Senate Bill 998 would raise the commercial paper portfolio concentration limit to 40% for cities and special districts with $100 million or more in investment assets, establish a combined issuer concentration limit of 10% for commercial paper and medium-term notes for cities and special districts based upon their total investment assets, and allow federally recognized California Indian tribes to invest in JPA investment pools.
Under current law, counties and the cities of San Francisco and Los Angeles are authorized to invest up to 40% of their securities portfolios in commercial paper (unsecured, short-term corporate debt). Other cities and special districts are only authorized to invest up to 25%. SB 998 would allow cities and special districts with $100 million or more of investment assets (the SEC’s benchmark for a sophisticated institutional investor) to invest up to 40% of their portfolios in commercial paper.
Under current law, cities and special districts have a 10% single issuer commercial paper concentration limit, based on the issuer’s total commercial paper allocation. Yet corporate medium-term notes, which carry higher risk due to longer maturities, have no single issuer concentration limit. SB 998 closes this loophole by establishing a combined 10% single issuer commercial paper and medium-term note concentration limit, based upon a local agency’s total investment assets.
Under current law, federally recognized California Indian tribes are classified as public agencies, but cannot participate in JPA investment pool agreements. SB 998 would allow Indian tribes to invest in these pools, which offer stable investment opportunities.
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