Amended in Senate June 21, 2016

Amended in Assembly April 25, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2638

Introduced by Assembly Member Gatto

February 19, 2016

An act to amend Section 16429.2 begin delete of end delete begin insert of, and to add Article 12 (commencing with Section 16429.50) to Chapter 2 of Part 2 of Division 4 of Title 2 of, end insert the Government Code, relating to begin delete local end delete government finance.

LEGISLATIVE COUNSEL’S DIGEST

AB 2638, as amended, Gatto. begin delete Local Investment Advisory Board: members. end delete begin insert Government finance: investment. end insert

begin delete

Existing

end delete

begin insert (1) end insert begin insert   end insert begin insert Existing end insert law creates the Local Agency Investment Fund, a trust fund in the custody of the Treasurer, in which local governments and other specified governmental entities may deposit, for investment, moneys that are not required for immediate needs. Existing law authorizes the Treasurer, with the advice of the Local Investment Advisory Board, to invest the moneys in the fund. Existing law requires the board to be made up of 5 members, including the Treasurer or his or her representative, 2 members appointed by the Treasurer who are experienced in the field of investment, and 2 members appointed by the Treasurer who are treasurers, finance or fiscal officers, or business managers employed by a county, city or local district, or municipal corporation of this state. Existing law establishes that the term of office of each appointed member of the board is 2 years.

This bill would extend the term of each of the appointed members of the board to 3 years. The bill would also make several nonsubstantive changes.

begin insert

(2) Existing law creates the Pooled Money Investment Board and authorizes it to determine whether any money on deposit in the State Treasury, with specified exceptions, is not necessary for immediate use and to designate that money as “surplus money.” Existing law requires transfer of this surplus money to the Surplus Money Investment Fund and requires that the moneys be invested by the Treasurer in specified eligible investment vehicles.

end insert begin insert

Existing law creates the Local Agency Investment Fund, a trust fund in the custody of the Treasurer, in which local governments and other specified governmental entities may deposit, for investment, moneys that are not required for immediate needs. Existing law authorizes the Treasurer, with the advice of the Local Investment Advisory Board, to invest the moneys in the fund in specified securities that are eligible for the investment of surplus state funds.

end insert begin insert

This bill would create the Intermediate and Long Term Investment Fund to receive voluntary deposit of funds by a governmental entity so that those funds may benefit from the intermediate or long-term investments authorized by this bill. The bill would, in addition, authorize investment of moneys that are deposited in the Intermediate and Long Term Investment Fund in long-term corporate and government bonds, in gold, and in convertible securities.

end insert begin insert

This bill would establish the Long Term Investment Board. The board would consist of 5 members with the Treasurer as the chair. The Treasurer would select the remaining 4 members, based upon specified criteria, for 2-year terms. The board’s primary purpose would be to advise and assist the Treasurer in formulating the investment and reinvestment of moneys in the fund and the acquisition, retention, management, and disposition of investments of the fund. The bill would require the board to submit quarterly and annual reports regarding the performance of the investments in the fund to the Legislature and to the Department of Finance.

end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 16429.2 of the Government Code is
amended to read:

16429.2.  

There is created the Local Investment Advisory Board
consisting of five members. The chair shall be the Treasurer or his
or her designated representative. Two members who are qualified
by training and experience in the field of investment or finance,
shall be appointed by the Treasurer. Two members who are
treasurers, finance or fiscal officers, or business managers
employed by any county, city or local district, or municipal
corporation of the state, shall be appointed by the Treasurer.

The term of office of each appointed member of the board is
three years, but each appointed member serves at the pleasure of
the appointing authority. A vacancy in the appointed membership,
occurring other than by expiration of term, shall be filled in the
same manner as the original appointment, but for the unexpired
term only.

Members of the board who are not state officers or employees
shall not receive a salary, but shall be entitled to a per diem
allowance of fifty dollars ($50) for each day’s attendance at a
meeting of the board, not to exceed three hundred dollars ($300)
in any month. All members shall be entitled to reimbursement for
expenses incurred in the performance of their duties under this
part, including travel and other necessary expenses.

The board’s primary purpose shall be to advise and assist the
Treasurer in formulating the investment and reinvestment of
moneys in the Local Agency Investment Fund, and the acquisition,
retention, management, and disposition of investments of the fund.
The board, from time to time, shall review those policies and advise
therein as it considers necessary or desirable. The board shall
advise the Treasurer in the management of the fund and consult
the Treasurer on any matter relating to the investment and
reinvestment of moneys in the fund.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Article 12 (commencing with Section 16429.50) is
added to Chapter 2 of Part 2 of Division 4 of Title 2 of the end insert begin insert
Government Code end insert begin insert , to read: end insert

begin insert

 

Article begin insert 12. end insert   Intermediate and Long Term Investment Fund

 

begin insert 16429.50. end insert   

(a) The Intermediate and Long Term Investment
Fund is hereby created. The Treasurer shall administer the fund
and shall maintain a separate account within the fund for each
governmental unit having deposits in this fund.

(b) The purpose of the fund is to permit voluntary deposit of
funds by a governmental entity where those funds may benefit from
the intermediate or long-term investments authorized by this
article.

