Docstoc

Senate Bill 64

Document Sample
Senate Bill 64 Powered By Docstoc
					SB 64 – CD Link Program




                            Office of the State Treasurer




                         2011 Legislative Session

                             Senate Bill 64
  Certificates of Deposit (CD) Link Program




      Office of the State Treasurer   1                     February 2011
SB 64 – CD Link Program


Goal of CD Link Program:
#1   Provide Nevada lending institutions with money for loans at
     a reduced rate of interest to Nevada businesses, local
     government entities, higher education institutions, and to
     businesses which agree to relocate to this state.

#2   Partner with local community banks and with the federal
     Small Business Administration to provide market rate loans
     backed by the SBA Loan Guarantee Program to small
     businesses.

#3   Assist Nevada businesses, local government entities, higher
     education institutions, and businesses which agree to
     relocate to this state in the creation or safekeeping of jobs.


      Office of the State Treasurer   2                  February 2011
SB 64 – CD Link Program


Multiple Benefits of Program
• Nevada small businesses, political subdivisions, institutions of
  higher learning, and out-of-state businesses which choose to
  relocate to Nevada receive below market rate loans.

• Nevada financial institutions access additional source of
  liquidity and are able to couple qualified loans with the added
  security of the SBA loan guarantee program.

• The State of Nevada assists small businesses in the
  creation/saving of jobs, resulting in additional business and
  personal taxes being generated, which is expected to more
  than offset the state’s reduced interest earnings on
  linked deposits.


      Office of the State Treasurer   3                February 2011
SB 64 – CD Link Program


Circulation of Approved Funding

                                                                          Economic Development
     CD Deposit Funds:
     2% below market rate                                                     Job Saving & Creation
                                               State of Nevada
                                                                                      Additional Tax Base




Financial Institutions                                                             Nevada Businesses
                                          Loan to qualified businesses:
                                          2% below market rate




          Office of the State Treasurer              4                                   February 2011
SB 64 – CD Link Program


Proven Track Record
 • CD Linked Deposit programs are successfully being used in
   many states to assist with business growth and stabilization,
   resulting in higher employment and tax revenues to the state.


     EXAMPLES OF CD LINK PROGRAM SUCCESSES

                     Amt. Invested     Enrolled Loans   Jobs Created/Saved   Estimated Tax Impact
*Missouri                $1.1 B           7,662               5,900              N/A
#Washington              $61 M             122                1,478           $87.2 M

 * Jan. 2006 to Jan. 2011
 # Fiscal Year 2008




       Office of the State Treasurer          5                                 February 2011
SB 64 – CD Link Program


History of CD Link Program Legislation:
2009 Session
 • Worked with Assemblyman Morse Arberry to amend his AB 451
   legislation to include a CD Link program.

 • Heard in Assembly Ways & Means, Assembly Government Affairs, and
   Senate Government Affairs.

 • Assembly Passage:            Yea 37, Nay 3, Excused 2
 • Senate Passage:              Yea 12, Nay 9

 • Enrolled and delivered to Gov. Gibbons on June 1, 2009.

 • Vetoed by Gov. Gibbons on June 9, 2009.

 • Returned to 2011 Session.

 • Treasurer’s Office sponsors SB 64, seeking to enhance AB 451.




      Office of the State Treasurer      6                     February 2011
SB 64 – CD Link Program


What’s Different about SB 64?

Inclusion of:

 • Political subdivisions of this state.

 • Nevada institution of higher education.

 • Out-of-state businesses which choose to relocate to this
   state.



      Office of the State Treasurer   7            February 2011
SB 64 – CD Link Program


Nuts & Bolts of CD Link Program:
 • Treasurer agrees to invest in Nevada lending institutions by providing CDs at
   a reduced rate of interest of up to 2%.
 • The qualified lending institution in turn agrees to provide a similarly
   reduced rate of interest loan to an eligible entity.

 • The lending institution shall apply the standard lending criteria of
   the lending institution to determine the creditworthiness of each eligible
   entity.
 • A lending institution-approved loan must include a completed one
   double-sided page Linked Deposit application.
 • As a deposit with the qualified lending institution, the state does NOT have
   any default risk.
 • Individual loans cannot exceed $500,000 and have a term of repayment of
   no more than 5 years.



       Office of the State Treasurer   8                          February 2011
SB 64 – CD Link Program


Funding Mechanism:

 • State General Portfolio Investment Fund
       Aggregate amount not to exceed $20 million
       Equates to about 1.3% of $1.5 billion fund
       Current return on the state’s investment portfolio:
                                      0.49%

NOTE: The potential loss of any present interest earnings will be
offset by increased employment and various taxes paid to the State
by those businesses and employees.


      Office of the State Treasurer    9              February 2011
SB 64 – CD Link Program


Lending Criteria:
Preferences:

   A member of a racial or ethnic minority

   A woman

   An honorably discharged veteran of the Armed Services of the
   United States

   A business engaged in the production or sale of fuel or power
   derived from renewable energy.

      Office of the State Treasurer   10             February 2011
SB 64 – CD Link Program


Eligible Entities:
Nevada business:
   Employ not more than 100 employees.
   Be headquartered in this state.
   Maintain offices or operating facilities in this state.
   Transact business in this state
   Be organized for profit.
   Satisfy the lending criteria of the qualified lending
   institution.

Eligible Uses: Working capital, acquiring real property,
establishing a line of credit, financing of accounts receivable, and
purchasing equipment.

       Office of the State Treasurer   11               February 2011
SB 64 – CD Link Program

Out-of-State Business:
   Employ not more than 100 employees.
   Be organized for profit.
   Satisfy the lending criteria of the qualified lending institution.
   Provide proof that the business intends to move to Nevada
   within 180 days after receiving a linked deposit loan.
   Provide proof that the business intends to employ in this state
   at least 10 full-time employees.
Eligible Uses: Working capital, acquiring real property,
establishing a line of credit, financing of accounts receivable,
opening a facility or office in this state, and purchasing equipment.



       Office of the State Treasurer   12                 February 2011
SB 64 – CD Link Program



Political Subdivision:
   Satisfy the lending criteria of the qualified lending institution.
Eligible Uses: Financing capital improvements and capital
outlay.



Institution of Higher Education
   Satisfy the lending criteria of the qualified lending institution.
Eligible Uses: Financing capital improvements.




      Office of the State Treasurer   13                  February 2011
SB 64 – CD Link Program

Oversight and Transparency: Regulations
Lending Institution Requirements
 • Must enter into a deposit agreement with the Treasurer’s Office
 • Must verify the entity is eligible for such a loan applying the standard
   lending criteria of the lending institution.
 • Must submit a qualified loan package to the Treasurer’s Office

Treasurer’s Office Requirements
 • Determine and calculate all linked deposit rates of interest on qualified CD
   Linked Deposits.
 • Track all CD Linked Deposits and subsequent loans to eligible entities.
 • Compile and maintain on its public website information about CD deposits
   and subsequent loans made to eligible entities by lending institutions.
 • Submit quarterly reports to the Governor, Legislature, and Board of Finance
   detailing CD Linked Deposit loans, as well as an annual report detailing
   employment and economic results.


       Office of the State Treasurer   14                            February 2011

				
DOCUMENT INFO