SB 1438 (2025) — Local government: investments and deposits.

AMENDED IN ASSEMBLY JUNE 1, 2026

AMENDED IN SENATE APRIL 13, 2026

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

SENATE BILLNo. 1438

Introduced by Committee on Local Government (Senators Durazo (Chair), Arreguín, Ashby, Cervantes, Choi, Laird, and Seyarto)

March 11, 2026

An act to amend Sections 41015, 41033, and 42651 of the Education Code, to amend Sections 6509.5, 6509.7, 6558, 16431, 27000.1, 27000.3, 53600, 53620, 53630, 53631, 53635.2, 53641, 53651, 53682, 53684, 53844, 57603, 59283, 67476, and 67480 of, to amend and renumber Sections 53600.5, 53600.6, 53601, and 53601.8 of, and to repeal Sections 53600.3, 53601, 53601.1, 53601.2, 53601.5, 53601.6, 53602, 53603, 53604, 53605, 53606, 53607, 53608, 53609, 53610, 53630.5, and 53635 of, the Government Code, to amend Sections 1702 and 6077.6 of the Harbors and Navigation Code, to amend Sections 9066 and 9067 of the Health and Safety Code, to amend Sections 12368, 28818, and ~~107105~~ 107015 of the Public Utilities Code, and to amend Section 100.06 of the Revenue and Taxation Code, relating to local government.

Vote: majority Appropriation: no Fiscal committee: no Local program: no

LEGISLATIVE COUNSEL’S DIGEST

Existing law regulates the investment of public funds by local agencies, as defined. Existing law authorizes the legislative body of a local agency, as specified, that has money in a sinking fund or in its treasury not required for immediate needs to invest the money as it deems wise or expedient in certain securities and financial instruments. Among other things, existing law authorizes investment in commercial paper issued by entities meeting one of 2 sets of specified requirements and in United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by specified development banks if certain conditions are met. Existing law prohibits investment in securities that could result in zero-interest accrual unless issued by the United States government in the event, and for the duration, of a period of negative market interest rates. Existing law removes that exception on January 1, 2031.

This bill would revise and recast the provisions regulating investment of public funds by local agencies, including, among other things, additionally authorizing investment in commercial paper issued by an entity organized as a federally or state-chartered bank or a federally or state-licensed branch of a foreign bank and in senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the Inter-American Investment Corporation. The bill would remove the January 1, 2031, sunset date for investments in United States-issued securities in a period of negative market interest rates, thereby extending that exception indefinitely.

Existing law imposes various limits on local government investment in commercial paper. Specifically, existing law imposes a separate maximum percent investment limit for local agencies that are a county, city and county, the City of Los Angeles, or other local agency that pools investments with other local agencies that do not share the same governing body. Existing law sets those limits at 40% of total investments, with no more than 10% in commercial paper from any one issuer. For the remaining local agencies, and until January 1, 2031, existing law imposes a maximum of 25% for local agencies with less than $100,000,000 in total investment assets and at 40% for those agencies with $100,000,000 or more in investment assets. Beginning January 1, 2031, the limit is reduced to 25% for those local agencies with $100,000,000 or more in investment assets.

This bill would revise and recast these provisions and would remove the January 1, 2031, reduction in the maximum investment for the above-described local agencies with $100,000,000 or more in investment assets.

Existing law makes the treasurer of a local agency responsible for the safekeeping of money and authorizes them to enter into a contract with a depository, as specified. Existing law requires the depository and the depository agent to secure the deposits in eligible securities. Existing law defines eligible securities for this purpose to include, among other things, letters of credit issued by the Federal Home Loan Bank of San Francisco, as specified.

This bill would make various nonsubstantive changes to those provisions and, for a county, city and county, or local agency that pools money in deposits or investments with other agencies, would additionally authorize an eligible bank headquartered outside of the state to submit letters of credit drawn on its regional federal home loan bank.

This bill would make additional nonsubstantive changes, including, among other things, to update cross-references.

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

SECTION 1.

Section 41015 of the Education Code is amended to read:

41015.

The governing board of any school district or any county office of education that has funds in a special reserve fund of the district or county office of education or any surplus moneys not required for the immediate necessities of the district or county office of education, is hereby authorized to invest all or any part of the funds in any of the investments specified in Section 16430 or 53603 of the Government Code.

SEC. 2.

Section 41033 of the Education Code is amended to read:

41033.

The governing board of a school district which has placed funds in the Foundation Fund is hereby authorized to invest all or any part of those funds as it deems wise and expedient as follows:

(a) In the securities, warrants, or instruments of indebtedness specified by Section 53603 of the Government Code.

(b) In corporate securities other than corporate shares, provided that the amount of investment under this subdivision shall not exceed 50 percent of the amount invested under subdivision (a).

Any security, warrant, or instrument of indebtedness purchased pursuant to this section may be sold and the proceeds reinvested in similar securities, warrants, or instruments, or placed in the Foundation Fund.

SEC. 3.

Section 42651 of the Education Code is amended to read:

42651.

(a) The governing board of a school district may authorize a bank, savings and loan association, or credit union in which school district deferred compensation funds are invested pursuant to Section 53602 of the Government Code, to disburse benefits to eligible school district employees or retired employees, or their beneficiaries, provided the following conditions are met:

(1) No payment shall be made to any person by the bank, savings and loan association, or credit union unless authorized in writing by the school district.

(2) Written authorization from a school district to a bank, savings and loan association, or credit union to make a payment shall include the name of each person to receive payment and the amount each person is to receive.

(3) The written authorization shall be signed by a majority of the members of the governing board of the district or by a person or persons authorized by the governing board to sign the authorization, so long as such person or persons is an officer or an employee of the district.

(b) The bank, savings and loan association, or credit union authorized to disburse funds pursuant to this section shall be considered an agent of the school district for the purposes of this section.

SEC. 4.

Section 6509.5 of the Government Code is amended to read:

6509.5.

Any separate agency or entity created pursuant to this chapter shall have the power to invest any money in the treasury pursuant to Section 6505.5 that is not required for the immediate necessities of the agency or entity, as the agency or entity determines is advisable, in the same manner and upon the same conditions as local agencies pursuant to Section 53603.

If a nonprofit corporation is designated by the agreement to administer or execute the agreement for the parties to the agreement, it shall invest any moneys held for disbursement on behalf of the parties in the same manner and upon the same conditions as local agencies pursuant to Section 53603.

SEC. 5.

Section 6509.7 of the Government Code is amended to read:

6509.7.

(a) Notwithstanding any other provision of law, two or more public agencies that have the authority to invest funds in their treasuries may, by agreement, jointly exercise that common power. Funds invested pursuant to an agreement entered into under this section may be invested in securities and obligations as described by subdivision (m) of Section 53603. A joint powers authority formed pursuant to this section may issue shares of beneficial interest to participating public agencies. Each share shall represent an equal proportionate interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section, the joint powers authority issuing the shares of beneficial interest shall have retained an investment adviser that meets all of the following criteria:

(1) The adviser is registered or exempt from registration with the Securities and Exchange Commission.

(2) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (l), inclusive, and subdivisions (n) to (p), inclusive, of Section 53603.

(3) The adviser has assets under management in excess of five hundred million dollars ($500,000,000).

(b) As used in this section, “public agency” includes a nonprofit corporation whose membership is confined to public agencies or public officials, in addition to those agencies listed in Section 6500.

(c) A joint powers authority formed pursuant to this section is authorized to establish the terms and conditions pursuant to which agencies may participate and invest in pool shares. Consistent with its status as a public agency as provided under Section 6500, a federally recognized Indian tribe is eligible to participate in a joint powers authority formed under this section or otherwise invest in pool shares consistent with the terms and conditions established by the joint powers authority.

SEC. 6.

Section 6558 of the Government Code is amended to read:

6558.

The indenture may include covenants or other provisions, other than or in lieu of the provisions required by Article 1 (commencing with Section 6500) of this chapter, relating to the collection, deposit and safekeeping of the revenues, the permissible uses thereof, the special fund or funds to be kept for the payment of principal and interest of the bonds, including reserve, sinking, bond service, redemption and trust funds, and any bond payable from the revenue fund may be paid from any such special fund set up therefor; the appointment of a trustee; the permissible investments for moneys in said funds, or any thereof, the accounts and records to be kept, audits thereof and examination thereof by bondholders and others, and reports to be made by the entity. Any indenture providing for the appointment of a trustee shall limit such trustee’s power of investment to only those investments as are authorized by Section 53603.

SEC. 7.

Section 16431 of the Government Code is amended to read:

16431.

(a) Notwithstanding any other provisions of this code, funds held by the state, pursuant to a written agreement between the state and employees of the state to defer a portion of the compensation otherwise receivable by the state’s employees and pursuant to a plan for that deferral as adopted by the state and approved by the Department of General Services, may be invested in the types of investments set forth in Sections 53602 and 53603 and may additionally be invested in corporate stocks, bonds, and securities, mutual funds, savings and loan accounts, credit union accounts, annuities, mortgages, deeds of trust, or other security interests in real or personal property. This section shall not be construed to permit any type of investment prohibited by the California Constitution.

(b) Deferred compensation funds are public pension or retirement funds for the purposes of Section 17 of Article XVI of the California Constitution.

SEC. 8.

Section 27000.1 of the Government Code is amended to read:

27000.1.

