Minnesota Session Laws - 1985, Regular Session

  

                         Laws of Minnesota 1985 

                        CHAPTER 239-S.F.No. 1398
           An act relating to deposit and investment of public 
          funds; modifying the collateral requirements for 
          public deposits; amending Minnesota Statutes 1984, 
          sections 118.005, subdivision 1; 118.01; 475.66, 
          subdivisions 1 and 3; and 475.76, subdivision 1. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1984, section 118.005, 
subdivision 1, is amended to read: 
    Subdivision 1.  The governing body of every municipality, 
as defined in section 118.01, which has the power to receive and 
disburse funds, shall designate as a depository of the funds 
such national, insured state banks or thrift institutions as 
defined in section 51A.02, subdivision 23, as it may deem proper.
The governing body may authorize the treasurer or chief 
financial officer to exercise the powers of the governing body 
in designating a depository of the funds.  
    Sec. 2.  Minnesota Statutes 1984, section 118.01, is 
amended to read: 
    118.01 [DEPOSITORY BONDS.] 
    Subdivision 1.  Any bank, trust company or thrift 
institution authorized to do business in this state, designated 
as a depository of funds of a municipality, as provided by law 
may, in lieu of the corporate or personal surety bond required 
to be furnished to secure the deposited funds, deposit with the 
custodian of the funds as collateral security, the bonds or 
other interest bearing obligations which are legally authorized 
investments for savings banks under section 50.14, except as 
otherwise provided by this subdivision. notes secured by first 
mortgages of future maturity, upon which interest is not past 
due, on improved real estate free from delinquent taxes, within 
the county wherein the depository is located, or within counties 
immediately adjoining the county in the state of Minnesota or, 
to the extent of the guarantee, loans guaranteed by the Small 
Business Administration under the Federal Small Business Act or, 
to the extent of the guarantee, loans or obligations secured or 
guaranteed by the United States or any department, bureau, 
board, commission, or establishment of the United States, 
including any corporation wholly owned directly or indirectly by 
the United States may also be deposited with the custodian of 
the funds in lieu of the corporate or personal surety bond 
required to be furnished to secure the funds.  Industrial 
revenue bonds or notes issued pursuant to chapter 474 or similar 
bonds or notes of other states, territories, or their municipal 
subdivisions or bonds secured by real estate may not be 
deposited with the custodian of the funds in fulfilling the 
requirement of this subdivision, the obligations which are 
legally authorized investments for debt service funds under 
section 475.66, subdivision 3, and qualified state or local 
government obligations acceptable to the treasurer or chief 
financial officer.  Qualified obligations must be general 
obligations rated "A" or better by Moody's Investors Service, 
Inc. or Standard & Poor's Corporation. 
    Subd. 2.  Except for notes secured by first mortgages of 
future maturity, the total in amount of the collateral computed 
at its market value shall be at least ten percent more than the 
amount of on deposit at the close of the business day, in excess 
of any insured portion, which would be permitted if a corporate 
or personal surety bond were furnished.  The total amount of 
collateral consisting of notes secured by first mortgages of 
future maturity computed at its market value shall be at least 
40 percent more than the amount on deposit at the close of the 
business day, in excess of any insured portion, which would be 
permitted if a corporate or personal surety bond were 
furnished.  The depository may at its discretion furnish both a 
bond and collateral aggregating the required amount.  
    Subd. 3.  Any collateral so deposited shall be accompanied 
by an assignment thereof to the municipality designating from 
the depository, which.  The assignment shall recite that the 
depository shall pay over to the treasurer or his order chief 
financial officer on demand or, if a time deposit, when due, 
free of exchange or any other charges, except for early 
withdrawal penalties on time deposits, all moneys deposited 
therein at any time during the period the collateral shall be so 
deposited and shall pay the interest thereon when due at the 
agreed rate; and that, in case of any default upon the part of 
the depository, the governing body of the municipality making 
the designation shall have full power and authority to or the 
treasurer or chief financial officer may sell the collateral, or 
as much thereof as may be necessary to realize the full amount 
due the municipality and to pay over any surplus to the 
depository or its assigns.  
    Subd. 4.  A depository may in its discretion deposit 
collateral of a value less than the total designation and may 
from time to time, during the period of its designation, deposit 
additional collateral and make withdrawals of excess collateral 
or substitute other collateral for that on deposit or any part 
thereof, as defined in subdivision 1, on receipt by the 
municipality of written notice from the depository.  Authority 
is vested in the treasurer to return the collateral to the 
depository when the trust so created is terminated and he shall, 
in the case of a reduction of the deposit, permit the depository 
to withdraw the excess portion thereof.  All interest on the 
collateral so deposited when collected shall be paid to the 
depository so long as it is not in default.  Before any 
collateral is deposited with the treasurer it shall first be 
approved by the same authority that designated the depository, 
but no such authority shall be necessary for the withdrawal of 
collateral.  
    Subd. 5.  The closing of a depository shall be deemed a 
default upon on the part of the depository and no demand upon on 
the part of the municipality or its treasurer shall be necessary 
to establish the default.  If a depository closes, any time 
deposit placed therein shall immediately become due and payable. 
    Subd. 6.  If both bond and collateral are furnished by a 
depository, all or any part of the collateral may be withdrawn 
without in any way impairing the full force and effect of the 
bond unless it contains a provision that the collateral shall 
not be withdrawn without the consent of the surety thereon.  If 
a corporate surety bond is furnished by a depository, it shall 
