HB 3360

Washington State House of Representatives Office of Program Research	BILL ANALYSIS

Finance Committee

HB 3360

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Increasing the availability of funds for the time certificate of deposit investment program.

Sponsors: Representatives Hasegawa and Santos.

Brief Summary of Bill

Increases the amount of funds available for the Linked Deposit Program from $150 million to $200 million.

Hearing Date: 2/12/08

Staff: Jeff Mitchell (786-7139).

Background:

The Linked Deposit Program (Program) was created in 1993. The stated purpose of the program is to increase access to business capital for the state's certified minority-owned and women-owned businesses. Under the program, certified businesses can obtain reduced interest rate loans from participating financial institutions.

The State Treasurer is authorized to use up to $150 million of short-term state treasury surplus funds for the Program. These funds are deposited with public depositories as certificate of deposits (CDs) on the condition that the public depositary make "qualifying loans" under the Program. The state forgoes up to 2 percent in interest on the CDs and passes along the savings to the public depository with the condition that the depository reduces the interest rate for the loan recipients. The State Treasurer must reduce the amount of the preference to ensure that the effective interest rate on the certificate of deposit is not less than 2 percent. If the preference given to a qualified public depository is less than 200 basis points, the qualified public depository may reduce the interest rate on the loans by an amount that corresponds to the reduction in the preference below 200 basis points.

Qualifying loans are loans:

made to certain minority or women's business enterprises;
for a period not to exceed 10 years;
for up to a maximum amount of $1 million for each individual loan;
at an interest rate that is at least 2 percentage points below the market rate that normally would be charged for a loan of that type; and
with points or origination fees are limited to 1 percent of the loan principal.

To be eligible the applicant must:

be a minority and/or a women;
have at least 51 percent of ownership of the business; and
control the business.

Three state agencies are involved in the program. The State Treasurer is authorized to fund the program. The Office of Minority and Women's Business Enterprises (OMWBE) certifies the eligibility of the businesses, monitors the performance of loans, and compiles information on borrowers in the program. The Department of Community, Trade and Economic Development provides technical assistance, loan packaging services and, in consultation with the OMBWE, must develop performance indicators for the Program.

Summary of Bill:

The State Treasurer is authorized to use up to $200 million, which is a $50 million increase, of short-term state treasury surplus funds for the Linked Deposit Program.

Appropriation: None.

Fiscal Note: Requested on February 10, 2008.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.