Subject to subdivision ~~(p)~~ (o) of Section 53602, the board of supervisors may, by ordinance, delegate to the county treasurer the authority to invest or reinvest the funds of the county and the funds of other depositors in the county treasury, pursuant to Chapter 4 (commencing with Section 53600) of Part 1 of Division 2 of Title 5. The county treasurer shall thereafter assume full responsibility for those transactions until the board of supervisors either revokes its delegation of authority, by ordinance, or decides not to renew the annual delegation, as provided in subdivision ~~(p)~~ (o) of Section 53602. This section does not limit the county treasurer’s authority pursuant to ~~Section~~ subdivision (h) of Section 53603 or pursuant to Section 53684.

SEC. 9.

Section 27000.3 of the Government Code is amended to read:

27000.3.

(a) With regard to county funds deposited in the county treasury, the board of supervisors is the agent of the county who serves as a fiduciary and is subject to the prudent investor standard, unless a delegation has occurred pursuant to subdivision ~~(p)~~ (o) of Section 53602 in which case the county treasurer shall be the agent of the county with respect to these funds, serve as a fiduciary, and be subject to the prudent investor standard and the board of supervisors shall not be the agent, serve as a fiduciary, or be subject to the prudent investor standard.

(b) With regard to funds deposited in the county treasury that are deposited by local agencies other than the county and at the discretion of those local agencies, the county treasurer serves as a fiduciary subject to the prudent investor standard.

(c) When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the county treasurer or the board of supervisors, as applicable, shall act with care, skill, prudence, and diligence under the circumstances then prevailing, specifically including, but not limited to, the general economic conditions and the anticipated needs of the county and other depositors, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the county and the other depositors. Within the limitations of this section and considering individual investments as part of an overall investment strategy, investments may be acquired as authorized by law. This chapter is not intended to grant investment authority to any person or governing body except as provided in Sections 53602 and 53603.

SEC. 10.

Section 53600 of the Government Code is amended to read:

53600.

For purposes of this article, the following definitions apply:

(a) “Corporation” includes a limited liability company.

(b) “Counterparty” means the other party to the transaction.

(c) “Local agency” means the legislative body of a county, city, city and county, including a chartered city or county, school district, community college district, public district, county board of education, county superintendent of schools, or any public or municipal corporation.

(d) “Proposition 1A receivable” means the right to payment of moneys due or to become due to a local agency, pursuant to clause (iii) of subparagraph (B) of paragraph (1) of subdivision (a) of Section 25.5 of Article XIII of the California Constitution and Section 100.06 of the Revenue and Taxation Code.

(e) “Repurchase agreement” means a purchase of securities by the local agency pursuant to an agreement by which the counterparty seller will repurchase the securities on or before a specified date and for a specified amount and the counterparty will deliver the underlying securities to the local agency by book entry, physical delivery, or by third-party custodial agreement. The transfer of underlying securities to the counterparty bank’s customer book-entry account may be used for book-entry delivery.

(f) “Reverse repurchase agreement” means a sale of securities by the local agency pursuant to an agreement by which the local agency will repurchase the securities on or before a specified date and includes other comparable agreements.

(g) “Savings association or federal association” means a savings association, savings and loan association, or savings bank as defined by Section 5102 of the Financial Code.

(h) “Securities,” for purposes of repurchase, means securities of the same issuer, description, issue date, and maturity.

(i) “Securities lending agreement” means an agreement under which a local agency agrees to transfer securities to a borrower who, in turn, agrees to provide collateral to the local agency. During the term of the agreement, both the securities and the collateral are held by a third party. At the conclusion of the agreement, the securities are transferred back to the local agency in return for the collateral.

(j) “Significant banking relationship” means any of the following activities of a bank:

(1) Involvement in the creation, sale, purchase, or retirement of a local agency’s bonds, warrants, notes, or other evidence of indebtedness.

(2) Financing of a local agency’s activities.

(3) Acceptance of a local agency’s securities or funds as deposits.

(k) “Spread” means the difference between the cost of funds obtained using the reverse repurchase agreement and the earnings obtained on the reinvestment of the funds.

SEC. 11.

Section 53600.3 of the Government Code is repealed.

SEC. 12.

Section 53600.5 of the Government Code is amended and renumbered to read:

53602.

When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a local agency shall comply with all of the following:

(a) The primary objective of a trustee shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet the liquidity needs of the depositor. The third objective shall be to achieve a return on the funds under its control.

(b) Except as provided in subdivision (a) of Section 27000.3, a local agency or a person authorized to make investment decisions on behalf of a local agency investing public funds pursuant to this chapter is a trustee and therefore a fiduciary subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.

(c) (1) A local agency purchasing or obtaining any securities prescribed in this article, in a negotiable, bearer, registered, or nonregistered format, shall require delivery of the securities to the local agency, including those purchased for the agency by financial advisers, consultants, or managers using the agency’s funds, by book entry, physical delivery, or by third-party custodial agreement.

(2) The transfer of securities to the counterparty bank’s customer book entry account may be used for book-entry delivery. A counterparty bank’s trust department or separate safekeeping department may be used for the physical delivery of the security if the security is held in the name of the local agency.

(d) Where this article specifies a percentage limitation for a particular category of investment, that percentage is applicable only at the date of purchase.

(e) (1) An investment’s term or remaining maturity shall be measured from the settlement date to final maturity. A security purchased in accordance with this section shall not have a forward settlement date exceeding 45 days from the time of investment.

(2) Where this section does not specify a limitation on the term or remaining maturity at the time of the investment, an investment shall not be made in any security, other than a security underlying a repurchase or reverse repurchase agreement or securities lending agreement authorized by this section, that at the time of the investment has a term remaining to maturity in excess of five years, unless the local agency has granted express authority to make that investment either specifically or as a part of an investment program approved by the local agency no less than three months before the investment.

(f) A local agency and a treasurer or other official of a local agency having legal custody of the moneys shall not invest local agency funds, or funds in the custody of the local agency, in negotiable certificates of deposit issued by a state or federal credit union if a member of the local agency, or a person with investment decisionmaking authority in the administrative office manager’s office, budget office, auditor-controller’s office, or treasurer’s office of the local agency also serves on the board of directors, or any committee appointed by the board of directors, or the credit committee or the supervisory committee of the state or federal credit union issuing the negotiable certificates of deposit.

(g) The base value of a local agency’s pool portfolio shall be that dollar amount obtained by totaling all cash balances placed in the pool by all pool participants, excluding any amounts obtained through selling securities by way of reverse repurchase agreements, securities lending agreements, or other similar borrowing methods.

(h) A local agency may purchase any investment authorized pursuant to Section 53601 or 53601.1, only from one of the following:

(1) Directly from the issuer.

(2) An institution licensed by the state as a broker-dealer, as defined in Section 25004 of the Corporations Code.

(3) A member of a federally regulated securities exchange.

(4) A national or state-chartered bank.

(5) A savings association or federal association.

(6) A brokerage firm designated as a primary government dealer by the Federal Reserve Bank.

(i) (1) A local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing with Section 53630) in inverse floaters, range notes, or mortgage-derived, interest-only strips.

(2) Except as provided in this paragraph, a local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing with Section 53630) in any security that could result in zero-interest accrual if held to maturity.

(A) A local agency may hold prohibited instruments until their maturity dates.

(B) The limitation in this subdivision shall not apply to local agency investments in shares of beneficial interest issued by diversified management companies registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.) that are authorized for investment pursuant to subdivision (l) of Section 53601.

(C) A local agency may invest in securities issued by, or backed by, the United States government that could result in zero- or negative-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates.

(j) (1) Except as provided in paragraph (2), a local agency shall invest only in notes, bonds, bills, certificates of indebtedness, warrants, or registered warrants which are legal investments for savings banks in the state.

(2) Notwithstanding paragraph (1), the board of supervisors of a county may, by a four-fifths vote thereof, invest in notes, warrants, or other evidences of indebtedness of public districts wholly or partly within the county, whether or not such notes, warrants, or other evidences of indebtedness are legal investments for savings banks.

(k) A local agency may make an investment by direct purchase of any issue of eligible securities at their original sale or after they have been issued.

(l) A local agency may sell, or exchange for other eligible securities, and reinvest the proceeds of, the securities purchased.

(m) From time to time, a local agency shall sell the securities in which it has invested so that the proceeds may be applied to the purposes for which the original purchase moneys were placed in the sinking fund or the treasury of the local agency.

(n) Any bonds purchased, which were issued by the purchaser, may be canceled either in satisfaction or sinking fund obligations or otherwise. When canceled, they are no longer outstanding, unless in its discretion the local agency holds them uncanceled. While held uncanceled, the bonds may be resold.

(o) The authority of the local agency to invest or to reinvest funds of a local agency, or to sell or exchange securities so purchased, may be delegated for a one-year period by the local agency to the treasurer of the local agency, who shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires, and shall make a monthly report of those transactions to the local agency. Subject to review, the local agency may renew the delegation of authority pursuant to this section each year.

(p) (1) A local agency may deposit for safekeeping with a financial institution set forth in this subdivision, the bonds, notes, bills, debentures, obligations, certificates of indebtedness, warrants, or other evidences of indebtedness in which the moneys of the local agency are invested pursuant to this article or pursuant to other legislative authority. The local agency shall take from that financial institution a receipt for securities so deposited. The authority of the local agency to deposit for safekeeping may be delegated by the local agency to the treasurer of the local agency. The treasurer shall not be responsible for securities delivered to and receipted for by a financial institution until they are withdrawn from the financial institution by the treasurer.

(2) For purposes of this subdivision, “financial institution” includes all of the following:

(A) A savings association or federal association.

(B) A trust company within this state.

(D) The Federal Reserve Bank of San Francisco or any branch thereof within this state.

(E) Any Federal Reserve Bank.

(F) A state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System.