(c) The moneys deposited into the Intermediate and Long Term
Investment Fund shall be subject to the requirements of Section
16430, except that the moneys may also be invested in corporate
bonds with a maturity of up to three years, in government bonds
with a maturity of up to 30 years, in physical gold, and in
convertible securities.

(d)  The Intermediate and Long Term Investment Advisory Board
shall recommend to the Treasurer the moneys in the Surplus Money
Investment Fund or the Local Agency Investment Fund which
qualify to participate in the Intermediate and Long Term
Investment Fund.

(e) The Treasurer may refuse to accept deposits into the fund
if, in the judgment of the Treasurer, the deposit would adversely
affect the state’s portfolio.

(f) Money in the fund shall be invested to achieve the objective
of the fund, which is to realize the maximum return consistent with
safe and prudent management.

(g) All instruments of title of all investments of the fund shall
remain in the Treasurer’s vault or be held in safekeeping under
control of the Treasurer in any federal reserve bank, or any branch
thereof, or the Federal Home Loan Bank of San Francisco, with
any trust company, or the trust department of any state or national
bank.

(h) Immediately at the conclusion of each calendar quarter, all
interest earned and other increment derived from investments shall
be distributed by the Controller to the contributing governmental
units or trustees or fiscal agents, nonprofit corporations, and
quasi-governmental agencies in amounts directly proportionate
to the respective amounts deposited in the Intermediate and Long
Term Investment Fund and the length of time the amounts remained
therein. An amount equal to the reasonable costs incurred in
carrying out the provisions of this section, not to exceed a
maximum of 5 percent of the earnings of this fund and not to exceed
the amount appropriated in the annual Budget Act for this function,
shall be deducted from the earnings prior to distribution. However,
if the 13-week Daily Treasury Bill Rate, as published by the United
States Department of the Treasury, on the last day of the state’s
fiscal year is below 1 percent, then the above-noted reasonable
costs shall not exceed a maximum of 8 percent of the earnings of
this fund for the subsequent fiscal year, shall not exceed the amount
appropriated in the annual Budget Act for this function, and shall
be deducted from the earnings prior to distribution. The amount
of the deduction shall be credited as reimbursements to the state
agencies, including the Treasurer, the Controller, and the
Department of Finance, having incurred costs in carrying out the
provisions of this article.

begin insert 16429.52. end insert   

(a) Moneys placed with the Treasurer for deposit
in the Intermediate and Long Term Investment Fund from the Local
Agency Investment Fund shall be held in trust. Those funds shall
not be subject to either of the following:

(1) Transfer or loan pursuant to Section 16310, 16312, or
16313.

(2) Impoundment or seizure by any state official or state agency.

(b) (1) The right of a city, county, city and county, special
district, nonprofit corporation, or qualified quasi-governmental
agency to withdraw its deposited moneys from the Intermediate
and Long Term Investment Fund, upon demand, shall not be
altered, impaired, or denied, in any way, by any state official or
state agency based upon the state’s failure to adopt a State Budget
by July 1, of each new fiscal year.

(2) Notwithstanding paragraph (1), if an agency prematurely
withdraws moneys deposited in a medium- or long-term investment,
the agency shall pay its fair share of any penalty imposed, as
determined by the Treasurer.

begin insert 16429.54. end insert   

(a) The Intermediate and Long Term Investment
Advisory Board is hereby established, consisting of five members.
The chairperson shall be the Treasurer or his or her designated
representative. Two members who are qualified by training and
experience in the field of investing and finance shall be appointed
by the Treasurer. Two members who are treasurers, finance or
fiscal officers, or business managers, employed by any county,
city, or local district or municipal corporation of this state, shall
be appointed by the Treasurer. No member of either the Local
Investment Advisory Board or the Pooled Money Investment Board
is eligible to be selected by the Treasurer for the Intermediate and
Long Term Investment Board.

(b) The term of office of each appointed member of the board
is two years, but each appointed member serves at the pleasure of
the appointing authority. A vacancy in the appointed membership,
occurring other than by expiration of term, shall be filled in the
same manner as the original appointment, but for the unexpired
term only.

(c) Members of the board who are not state officers or
employees shall not receive a salary, but shall be entitled to a per
diem allowance of fifty dollars ($50) for each day’s attendance at
a meeting of the board, not to exceed three hundred dollars ($300)
in any month. All members shall be entitled to reimbursement for
expenses incurred in the performance of their duties under this
part, including travel and other necessary expenses.

(d) The board’s primary purpose shall be to advise and assist
the Treasurer in formulating the investment and reinvestment of
moneys in the Intermediate and Long Term Investment Fund and
the acquisition, retention, management, and disposition of
investments of the fund. The board, from time to time, shall review
those policies and advise therein as it considers necessary or
desirable.

(e) The board shall distribute investment performance reports
quarterly and distribute an annual report to the Legislature, in
compliance with Section 9795 of the Government Code, and to the
Department of Finance. The investment performance reports shall
include investment returns, comparisons to benchmarks, holdings,
market values, and fees.

end insert