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SF 2255

1st Engrossment - 88th Legislature (2013 - 2014) Posted on 10/30/2014 12:52pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 1st Engrossment

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A bill for an act
relating to deposits and investments of public funds; granting the Metropolitan
Council additional investment authority; authorizing certain investments by a
Minnesota joint powers investment trust; making certain conforming technical
changes; amending Minnesota Statutes 2012, sections 118A.03, subdivision
5; 118A.04, subdivisions 7, 8; 118A.05, subdivision 4; 118A.07; 473.543,
subdivision 3.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2012, section 118A.03, subdivision 5, is amended to read:


Subd. 5.

Withdrawal of excess collateral.

A financial institution may withdraw
excess collateral or substitute other collateral after giving written notice to the
deleted text begingovernmentaldeleted text endnew text begin governmentnew text end entity and receiving confirmation. The authority to return any
delivered and assigned collateral rests with the government entity.

Sec. 2.

Minnesota Statutes 2012, section 118A.04, subdivision 7, is amended to read:


Subd. 7.

Temporary general obligation bonds.

Funds may be invested in general
obligation temporary bonds of the same deleted text begingovernmentaldeleted text endnew text begin governmentnew text end entity issued under
section 429.091, subdivision 7, 469.178, subdivision 5, or 475.61, subdivision 6.

Sec. 3.

Minnesota Statutes 2012, section 118A.04, subdivision 8, is amended to read:


Subd. 8.

Debt service funds.

Funds held in a debt service fund may be used to
purchase any obligation, whether general or special, of an issue which is payable from the
fund, at such price, which may include a premium, as shall be agreed to by the holder, or
may be used to redeem any obligation of such an issue prior to maturity in accordance
with its terms. The securities representing any such investment may be sold by the
deleted text begingovernmentaldeleted text endnew text begin governmentnew text end entity at any time, but the money so received remains part of
the fund until used for the purpose for which the fund was created. Any obligation held in
a debt service fund from which it is payable may be canceled at any time unless otherwise
provided in a resolution or other instrument securing obligations payable from the fund.

Sec. 4.

Minnesota Statutes 2012, section 118A.05, subdivision 4, is amended to read:


Subd. 4.

Minnesota joint powers investment trust.

Government entities may enter
into agreements or contracts for:

(1) shares of a Minnesota joint powers investment trust whose investments are
restricted to securities described in this section deleted text beginanddeleted text endnew text begin,new text end section 118A.04new text begin, and section 118A.07,
subdivision 7
new text end
;

(2) units of a short-term investment fund established and administered pursuant to
regulation 9 of the Office of the Comptroller of the Currency, in which investments are
restricted to securities described in this section and section 118A.04;

(3) shares of an investment company which is registered under the Federal
Investment Company Act of 1940 and which holds itself out as a money market fund
meeting the conditions of rule 2a-7 of the Securities and Exchange Commission and is
rated in one of the two highest rating categories for money market funds by at least one
nationally recognized statistical rating organization; or

(4) shares of an investment company which is registered under the Federal
Investment Company Act of 1940, and whose shares are registered under the Federal
Securities Act of 1933, as long as the investment company's fund receives the highest
credit rating and is rated in one of the two highest risk rating categories by at least one
nationally recognized statistical rating organization and is invested in financial instruments
with a final maturity no longer than 13 months.

Sec. 5.

Minnesota Statutes 2012, section 118A.07, is amended to read:


118A.07 ADDITIONAL INVESTMENT AUTHORITY.

Subdivision 1.

Authority provided.

As used in this section, "governmental entity"
means a city with a population in excess of 200,000 deleted text beginordeleted text endnew text begin,new text end a county that contains a city of
that sizenew text begin, or the Metropolitan Councilnew text end. If a governmental entity meets the requirements of
subdivisions 2 and 3, it may exercise additional investment authority under subdivisions 4,
5, and 6.

Subd. 2.

Written policies and procedures.

Prior to exercising any additional
authority under subdivisions 4, 5, and 6, the governmental entity must have written
investment policies and procedures governing the following:

(1) the use of or limitation on mutual bond funds or other securities authorized or
permitted investments under law;

(2) specifications for and limitations on the use of derivatives;

(3) the final maturity of any individual security;

(4) the maximum average weighted life of the portfolio;

(5) the use of and limitations on reverse repurchase agreements;

(6) credit standards for financial institutions with which the deleted text begingovernment
deleted text endnew text begin governmentalnew text end entity deals; and

(7) credit standards for investments made by the deleted text begingovernmentdeleted text endnew text begin governmentalnew text end entity.