(q) (1) Notwithstanding the provisions of this chapter or any provision of this code, funds held by a local agency pursuant to a written agreement between the agency and employees of the agency to defer a portion of the compensation otherwise receivable by the agency’s employees and pursuant to a plan for such deferral as adopted by the local agency may be invested in the types of investments set forth in subdivision ~~(k)~~ (j) of this section and in Section 53603 and may additionally be invested in corporate stocks, bonds, and securities, mutual funds, savings and loan accounts, credit union accounts, life insurance policies, annuities, mortgages, deeds of trust, or other security interests in real or personal property. This subdivision shall not be construed to permit any type of investment prohibited by the California Constitution.

(2) Deferred compensation funds are public pension or retirement funds for the purposes of Section 17 of Article XVI of the California Constitution.

SEC. 13.

Section 53600.6 of the Government Code is amended and renumbered to read:

53601.

The Legislature hereby finds that the solvency and creditworthiness of each individual local agency can impact the solvency and creditworthiness of the state and other local agencies within the state. Therefore, to protect the solvency and creditworthiness of the state and all of its political subdivisions, the Legislature hereby declares that the deposit and investment of public funds by local officials and local agencies is an issue of statewide concern.

SEC. 14.

Section 53601 of the Government Code, as amended by Section 1 of Chapter 323 of the Statutes of 2025, is amended and renumbered to read:

53603.

If a local agency has moneys in a sinking fund or moneys in its treasury that are not required for the immediate needs of the local agency, the local agency may invest any portion of the moneys that it deems wise or expedient in the following investments:

(a) Bonds issued by the local agency, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the local agency.

(b) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest.

(c) Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state.

(d) Registered treasury notes or bonds of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California.

(e) Bonds, notes, warrants, or other evidences of indebtedness of a local agency within this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency.

(f) Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises.

(g) (1) Bankers’ acceptances otherwise known as bills of exchange or time drafts that are drawn on and accepted by a commercial bank, in compliance with the following limitations:

(A) Purchases of bankers’ acceptances shall not exceed 180 days’ maturity or 40 percent of the agency’s moneys that may be invested pursuant to this section.

(B) No more than 30 percent of the agency’s moneys may be invested in the bankers’ acceptances of any one commercial bank pursuant to this section.

(2) This subdivision does not preclude a municipal utility district from investing moneys in its treasury in a manner authorized by the Municipal Utility District Act (Division 6 (commencing with Section 11501) of the Public Utilities Code).

(h) Commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating as provided for by a nationally recognized statistical rating organization (NRSRO).

(1) Eligible commercial paper shall have a maximum maturity of 397 days or less.

(2) Except as provided in paragraph (3), local agencies that have less than one hundred million dollars ($100,000,000) of investment assets under management may invest no more than 25 percent of their moneys in eligible commercial paper and local agencies that have one hundred million dollars ($100,000,000) or more of investment assets under management may invest no more than 40 percent of their moneys in eligible commercial paper. A local agency may invest no more than 10 percent of its total investment assets in the commercial paper and the medium-term notes of any single issuer.

(3) This paragraph shall apply to a local agency that is a county, a city and county, the City of Los Angeles, or a local agency that pools moneys in deposits or investments with other local agencies, including local agencies that have the same governing body, except that paragraph (2) shall apply to all local agencies that pool moneys in deposits or investments exclusively with local agencies that have the same governing body.

(A) No more than 40 percent of the local agency’s moneys may be invested in eligible commercial paper.

(B) No more than 10 percent of the total assets of the investments held by a local agency may be invested in any one issuer’s commercial paper.

(C) A local agency subject to this paragraph may invest in commercial paper, debt securities, or other obligations of a public bank, as defined in Section 57600.

(D) This paragraph shall be interpreted in a manner that recognizes the distinct characteristics of investment pools and the distinct administrative burdens on managing and investing funds on a pooled basis pursuant to Article 6 (commencing with Section 27130) of Chapter 5 of Part 3 of Division 2 of Title 3.

(4) The entity that issues the commercial paper shall meet all of the following conditions in either subparagraph (A) or (B):

(A) The entity meets the following criteria:

(i) Is organized and operating in the United States as a general corporation.

(ii) Has total assets in excess of five hundred million dollars ($500,000,000).

(iii) Has debt other than commercial paper, if any, that is rated in a rating category of “A” or its equivalent or higher by an NRSRO.

(B) The entity meets the following criteria:

(i) Is organized within the United States as a federally or state-chartered bank or a federally or state-licensed branch of a foreign bank, special purpose corporation, trust, or limited liability company.

(ii) Has programwide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond.

(iii) Has commercial paper that is rated “A-1” or higher, or the equivalent, by an NRSRO.

(i) Negotiable certificates of deposit issued by a nationally or state-chartered bank, a savings association or a federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank. Purchases of negotiable certificates of deposit shall not exceed 30 percent of the agency’s moneys that may be invested pursuant to this section. For purposes of this section, negotiable certificates of deposit do not come within Article 2 (commencing with Section 53630), except that the amount so invested shall be subject to the limitations of Section 53638.

(j) (1) Investments in repurchase agreements or reverse repurchase agreements or securities lending agreements of securities authorized by this section, provided that the agreements comply with this subdivision, including the delivery requirements specified in this section.

(2) Investments in repurchase agreements may be made, on an investment authorized in this section, when the term of the agreement does not exceed one year. The market value of securities that underlie a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Since the market value of the underlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value of the underlying securities is brought back up to 102 percent no later than the next business day.

(3) Reverse repurchase agreements or securities lending agreements may be utilized only when all of the following conditions are met:

(A) The security to be sold using a reverse repurchase agreement or securities lending agreement has been owned and fully paid for by the local agency for a minimum of 30 days prior to sale.

(B) The total of all reverse repurchase agreements and securities lending agreements on investments owned by the local agency does not exceed 20 percent of the base value of the portfolio.

(C) The agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security.

(D) Funds obtained or funds within the pool of an equivalent amount to that obtained from selling a security to a counterparty using a reverse repurchase agreement or securities lending agreement shall not be used to purchase another security with a maturity longer than 92 days from the initial settlement date of the reverse repurchase agreement or securities lending agreement, unless the reverse repurchase agreement or securities lending agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security.

(4) Investments in reverse repurchase agreements, securities lending agreements, or similar investments in which the local agency sells securities prior to purchase with a simultaneous agreement to repurchase the security may be made only upon prior approval of the local agency and shall be made only with primary dealers of the Federal Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a significant banking relationship with a local agency.

(k) Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States.

(1) Notes eligible for investment under this subdivision shall be rated in a rating category of “A” or its equivalent or better by an NRSRO.

(2) Purchases of medium-term notes shall not include other instruments authorized by this section and shall not exceed 30 percent of the agency’s moneys that may be invested pursuant to this section.

(3) A local agency, other than a county or a city and a county, may invest no more than 10 percent of its total investment assets in the commercial paper and the medium-term notes of any single issuer.

(l) (1) Shares of beneficial interest issued by diversified management companies in compliance with the following:

(A) The issuer invests only in the securities and obligations as authorized by subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and complies with the investment restrictions of this article and Article 2 (commencing with Section 53630), except that, notwithstanding these restrictions, a counterparty to a reverse repurchase agreement or securities lending agreement is not required to be a primary dealer of the Federal Reserve Bank of New York if the company’s board of directors finds that the counterparty presents a minimal risk of default, and the value of the securities underlying a repurchase agreement or securities lending agreement may be 100 percent of the sales price if the securities are marked to market daily.

(B) The issuer meets either of the following criteria:

(i) Attained the highest ranking or the highest letter and numerical rating provided by not less than two NRSROs.

(ii) Retained an investment adviser registered or exempt from registration with the United States Securities and Exchange Commission with not less than five years’ experience investing in the securities and obligations authorized by subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and with assets under management in excess of five hundred million dollars ($500,000,000).

(2) Shares of beneficial interest issued by diversified management companies that are money market funds registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), provided the company meets either of the following criteria:

(A) Attained the highest ranking or the highest letter and numerical rating provided by not less than two NRSROs.

(B) Retained an investment adviser registered or exempt from registration with the United States Securities and Exchange Commission with not less than five years’ experience managing money market mutual funds with assets under management in excess of five hundred million dollars ($500,000,000).

(3) The purchase price of shares of beneficial interest purchased pursuant to paragraphs (1) and (2) shall not include commission that the companies may charge and shall not exceed 20 percent of the agency’s moneys that may be invested pursuant to this section. No more than 10 percent of the agency’s funds may be invested in shares of beneficial interest of any one mutual fund pursuant to paragraph (1).

(m) Shares of beneficial interest issued by a joint powers authority organized pursuant to Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a) to (r), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria:

(1) The adviser is registered or exempt from registration with the United States Securities and Exchange Commission.

(2) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive.

(3) The adviser has assets under management in excess of five hundred million dollars ($500,000,000).

(n) Moneys held by a trustee or fiscal agent and pledged to the payment or security of bonds or other indebtedness, or obligations under a lease, installment sale, or other agreement of a local agency, or certificates of participation in those bonds, indebtedness, or lease installment sale, or other agreements, may be invested in accordance with the statutory provisions governing the issuance of those bonds, indebtedness, or lease installment sale, or other agreement, or to the extent not inconsistent therewith or if there are no specific statutory provisions, in accordance with the ordinance, resolution, indenture, or agreement of the local agency providing for the issuance.

(o) Notes, bonds, or other obligations that are at all times secured by a valid first priority security interest in securities of the types listed by Section 53651 as eligible securities for the purpose of securing local agency deposits having a market value at least equal to that required by Section 53652 for the purpose of securing local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust company or the trust department of a bank that is not affiliated with the issuer of the secured obligation, and the security interest shall be perfected in accordance with the requirements of the Uniform Commercial Code or federal regulations applicable to the types of securities in which the security interest is granted.

