Section 6592.5.

(a) No bonds issued by any local agency shall be purchased pursuant to this article by an authority at a price to yield in excess of 1 percent of the yield of the issue of bonds issued by the authority to purchase the bonds of the local agency. For the purposes of this subdivision, yield is determined on the issue date of the bonds.

(b) At least 95 percent of the receipts by an authority from bonds of a local agency purchased by the authority after January 1, 1995, shall be used for any of the following:

(1) To pay principal, interest, redemption prices or fees for credit enhancement on the issue of bonds of the authority used to acquire those bonds of the local agency.

(2) To pay or reimburse administrative costs of the bonds of the authority used to acquire those bonds of the local agency.

(3) To pay or reimburse a local agency for principal, interest, or redemption price on bonds of that local agency.

(4) To establish reasonable reserves for the payment of debt service on authority bonds.

(5) To purchase other bonds of a local agency.

(6) To pay or reimburse fees and expenses charged to the authority by third parties, excluding any member of the authority, for services relating to administration of the authority's bonds or of the program established by the authority for purchase of local agency bonds.

(c) For the purposes of this section, the following definitions shall apply:

(1) "Administrative costs" means, and is limited to, costs of issuing, carrying, or repaying the authority bonds.

(2) "Credit enhancement" means any municipal bond insurance, surety bond, letter of credit, or other guaranty arrangement entered into between an independent party and the authority or the local agency that unconditionally shifts substantially all of the credit risk for all or part of the payments on the issue of bonds guaranteed by the credit enhancement and, in the case of bonds bearing a variable rate of interest and containing a provision permitting or requiring tender of the bonds by the bondholder, includes payments against failure to remarket bonds.

(3) "Issue" means bonds that are issued by the same issuer on the same issue date pursuant to the same plan of financing that are reasonably expected to be paid from substantially the same source of funds, without regard to credit enhancement or priority of lien.

(4) "Issue date" means the first date on which the authority, in the case of an issue of bonds issued by the authority, or the local agency, in the case of an issue of bonds issued by the local agency for purchase by the authority, receives the purchase price of the issue of bonds in exchange or the delivery of the evidence of indebtedness representing the bonds of the issue.

(5) "Issue price" means, in the case of an issue of bonds issued by the authority, the initial offering price to the public, excluding bondhouses, underwriters, brokers, and other intermediaries, and assuming that the issue price for each maturity of bonds of the issue is equal to the price at which at least 10 percent of that maturity was sold to the public, and if an issue is privately placed, means the purchase of each maturity of bonds of the issue paid by the first buyer of the obligation, excluding bondhouses, underwriters, brokers, and other intermediaries. "Issue price" means, in the case of an issue of bonds issued by the local agency, the purchase price of each maturity of bonds of the issue paid by the authority to the local agency.

(6) "Yield" means that discount rate that, when used in computing the present value as of the issue date of all unconditionally payable payments of principal, interest, and fees for credit enhancement on the issue of bonds produces an amount equal to the present value, using the same discount rate, of the aggregate issue price of bonds of the issue as of the issue date. In the case of an issue of bonds issued by a local agency for purchase by the authority, payments for administrative costs shall not be taken into account in determining the yield of those local agency bonds.

(Added by Stats. 1995, Ch. 229, Sec. 6. Effective July 31, 1995.)