BILL NUMBER: AB 283	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Dababneh

                        FEBRUARY 11, 2015

   An act to amend and repeal Sections 53601.8 and 53635.8 of the
Government Code, relating to local government.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 283, as introduced, Dababneh. Financial affairs.
   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.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 53601.8 of the Government Code, as amended by
Section 1 of Chapter 228 of the Statutes of 2013, is amended to read:

   53601.8.  Notwithstanding Section 53601 or any other provision of
this code, a local agency that has the authority under law to invest
funds, at its discretion, may 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 deposits. The following conditions shall
apply:
   (a) The local agency shall choose a nationally or state chartered
commercial bank, savings bank, savings and loan association, or
credit union in this state to invest the funds, which shall be known
as the "selected" depository institution.
   (b) The selected depository institution may 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 are within
the network used by the private sector entity for this purpose.
   (c) Any private sector entity used by a selected depository
institution to help place its local agency deposits shall maintain
policies and procedures requiring both of the following:
   (1) The full amount of each deposit placed pursuant to subdivision
(b) and the interest that may accrue on each such deposit shall at
all times be insured by the Federal Deposit Insurance Corporation or
the National Credit Union Administration.
   (2) Every depository institution where funds are placed shall be
capitalized at a level that is sufficient, and be otherwise eligible,
to receive such deposits pursuant to regulations of the Federal
Deposit Insurance Corporation or the National Credit Union
Administration, as applicable.
   (d) The selected depository institution shall serve as a custodian
for each such deposit.
   (e) On the same date that the local agency's funds are placed
pursuant to subdivision (b) by the private sector entity, the
selected depository institution shall 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 that the local
agency initially deposited through the selected depository
institution pursuant to subdivision (b).
   (f)  Notwithstanding subdivisions (a) to (e), inclusive, a credit
union shall not act as a selected depository institution under this
section or Section 53635.8 unless both of the following conditions
are satisfied:
   (1) The credit union offers federal depository insurance through
the National Credit Union Administration.
   (2) The credit union is in possession of written guidance or other
written communication from the National Credit Union Administration
authorizing participation of federally insured credit unions in one
or more deposit placement services and affirming that the moneys held
by those credit unions while participating in a deposit placement
service will at all times be insured by the federal government.
   (g) It is the intent of the Legislature that this section shall
not restrict competition among private sector entities that provide
placement services pursuant to this section.
   (h) The deposits placed pursuant to this section and Section
53635.8 shall not, in total, exceed 30 percent of the agency's funds
that may be invested for this purpose. 
   (i) Purchases of certificates of deposit pursuant to this section,
Section 53635.8, and subdivision (i) of Section 53601 shall not, in
total, exceed 30 percent of the agency's funds that may be invested
for this purpose.  
   (j) Excluding purchases of certificates of deposit pursuant to
this section, no more than 10 percent of the agency's funds that may
be invested for this purpose may be submitted, pursuant to
subdivision (b), to any one private sector entity that assists in the
placement of deposits with one or more commercial banks, savings
banks, savings and loan associations, or credit unions that are
located in the United States, for the local agency's account.
 
   (k) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date. 
  SEC. 2.  Section 53601.8 of the Government Code, as added by
Section 2 of Chapter 228 of the Statutes of 2013, is repealed.

   53601.8.  Notwithstanding Section 53601 or any other provision of
this code, a local agency that has the authority under law to invest
funds may, at its discretion, invest a portion of its surplus funds
in certificates of deposit at a commercial bank, savings bank,
savings and loan association, or credit union that uses a private
sector entity that assists in the placement of certificates of
deposit, provided that the purchases of certificates of deposit
pursuant to this section, Section 53635.8, and subdivision (i) of
Section 53601 do not, in total, exceed 30 percent of the agency's
funds that may be invested for this purpose. The following conditions
shall apply:
   (a) The local agency shall choose a nationally or state-chartered
commercial bank, savings bank, savings and loan association, or
credit union in this state to invest the funds, which shall be known
as the "selected" depository institution.
   (b) The selected depository institution may submit the funds to a
private sector entity that assists in the placement of certificates
of deposit with one or more commercial banks, savings banks, savings
and loan associations, or credit unions that are located in the
United States for the local agency's account.
   (c) The full amount of the principal and the interest that may be
accrued during the maximum term of each certificate of deposit shall
at all times be insured by the Federal Deposit Insurance Corporation
or the National Credit Union Administration.
   (d) The selected depository institution shall serve as a custodian
for each certificate of deposit that is issued with the placement
service for the local agency's account.
   (e) At the same time the local agency's funds are deposited and
the certificates of deposit are issued, the selected depository
institution shall receive an amount of deposits from other commercial
banks, savings banks, savings and loan associations, or credit
unions that, in total, are equal to, or greater than, the full amount
of the principal that the local agency initially deposited through
the selected depository institution for investment.
   (f) Notwithstanding subdivisions (a) to (e), inclusive, no credit
union may act as a selected depository institution under this section
or Section 53635.8 unless both of the following conditions are
satisfied:
   (1) The credit union offers federal depository insurance through
the National Credit Union Administration.
   (2) The credit union is in possession of written guidance or other
written communication from the National Credit Union Administration
authorizing participation of federally insured credit unions in one
or more certificate of deposit placement services and affirming that
the moneys held by those credit unions while participating in a
deposit placement service will at all times be insured by the federal
government.
   (g) It is the intent of the Legislature that this section shall
not restrict competition among private sector entities that provide
placement services pursuant to this section.
   (h) This section shall become operative on January 1, 2017.