(p) (1) A mortgage passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable passthrough certificate, or consumer receivable-backed bond.

(2) For securities eligible for investment under this subdivision not issued or guaranteed by an agency or issuer identified in subdivision (b) or (f), the following limitations apply:

(A) The security shall be rated in a rating category of “AA” or its equivalent or better by an NRSRO and have a maximum remaining maturity of five years or less.

(B) Purchase of securities authorized by this paragraph shall not exceed 20 percent of the agency’s surplus moneys that may be invested pursuant to this section.

(q) United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, Inter-American Development Bank, or Inter-American Investment Corporation, with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of “AA” or its equivalent or better by an NRSRO and shall not exceed 30 percent of the agency’s moneys that may be invested pursuant to this section.

(r) Commercial paper, debt securities, or other obligations of a public bank, as defined in Section 57600.

(s) Financial futures or financial option contracts in any of the investment categories enumerated in this section.

(t) Proposition 1A receivables sold pursuant to Section 53999. A purchaser of Proposition 1A receivables pursuant to this section shall not offer them for sale pursuant to Section 6588.

SEC. 15.

Section 53601 of the Government Code, as amended by Section 2 of Chapter 323 of the Statutes of 2025, is repealed.

SEC. 16.

Section 53601.1 of the Government Code is repealed.

SEC. 17.

Section 53601.2 of the Government Code is repealed.

SEC. 18.

Section 53601.5 of the Government Code is repealed.

SEC. 19.

Section 53601.6 of the Government Code, as amended by Section 3 of Chapter 323 of the Statutes of 2025, is repealed.

SEC. 20.

Section 53601.6 of the Government Code, as amended by Section 4 of Chapter 323 of the Statutes of 2025, is repealed.

SEC. 21.

Section 53601.8 of the Government Code, as amended by Section 1 of Chapter 239 of the Statutes of 2024, is amended and renumbered to read:

53604.

Notwithstanding 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) The selected depository institution shall request that the local agency inform it of depository institutions at which the local agency has other deposits, and the selected depository institution shall provide that information to the private sector entity.

(d) Any private sector entity used by a selected depository institution to help place its local agency deposits shall maintain policies and procedures requiring all 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.

(3) At the time of the local agency’s investment with a selected depository institution and no less than monthly thereafter, the private sector entity shall ensure that the local agency is provided with an inventory of all depository institutions in which deposits have been placed on the local agency’s behalf and that are within the private sector entity’s network.

(4) Within its network, the private sector entity shall ensure that it does not place additional deposits from a particular local agency with any depository institution identified pursuant to subdivision (c) as holding that local agency’s deposits if those additional deposits would result in that local agency’s total amount on deposit at that depository institution exceeding the Federal Deposit Insurance Corporation or the National Credit Union Administration insurance limit.

(e) If a selected depository uses two or more private sector entities to assist in the placement of a local agency’s deposits, the selected depository shall ensure that it does not place additional deposits from a particular local agency with a depository institution if those additional deposits would result in that local agency’s total amount on deposit at that depository institution exceeding the Federal Deposit Insurance Corporation or the National Credit Union Administration insurance limit.

(f) The selected depository institution shall serve as a custodian for each such deposit.

(g) 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).

(h) Notwithstanding subdivisions (a) to (g), inclusive, a credit union shall not act as a selected depository institution under this section 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.

(i) 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.

(j) The deposits placed pursuant to this section shall be subject to Section 53638 and shall not, in total, exceed 50 percent of the agency’s funds that may be invested for this purpose.

(k) (1) On or before January 1, 2030, the California Debt and Investment Advisory Commission shall submit a report to the appropriate policy committees of the Legislature on the deposit of surplus funds pursuant to this section by local agencies. The report shall include, but is not limited to, the following information:

(A) An overview of local agency surplus funds invested in depository institutions that use private-entity placement services pursuant to this section, including information regarding the number of agencies that have deposited more than 30 percent of their surplus funds in depository institutions that use private-entity placement services and whether any local agencies have deposited funds in more than one depository institution pursuant to this section.

(B) A recommendation for a limitation, if any, on the share of deposits that a local agency can invest in depository institutions that use private-entity placement services pursuant to this section for consideration by the Legislature.

(2) The report to be submitted pursuant to this subdivision shall be submitted in compliance with Section 9795.

(l) This section shall remain in effect only until January 1, 2031, and as of that date is repealed.

SEC. 22.

Section 53601.8 of the Government Code, as amended by Section 2 of Chapter 239 of the Statutes of 2024, is amended and renumbered to read:

53604.

(d) Any private sector entity used by a selected depository institution to help place its local agency deposits shall maintain policies and procedures requiring all of the following:

(3) At the time of the local agency’s investment with a selected depository institution and no less than monthly thereafter, the private sector entity shall ensure that the local agency is provided with an inventory of all depository institutions in which deposits have been placed on the local agency’s behalf, that are within the private sector entity’s network.

(f) The selected depository institution shall serve as a custodian for each such deposit.

(h) Notwithstanding subdivisions (a) to (g), inclusive, a credit union shall not act as a selected depository institution under this section unless both of the following conditions are satisfied:

(1) The credit union offers federal depository insurance through the National Credit Union Administration.

(i) 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.

(j) The deposits placed pursuant to this section shall be subject to Section 53638 and shall not, in total, exceed 30 percent of the agency’s funds that may be invested for this purpose.

(k) This section shall become operative on January 1, 2031.

SEC. 23.

Section 53602 of the Government Code is repealed.

SEC. 24.

Section 53603 of the Government Code is repealed.

SEC. 25.

Section 53604 of the Government Code is repealed.

SEC. 26.

Section 53605 of the Government Code is repealed.

SEC. 27.

Section 53606 of the Government Code is repealed.

SEC. 28.

Section 53607 of the Government Code is repealed.

SEC. 29.

Section 53608 of the Government Code is repealed.

SEC. 30.

Section 53609 of the Government Code is repealed.

SEC. 31.

Section 53610 of the Government Code is repealed.

SEC. 32.

Section 53620 of the Government Code is amended to read:

53620.

Notwithstanding Section 53603, the governing body of a local agency may invest funds designated for the payment of employee retiree health benefits in any form or type of investment deemed prudent by the governing body pursuant to Section 53622.

SEC. 33.

Section 53630 of the Government Code is amended to read:

53630.

As used in this article:

(a) “Administrator” means the Administrator of Local Agency Security of the State of California.

(b) “Agent of depository” means a trust company or trust department of a state or national bank located in this state, including the trust department of a depository where authorized, and the Federal Home Loan Bank of San Francisco, which is authorized to act as an agent of depository for the purposes of this article pursuant to Section 53657.

(d) “Depository” means a state or national bank, savings association or federal association, a state or federal credit union, or a federally insured industrial loan company, in this state in which the moneys of a local agency are deposited.

(e) “Federally insured industrial loan company” means an industrial loan company licensed under Division 7 (commencing with Section 18000) of the Financial Code, the investment certificates of which are insured by the Federal Deposit Insurance Corporation.

(f) “Local agency” means a county, city, city and county, including a chartered city or county, a community college district, or other public agency or corporation in this state.

(g) “Pooled securities” means eligible securities held by an agent of depository for a depository and securing deposits of one or more local agencies.

(h) “Savings association or federal association” means a savings association, savings and loan association, or savings bank as defined by Section 5102 of the Financial Code.

(i) “Security” means any of the eligible securities or obligations listed in Section 53651.

(j) “Treasurer” means the treasurer of a local agency.

(k) (1) The definitions in Section 1670 of, and Chapter 1 (commencing with Section 99) of Division 1 of, the Financial Code apply to this subdivision.

(2) For purposes of being a depository of moneys belonging to or being in the custody of a local agency, the phrases “state or national bank located in this state,” “state or national bank,” “state or national bank in this state,” and “state or national banks in the state” include, without limitation, any of the following:

(A) A California branch office of a foreign (other state) state bank that the bank is authorized to maintain under the law of its domicile and federal law.

(B) A California branch office of a foreign (other state) national bank that the bank is authorized to maintain under federal law.

(C) A California branch office of a foreign (other nation) bank that the bank is licensed to maintain under Article 3 (commencing with Section 1800) of Chapter 20 of Division 1.1 of the Financial Code.

(D) A California federal branch of a foreign (other nation) bank that the bank is authorized to maintain under federal law.

SEC. 34.

Section 53630.5 of the Government Code is repealed.

SEC. 35.

Section 53631 of the Government Code is amended to read:

53631.

Under those conditions as the treasurer of a local agency fixes with the approval of the legislative body, a treasurer may establish accounts at banks within or without the state and deposit moneys in those accounts to the extent necessary to pay the principal and interest of bonds to pay any warrant that has been presented for payment, or to fund any electronic disbursement of funds from the treasury of the local agency. This article does not apply to deposits for those purposes.

SEC. 36.

Section 53635 of the Government Code is repealed.

SEC. 37.

Section 53635.2 of the Government Code is amended to read:

53635.2.

As far as possible, all moneys belonging to, or in the custody of, a local agency, including money paid to the treasurer or other official to pay the principal, interest, or penalties of bonds, shall be deposited for safekeeping in state or national banks, public banks, savings associations, federal associations, credit unions, or federally insured industrial loan companies in this state selected by the treasurer or other official having legal custody of the moneys; or may be invested in the investments set forth in Section 53603. To be eligible to receive local agency moneys, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than “satisfactory” in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California’s communities, including low- and moderate-income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code. Subdivisions ~~(j) and (k)~~ (h) and (i) of Section 53602 shall apply to all investments that are acquired pursuant to this section.

