Here's another possible place to cash those state IOUs: Sacramento City Hall. The City Council is expected to vote Tuesday evening on a proposal to pay 100 cents-on-the-dollar for IOUs held by city residents and businesses located in the city.
This isn't about altruism. City officials believe the IOUs are a terrific short-term investment. The notes will pay the annual equivalent of 3.75 percent interest when they're redeemed by the state Oct. 2.
In the financial markets, "I can't find anything out there that even approaches that," said John Colville, the city's senior investment officer.
The proposal calls for the city to purchase up to $10 million in IOUs using short-term investment cash.
The state has issued hundreds of millions of dollars in IOUs since July 2. It's not known when the the practice will stop, given that legislative leaders are close to making a budget deal with Gov. Arnold Schwarzenegger.
A fledgling secondary market for IOUs has popped up on the Internet and on Wall Street, with investors offering 80 to 95 cents on the dollar. The city will offer full face value, "not like a lot of these people on Craigslist," Colville said.