by CalWatchdog Staff | December 17, 2010 1:12 pm
Dec. 17, 2010
By KATY GRIMES
On Dec. 15, a state investment fund loaned more than a million dollars to the state Department of Corrections and Rehabilitation. The Pooled Money Investment Board, which approved the loan, plays a quiet role in the complicated process of getting expensive infrastructure projects built.
The money comes from the state’s Pooled Money Investment Account (PMIA). It’s through the PMIA that, “The State Treasurer invests taxpayers’ money to manage the State’s cash flow and strengthen the financial security of local governmental entities,” according to the Treasurer’s website.
“The PMIA is a pot of money managed by investment professionals to help manage the state’s cash flow,” said Tom Dressler, spokesman for state Treasurer Bill Lockyer. “Until 2008 the main function was to provide funds for start-up money to agencies.” Now, agencies usually need to have bonds sold up front before starting projects. He said the new policy is better for infrastructure financing and helps the state manage cash flow more efficiently, stressing that “the state needs regular access to the bond market.”
The corrections department loan amount of $1,015,000 was approved by the PMIA board, made up of the State Treasurer, State Controller and Director of Finance, represented at Wednesday’s meeting by officials from the state offices. Though the meeting was open to the public, no one from the public seemed to be in attendance.
This loan is just one in a series of loans to the Corrections Department, with the most recent loans going to pay vendors at the San Bernardino County Adelauto Detention Center and the Northern California Reentry Facility in Stockton. Those loans were for $9,943,000 and $9,263,000, respectively, all of which are a result of AB 900, which authorized $7.7 billion ($7.3 billion in bonds and $350 million from the state’s general fund) to fund the addition of 53,000 state prison and local jail beds to relieve severe overcrowding, improve conditions and offender outcomes and ward off the threat of federal court intervention.
The Treasurer’s staff recommended approval of Wednesday’s loan. “The corrections department complied with the new requirements of section 3.0 of the PMIA Loan policy adopted October 20, 2010 regarding new loans,” stated a report to the board. The new requirements only involve the applying agency to complete an application, prepare a bond resolution authorizing the issuance of bonds for the project, have valid appropriation, and no pending litigation, which are more procedure than policy.
Greg Rogers, a spokesman with the Department of Public Works, explained that much of the infrastructure work being done in California prisons and jails is a direct result of the 2007 court order to reduce overpopulation. “Public works has been working on these projects since at least 2008,” said Rogers. “Many of the prisons are updating health care facilities and adding court-ordered square footage.”
Dresslar said he did not know the specifics behind the recent corrections department loan, but was able to explain the process for acquiring funds and the purpose of the board. “[L]oans to agencies are SOP,” he said, using government speak for “standard operating procedure.”
State law authorizes loans to agencies from the Pooled Money Investment Account with repayment to come from the later sale of notes or bonds, although Dressler said “infrastructure loans were frozen in 2008 in order to allow more cash to accrue in the state’s accounts to help the state with cash flow.” The loan to the corrections department authorized this week is an exception to the 2008 rule. And Dressler said that usually loans are only approved for “shovel-ready projects.”
The project for the corrections department states that it is for the Central California Women’s Facility — an “enhanced outpatient program treatment and office space.” Dressler confirmed this and said the loan would be used for preliminary plans for the facility. Dressler likened the loan to high-speed rail bonds, sold before ground was ever broken and used for “preliminary plans.”
“CDCR has received interim financing for the Adelanto jail project from the Pooled Money Investment Board, and will reimburse the county’s allowable construction costs from this source.,” said Paul Verke, a Corrections Department spokesman, when asked about the repayment process. “The Public Works Board intends to sell the bonds about the same time as the construction is completed, which will repay the interim financing. Through a series of lease agreements between the Public Works Board, CDCR and the county, CDCR will pay rent on the facility sufficient to cover debt service on the bonds. The county will not pay any rent to the state for the facility, but will be required to operate and maintain the facility for the life of the bonds. When the bonds are all repaid, these lease agreements will expire and the facility will belong to the county.”
Verke said that the whole idea behind the PMIA loans was to find start-up money for infrastructure projects “that doesn’t burden counties.” Of course, the money does come with strings attached — the counties have to operate and maintain the facilities for the life of the bonds, but the ownership of the facility goes to the county at the end of the bond payoff.
“The Public Works department establishes the project(s), and the Legislature must give its approval before anything can happen,” said Rogers. “Public works then authorizes the sale of bonds while the project is under construction so that upon completion, the money is available to replenish the pooled investment fund. But the process takes years.”
Verke provided other links to information explaining the loan process:
— Lease Revenue Bonds
— State map showing all AB 900 construction projects
— The PMIA website has links to most reports.
Source URL: https://calwatchdog.com/2010/12/17/state-board-loans-state-dept-money/
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