SEC. 38.

Section 53641 of the Government Code is amended to read:

53641.

When money is deposited in a depository, the treasurer or other authorized official shall take and preserve a receipt, certificate of deposit, or other evidence of the deposit as they require.

SEC. 39.

Section 53651 of the Government Code is amended to read:

53651.

Eligible securities are any of the following:

(a) United States Treasury notes, bonds, bills or certificates of indebtedness, or obligations for which the faith and credit of the United States are pledged for the payment of principal and interest, including the guaranteed portions of small business administration loans, so long as the loans are obligations for which the faith and credit of the United States are pledged for the payment of principal and interest.

(b) Notes or bonds or any obligations of a local public agency (as defined in the United States Housing Act of 1949) or any obligations of a public housing agency (as defined in the United States Housing Act of 1937) for which the faith and credit of the United States are pledged for the payment of principal and interest.

(c) Bonds of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments to pay the principal and interest of the bonds upon all property within its boundaries subject to taxation or assessment by the local agency or district, and in addition, limited obligation bonds pursuant to Article 4 (commencing with Section 50665) of Chapter 3 of Division 1, senior obligation bonds pursuant to Article 5 (commencing with Section 53387) of Chapter 2.7, and revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, ~~controlled~~ controlled, or operated by the state, ~~local agency~~ local agency, or district or by a department, board, ~~agency~~ agency, or authority thereof.

(d) Bonds of any public housing agency (as defined in the United States Housing Act of 1937, as amended) as are secured by a pledge of annual contributions under an annual contribution contract between the public housing agency and the Public Housing Administration if both of the following conditions are met:

(1) The contract contains the covenant by the Public Housing Administration that is authorized by subsection (b) of Section 22 of the United States Housing Act of 1937, as amended.

(2) The maximum sum and the maximum period specified in the contract pursuant to subsection 22(b) are not less than the annual amount and the period for payment that are requisite to provide for the payment when due of all installments of principal and interest on the obligations.

(e) Registered warrants of this state.

(f) (1) Bonds, consolidated bonds, collateral trust debentures, consolidated debentures, or other obligations issued by either of the following:

(A) The United States Postal Service.

(B) Federal land banks or federal intermediate credit banks established under the Federal Farm Loan Act, as amended.

(2) Debentures and consolidated debentures issued by the Central Bank for Cooperatives and banks for cooperatives established under the Farm Credit Act of 1933, as amended.

(3) Consolidated obligations of the federal home loan banks established under the Federal Home Loan Bank Act.

(4) Bonds, ~~debentures~~ debentures, and other obligations of the Federal National Mortgage Association or of the Government National Mortgage Association established under the National Housing Act, as amended.

(5) Bonds of any federal home loan bank established under the National Housing ~~Act.~~ Act, as amended.

(6) Bonds, debentures and other obligations of the Federal Home Loan Mortgage Corporation established under the Emergency Home Finance Act of 1970.

(7) Obligations of the Tennessee Valley Authority.

(g) Notes, tax anticipation ~~warrants~~ warrants, or other evidence of indebtedness issued pursuant to Article 7 (commencing with Section 53820), Article 7.5 (commencing with Section ~~53840)~~ 53840), or Article 7.6 (commencing with Section 53850) of this ~~Chapter 4.~~ chapter.

(h) State of California notes.

(i) Bonds, notes, certificates of indebtedness, ~~warrants~~ warrants, or other obligations issued by either of the following:

(1) Any state of the United States (except this state), or the Commonwealth of Puerto Rico, or any local agency thereof having the power to levy taxes, without limit as to rate or amount, to pay the principal and interest of such obligations, provided the obligations issued are rated in one of the three highest grades by a nationally recognized investment service organization that has been engaged regularly in rating state and municipal issues for a period of not less than five years.

(2) Any state of the United States (except this state), or the Commonwealth of Puerto Rico, or a department, board, agency, or authority thereof except bonds which provide for or are issued pursuant to a law which may contemplate a subsequent legislative appropriation as an assurance of the continued operation and solvency of the department, board, ~~agency~~ agency, or authority but which does not constitute a valid and binding obligation for which the full faith and credit of such state or the Commonwealth of Puerto Rico are pledged, which are payable solely out of the revenues from a revenue-producing source owned, ~~controlled~~ controlled, or operated thereby; provided the obligations issued are rated in one of the two highest grades by a nationally recognized investment service organization that has been engaged regularly in rating state and municipal issues for a period of not less than five years.

(j) Obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development, Inter-American Development Bank, the Government Development Bank of Puerto Rico, the Asian Development Bank, the International Finance Corporation, or the African Development Bank.

(k) Participation certificates of the Export-Import Bank of the United States.

(l) Bonds and notes of the California Housing Finance Agency issued pursuant to Chapter 7 (commencing with Section 51350) of Part 3 of Division 31 of the Health and Safety Code.

(m) Promissory notes secured by first mortgages and first trust deeds that comply with Section 53651.2.

(n) Any bonds, notes, warrants, or other evidences of indebtedness of a nonprofit corporation issued to finance the construction of a school building or school buildings pursuant to a lease or agreement with a school district entered into in compliance with the provisions of Section 39315 or 81345 of the Education Code, and also any bonds, notes, ~~warrants~~ warrants, or other evidences of indebtedness issued to refinance those bonds, notes, warrants, or other evidences of indebtedness as specified in Section 39317 of the Education Code.

(o) Any municipal securities, as defined by Section 3(a)(29) of the Securities Exchange Act of ~~June 6,~~ 1934, (15 U.S.C. Sec. 78, as amended), which are issued by this state or any local agency thereof.

(p) (1) With the consent of the treasurer, letters of credit issued by the Federal Home Loan Bank of San Francisco which comply with Section 53651.6.

(2) For local agencies described in paragraph (3) of subdivision (h) of Section 53603, and with assets under management of at least one hundred million dollars ($100,000,000), an eligible bank that has been selected by the treasurer for the safekeeping of moneys belonging to, or in the custody of, the local agency, and that has its headquarters located outside of the state, may submit letters of credit that are drawn on its regional federal home loan bank as security, subject to the terms set forth in Section 53651.6.

SEC. 40.

Section 53682 of the Government Code is amended to read:

53682.

Notwithstanding any other provision in this article except Section 53652, the treasurer may deposit moneys in and enter into contracts with any depository, as defined in subdivision (d) of Section 53630, for services to be rendered by that depository that in the treasurer’s judgment are to the public advantage. One copy of each contract entered into under this section shall be filed with the auditor or corresponding officer of the local agency. The contract shall:

(a) Fix the duration of compensating deposits, if any.

(b) Fix the interest rate of that compensating deposit, if any.

(d) Indicate whether the depository shall bear the expenses of transportation of the money to and from the depository.

(e) Fix the consideration payable by the agency for such services.

(f) Specify who may deposit moneys into the treasurer’s active account and how those persons are to make those deposits.

SEC. 41.

Section 53684 of the Government Code is amended to read:

53684.

(a) Unless otherwise provided by law, if the treasurer of any local agency, or other official responsible for the funds of the local agency, determines that the local agency has excess funds which are not required for immediate use, the treasurer or other official may, upon the adoption of a resolution by the legislative or governing body of the local agency authorizing the investment of funds pursuant to this section and with the consent of the county treasurer, deposit the excess funds in the county treasury for the purpose of investment by the county treasurer pursuant to Section 53603, or Section 20822 of the Revenue and Taxation Code.

(b) (1) The county treasurer shall, at least quarterly, apportion any interest or other increment derived from the investment of funds pursuant to this section in an amount proportionate to the average daily balance of the amounts deposited by the local agency and to the total average daily balance of deposits in the investment pool. In apportioning and distributing that interest or increment, the county treasurer may use the cash method, the accrual method, or any other method in accordance with generally accepted accounting principles.

(2) Before distributing that interest or increment, the county treasurer may deduct the actual costs incurred by the county in administering this section in proportion to the average daily balance of the amounts deposited by the local agency and to the total average daily balance of deposits in the investment pool.

(c) The county treasurer shall disclose to each local agency that invests funds pursuant to this section the method of accounting used, whether cash, accrual, or other, and shall notify each local agency of any proposed changes in the accounting method at least 30 days prior to the date on which the proposed changes take effect.

(d) The treasurer or other official responsible for the funds of the local agency may withdraw the funds of the local agency pursuant to the procedure specified in Section 27136.

(e) Any moneys deposited in the county treasury for investment pursuant to this section are not subject to impoundment or seizure by any county official or agency while the funds are so deposited.

(f) This section is not operative in any county until the board of supervisors of the county, by majority vote, adopts a resolution making this section operative in the county.

(g) It is the intent of the Legislature in enacting this section to provide an alternative procedure to Section 51301 for local agencies to deposit moneys in the county treasury for investment purposes. Therefore, this section shall not be construed as a limitation on the authority of a county and a city to contract for the county treasurer to perform treasury functions for a city pursuant to Section 51301.

SEC. 42.

Section 53844 of the Government Code is amended to read:

53844.

In any county which qualifies as set forth in Section 53840 to use the foregoing procedure for short-term financing, all interest payments on the loans may, in the discretion of the board of supervisors, be charged to the general fund of any district or fund for which loans have been made. All interest earned on funds in the county treasury shall be credited to said general fund of the county, excepting therefrom the interest on deposits of school districts which shall accrue to the general funds of the respective school districts, the interest earned on specific investments of a local agency as authorized by Section 53603, of this code or by Section 5007 of the Education Code, and moneys on deposit in court in eminent domain actions pursuant to Article 1 (commencing with Section 1255.010) of Chapter 6 of, or Article 2 (commencing with Section 1268.110) of Chapter 11 of, Title 7 of Part 3 of the Code of Civil Procedure.

