“Bonds” as used in this chapter means (a) any bonds or other evidences of indebtedness issued after the effective date of this chapter by the state or any state department, board, agency or authority or (b) any bonds or other evidences of indebtedness issued by any joint powers agency created under Chapter 5 (commencing with Section 6500) of Division 7 that are payable from payments made with respect to a lease or sale of property to or from the state or any state department, board, agency, or authority. For purposes of this chapter, “evidence of indebtedness” includes, but is not limited to, certificates of participation or interests in any rental or lease payments or installment purchase payments, in an aggregate principal amount exceeding $10,000,000, to be made by the state or any state department, board, agency, or authority with respect to buildings or other capital improvements.
Chapter 9Sale of State Bonds
Section § 5700
This section defines 'bonds' as either debts issued by the state or any of its departments after this chapter took effect, or by a joint powers agency. These debts can be bonds or other signs of owing money that relate to property leases or sales involving the state. The term 'evidence of indebtedness' includes certificates for future payments the state agrees to make for things like buildings or improvements, provided the total is over $10 million.
bonds indebtedness evidence of indebtedness certificates of participation installment purchase payments joint powers agency lease payments property sales state departments capital improvements
Section § 5701
This law states that the rules in this chapter apply to every bond, no matter what other laws say or what the bond's own terms state.
The provisions of this chapter apply to every bond regardless of any other provision of law or any provision of the bond’s authorization.
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Section § 5702
This law states that the State Treasurer is the only person allowed to sell state bonds. They must also work with the government department or agency that needs the funds from the bond sale to plan and time the sale correctly.
The State Treasurer shall be the sole agent for offering and selling bonds. In selling bonds on behalf of any department of state government or agency of the state, the State Treasurer shall schedule the sale of such bonds in such a manner that the sale shall be coordinated with the program of such department or agency necessitating the sale of such bonds.
State Treasurer bonds sale coordination state government agency state department funding bond sale schedule sole agent offering bonds selling bonds departmental programs agency programs fundraising bonds government financing
Section § 5703
This law outlines how the California State Treasurer should manage the process of selecting underwriters for selling state bonds. Generally, the Treasurer must use a competitive process involving written qualifications from at least 20 firms, consider minority and women business enterprise participation, and keep records open for inspection for six months.
If a pool of underwriters is formed, this process is repeated every two years. In special cases, like when time constraints could harm the state's finances, underwriters can be chosen without this process.
Bonds sold as financing through public or nonprofit entities have similar processes but can allow underwriter additions from project recommendations without competitive bidding in certain cases. Financial records must be kept for each bond sale and include payments to underwriters and fees to other service providers.
The State Auditor audits these records and reports to the Legislature, comparing costs and interest rates with those from other states. This law excludes certain requirements from public contracts and rulemaking procedures from applying to the Treasurer's agreements related to bond sales.
(a)CA Government Code § 5703(a) Except as provided in subdivisions (b), (c), and (d), the Treasurer, in exercising the duties of agent for offering and selling bonds, whose duties include, among others, establishing the timing of a sale, preparation or approval of the documentation for the sale, sole authority to select the underwriters for negotiating the sale, and executing the bond purchase agreement on behalf of the state or the state’s agencies, is responsible for developing and implementing a competitive process for selection of underwriters for negotiated offerings of bonds. The competitive process may be conducted on a issue-by-issue basis or to establish one or more pools of underwriters for various types of issues. The competitive process
shall have at least all of the following features:
(1)CA Government Code § 5703(a)(1) Solicitation of written qualifications from at least 20 underwriting firms.
(2)CA Government Code § 5703(a)(2) Consideration of the goals for minority and women business enterprise participation in professional bond services contracts.
(3)CA Government Code § 5703(a)(3) The written submissions shall be available for inspection at the office of the Treasurer for a period of at least six months.
(4)CA Government Code § 5703(a)(4) If a pool of underwriters is established, the competitive process shall be repeated at least every 24 months to reestablish the pool of underwriters.
(b)CA Government Code § 5703(b) For negotiated offerings of bonds by state financing authorities
that act as conduits to provide financing to other public, nonprofit, or private organizations, the Treasurer shall use the competitive process described in subdivision (a) to establish one or more pools of underwriters for each financing authority. The Treasurer may make additions to a pool without competitive solicitation, on a case-by-case determination upon the recommendation of a project applicant, where the Treasurer finds that the underwriter to be added has provided significant services to the project applicant with the expectation of compensation for those services from underwriting the revenue bonds which will fund the applicant’s project.
(c)CA Government Code § 5703(c) The Treasurer may select underwriters for a negotiated sale of bonds by means other than as described in subdivision (a) if the Treasurer makes a written finding that extraordinary market conditions
do not allow enough time to comply with subdivision (a) without risking financial detriment to the state.
(d)CA Government Code § 5703(d) Subdivisions (a), (b), and (c) shall not apply to the issuance of state bonds for which the Treasurer is precluded by statute from selecting underwriters.
(e)CA Government Code § 5703(e) For negotiated sales, the Treasurer shall maintain records of all cost information pertinent to the initial offering of all state bonds, except that in the case of bonds issued by a state financing authority, as described in subdivision (b), the issuing state financing authority shall instead be responsible for maintaining the same cost information on bonds it has issued. The information shall include, but not be limited to, all of the following:
(1)CA Government Code § 5703(e)(1) All amounts paid
out of bond proceeds to the underwriter, detailed by management fee, takedown, risk, and underwriter’s expenses.
(2)CA Government Code § 5703(e)(2) All costs paid out of bond proceeds to rating agencies for rating of the bonds.
(3)CA Government Code § 5703(e)(3) All fees paid out of bond proceeds to bond counsels, trustees, or financial advisers relating to the initial offering of the bonds.
(4)CA Government Code § 5703(e)(4) The interest rate to be paid on the bonds.
(f)CA Government Code § 5703(f) For competitive sales, the Treasurer shall maintain records of all bids submitted and the documentation of bid verifications including the terms of sale and the calculation of net interest cost or true interest cost.
(g)CA Government Code § 5703(g) The State Auditor shall audit the cost records required to be maintained pursuant to subdivision (e) and conduct a review of the records required to be maintained pursuant to subdivision (f).
(h)CA Government Code § 5703(h) The State Auditor shall report whether this section is being fully implemented. The State Auditor shall make cost and interest rate comparisons with similar initial bond offerings of other states where possible. The State Auditor shall submit a report to the Legislature on March 1, 1993, and March 1, 1995, for bonds sold during the two calendar years immediately preceding the year in which the report is due.
(i)CA Government Code § 5703(i) Section 10295 of, and Article 4 (commencing with Section 10335) and Article 5 (commencing with Section 10355) of Chapter 2 of Part 2 of Division 2 of, the Public
Contract Code are not applicable to agreements entered into by the Treasurer in connection with the sale of any evidence of indebtedness.
(j)CA Government Code § 5703(j) The Treasurer is exempt from the rulemaking procedures and requirements of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3) when entering into agreements in connection with the sale or administration of any evidence of indebtedness, including the establishment of pools of eligible contractors, pursuant to this chapter.
competitive bond underwriting underwriter selection minority business participation women business enterprise bond sale documentation pool of underwriters financial record maintenance state bonds issuance conduit financing Treasurer's authority auditor review cost and interest comparison exemption from Public Contract Code administrative procedure exemption bond sale agreements
