5920-5925
GOVERNMENT CODE
SECTION 5920-5925
5920. The Legislature finds and declares that the incurring or
carrying of obligations and making and managing of investments by
state and local governments involves a variety of interest rates,
payment, and other risks, that a number of financial instruments are
available to offset, hedge, or reduce, and improve net costs, and
that many state agencies and local governments lack express statutory
authority to take advantage of those instruments.
5921. As used in this chapter, the following definitions apply,
unless the context otherwise indicates or requires another or
different meaning or intent:
(a) "Bonds" mean bonds, notes, bond anticipation notes, commercial
paper, or other evidences of indebtedness, or reimbursement warrants
or refunding warrants, or lease, installment purchase, or other
agreements or certificates of participation therein.
(b) "State" means the state or any department, agency, board,
commission, or authority of the state.
(c) "Local government" means any city, city and county, county,
public district, public corporation, authority, agency, board,
commission, or other public entity.
5921.5. For purposes of this chapter, in addition to any other
authorization provided by law, the Treasurer may enter into and
manage on behalf of the state any contracts described in Section 5922
with respect to any state bonds for which the Treasurer acts as the
agent for sale pursuant to Chapter 9 (commencing with Section 5700).
5922. Notwithstanding any other provision of law, all of the
following apply:
(a) (1) In connection with, or incidental to, the issuance or
carrying of bonds, or acquisition or carrying of any investment or
program of investment, the state or any local government may enter
into any contracts that the state or local government determines to
be necessary or appropriate to place the obligation or investment of
the state or local government, as represented by the bonds,
investment or program of investment and the contract or contracts, in
whole or in part, on the interest rate, currency, cashflow, or other
basis desired by the state or local government, including, without
limitation, contracts commonly known as interest rate swap
agreements, currency swap agreements, forward payment conversion
agreements, futures, or contracts providing for payments based on
levels of, or changes in, interest rates, currency exchange rates,
stock or other indices, or contracts to exchange cashflows or a
series of payments, or contracts, including, without limitation,
interest rate floors or caps, options, puts or calls to hedge
payment, currency, rate, spread, or similar exposure. These contracts
or arrangements may also be entered into by the state or by local
governments in connection with, or incidental to, entering into or
maintaining any agreement that secures bonds, including bonds issued
by private entities. These contracts and arrangements shall be
entered into with the parties, selected by the means, and contain the
payment, security, default, remedy, and other terms and conditions,
determined by the state or the local government, after giving due
consideration for the creditworthiness of the counterparties, where
applicable, including any rating by a nationally recognized rating
agency or any other criteria as may be appropriate.
(2) No local government shall enter into any of the contracts or
arrangements pursuant to this subdivision, unless its governing body
first determines that the contract or arrangement or program of
contracts is designed to reduce the amount or duration of payment,
currency, rate, spread, or similar risk or result in a lower cost of
borrowing when used in combination with the issuance of bonds or
enhance the relationship between risk and return with respect to the
investment or program of investment in connection with, or incident
to, the contract or arrangement which is to be entered into.
(b) Bonds issued by the state or by a local government may be
payable in accordance with their terms, in whole or in part, in
currency other than lawful money of the United States of America,
provided that the state or the local government enters into a
currency swap or similar agreement for payments in lawful money of
the United States of America, which covers the entire amount of the
debt service payment obligation of the state or the local government
with respect to the bonds payable in other currency, and provided
further that if the term of that agreement is less than the term of
the bonds, the state or the local government shall covenant to enter
into additional agreements as may be necessary to cover the entire
amount of the debt service payment obligation. An issuer shall
include in its written notice to the California Debt Advisory
Commission pursuant to subdivision (g) of Section 8855 a statement of
its intent to issue bonds payable in a currency other than lawful
money of the United States of America.
(c) In connection with, or incidental to, the issuance or carrying
of bonds, or entering into any of the contracts or arrangements
referred to in subdivision (a), the state or a local government may
enter into credit enhancement or liquidity agreements, with payment,
interest rate, currency, security, default, remedy, and other terms
and conditions as the state or the local government determines.
(d) Proceeds of bonds and any moneys set aside and pledged to
secure payment of the bonds or any of the contracts entered into
pursuant to this section, may be invested in securities or
obligations described in the ordinance, resolution, indenture,
agreement, or other instrument providing for the issuance of the
bonds or the contract and may be pledged to and used to service any
of the contracts or agreements entered into pursuant to this section.
5923. (a) To the extent that this chapter is inconsistent with any
other general statute or special act or parts thereof, now or
hereafter enacted, this chapter is controlling.
(b) This chapter shall be liberally construed to effect its
purpose.
5924. (a) (1) Notwithstanding Section 13340, there is hereby
continuously appropriated without regard to fiscal years, from the
General Fund in the State Treasury for the purpose of this chapter,
an amount that will equal the sum annually as will be necessary to
pay all obligations, including principal, interest, fees, costs,
indemnities, and all other amounts incurred by the state under or in
connection with any credit enhancement or liquidity agreement, as
specified in paragraph (2), that is entered into by the state
pursuant to this chapter for bonds payable pursuant to an
appropriation from the General Fund.
(2) A credit enhancement or liquidity agreement subject to this
section includes a credit enhancement or liquidity agreement that is
in the form of a letter of credit, standby purchase agreement,
reimbursement agreement, liquidity facility, or other similar
arrangement.