SEC. 43.

Section 57603 of the Government Code is amended to read:

57603.

(a) Before engaging in business, a public bank shall obtain a certificate of authorization to transact business as a bank pursuant to Division 1.1 of the Financial Code (commencing with Section 1000).

(b) A local agency shall comply with the requirements of Section 53638 with respect to its deposits in a public bank unless, with the prior approval of the Commissioner of Financial Protection and Innovation, the public bank and the local agency depositor agree otherwise.

(d) Notwithstanding Section 53603, any local agency may invest in debt securities or other obligations of a public bank.

(e) Notwithstanding Section 53635.2, a public bank shall be eligible to receive local agency moneys.

SEC. 44.

Section 59283 of the Government Code is amended to read:

59283.

The proceeds of the sale of any refunding bonds shall be deposited in escrow or in trust with any bank or trust company within or without the state, or both within or without the state, and shall be secured in accordance with the laws applicable to funds of the local agency and may, along with any other moneys available for that purpose similarly deposited, be invested or reinvested in federal securities. The term “federal securities” means those securities described in Sections 1360 and 1360.1 of the Financial Code or Section 53603 of this code.

SEC. 45.

Section 67476 of the Government Code is amended to read:

67476.

(a) This title shall be administered by the authority, which shall have and is hereby vested with all powers reasonably necessary or proper to carry out the powers and responsibilities expressly granted or imposed, or reasonably implied, under this title.

(b) (1) The authority may exercise any power common to the county and the trustees necessary to carry out this title, and it shall have the power to issue bonds, notes, and other debt instruments.

(2) Obligations and liabilities of the authority do not constitute debt or liabilities of the state or of any political subdivision thereof, other than the authority, and do not constitute a pledge of the full faith and credit of the state or any of its political subdivisions. All bonds, notes, and other debt instruments issued by the authority shall contain on the face thereof, where applicable, the following statement: “Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, the bond.”

(3) The authority or the California State University shall not at any time use or permit the use of the facilities at the site in a manner or to a degree that the tax-exempt status of bonds issued by the State of California, the State Public Works Board, or the California State University would be adversely affected. Both the authority and the California State University shall monitor the use of the facilities improved with the proceeds of the tax-exempt bonds to ensure that the requirements of this section are satisfied.

(1) Adopt bylaws for the regulation of its affairs and the conduct of its business.

(2) Adopt an official seal.

(3) Sue and be sued in its own name.

(4) Receive and accept gifts, grants, loans, or donations of money, property, labor, or other things of value, for any of the purposes of this title from any of the following:

(A) A federal agency.

(B) A state agency.

(D) An individual, association, or corporation.

(5) Engage the services of private consultants to render professional and technical assistance and advice in carrying out the purposes of this title.

(6) (A) Determine the location and character of any project or educational facility and acquire, construct, enlarge, remodel, renovate, alter, improve, furnish, equip, own, maintain, manage, repair, operate, sell, lease as lessee or lessor, or regulate the project or educational facility.

(B) Enter into contracts for any of the purposes specified in this title, including, but not limited to, contracts for the management and operation of a project or other facilities owned by the authority.

(C) Designate a participating institution as its agent, with authority to enter into contracts, for any of the purposes specified in this title.

(7) Acquire, directly or by and through a participating institution as its agent, by purchase solely from funds provided pursuant to this title, or by gift or devise, and sell, by installment or otherwise, lands, structures, real or personal property, tangible or intangible property, rights, rights-of-way, franchises, easements, and other interests in property, including, but not limited to, lands lying under water and riparian rights, which the authority deems necessary or convenient for the acquisition, construction, financing, or operation of a project or an educational facility. The authority may do so upon the terms, and at the prices, it considers reasonable and upon which it can agree with the owner, and may take the title to the interest in the name of the authority.

(8) Make, directly or through a lending institution, secured or unsecured loans to, or purchase secured or unsecured loans from, a participating institution for any of the following purposes:

(A) To finance a project or provide working capital.

(B) To refinance indebtedness incurred by the participating institution in connection with projects undertaken, educational facilities acquired, or working capital financed.

(9) Mortgage all or any portion of interest of the authority in a project or other educational facility and the property on which that project or other educational facility is located whether owned or thereafter acquired, including the granting of a security interest in any property, tangible, or intangible and to assign or pledge all or any portion of the interests of the authority in mortgages, deeds of trust, indentures of mortgage or trust or similar instruments, notes and security interest in property, tangible or intangible, or future payments owed to the authority from participating institutions to which the authority has made loans, and the revenues therefrom, as well as moneys held by the authority on those payments or income from any owned or held by the authority, for the benefit of the holders of bonds issued to finance the project or educational facility or issued to refund or refinance outstanding bonds or indebtedness of participating institutions as permitted by this title.

(10) Upon the terms and conditions the authority deems proper, lease a project or educational facility being financed pursuant to this title to a person, partnership, corporation, or participating institution, and charge and collect rent therefor. The site authority shall ensure that all lease transactions are based upon fair market value rental rates appropriate to the type of facility, the terms of the lease, and the needs of the site authority. The authority may terminate a lease pursuant to this paragraph upon the lessee’s failure to comply with any of its obligations under the lease. The lease may include, but need not be limited to, any of the following provisions:

(A) The lessee shall have the option to renew the term of the lease for the period or periods, and at the rent, determined by the authority, or to purchase any or all of the lease property.

(B) Upon payment by the participating institution of all of the bonds incurred by the authority for the financing of the project or for the refinancing of the participating institution’s outstanding indebtedness, the authority may convey any or all of the leased property to the lessee or lessees, with or without further consideration.

(11) (A) Obtain, or aid in obtaining, from any state or federal agency or any private company, any insurance, guarantee, surety bond, letter or line of credit, or standby purchase agreement regarding, or of, or for, the payment or repayment of all or part of the interest, principal, or both, on any loan, lease, or obligation, or any instrument evidencing or securing the same, made or entered into pursuant to this title, or on any bonds issued pursuant to this title.

(B) Notwithstanding any other provision of this title, enter into any agreement, contract, or any other instrument regarding any insurance, guarantee, surety bond, letter or line of credit or standby purchase agreement specified in subparagraph (A), and accept payment in the manner and form provided therein in the event of default by a participating institution.

(C) Assign any insurance, guarantee, surety bond, letter, or line of credit or standby purchase agreement specified in subparagraph (A) as security for bonds issued by the authority.

(12) At the discretion of the authority, invest any moneys held in reserve or in sinking funds, or any moneys not required for immediate use of disbursement, in eligible securities pursuant to Section 16430 or investments pursuant to Section 53603.

(13) (A) Contract with the participating institution or institutions for insurance coverage from the insurance company or program and for the payment of any expenses in connection therewith, including any bonds issued to fund or finance the insurance company or program.

(B) Participate in joint risk management programs of its participating institutions, including, but not limited to, the California State University Risk Management Authority, with respect to some or all of its activities.

(14) Provide funding for self-insurance for participating institutions. Any self-insurance pooling program entered into by participating institutions that is funded or financed in whole or in part with proceeds of the sale of bonds pursuant to this title shall not be subject to regulation of any kind under the Insurance Code or otherwise as insurance, but shall only be subject to any conditions or restrictions that may be imposed by the authority.

(d) The authority shall not have power of eminent domain.

SEC. 46.

Section 67480 of the Government Code is amended to read:

67480.

(a) (1) The California State University, Channel Islands Site Authority Fund is hereby created in the State Treasury, to be administered by the authority. Notwithstanding Section 13340, all moneys in the fund are continuously appropriated to the authority without regard to fiscal years for the purposes of this title.

(2) All capital plans for the university portion of the site that are proposed to be funded through moneys in the fund shall be included in the annual five-year Capital Outlay Program report of the California State University that is submitted to the Legislature and the Governor each year.

(b) The authority may pledge any or all of the moneys in the fund as security for payment of the principal of, and interest on, any particular issuance of bonds pursuant to this title.

(c) As necessary or convenient to accomplish any purpose of this title, the authority may divide the fund into separate accounts.

(d) All moneys accruing to the authority pursuant to this title from any source shall be deposited in the fund.

(e) (1) Subject to any priorities created by the pledge of particular moneys in the fund to secure any issuance of bonds of the authority, and to reasonable administrative costs incurred by the authority in implementing this title, all moneys in the fund, regardless of the source, shall be held in trust for the security and payment of bonds of the authority, and shall not be used or pledged for any other purpose while any bonds are outstanding and unpaid. Nothing in this subdivision shall be construed to limit the power of the authority to make loans with bond proceeds in accordance with the terms of the resolution authorizing the issuance of those bonds.

(2) Pursuant to any agreements with the holders of particular bonds pledging any particular assets, revenues, or moneys, the authority may create separate accounts in the fund to manage the assets, revenues, or moneys in the manner prescribed by the agreements.

(f) From time to time, the authority may direct the treasurer of the authority to do any of the following:

(1) Invest moneys in the fund that are not required for its current needs, including, but not limited to, proceeds from the sale of any bonds in eligible securities specified in Section 16430 or 53603 and designated by the authority, in the resolution authorizing the issuance of the bonds payable or secured by the moneys.

(2) Deposit moneys in the fund in interest-bearing accounts in state or national banks or other financial institutions having principal offices in the state.

(3) (A) Transfer moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 4 of Division 4 of Title 2 or Article 1 (commencing with Section 56300) of Chapter 4 of Part 1 of Division 2 of Title 5.

