2005 California Government Code Sections 5920-5924 CHAPTER 12. PUBLIC FINANCE CONTRACTS

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