Private Placement Bonds

Background
On December 18, 2008 the California Department of Finance issued Budget Letter 08-33 ordering state agencies to cease authorizing new grants and to order grantees to suspend projects unless the contracting entity could continue work with non-state funds. The State immediately ceased processing invoices and halted payments on already conducted work. This decision was made by the Pooled Money Investment Board (PMIB), a three member board chaired by the State Treasurer Bill Lockyer and additionally comprising the State Controller John Chiang and the State Director of Finance Michael C. Genest.

In recognition of the adverse impacts of the state freeze on bond funded projects, at its February 18, 2009 meeting the PMIB approved a resolution consenting to the use of proceeds from the sale of Private Placement of Bonds for purposes authorized under the Bond Acts. Soon after the PMIB action, the Treasurer announced a $194 million bond sale to fund eleven road projects in the Bay Area and other northern California counties; bonds were purchased by the Bay Area Toll Authority which specified the projects that would receive their funding.

Private Placement of Bonds
The basic premise of this concept is simple: qualified institutional buyers or accredited investors, as defined by S.E.C. regulations, can enter into bond purchase agreements with the Treasurer for a negotiated amount, term and interest rate, and in exchange the agreement will specify that the State will dedicate the proceeds from the bond sales to enumerated projects or programs. The minimum amount initially set by the State is $5 million, with terms ranging from 18 to 36 months. The State will not obtain any rating on the bonds.

Next Steps for Groups Interested in Participating
Regions from around the state are organizing themselves to pull together bundles of projects that can meet the $5 million threshold. These groups are identifying which stopped projects would be best suited to participate and brainstorming potential investors.

• Bundle project to reach the $5 million threshold: combined projects can be of any type and from any bond. They have to be stopped.
• Use a survey to include all the information needed for each project.
• Ensure your project(s) is posted on the Market Place website (details coming soon)
• Find potential investors: Community Foundations, local banks and investment firms, county treasurers, philanthropic foundations, other public/county pots of money,
• You can use the proposal provided here to help tailor your pitch to potential investors.
• Communicate with agencies. Bundled projects will go through the funding agencies for approval. It is important that the funding agencies feel comfortable with the bundles.
• Each bundle will have to identify one intermediary entity to liaison between the State Treasurer and the investors. We may be able to lump bundles together into mega-bundles all with one or a few intermediaries. If not, each bundle will need its own intermediary. This could be a community foundation or other non-profit.

Below are documents that may help as we develop a proven process. Please inquire about any additional information you would find helpful. Also visit http:stopworkimpact.ning.com

For more information contact Paul Gilligan at pgilligan@pcl.org or 916-313-4506