(B) Notwithstanding Section 16305.7, all interest or other earnings resulting from an investment or deposit pursuant to this subdivision shall be deposited in the fund.

(g) Except as otherwise provided in paragraph (3) of subdivision (f), moneys in the fund shall not be subject to transfer to any other fund pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2.

SEC. 47.

Section 1702 of the Harbors and Navigation Code is amended to read:

1702.

An authority may establish one or more subaccounts within the infrastructure fund, and may treat each subaccount as separate and distinct. Moneys in the infrastructure fund may be invested in any instrument permitted by Section 53603 of the Government Code, except that any moneys in any subaccount which is are separately pledged to secure or pay bonds may be invested in, or may be limited to investments in, any instrument permitted by the resolution or indenture providing for the issuance of the bonds. Any investment income earned on the investment of moneys in an infrastructure fund shall be credited to the infrastructure fund unless, and to the extent that, federal or state law or agreement, pursuant to which moneys were deposited into the fund, requires otherwise. Any income earned on the investment of moneys in any subaccount shall be credited to the subaccount unless, and to the extent that, the authority establishing the fund determines otherwise.

SEC. 48.

Section 6077.6 of the Harbors and Navigation Code is amended to read:

6077.6.

A harbor district may by resolution order that all or any of the funds under its control and not necessary for current operating expenses be invested in accordance with subdivisions (c) to (g), inclusive, of Section 53602 and Section 53603 of the Government Code.

SEC. 49.

Section 9066 of the Health and Safety Code is amended to read:

9066.

The board of trustees shall cause the principal of the endowment care fund to be invested and reinvested in any of the following:

(a) Securities and obligations designated by Section 53603 of the Government Code.

(b) Obligations of the United States or obligations for which the faith and credit of the United States are pledged for the payment of principal and interest. These shall not be limited to maturity dates of one year or less.

(c) Obligations issued under authority of law by any county, municipality, or school district in this state for which are pledged the faith and credit of that county, municipality, or school district for the payment of principal and interest, if within 10 years immediately preceding the investment that county, municipality, or school district was not in default for more than 90 days in the payment of principal or interest upon any legally authorized obligations issued by it.

(d) Obligations of the State of California or those for which the faith and credit of the State of California are pledged for the payment of principal and interest.

(e) Interest-bearing obligations issued by a corporation organized under the laws of any state, or of the United States, provided that they bear a Standard and Poor’s financial rating of AAA at the time of the investment.

(f) Certificates of deposit or other interest-bearing accounts in any state or federally chartered bank or savings association, the deposits of which are insured by the Federal Deposit Insurance Corporation.

SEC. 50.

Section 9067 of the Health and Safety Code is amended to read:

9067.

The board of trustees may cause the funds deposited in the endowment income fund pursuant to subdivision (f) of Section 9065 that are not required for the immediate care of the cemeteries owned by the district to be invested in the securities and obligations designated by Section 53603 of the Government Code.

SEC. 51.

Section 12368 of the Public Utilities Code is amended to read:

12368.

Funds held by a district pursuant to a written agreement between the district and the employees of the district to defer a portion of the compensation otherwise receivable by the district’s employees and pursuant to a plan for such deferral as adopted by the board, may be invested in the types of investments set forth in subdivision ~~(r)~~ (q) of Section 53602 of the Government Code.

SEC. 52.

Section 28818 of the Public Utilities Code is amended to read:

28818.

(a) With the consent of the general manager, who shall seek consent from the board when deemed necessary, the chief financial officer may:

(1) Authorize any state or national bank in this state, a federally chartered or state chartered savings and loan association, or a trust company authorized to act as such in this state, to receive as the agent of the chief financial officer deposits of any securities acquired by the district.

(2) Place and maintain for safekeeping with any state or national bank in this state, a federally chartered or state chartered savings and loan association, or a trust company authorized to act as such in this state, any securities owned by the district.

(3) Make deposits of securities for safekeeping pursuant to the provisions of subdivision ~~(q)~~ (p) of Section 53602 of the Government Code.

(b) The financial institution selected pursuant to subdivision (a) shall have a total paid-in capital of at least one million dollars ($1,000,000). The chief financial officer shall take from the financial institution a receipt for the securities, and neither the chief financial officer nor the district is responsible for the custody and safe return of the securities until they are withdrawn from the financial institution by the chief financial officer. Any financial institution to which securities are delivered, either as agent or depositary for the chief financial officer, shall make such disposition of the securities as the chief financial officer directs and is responsible only for strict compliance with written instructions given to it by the chief financial officer. These securities shall at all times be subject to the order of the chief financial officer.

SEC. 53.

Section 107015 of the Public Utilities Code is amended to read:

107015.

The district shall have the power to own, operate, manage, and maintain a public transit system and associated facilities, and, in the exercise of the power under this part, the district is authorized in its own name to do all of the following:

(a) Adopt a seal and alter it at its pleasure.

(b) Enact ordinances, resolutions, policies, and guidelines.

(d) Make and enter into contracts and enter into stipulations of any nature whatsoever and do all acts necessary and convenient for the full exercise of the powers granted in this part for the operation of the district and transit services and facilities.

(e) Acquire, convey, construct, manage, maintain, and operate buildings and improvements, equipment, and assets of the district.

(f) Acquire, convey, and dispose of real and personal property, easements, and licenses.

(g) Adopt a conflict-of-interest code.

(h) Lease and sublease real and personal property, equipment, and facilities.

(i) Create and administer funds and the distribution of those funds.

(j) Create and enact taxes, fees, fares, and penalties, as permitted by law.

(k) Advocate on behalf of the district.

(l) Develop and pursue ballot measures.

(m) Enforce criminally or civilly, as applicable, any and all ordinances, resolutions, and policies as permitted by law.

(n) Create standing and ad hoc committees, as deemed necessary.

(o) Incur and encumber debts, obligations, and liabilities, including, but not limited to, bonds, notes, warrants, and other forms of indebtedness. However, the debts, obligations, and liabilities incurred by the district shall not be, nor shall they be deemed to be, debts, encumbrances, obligations, or liabilities of any member.

(p) Invest moneys in the district treasury that is are not needed for immediate necessities, as the board determines advisable, in the same manner and upon the same conditions as other local entities in accordance with Section 53603 of the Government Code.

(q) Pursue collection of obligations owed to the district.

(r) Sue and be sued, except as otherwise provided by law, in all actions and proceedings, in all courts and tribunals of competent jurisdiction.

(s) Exercise the right and power of eminent domain to take any property necessary or convenient to the exercise of the powers granted in this part.

(t) Subject to applicable law, provide transportation services or facilities outside the district’s jurisdictional boundaries provided a finding is made by the board that those services or facilities benefit the citizens or users of the transportation service or facilities.

(u) Do and undertake any and all other acts reasonable and necessary to carry out the purposes of this part.

SEC. 54.

Section 100.06 of the Revenue and Taxation Code is amended to read:

100.06.

(a) In accordance with the suspension under Section 100.05 of the Revenue and Taxation Code of subparagraph (A) of paragraph (1) of subdivision (a) of Section 25.5 of Article XIII of the California Constitution, the county auditor shall, for the 2009–10 fiscal year, do both of the following:

(1) (A) Except as otherwise provided in subparagraph (B) and subdivision (b), reduce the total amount of ad valorem property tax revenue otherwise required to be apportioned to a city, county, city and county, or a special district by 8 percent of the total amount of ad valorem property tax revenue apportioned to that local agency for the 2008–09 fiscal year.

(B) For purposes of calculating the amount of an 8-percent reduction required by subparagraph (A), any amount required to be paid or allocated to a city, county, or city and county under Section 97.68 or 97.70 for the 2008–09 fiscal year is included in determining the total amount of property tax revenue apportioned to that local agency for that fiscal year. A reduction made pursuant to this paragraph shall not, however, be made from any amount that is to be apportioned to a city, county, or city and county as a result of Section 97.68.

(2) Transfer to the Supplemental Revenue Augmentation Fund, hereby established in the county treasury for administration by the county office of education as provided in subdivision (c), an amount equal in the aggregate to that portion of the total amount of reductions required by paragraph (1). The aggregate amount of transfers required by this paragraph shall be made in two equal shares, with the first share being transferred on January 15, 2010, and the second share being transferred on May 3, 2010.

(b) (1) Upon written request by a local agency that is received no later than 30 days after the issuance on bonds under Section 6590 of the Government Code or December 1, 2009, whichever date is earlier, the Director of Finance may, on the basis of extreme hardship and only to the extent that the agency did not receive bond proceeds for the full amount of Proposition 1A receivables that it offered for sale under Section 6588.6, decrease the reduction amount that would otherwise be applied to that local agency under subdivision (a). In evaluating a written request for a decrease, the Director of Finance may consider factors including, but not limited to, all of the following:

(A) Whether the requesting local agency is the subject of a current bankruptcy proceeding, or whether incurring the full reduction amount otherwise required by subdivision (a) would likely cause the local agency to seek bankruptcy protection.

(B) Whether the requesting local agency has any financial reserves, and whether incurring the full reduction amount otherwise required by subdivision (a) would impair the ability of the local agency to provide a basic level of core public services.

(2) (A) If the Director of Finance approves a request made pursuant to paragraph (1), ~~he or she~~ they shall, by December 10, 2009, certify to the auditor of the county in which the requesting local agency is located, the amount of a decrease in the reduction otherwise to be incurred by the requesting local agency pursuant to subdivision (a). The amount of that decrease shall be applied in proportionate shares to increase the reduction amounts under subdivision (a) of all other local agencies in the county, so that there is no decrease in the aggregate amount of reductions to be incurred by local agencies located in the county. The Director of Finance may determine that the reduction amount that would otherwise be incurred by the requesting local agency under subdivision (a) should be decreased to zero. The amount of any certified decrease, in whole or in part, of a reduction amount shall be based upon the director’s evaluation of the factors considered with respect to the requesting local agency under paragraph (1) and the extent to which those factors indicate that the requesting local agency should be given relief.

