2011 California Code
Government Code
TITLE 10. CALIFORNIA INDUSTRIAL DEVELOPMENT FINANCING ACT [91500 - 91574]
ARTICLE 3. California Industrial Development Financing Advisory Commission
Section 91558.5

(a) For purposes of this section, the following terms have the following meanings:

(1) Economic development lenders may include public, private, or quasi-public community development loan funds, microenterprise funds, community development corporation-based loan funds, community and economic development venture funds, revolving loan funds, and community development financial institutions, as defined in Section 1805.200 of Title 12 of the Code of Federal Regulations.

(2) Fund means the Community and Economic Development Fund established pursuant to subdivision (b).

(3) Measured criteria means evaluation of active loans based upon the lender s original underwriting criteria, including, but not limited to, the payment history of the borrower, the relationship between the lender and borrower, and the borrower s pledged collateral. Measured criteria also includes traditional credit risk analysis.

(4) Overcollateralization means the assignment of collateral in excess of the principal amount of the debt secured by that collateral.

(5) Reserve fund means cash assets held in the fund to offset loan losses otherwise intended to meet the dividend obligations of the commission pursuant to this section. The reserve fund may be capitalized by the transfer to the fund made by the act adding this section, by loan payments from loans pledged to the commission by economic development lenders pursuant to subdivision (d), and by revenue generated through the bonds secured by those loans.

(6) Subordination means the commission s right to receive payment on the loans securing the bonds issued by the commission shall be subordinate to the obligations owed to the purchasers of those bonds.

(b) The Community and Economic Development Fund is hereby created in the State Treasury and, notwithstanding Section 13340, this fund is continuously appropriated to the commission for purposes of this section. The commission may expend up to 10 percent of any moneys appropriated by the Legislature to the fund for administrative costs directly related to the implementation of this section.

(c) The commission shall establish procedures to evaluate and certify the participation of economic development lenders in the state in a program that allows lenders to recapitalize their financial resources in order to meet the current demands of borrowers. The evaluation and certification procedures shall include the performance of due diligence on the part of economic development lenders and for each loan a lender seeks to pledge as collateral to the commission pursuant to subdivision (f).

(d) To the extent funds are appropriated by the Legislature for the purposes of this subdivision, the commission shall develop and maintain a data base on economic development lenders in the state, including, but not limited to, the asset size of each lender, average loan size and loan duration, borrower target groups, and loan default and loan loss rates. The data base shall also include information on loans pledged by economic development lenders to participate in the program.

(e) To the extent funds are appropriated by the Legislature for the purposes of this subdivision, the commission shall recommend minimum standards for loan documentation, loan underwriting, and loan servicing for economic development lenders who participate in the program. The loan documentation, underwriting, and servicing standards shall be designed to promote uniformity in the commission s process of loan evaluation and due diligence for individual loans. The loan documentation and underwriting standards shall seek to be consistent with the mission of economic development lenders eligible for participation under this part. The commission shall develop measurement criteria for consideration of existing loans pledged for participation in the program that were made by economic development lenders prior to the establishment of the minimum standards.

(f) To the extent funds are appropriated by the Legislature for the purposes of this subdivision, the commission shall provide technical assistance to lenders in order to increase utilization of the minimum loan documentation, loan underwriting, and loan servicing standards.

(g) Once certified by the commission to participate in the program, economic development lenders may pledge as collateral to the commission current and active loans in exchange for cash liquidity. The amount of cash liquidity available for each loan shall be determined on a loan-by-loan basis, shall be based upon the projected income from the loan and the perceived risk of the loan, and shall provide the economic development lender a reasonable value for the loan asset. The income stream from loans pledged as collateral to the commission shall accrue to the commission in order to regenerate the fund.

(h) Loans pledged to the commission pursuant to subdivision (g) shall serve as collateral for bonds issued by the commission. The revenue generated by the issuance of bonds secured by those loans shall be used to regenerate the fund and may also be used by the commission to establish and recapitalize a reserve fund. The commission may provide credit enhancements for these bonds in order to support the credit quality of the bonds and increase their marketability to investors. Credit enhancements by the commission may include, but shall not be limited to, overcollateralization, subordination, third party letters of credit, or a reserve fund dedicated to ensure full and timely repayment of the bonds.

(i) The commission shall report to the Governor and the Legislature on or before January 1, 2004, on the effectiveness of this program in creating a secondary market for community and economic development lenders and on any recommended changes to the program established by this section.

(j) This section shall remain in effect only until January 1, 2005, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2005, deletes or extends that date. This subdivision shall not, however, apply to any bonds secured by loans pledged to the commission pursuant to this section, if those bonds were issued prior to, and remain outstanding on, January 1, 2005. Those bonds shall remain outstanding until their redemption date or until the time that they are purchased or mature, and the commission may issue bonds for the purpose of refunding those outstanding bonds only for the purpose of reducing the commission s borrowing costs, and provided further that the term of the bonds so refunded is not extended. Upon prepayment of the loans securing those bonds, the bonds shall be redeemed as soon as practicable.

(Added by Stats. 1999, Ch. 863, Sec. 2. Effective January 1, 2000. Repealed as of January 1, 2005, but with continuing effect, as provided in subd. (j).)