Report Title:

Linked Investments; Agricultural Loans

Description:

Establishes linked investments to provide loan funds for agriculture. Authorizes the State to invest in linked investments. Provides that a lending institution is liable for default of a linked investment loan. (HB3067 HD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

3067

TWENTY-THIRD LEGISLATURE, 2006

H.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to state funds.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Chapter 36, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§36- Linked investments. (a) An eligible lending institution shall accept and review applications for loans, certify applicants that are eligible borrowers, and prepare linked investment loan packages in a form and manner prescribed by the director of finance. The loan package shall include information on the amount of the loan requested, the purpose of the loan, and the eligible lending institution's certification that the applicant is an eligible borrower. The director of finance shall accept or reject the linked investment loan package, with consideration given to the availability of state funds. Upon acceptance of the linked investment loan package, the director of finance, pursuant to section 36-21, shall place a certificate of deposit for the loan amount with the eligible lending institution.

(b) The director of finance may invest not more than ten per cent of moneys available in the state treasury for deposit, under section 38-2, in linked investments.

(c) Loans made through linked investments shall not exceed $_____ and shall not be used for the purchase of real property as defined in section 246-1.

(d) In the event that an eligible borrower defaults on a loan made through a linked investment, the State shall have no liability for payment of the outstanding amount of the loan.

(e) As used in this section:

"Eligible borrower" means an entity, individual or corporate, that:

(1) Is engaged in agriculture, as defined in section 163D-2, or proposes to be engaged in agriculture, as defined in section 163D-2, and submits a viable agricultural business plan; and

(2) Is certified as an eligible borrower by an eligible lending institution.

"Eligible lending institution" means any federally insured national or state bank, savings and loan association, financial services loan company, or federal or state credit union insured by the National Credit Union Administration, which is authorized to do business in this state and that has entered into an agreement with the director of finance to receive linked investments.

"Linked investment" means a certificate of deposit placed with an eligible lending institution; provided that the eligible lending institution agrees to lend the value of the certificate of deposit to an eligible borrower at a rate not more than the prime rate or ___ per cent a year, whichever is less; and provided further that the certificate of deposit shall:

(1) Earn a rate of interest of not more than one per cent below current market rates or two per cent, whichever is greater;

(2) Not be subject to a penalty for early withdrawal; and

(3) Have a maturity of one year for the initial period with an option for renewal for eight additional one-year periods."

SECTION 2. Section 36-21, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The director of finance may invest any moneys of the State which in the director's judgment are in excess of the amounts necessary for meeting the immediate requirements of the State and where in the director's judgment the action will not impede or hamper the necessary financial operations of the State in:

(1) Any bonds or interest-bearing notes or obligations:

(A) Of the State (including state director of finance's warrant notes issued pursuant to chapter 40);

(B) Of the United States;

(C) For which the faith and credit of the United States are pledged for the payment of principal and interest;

(2) Federal Farm Credit System notes and bonds;

(3) Federal Agricultural Mortgage Corporation notes and bonds;

(4) Federal Home Loan Bank notes and bonds;

(5) Federal Home Loan Mortgage Corporation bonds;

(6) Federal National Mortgage Association notes and bonds;

(7) Student Loan Marketing Association notes and bonds;

(8) Tennessee Valley Authority notes and bonds;

(9) Securities of a mutual fund whose portfolio is limited to bonds or securities issued or guaranteed by the United States or an agency thereof or repurchase agreements fully collateralized by any such bonds or securities;

(10) Securities of a money market mutual fund that is rated AAA, or its equivalent, by a nationally recognized rating agency or whose portfolio consists of securities that are rated as first tier securities by a nationally recognized statistical rating organization as provided in 17 Code of Federal Regulations section 270.2a-7;

(11) Federally insured savings accounts;

(12) Time certificates of deposit;

(13) Certificates of deposit open account;

(14) Repurchase agreements with federally insured banks, savings and loan associations, and financial services loan companies;

(15) Student loan resource securities including:

(A) Student loan auction rate securities;

(B) Student loan asset-backed notes;

(C) Student loan program revenue notes and bonds; and

(D) Securities issued pursuant to Rule 144A of the Securities Act of 1933, including any private placement issues;

issued with either bond insurance or overcollateralization guaranteed by the United States Department of Education; provided all insurers maintain a triple-A rating by Standard & Poor's, Moody's, Duff & Phelps, Fitch, or any other major national securities rating agency;

(16) Commercial paper with an A1/P1 or equivalent rating by any national securities rating service; [and]

(17) Bankers' acceptances with an A1/P1 or equivalent rating by any national securities rating service; and

(18) Linked investments under section 36- ;

provided that the investments are due to mature not more than five years from the date of investment. Income derived from those investments shall be a realization of the general fund; provided that income earned from moneys invested by the general funds, special funds, bond funds, and trust and agency funds on an investment pool basis shall be paid into and credited to the respective funds based on the contribution of moneys into the investment pool by each fund. As used in this section, "investment pool" means the aggregate of state treasury moneys that are maintained in the custody of the director of finance for investment and reinvestment without regard to fund designation."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2007.