(B) The Director of Finance may not grant decreases to local agencies within a single county that, in the aggregate, total more than 10 percent of the combined total of the reduction amounts under subdivision (a) for all local agencies in that county.

(3) (A) Two or more local agencies in a county may agree to reallocate exclusively among themselves all or part of their reduction amounts otherwise required by this section. Any local agencies entering into an agreement to so reallocate their reduction amounts shall, no later than November 2, 2009, notify the county auditor of that agreement and the reallocations specified in that agreement, except that these agreements may be entered into after November 2, 2009, with respect to any Proposition 1A receivable created pursuant to paragraph (2). The auditor shall thereafter implement subdivision (a) with respect to those local agencies in accordance with that agreement.

(B) A redevelopment agency that will, on behalf of the city, city and county, or county under Section 33681.12 of the Health and Safety Code, pay all or a portion of a reduction amount under subdivision (a) shall so notify the county auditor by November 2, 2009. The auditor shall thereafter decrease the city’s, city and county’s, or county’s reduction amount by the amount of the payment from the city, city and county, or county redevelopment agency to the extent that the payment is received prior to a date by which a transfer is required by paragraph (2) of subdivision (a).

(c) (1) Except for those moneys subject to paragraph (3), the moneys in the Supplemental Revenue Augmentation Fund shall be transferred by the county office of education to the Controller, in amounts and for those purposes as directed by the Director of Finance, exclusively to reimburse the state for the costs of providing health care, trial court, correctional, or other state-funded services and costs, until those moneys are exhausted. Moneys in a Supplemental Revenue Augmentation Fund shall be transferred to reimburse only those costs incurred, and the costs of services provided, in the county in which those moneys are collected.

(2) (A) Entities of state government, including the Administrative Office of the Courts, that are responsible for the functions funded with moneys transferred pursuant to paragraph (1) shall keep records, as required by the Department of Finance, of expenditures made in the county pursuant to that paragraph, and shall provide to the Department of Finance any information required by the department with respect to those expenditures.

(B) Moneys transferred pursuant to paragraph (1) for the funding of trial courts shall reimburse transfers from the state General Fund to the Trial Court Trust Fund.

(C) The county office of education shall make a transfer under paragraph (1) within five days of that transfer being directed by the Department of Finance, and shall provide to the Controller, with that transfer, information specifying the purpose of that transfer.

(D) Moneys in the Supplemental Revenue Augmentation Fund that are not transferred in a fiscal year and are not subject to paragraph (3) shall be retained in the fund for transfer pursuant to paragraph (1) in a subsequent fiscal year.

(3) Any moneys in the Supplemental Revenue Augmentation Fund that are determined by the Director of Finance not to be necessary to fund the provision of state-funded services and costs shall be transferred to the county’s Educational Revenue Augmentation Fund, no later than June 1, 2010. Funds transferred to the county’s Educational Revenue Augmentation Fund pursuant to this paragraph shall not be apportioned to community college districts. This paragraph shall not be construed to increase any allocations of excess, additional, or remaining funds that would otherwise have been allocated to cities, counties, cities and counties, or special districts pursuant to clause (i) of subparagraph (B) of paragraph (4) of subdivision (d) of Section 97.2 of, clause (i) of subparagraph (B) of paragraph (4) of subdivision (d) of Section 97.3 of, or Article 4 (commencing with Section 98) of Chapter 6 of Part 0.5 of Division 1 of, the Revenue and Taxation Code had this section not been enacted.

(4) (A) Each county auditor shall report to the Department of Finance the amount of property tax revenue that was transferred from each local agency located in the county to the county’s Supplemental Revenue Augmentation Fund. The county auditor first shall report this information on or before January 15, 2010, and then on or before May 15, 2010, and shall provide a copy of each report to each local agency located in the county.

(B) When transferring the amounts required by paragraph (1), each county auditor shall also provide the Department of Finance, the Legislative Analyst’s Office, and each local agency located in the county with information detailing how each local agency’s reduction amount under subdivision (a) was calculated. This information shall first be reported on or before January 15, 2010, and then on or before May 15, 2010.

(d) For the 2010–11 fiscal year and each fiscal year thereafter, the county auditor shall apportion ad valorem property tax to cities, counties, cities and counties and special districts without regard to the changes in property tax revenue apportionments required by this section.

(e) (1) In accordance with Section 25.5 of Article XIII of the California Constitution, the state shall fully reimburse the revenue reductions incurred pursuant to subdivision (a) no earlier than June 6, 2013, except as allowed by paragraph (2), but not later than June 13, 2013, as provided in the terms and conditions of the sale of the bonds authorized by Section 6591 of the Government Code, in the following amounts determined by the Controller:

(A) (i) The amount due to the authority that issued bonds pursuant to Section 6590 of the Government Code to purchase Proposition 1A receivables pursuant to Section 6588.6 of the Government Code shall be paid and calculated as follows:

(I) The principal amount of the bonds on the date of the maturity or upon call.

(II) Periodic interest on the bonds as applicable, except that if the bonds sold pursuant to Section 6590 of the Government Code bear interest on periodic interest payment dates pursuant to subdivision (e) of Section 6591 of the Government Code, the state shall pay periodic interest payments on or before each interest payment date.

(III) The accrued interest on the bonds upon call, on the date of maturity, or a later date, if repayment does not occur prior to the date of maturity.

(ii) The repayment date shall be certified by the Treasurer and the Director of Finance at the time of approval of the terms of the bonds pursuant to paragraph (4) of subdivision (x) of Section 6588 of the Government Code and shall be specified in the documents pursuant to which the bonds are issued. Upon certification of that repayment date, as provided in this subdivision, the obligation of the state to make payment on that date shall be deemed an obligation imposed by law.

(iii) In the event the state fully repays the reduction amounts in accordance with paragraph (2) prior to the maturity date of the bonds, the payment amount shall be equal to the amount required, as shown in a report of an independent certified public accountant provided by the authority, to legally defease the bonds.

(B) The amount due to each local agency that does not sell all of its Proposition 1A receivables to an authority described in subparagraph (A) or to purchasers of Proposition 1A receivables pursuant to subdivision (t) of Section 53603 of the Government Code shall be the sum of both of the following:

(i) The unpaid principal amount of the revenue reduction incurred by each local agency pursuant to subdivision (a), less the amount of the revenue reduction that is attributable to Proposition 1A receivables that are sold to an authority described in subparagraph (A).

(ii) Interest on the amount described in clause (i) from the time of each revenue reduction pursuant to paragraph (2) of subdivision (a), at a rate, set by the Department of Finance no later than 60 days after the operative date of this section, that is higher than the rate of interest earned by the Pooled Money Investment Account but no greater than 6 percent.

(2) The state may repay the revenue reductions incurred pursuant to subdivision (a) before June 6, 2013, upon the order of the Director of Finance issued no earlier than 30 days after delivery of a written notice of the intent to do so to the Joint Legislative Budget Committee.

(3) The payment of the amounts specified in this subdivision shall take priority over all other obligations of the state in any fiscal year in which those payments are due, excepting payments to schools under Article XVI of the California Constitution and debt service on general obligation bonds. The Controller shall take all prudent means within ~~his or her~~ their legal discretion to assure that sufficient sums are available to pay these amounts and all other obligations of higher priority.

(4) Notwithstanding Section 13340 of the Government Code, there is hereby continuously appropriated to the Controller from the General Fund, without regard to fiscal year, those amounts sufficient to pay the amounts specified in this subdivision.

(f) (1) Notwithstanding any other law, if by June 30, 2013, the state has not fully reimbursed each local agency for its revenue reduction incurred pursuant subdivision (a) in the amounts as required by subdivision (e), the issuer of any bonds issued pursuant to subdivision (x) of Section 6588 of the Government Code, or any local agency that did not participate in the sale of Proposition 1A receivables pursuant to paragraph (2) of subdivision (x) of Section 6588 of the Government Code, may seek a writ of mandamus to compel the Controller to fully pay the amounts the state is obligated to pay under subdivision (e) and Section 25.5 of Article XIII of the California Constitution. A petition seeking a writ of mandamus pursuant to this subdivision, and any appellate proceedings arising from that action, shall have priority and preference in setting and review in furtherance of the repayment deadline mandated by Section 25.5 of Article XIII of the California Constitution. A petition for a writ of mandamus authorized by this subdivision may also be filed in the California Supreme Court pursuant to that court’s original jurisdiction described in Section 10 of Article VI of the California Constitution.

(2) In authorizing an original mandamus petition to the California Supreme Court pursuant to this paragraph, the Legislature finds and declares all of the following:

(A) The Legislature is expressly required by Section 25.5 of Article XIII of the California Constitution to enact a statute mandating the full and timely repayment, as provided by subdivision (e), of any revenue reduction incurred by a local agency pursuant to subdivision (a) and all accrued interest thereon.

(B) Full and timely repayment of any revenue reduction incurred by a local agency pursuant to subdivision (a), with interest, is critical to every local agency from which those funds were diverted.

(C) The Legislature further finds and declares that conclusively determining, no later than the deadline mandated under Section 25.5 of Article XIII of the California Constitution, that the state’s obligation under subdivision (e) to fully repay any revenue reduction incurred by a local agency pursuant to subdivision (a) and all accrued interest thereon is a matter of vital and urgent public importance.