BILL ANALYSIS                                                                                                                                                                                                    Ó


          |SENATE RULES COMMITTEE            |                       AB 1933|
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          Bill No:  AB 1933
          Author:   Levine (D)
          Amended:  4/24/14 in Assembly
          Vote:     21

           SENATE GOVERNANCE & FINANCE COMMITTEE  :  7-0, 6/11/14
          AYES:  Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters

           ASSEMBLY FLOOR  :  75-0, 5/1/14 - See last page for vote

           SUBJECT  :    Local government:  investments

           SOURCE  :     California Association of County Treasurers and Tax  

           DIGEST  :    This bill expands the list of financial instrument in  
          which local agencies may invest surplus funds to include United  
          States dollar denominated senior unsecured unsubordinated  
          obligations issued or unconditionally guaranteed by the  
          International Bank for Reconstruction and Development (IBRD),  
          International Finance Corporation (IFC), or Inter-American  
          Development Bank (IADB).  

           ANALYSIS  :    Since 1913, existing law has authorized local  
          officials to invest a portion of their temporarily idle funds in  
          a variety of financial instruments.  Existing law originally  
          limited these local investments to government bonds, but over  
          time legislators expanded the list to include numerous  
          additional financial instruments.



                                                                    AB 1933

          Multilateral lending institutions - also known as  
          "supranationals" - provide development financing, advisory  
          services and other financial services to their member countries  
          to promote improved living standards through sustainable  
          economic growth.  Three of these supranationals are  
          headquartered in the United States and issue highly-rated bonds  
          that are denominated in U.S. currency.

          This bill expands the list of financial instrument in which  
          local agencies may invest surplus funds to include United States  
          dollar denominated senior unsecured unsubordinated obligations  
          issued or unconditionally guaranteed by the IBRD, IFC, or IADB.   
          This bill specifies that those investments must:

           Have a maximum remaining maturity of five years or less, 

           Be eligible for purchase and sale within the United States,

           Be rated "AA" or better by a nationally recognized statistical  
            rating organization, and

           Not exceed 30% of the agency's surplus funds that may be  
            invested pursuant to existing law.


           In response to a recent decrease in the supply of debt issued by  
          government sponsored enterprises, like mortgage-related  
          securities issued by Fannie Mae and Freddie Mac, local  
          investment officers are seeking other highly-rated, medium-term  
          financial instruments in which to invest public funds.  Existing  
          law already allows state surplus funds and state and local  
          pension funds to be invested in supranational organizations'  
          bonds.  The State Treasurer's Pooled Money Investment Account,  
          which includes funds from some local agencies, invests a portion  
          of its portfolio in debt instruments issued by supranationals.   
          Allowing local agencies' surplus funds to be invested directly  
          in debt issued by three supranational finance organizations will  
          give local finance officers access to a wider pool of secure  
          investment options that provide better returns than U.S.   
          Treasury securities and will help to diversify local investment  


                                                                    AB 1933

           Prior Legislation
          SB 194 (Senate Governance and Finance Committee, Chapter 382,  
          Statutes of 2011) added the federally chartered branches of  
          foreign banks to the list of financial institutions whose  
          certificates of deposit are eligible for local agencies'  

          AB 1745 (Assembly Revenue and Taxation Committee, Chapter 340,  
          Statutes of 2007) added registered treasury notes or bonds,  
          including bonds payable solely out of the revenues from a  
          revenue-producing property owned by a state, department, board,  
          agency or authority. 

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

           SUPPORT  :   (Verified  6/13/14)

          California Association of County Treasurers and Tax Collectors  

           ARGUMENTS IN SUPPORT  :    According to the author's office, "The  
          Great Recession has changed the investment landscape.  The  
          diversity of triple-A bond rated investments has shrunk  
          dramatically.  As a result local agency investment officers are  
          in great need of additional investment options that provide for  
          safe returns and help diversify the investment portfolio.

          "AB 1933 would extend the same authority afforded to state and  
          local public retirement systems to local agencies by clarifying  
          that investment in supranationals is a permissible investment."

           ASSEMBLY FLOOR  :  75-0, 5/1/14
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Buchanan, Ian Calderon,  
            Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh,  
            Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,  
            Gray, Grove, Hagman, Harkey, Roger Hernández, Holden, Jones,  
            Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,  
            Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande,  
            Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk,  
            Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Skinner, Stone,  


                                                                    AB 1933

            Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,  
            Yamada, John A. Pérez
          NO VOTE RECORDED:  Brown, Hall, Mansoor, Salas, Vacancy

          AB:e  6/13/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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