California’s Electronic Financial Marketplace - 1902.1

State Financial Marketplace (SFM)

All State departments and local governmental agencies are permitted to enter into either installment purchase agreements (commonly referred to in the industry as “lease purchases”) or financed leases as described in the Uniform Commercial Code, Section 2A (commonly referred to as “operating leases”), via DGS’s State Financial Marketplace (SFM) , which includes “GS $Mart” and “Lease $Mart.”  DGS is authorized to administer the State Financial Marketplace programs per Government Code, Section 14930 et seq.

Contact the SFM Managers prior to initiating a procurement that might involve financing.

Click here to access the State Financial Marketplace(SFM).

SFM Compliance Certification Form

State departments will be required to complete a SFM Certification of Compliance Form and a Request for Rate Quote (RFRQ) Form when contemplating financing a transaction using the SFM program. The completed form must be sent to the SFM Managers for approval before the SFM will proceed with the financing process.

Click here for the SMF Certification of Compliance Form and a Request for Rate Quote (RFRQ) Form.

Tax Exempt Rates

The Golden State Financial Marketplace or GS $Mart offers tax-exempt rates which usually are less costly than commercial lending rates. For this reason, rates negotiated under GS $Mart tend to be the lowest obtainable.  Also, loans are structured to comply with Internal Revenue Service (IRS) Tax Code.  GS $Mart can be used for financed agreements as a matter of:

• Convenience;
• Efficiency; and
• Substantial cost savings.

Financing Conditions

Conditions for entering into a financed agreement include, but are not limited to, the following:

• Generally, the financed portion of an acquisition is a minimum of $50,000.  This includes the cost of the tangible asset and, if applicable, sales tax.  Financing an amount smaller than $50,000 may not be cost-effective.  Contact the SFM for additional information regarding finance of lower dollar-value transactions.
• Acquisitions conducted under delegated purchasing authority that include financing must subscribe to the requirements identified in the Purchasing Authority chapter.  For determination of whether the transaction is within a department’s delegated purchasing authority limit, the cost of financing is not included.
• The term duration of the finance agreement may not exceed the projected useful life of the asset being financed.
• If a department wishes to consider a lender that is not participating in the GS $Mart program, contact the GS $Mart Managers prior to proceeding to learn how the desired lender can qualify for the GS $Mart program. Requirements to become a lender are found on the GS $Mart home page.
• Any requested financing of an acquisition $10 million or larger must first be approved by the Department of Finance (DOF).

Current DGS-approved lenders and financing plans are posted on DGS’ website in State Financial Marketplace (GS $mart).

Applicability

The above conditions for financed agreements apply to the following:

• Orders for applicable items placed against Statewide Contracts, and Leveraged Procurement Agreements including, unless otherwise stated in user instructions;
• A competitive acquisition; or
• A non-competitively bid acquisition.

The above conditions do not apply to operating leases and rental agreements.

Tangible Assets

Purchased tangible assets that may be financed through GS $Mart include:

• Vehicles
• Laboratory and medical equipment
• Furniture (including modular)
• Information technology equipment and necessary pre-integrated software (including mainframes, PCs, printers, network equipment, and storage)
• Software licenses
• Software development and integration (on a case-by-case basis by the Department of Technology)
• Select services included with the procurement of assets (e.g., warranty, installation, and training)
• Copy machines
• Video conferencing systems
• Mailing equipment
• Telephone systems
• Most energy efficiency and sustainability equipment and systems (see “Capital Outlay” below)

“Tangible assets” that may not be financed through GS $Mart include:

• Consultant and other services
• Capital outlay projects:
  • Capital outlay projects are those that alter the purpose or capacity of real property.  Projects that keep real property functioning at its designed level service, or improve the efficiency of its operating systems—such as repair projects and most energy efficiency projects—are not capital outlay.  Note, however, that some energy efficiency projects (e.g., photovoltaics) can involve significant facility engineering issues that make them capital outlay in nature or could be limited by covenants on debt-financed buildings.  Such projects must receive prior approval by the DOF before securing financing.

Energy Savings Projects

GS $Mart financing may also be used for energy efficiency and sustainability projects. However, the approval of these projects will be based on a cost-benefit analysis to substantiate that there is enough energy savings derived to repay all associated project costs including financing. A Life Cycle Cost (LCC) analysis model is available from DGS to conduct this evaluation.  The LCC model must be used for this analysis, and DGS will not approve any GS $Mart financing for such projects unless the applicant department certifies that the model has been applied and the results justify the asset acquisition on a cost-benefit basis.

The DGS Oversight

All State departments that use the SFM and are subject to DGS oversight must send a copy of any finance proposal to the GS $Mart manager for review.  GS $Mart will conduct a Request for Rate Quote to qualified lenders for a department’s financing.  The department will be required to create a financing agreement/purchase order under the authority of the GS $Mart manager to include the payment schedule and financing charges.  The financing is reviewed to ensure compliance with IRS Tax Code requirements.  The GS $Mart manager also files the required IRS tax forms and reports on behalf of the department.  No financing contract may be signed by a department without prior written approval by DGS.

Assignments

Contact the GS $Mart Managers prior to initiating an assignment of a contract that was financed using the GS $Mart program.

Refinancing

GS $Mart program posts the latest market information on the Internet, including DGS‑approved lenders and finance rates.  State departments are advised to review GS $Mart information periodically for refinancing opportunities and, if advantageous, to execute a refinancing contract to realize the cost savings. To ensure refinancing is executed properly, departments should contact the GS $Mart Managers before proceeding.

Financing Arrangements other than GS $Mart and Budgetary Conditions

Use of any financing arrangement other than GS $Mart, even utilizing baseline budget resources, is prohibited without prior approval from the Department of Finance.  A department proposing such financing must request approval in writing and must provide an analysis to support the basis for selection of the financing to the Department of Finance support unit.  A proposed financing arrangement other than GS $Mart will be subjected to a rigorous evaluation that must demonstrate that it will provide the state with better terms than GS $Mart and will provide comparable financial security regarding such issues as tax exempt qualifications, financial health of the lender, and the financing’s effect on the state’s credit rating.

Contact Financial Marketplace Managers

The State Financial Marketplace manager must conduct all leasing and financing solicitations.  Departments considering financing options shall contact the State Financial Marketplace manager for assistance.

Click here to access the State Financial Marketplace.

DGS Office of Fiscal Services

For those departments under DGS purview, DGS Office of Fiscal Service (OFS), under the direction of DOF, and in conjunction with the California State Controller’s Office, will have the money withdrawn from the using department’s budget and OFS will make the finance or lease payments on the using department’s behalf.