Union Bank & Trust Company President/CEO Steve Eager is the banking industry’s representative on a Legislative Council Study Committee examining the role of the Board of Commission of Public Lands (BCPL) in the lending marketplace. The Study Committee has been working since August, gathering information to ultimately make legislative recommendations in the 2019-2020 legislative session. At a recent meeting, the committee heard testimony about concerns regarding how the BCPL loan program competes with the private lending industry. Expressed concerns included: (1) that BCPL loans include features that private lenders cannot offer; (2) that local governments are not always aware of the private lending options available to them; and (3) that certain statutes limit a private lender’s ability to offer long-term loans to local governments.
The Study Committee is actively reviewing the effects of the loan program on private lending to municipalities and school districts. The extent to which the statutes enable municipalities to use the loan program to finance expenditures that committee members think should not be financed through borrowing, overall fund investment, and revenue from fines, escheats, and unclaimed property.
In addition, the committee discussed amending the statutes in a manner intended to increase the return achieved through the loan program itself. Considerations include 1) whether to modify the minimum interest rate set forth in statute, such as by increasing it, requiring that it be indexed to interest rates, or specifying the procedure that the BCPL must follow in setting loan interest rates; (2) whether to modify the statutes to require, rather than permit, the BCPL to charge a borrower a prepayment fee; and (3) whether to prohibit or limit a borrower’s ability to prepay a loan.