 7. POWERS
17756. The California Investment Trust may do all of the
following:
(a) Make loans in the form of participation loans in which the
originator of the loan is a financial institution doing business in
this state that meets safety and performance standards that are
generally accepted by state or federal financial regulatory agencies
and the purpose of the loan is for operation or expansion of a
qualified business located in California.
(b) Purchase participation interests in loans made or held by
financial institutions doing business in this state and that meet
safety and performance standards that are generally accepted by state
or federal financial regulatory agencies where the purpose of the
loan is for operation or expansion of a qualified business located in
California.
(c) Purchase, guarantee, or hold loans originated by financial
institutions doing business in this state that meet safety and
performance standards that are generally accepted by state or federal
financial regulatory agencies.
(d) Purchase or hold loans that are insured or guaranteed in whole
or in part by the United States, its agencies, or instrumentalities.
(e) Make, purchase, guarantee, or hold loans of instrumentalities
of this state.
(f) Purchase or hold loans that are obtained as security pledged
for, or originated in the restructuring of, any other loan properly
originated or participated in by the trust.
(g) Invest its funds in conformity with policies of the board.
(h) Buy and sell federal funds.
(i) Act as a custodian bank for financial institutions organized
under the laws of this state and accept deposits from the financial
institutions in connection with this function.
(j) Issue bank stock loans to financial institutions organized
under the laws of this state and doing the majority of their business
in this state.
(k) For financial institutions that make the trust a reserve
depository, perform the functions and render the services of a
clearinghouse, including all facilities for providing domestic and
foreign exchange and may rediscount paper, on terms prescribed by the
board.
(l) Perform all acts and do all things necessary, convenient,
advisable, or desirable to carry out the powers expressly granted or
necessarily implied in this act through or by means of its president,
officers, agents, or employees or by contracts with any person,
firm, or corporation.
(m) The bank may not make a loan to any board member, the
president, or any officer of the bank.
CHAPTER 8. CALIFORNIA INVESTMENT TRUST FUND
17757. (a) The California Investment Trust Fund is hereby
established in the State Treasury for use by the trust.
Notwithstanding Section 13340, all money held in the fund is
continuously appropriated to the trust for purposes of this part.
(b) As soon as possible after the end of each calendar year, the
board shall determine the amount of income, if any, earned by the
California Investment Trust in that calendar year that is in excess
of amounts necessary to pay for expenses of administering the
activities of the trust and shall, in consultation with the
Legislature, determine how much of the excess shall be transferred to
the General Fund, if not constitutionally restricted with regard to
the transfer of those funds.
CHAPTER 9. RULES AND REGULATIONS
17758. The California Investment Trust Board shall adopt rules
and regulations to do all of the following:
(a) Ensure the safety and soundness of the California Investment
Trust, adhere to sound underwriting practices, avoid excessive risk
and, to the extent possible, reflect applicable standards for safety
and soundness set forth in Part 364 of Title 12 of the Code of
Federal Regulations.
(b) Specify the trust's powers and permissible investments and
activities.
(c) Authorize specific services that the trust may provide.
(d) Specify limits for loans and other obligations the trust makes
or undertakes.
(e) Specify reserve requirements consistent with federal law.
(f) Set other requirements that the board considers necessary to
administer the trust under this act.
CHAPTER 10. AUDIT
17759. (a) The State Auditor shall contract with an independent
certified public accounting firm for an annual audit of the trust in
accordance with generally accepted government auditing standards.
(b) The State Auditor shall audit annually or contract for an
annual audit of the separate programs and funds administered by the
trust. On request of the State Auditor, the board shall assist the
State Auditor in the auditing firm selection process, but the
selection of the auditing firm is the State Auditor's responsibility.
The auditor selected shall prepare an audit report that includes
financial statements presented in accordance with the audit and
accounting guide for banks and savings institutions issued by the
American Institute of Certified Public Accountants. The auditor also
shall prepare audited financial statements for inclusion in the
comprehensive annual financial report for the state.
(c) The State Auditor may conduct performance audits of the trust,
including the separate programs and funds administered by the trust.
(d) The auditor shall report the results of the audit to the board
and to the Legislature.
(e) The trust or its separate programs and funds shall pay the
costs of the audit, which shall be expended from the fund.
(f) The Department of Finance and the Controller shall examine the
bank at least once every 24 months and conduct any investigation of
the trust that may be necessary.
(g) The Treasurer shall report the examination results, and the
results of any necessary investigation, to the board and to the
Legislature as soon as practicable.
(h) The Department of Finance and the Controller may charge a fee
for any examination or investigation at an hourly rate to be set by
the Treasurer, sufficient to cover all reasonable expenses of the
department and the Controller associated with the examinations and
investigations provided for by this section, which shall be expended
from the fund.
CHAPTER 11. REPORT
17760. (a) Immediately following the close of each calendar
month, the Treasurer shall prepare a report on the General Fund, the
trust, and every other fund under his or her control itemized as to
all of the following:
(1) The amount in the fund at the close of business at the end of
the preceding month.
(2) The amount of revenue deposited or transferred to the credit
of each fund during the current month.
(3) The amount of withdrawals or transfers from each fund during
the current month.
(4) The amount on hand in each fund at the close of business at
the end of the current month.
(b) One copy of the report shall be provided promptly to those
requesting the report, so long as the supply lasts. The report shall
also be posted on the Internet Web site of the Treasurer.
CHAPTER 12. TITLE
17761. (a) All business of the California Investment Trust shall
be conducted under the name of the "California Investment Trust."
Title to property pertaining to the operation of the trust shall be
obtained and conveyed in the name of the "California Investment
Trust, doing business as the California Investment Trust."
(b) Instruments shall be executed in the name of the State of
California within the scope of authority granted by the California
Investment Trust Board. The president of the trust may execute
instruments on behalf of the trust, including any instrument
granting, conveying, or otherwise affecting any interest in or lien
upon real or personal property.
(c) Other officers or employees of, and legal counsel to, the
trust may execute instruments on behalf of the trust when authorized
by the board.
CHAPTER 13. RECORDS
17762. (a) The following records of the California Investment
Trust are confidential and shall not be disclosed to the public:
(1) Commercial or financial information of a customer of the
trust, whether obtained directly or indirectly, other than routine
credit inquiries concerning information that is required to be
disclosed in accordance with due legal process.
(2) Internal or interagency memoranda or letters that would not be
available by law to a party other than in litigation with the trust.
(3) Except as provided in Section 11759 or 11780, information that
is contained in, or related to a report of, an examination or
operating or condition reports prepared by, on behalf of or for the
use of a state or federal agency responsible for the regulation or
supervision of any trust activity, unless the state or federal agency
is required by law to make the report open to the public.
(b) As used in this section, "customer" means any person that has
transacted or is transacting business with, or has used or is using
the services of, the California Investment Trust, or for which the
trust has acted or is acting as a fiduciary with respect to trust
property.
SEC. 2. The Legislature finds and declares that Section 1 of this
act, which adds Section 11762 to the Government Code, imposes a
limitation on the public's right of access to the meetings of public
bodies or the writings of public officials and agencies within the
meaning of Section 3 of Article I of the California Constitution.
Pursuant to that constitutional provision, the Legislature makes the
following finding to demonstrate the interest protected by this
limitation and the need to protect that interest:
In order to protect the confidentiality of the internal records of
persons doing business with the California Investment Trust and to
ensure effective administration of the California Investment Trust,
it is necessary that certain records be exempt from disclosure.