(b) (1) If the agent for sale determines that the credit
enhancement or liquidity agreement is expected to result in a lower
cost of the borrowing for the bonds to which the credit enhancement
or liquidity agreement pertains, the state may incur fees, costs, and
other similar expenses under or in connection with any credit
enhancement or liquidity agreement entered into by the state pursuant
to this chapter.
(2) The amount appropriated pursuant to subdivision (a) for fees,
costs, and other similar expenses incurred in connection with any
credit enhancement or liquidity agreement, when expressed as a
percentage of the original principal amount of the bonds to which the
credit enhancement or liquidity agreement pertains, may not exceed 3
percent.
(3) The amount appropriated pursuant to subdivision (a) for
interest incurred in connection with any credit enhancement or
liquidity agreement, when expressed as a percentage of the
outstanding principal amount of the bonds to which the credit
enhancement or liquidity agreement pertains, may not exceed the
interest rate percentage set forth in subdivision (d) of Section
16731.
(c) This section shall become inoperative on June 30, 2013, and,
as of January 1, 2014, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2014, deletes or
extends the dates on which it becomes inoperative and is repealed.
5924. (a) (1) Notwithstanding Section 13340, there is hereby
continuously appropriated without regard to fiscal years, from the
General Fund in the State Treasury for the purpose of this chapter,
an amount that will equal the sum annually as will be necessary to
pay all obligations, including principal, interest, fees, costs,
indemnities, and all other amounts incurred by the state under or in
connection with any credit enhancement or liquidity agreement, as
specified in paragraph (2), that is entered into by the state
pursuant to this chapter for bonds payable pursuant to an
appropriation from the General Fund.
(2) A credit enhancement or liquidity agreement subject to this
section includes a credit enhancement or liquidity agreement that is
in the form of a letter of credit, standby purchase agreement,
reimbursement agreement, liquidity facility, or other similar
arrangement.
(b) (1) If the agent for sale determines that the credit
enhancement or liquidity agreement is expected to result in a lower
cost of the borrowing for the bonds to which the credit enhancement
or liquidity agreement pertains, the state may incur fees, costs, and
other similar expenses under or in connection with any credit
enhancement or liquidity agreement entered into by the state pursuant
to this chapter.
(2) The amount appropriated pursuant to subdivision (a) for fees,
costs, and other similar expenses incurred in connection with any
credit enhancement or liquidity agreement, when expressed as a
percentage of the original principal amount of the bonds to which the
credit enhancement or liquidity agreement pertains, may not exceed
the percentage set forth in paragraph (1) of subdivision (g) of
Section 147 of Title 26 of the United States Code enacted as of
January 1, 2003.
(3) The amount appropriated pursuant to subdivision (a) for
interest incurred in connection with any credit enhancement or
liquidity agreement, when expressed as a percentage of the
outstanding principal amount of the bonds to which the credit
enhancement or liquidity agreement pertains, may not exceed the
interest rate percentage set forth in subdivision (d) of Section
16731.
(c) This section shall become operative June 30, 2013.
5924. (a) (1) Notwithstanding Section 13340, there is hereby
continuously appropriated without regard to fiscal years, from the
General Fund in the State Treasury for the purpose of this chapter,
an amount that will equal the sum annually as will be necessary to
pay all obligations, including principal, interest, fees, costs,
indemnities, and all other amounts incurred by the state under or in
connection with any credit enhancement or liquidity agreement, as
specified in paragraph (2), that is entered into by the state
pursuant to this chapter for bonds payable pursuant to an
appropriation from the General Fund.
(2) A credit enhancement or liquidity agreement subject to this
section includes a credit enhancement or liquidity agreement that is
in the form of a letter of credit, standby purchase agreement,
reimbursement agreement, liquidity facility, or other similar
arrangement.
(b) (1) If the agent for sale determines that the credit
enhancement or liquidity agreement is expected to result in a lower
cost of the borrowing for the bonds to which the credit enhancement
or liquidity agreement pertains, the state may incur fees, costs, and
other similar expenses under or in connection with any credit
enhancement or liquidity agreement entered into by the state pursuant
to this chapter.
(2) The amount appropriated pursuant to subdivision (a) for fees,
costs, and other similar expenses incurred in connection with any
credit enhancement or liquidity agreement, when expressed as a
percentage of the original principal amount of the bonds to which the
credit enhancement or liquidity agreement pertains, may not exceed
the percentage set forth in paragraph (1) of subdivision (g) of
Section 147 of Title 26 of the United States Code enacted as of
January 1, 2003.
(3) The amount appropriated pursuant to subdivision (a) for
interest incurred in connection with any credit enhancement or
liquidity agreement, when expressed as a percentage of the
outstanding principal amount of the bonds to which the credit
enhancement or liquidity agreement pertains, may not exceed the
interest rate percentage set forth in subdivision (d) of Section
16731.
(c) This section shall become operative June 30, 2013.
5925. The purchase or other acquisition of bonds by or on behalf of
the state or local government that issued the bonds does not cancel,
extinguish, or otherwise affect the bonds and the bonds shall be
treated as outstanding bonds for all purposes except to the extent
otherwise determined by the issuer or otherwise provided in the
constituent instruments defining the rights of the holders of the
bonds.