Subd. 3.

Oversight process.

Prior to exercising any authority under subdivisions 4,
5, and 6, the governmental entity must establish an oversight process that provides for
review of the deleted text begingovernmentdeleted text endnew text begin governmentalnew text end entity's investment strategy and the composition
of the financial portfolio. This process shall include one or more of the following:

(1) audit reviews;

(2) internal or external investment committee reviews; and

(3) internal management control.

Additionally, the governing body of the governmental entity must, by resolution,
authorize its treasurer to utilize the additional authorities under this section within
their prescribed limits, and in conformance with the written limitations, policies, and
procedures of the governmental entity.

If the governing body of a governmental entity exercises the authority provided in
this section, the treasurer of the governmental entity must annually report to the governing
body on the findings of the oversight process required under this subdivision. If the
governing body intends to continue to exercise the authority provided in this section for the
following calendar year, it must adopt a resolution affirming that intention by December 1.

Subd. 4.

Repurchase agreements.

A deleted text begingovernmentdeleted text endnew text begin governmentalnew text end entity may enter
into repurchase agreements as authorized under section 118A.05, provided that the
exclusion of mortgage-backed securities defined as "high-risk mortgage-backed securities"
under section 118A.04, subdivision 6, shall not apply to repurchase agreements under this
authority if the margin requirement is 101 percent or more.

Subd. 5.

Reverse repurchase agreements.

Notwithstanding the limitations
contained in section 118A.05, subdivision 2, the deleted text begincountydeleted text endnew text begin governmental entitynew text end may enter
into reverse repurchase agreements to:

(1) meet cash flow needs; or

(2) generate cash for investments, provided that the total securities owned shall be
limited to an amount not to exceed 130 percent of the annual daily average of general
investable monies for the fiscal year as disclosed in the most recently available audited
financial report. Excluded from this limit are:

(i) securities with maturities of one year or less; and

(ii) securities that have been reversed to maturity.

There shall be no limit on the term of a reverse repurchase agreement. Reverse
repurchase agreements shall not be included in computing the net debt of the governmental
entity, and may be made without an election or public sale, and the interest payable
thereon shall not be subject to the limitation in section 475.55. The interest shall not be
deducted or excluded from gross income of the recipient for the purpose of state income,
corporate franchise, or bank excise taxes, or if so provided by federal law, for the purpose
of federal income tax.

Subd. 6.

Options and futures.

A deleted text begingovernmentdeleted text endnew text begin governmentalnew text end entity may enter
into futures contracts, options on futures contracts, and option agreements to buy or sell
securities authorized under law as legal investments for deleted text begincountiesdeleted text endnew text begin governmental entitiesnew text end,
but only with respect to securities owned by the governmental entity, including securities
that are the subject of reverse repurchase agreements under this section that expire at or
before the due date of the option agreement.

new text begin Subd. 7. new text end

new text begin Negotiable certificates of deposit. new text end

new text begin A Minnesota joint powers investment
trust may invest funds in negotiable certificates of deposit or other evidences of deposit,
with a remaining maturity of three years or less, issued by a nationally or state-chartered
bank, a federal or state savings and loan association, or a state-licensed branch of a foreign
bank, except that for obligations with a maturity of one year or less, the debt obligations of
the issuing institution or its parent are rated in the top short-term rating category by at
least two nationally recognized statistical ratings organizations and for obligations with
a maturity in excess of one year, the senior debt obligations of the issuing institution
or its parent are rated at least A or its equivalent by at least two nationally recognized
statistical ratings organizations. Investments in these instruments shall not be subject to
the collateralization requirements of section 118A.03.
new text end

Sec. 6.

Minnesota Statutes 2012, section 473.543, subdivision 3, is amended to read:


Subd. 3.

Where to deposit; how to invest.

The moneys on hand in said funds
and accounts may be deposited in the official depositories of the council or invested as
hereinafter provided. The amount thereof not currently needed or required by law to be
kept in cash on deposit may be invested in obligations authorized for the investment of
public funds by deleted text beginsection 118A.04deleted text endnew text begin chapter 118Anew text end. Such moneys may also be held under
certificates of deposit issued by any official depository of the council.

Sec. 7. new text beginAPPLICATION.
new text end

new text begin Section 6 applies in the counties of Anoka, Carver, Dakota, Hennepin, Ramsey,
Scott, and Washington.
new text end