  SEC. 3.  Section 53635.8 of the Government Code, as amended by
Section 3 of Chapter 228 of the Statutes of 2013, is amended to read:

   53635.8.  Notwithstanding Section 53601 or any other provision of
this code, a local agency that has the authority under law to invest
funds, at its discretion, may 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 deposits. The following conditions shall
apply:
   (a) The local agency shall choose a nationally or state-chartered
commercial bank, savings bank, savings and loan association, or
credit union in this state to invest the funds, which shall be known
as the "selected" depository institution.
   (b) The selected depository institution may 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 are within
the network used by the private sector entity for this purpose.
   (c) Any private sector entity used by a selected depository
institution to help place its local agency deposits shall maintain
policies and procedures requiring both of the following:
   (1) The full amount of each deposit placed pursuant to subdivision
(b) and the interest that may accrue on each such deposit shall at
all times be insured by the Federal Deposit Insurance Corporation or
the National Credit Union Administration.
   (2) Every depository institution where funds are placed shall be
capitalized at a level that is sufficient, and be otherwise eligible,
to receive such deposits pursuant to regulations of the Federal
Deposit Insurance Corporation or the National Credit Union
Administration, as applicable.
   (d) The selected depository institution shall serve as a custodian
for each such deposit.
   (e) On the same date that the local agency's funds are placed
pursuant to subdivision (b) by the private sector entity, the
selected depository institution shall 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 that the local
agency initially deposited through the selected depository
institution for investment pursuant to subdivision (b).
   (f) Notwithstanding subdivisions (a) to (e), inclusive, a credit
union shall not act as a selected depository institution under this
section or Section 53601.8 unless both of the following conditions
are satisfied:
   (1) The credit union offers federal depository insurance through
the National Credit Union Administration.
   (2) The credit union is in possession of written guidance or other
written communication from the National Credit Union Administration
authorizing participation of federally insured credit unions in one
or more deposit placement services and affirming that the moneys held
by those credit unions while participating in a deposit placement
service will at all times be insured by the federal government.
   (g) It is the intent of the Legislature that this section shall
not restrict competition among private sector entities that provide
placement services pursuant to this section.
   (h) The deposits placed pursuant to this section and Section
53601.8 shall not, in total, exceed 30 percent of the agency's funds
that may be invested for this purpose. 
   (i) Purchases of certificates of deposit pursuant to this section,
Section 53601.8, and subdivision (i) of Section 53601 shall not, in
total, exceed 30 percent of the agency's funds that may be invested
for this purpose.  
   (j) Excluding purchases of certificates of deposit pursuant to
this section, no more than 10 percent of the agency's funds that may
be invested for this purpose may be submitted, pursuant to
subdivision (b), to any one private sector entity that assists in the
placement of deposits with one or more commercial banks, savings
banks, savings and loan associations, or credit unions that are
located in the United States, for the local agency's account.
 
   (k) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date. 
  SEC. 4.  Section 53635.8 of the Government Code, as added by
Section 4 of Chapter 228 of the Statutes of 2013, is repealed.

   53635.8.  Notwithstanding Section 53601 or any other provision of
this code, a local agency that has the authority under law to invest
funds, at its discretion, may invest a portion of its surplus funds
in certificates of deposit at a commercial bank, savings bank,
savings and loan association, or credit union that uses a private
sector entity that assists in the placement of certificates of
deposit, provided that the purchases of certificates of deposit
pursuant to this section, Section 53601.8, and subdivision (i) of
Section 53601 do not, in total, exceed 30 percent of the agency's
funds that may be invested for this purpose. The following conditions
shall apply:
   (a) The local agency shall choose a nationally or state-chartered
commercial bank, savings bank, savings and loan association, or
credit union in this state to invest the funds, which shall be known
as the "selected" depository institution.
   (b) The selected depository institution may submit the funds to a
private sector entity that assists in the placement of certificates
of deposit with one or more commercial banks, savings banks, savings
and loan associations, or credit unions that are located in the
United States, for the local agency's account.
   (c) The full amount of the principal and the interest that may be
accrued during the maximum term of each certificate of deposit shall
at all times be insured by the Federal Deposit Insurance Corporation
or the National Credit Union Administration.
   (d) The selected depository institution shall serve as a custodian
for each certificate of deposit that is issued with the placement
service for the local agency's account.
   (e) At the same time the local agency's funds are deposited and
the certificates of deposit are issued, the selected depository
institution shall receive an amount of deposits from other commercial
banks, savings banks, savings and loan associations, or credit
unions that, in total, are equal to, or greater than, the full amount
of the principal that the local agency initially deposited through
the selected depository institution for investment.
   (f) Notwithstanding subdivisions (a) to (e), inclusive, a credit
union shall not act as a selected depository institution under this
section or Section 53601.8 unless both of the following conditions
are satisfied:
   (1) The credit union offers federal depository insurance through
the National Credit Union Administration.
   (2) The credit union is in possession of written guidance or other
written communication from the National Credit Union Administration
authorizing participation of federally insured credit unions in one
or more certificate of deposit placement services and affirming that
the moneys held by those credit unions while participating in a
deposit placement service will at all times be insured by the federal
government.
   (g) It is the intent of the Legislature that this section shall
not restrict competition among private sector entities that provide
placement services pursuant to this section.
   (h) This section shall become operative on January 1, 2017.