Local government: investments and financial reports.

Senator Choi's legislation extends key investment provisions for California local agencies while revising financial reporting requirements and enforcement mechanisms. The bill postpones until 2031 the planned reduction in commercial paper investment limits, which currently allow agencies with over $100 million in assets to invest up to 40% in eligible commercial paper, while maintaining the 25% cap for smaller agencies.

The legislation modifies financial reporting compliance by establishing a 10-month post-fiscal-year deadline for local agencies to file required reports with the State Controller. Agencies failing to meet this timeline face tiered penalties based on their total revenue: $1,000 for agencies with revenue under $100,000, $2,500 for those between $100,000 and $250,000, and $5,000 for agencies with revenue exceeding $250,000. The Controller retains authority to waive penalties for good cause, with the Attorney General responsible for prosecuting forfeiture actions.

The bill also extends until 2031 the current exception allowing local agencies to invest in U.S. government-backed securities that could result in zero-interest accrual during periods of negative market interest rates. This maintains existing investment flexibility while preserving core prohibitions on other zero-interest securities, inverse floaters, range notes, and mortgage-derived interest-only strips.