HB-4398, As Passed House, March 17, 2009

 

 

 

 

 

 

 

 

 

 

 

 

HOUSE BILL No. 4398

 

February 24, 2009, Introduced by Rep. Mayes and referred to the Committee on Banking and Financial Services.

 

     A bill to amend 1943 PA 20, entitled

 

"An act relative to the investment of funds of public corporations

of the state; and to validate certain investments,"

 

by amending section 1 (MCL 129.91), as amended by 2008 PA 308.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1. (1) Except as provided in section 5, the governing

 

body by resolution may authorize its investment officer to invest

 

the funds of that public corporation in 1 or more of the following:

 

     (a) Bonds, securities, and other obligations of the United

 

States or an agency or instrumentality of the United States.

 

     (b) Certificates of deposit, savings accounts, deposit

 

accounts, or depository receipts of a financial institution, but

 

only if the financial institution complies with subsection (2), or

 

certificates of deposit obtained through a financial institution as

 


provided in subsection (5).

 

     (c) Commercial paper rated at the time of purchase within the

 

2 highest classifications established by not less than 2 standard

 

rating services and that matures not more than 270 days after the

 

date of purchase.

 

     (d) Repurchase agreements consisting of instruments listed in

 

subdivision (a).

 

     (e) Bankers' acceptances of United States banks.

 

     (f) Obligations of this state or any of its political

 

subdivisions that at the time of purchase are rated as investment

 

grade by not less than 1 standard rating service.

 

     (g) Mutual funds registered under the investment company act

 

of 1940, title I of chapter 686, 54 Stat. 789, 15 USC 80a-1 to 80a-

 

3 and 80a-4 to 80a-64, with authority to purchase only investment

 

vehicles that are legal for direct investment by a public

 

corporation. However, a mutual fund is not disqualified as a

 

permissible investment solely by reason of either of the following:

 

     (i) The purchase of securities on a when-issued or delayed

 

delivery basis.

 

     (ii) The ability to lend portfolio securities as long as the

 

mutual fund receives collateral at all times equal to at least 100%

 

of the value of the securities loaned.

 

     (iii) The limited ability to borrow and pledge a like portion of

 

the portfolio's assets for temporary or emergency purposes.

 

     (h) Obligations described in subdivisions (a) through (g) if

 

purchased through an interlocal agreement under the urban

 

cooperation act of 1967, 1967 (Ex Sess) PA 7, MCL 124.501 to

 


124.512.

 

     (i) Investment pools organized under the surplus funds

 

investment pool act, 1982 PA 367, MCL 129.111 to 129.118.

 

     (j) The investment pools organized under the local government

 

investment pool act, 1985 PA 121, MCL 129.141 to 129.150.

 

     (2) Except as provided in subsection (5), a public corporation

 

that invests its funds under subsection (1) shall not deposit or

 

invest the funds in a financial institution that is not eligible to

 

be a depository of funds belonging to this state under a law or

 

rule of this state or the United States.

 

     (3) Assets acceptable for pledging to secure deposits of

 

public funds are limited to assets authorized for direct investment

 

under subsection (1).

 

     (4) The governing body by resolution may authorize its

 

investment officer to enter into written agreements with other

 

public corporations to pool or coordinate the funds to be invested

 

under this section with the funds of other public corporations.

 

Agreements allowed under this subsection shall include all of the

 

following:

 

     (a) The types of investments permitted to be purchased with

 

pooled funds.

 

     (b) The rights of members of the pool to withdraw funds from

 

the pooled investments without penalty.

 

     (c) The duration of the agreement and the requirement that the

 

agreement shall not commence until at least 60 days after the

 

public corporations entering the agreement give written notice to

 

an existing local government investment pool which is organized

 


pursuant to the local government investment pool act, 1985 PA 121,

 

MCL 129.141 to 129.150, in those counties where such a pool is

 

operating and accepting deposits on or before September 29, 2006.

 

     (d) The method by which the pool will be administered.

 

     (e) The manner by which the public corporations will respond

 

to liabilities incurred in conjunction with the administration of

 

the pool.

 

     (f) The manner in which strict accountability for all funds

 

will be provided for, including an annual statement of all receipts

 

and disbursements.

 

     (g) The manner by which the public corporations will adhere to

 

the requirements of section 5.

 

     (5) In addition to the investments authorized under subsection

 

(1), the governing body by resolution may authorize its investment

 

officer to invest the funds of the public corporation in

 

certificates of deposit in accordance with all of the following

 

conditions:

 

     (a) The funds are initially invested through a financial

 

institution that is not ineligible to be a depository of surplus

 

funds belonging to this state under section 6 of 1855 PA 105, MCL

 

21.146.

 

     (b) The financial institution arranges for the investment of

 

the funds in certificates of deposit in 1 or more insured

 

depository institutions, as defined in 12 USC 1813, or 1 or more

 

insured credit unions, as defined in 12 USC 1752, for the account

 

of the public corporation.

 

     (c) The full amount of the principal and any accrued interest

 


of each certificate of deposit is insured by an agency of the

 

United States.

 

     (d) The financial institution acts as custodian for the public

 

corporation with respect to each certificate of deposit.

 

     (e) At the same time that the funds of the public corporation

 

are deposited and the certificate or certificates of deposit are

 

issued, the financial institution receives an amount of deposits

 

from customers of other insured depository institutions or insured

 

credit unions equal to or greater than the amount of the funds

 

initially invested by the public corporation through the financial

 

institution.

 

     (6) A public corporation that initially invests its funds

 

through a financial institution that maintains an office located in

 

this state may invest the funds in certificates of deposit as

 

provided under subsection (5).

 

     (7) As used in this section, "financial institution" means a

 

state or nationally chartered bank or a state or federally

 

chartered savings and loan association, savings bank, or credit

 

union whose deposits are insured by an agency of the United States

 

government and that maintains a principal office or branch office

 

located in this state under the laws of this state or the United

 

States.

 

     (8) As used in this act:

 

     (a) "Governing body" means the legislative body, council,

 

commission, board, or other body having legislative powers of a

 

public corporation.

 

     (b) "Funds" means the money of a public corporation, the

 


investment of which is not otherwise subject to a public act of

 

this state or bond authorizing ordinance or resolution of a public

 

corporation that permits investment in fewer than all of the

 

investment options listed in subsection (1) or imposes 1 or more

 

conditions upon an investment in an option listed in subsection

 

(1).

 

     (c) "Investment officer" means the treasurer or other person

 

designated by statute or charter of a public corporation to act as

 

the investment officer. In the absence of a statutory or charter

 

designation, the governing body of a public corporation shall

 

designate the investment officer.

 

     (d) "Public corporation" means a county, city, village,

 

township, port district, drainage district, special assessment

 

district, or metropolitan district of this state, or a board,

 

commission, or another authority or agency created by or under an

 

act of the legislature of this state.