be in a penal sum not to exceed the amount designated as the 
limit of deposit therein, notwithstanding any other provisions 
of law to the contrary.  
    Subd. 7.  At no time shall the treasurer maintain a deposit 
in any depository against collateral in excess of 90 percent of 
the market value thereof.  
    Subd. 8.  Any provision of law authorizing any municipality 
to designate banks as depositories shall be construed to include 
trust companies and thrift institutions authorized to do 
business.  
    Subd. 9.  All bonds furnished under the provisions of this 
section shall be approved by the governing body of the 
municipality designating the depository and shall be filed in 
the office of the county auditor.  All collateral deposited 
under the provisions of this section shall be approved by the 
governing body of the municipality and deposited with the 
treasurer or chief financial officer of the municipality, unless 
the governing body by resolution designates some other place for 
the safe-keeping of the collateral or placed in safekeeping for 
the municipality in a financial institution approved by the 
governing body of the municipality or the treasurer or chief 
financial officer, if approval authority is designated to the 
treasurer or chief financial officer.  The collateral shall not 
be redeposited in the bank, trust company or thrift institution 
furnishing it. 
    Subd. 10.  Any depository pledging securities, at any time 
it deems it advisable or desirable, may substitute obligations 
of the United States of America for all or any part of the 
securities pledged.  The substituted collateral shall be 
approved by the governing body of the municipality making the 
designation at its next official meeting.  The substituted 
securities, at the time of substitution, shall have a market 
value which, together with the market value of the original 
securities for which no substitution is made, is at least ten 
percent more than the amount of deposit, in excess of any 
insured portion, that would be permitted if a corporate or 
personal surety bond were furnished.  In the event of 
substitution the holder or custodian of the securities shall, on 
the same day, forward by registered or certified mail to the 
public corporation and the depository, a receipt specifically 
describing and identifying both the substituted securities and 
those released and returned to the depository. 
    Subd. 11 7.  "Municipality" for the purpose of this section 
means a county, city, town, school district, hospital district, 
public authority, public corporation, public commission, special 
district, police or salaried firefighter's relief association, 
volunteer firefighter's relief association, independent 
nonprofit firefighting corporation having a subsidiary 
firefighter's relief association, or any retirement association 
established pursuant to statute or special law holding funds 
intended to support or pay retirement benefits for employees of 
a municipality, any other political subdivision, or an agency of 
the state or of its subdivisions. 
     Sec. 3.  Minnesota Statutes 1984, section 475.66, 
subdivision 1, is amended to read: 
    Subdivision 1.  All debt service funds shall be deposited 
and secured as provided in chapter 118, except for amounts 
invested as authorized in this section, and may be deposited in 
interest bearing accounts, and such deposits may be evidenced by 
certificates of deposit with fixed maturities.  Sufficient cash 
for payment of principal, interest, and redemption premiums when 
due with respect to the obligations for which any debt service 
fund is created shall be provided by crediting to the fund the 
collections of tax, special assessment, or other revenues 
appropriated for that purpose, and depositing all such receipts 
in a depository bank or banks duly qualified according to law or 
investing and reinvesting such receipts in securities authorized 
in this section.  Time deposits shall be withdrawable and 
certificates of deposit and investments shall mature and shall 
bear interest payable at times and in amounts which, in the 
judgment of the governing body or its treasurer or other officer 
or committee to which it has delegated investment decisions, 
will provide cash at the times and in the amounts required for 
the purposes of the debt service fund, provided however, that 
the governing body may authorize the purchase of longer term 
investments subject to an agreement to repurchase such 
investments at times and prices sufficient to yield the amounts 
estimated to be so required.  Repurchase agreements may be 
entered into with a bank qualified as depository of money held 
in the debt service fund, or with any national or state bank in 
the United States which is a member of the federal reserve 
system and whose combined capital and surplus equals or exceeds 
$10,000,000, or a primary reporting dealer in United States 
government securities to the federal reserve bank of New York. 
    Sec. 4.  Minnesota Statutes 1984, section 475.66, 
subdivision 3, is amended to read: 
    Subd. 3.  Subject to the provisions of any resolutions or 
other instruments securing obligations payable from a debt 
service fund, any balance in the fund may be invested 
    (a) in any security which is a direct obligation of or is 
guaranteed as to payment of principal and interest by the United 
States or any agency or instrumentality of the United States 
governmental bonds, notes, bills, mortgages, and other 
securities, which are direct obligations or are guaranteed or 
insured issues of the United States, its agencies, its 
instrumentalities, or organizations created by an act of 
Congress, 
    (b) in shares of an investment company registered under the 
federal investment company act of 1940, whose shares are 
registered under the federal securities act of 1933, and whose 
only investments are in securities described in the preceding 
clause, 
    (c) in any security which is a general obligation of the 
state of Minnesota or any of its municipalities, 
    (d) in bankers acceptances of United States banks eligible 
for purchase by the Federal Reserve System, or 
    (e) in commercial paper issued by United States 
corporations or their Canadian subsidiaries that is of the 
highest quality and matures in 270 days or less. 
    The fund may also 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 or hypothecated by the municipality at any time, but the 
money so received remains a part of the fund until used for the 
purpose for which the fund was created. 
    Sec. 5.  Minnesota Statutes 1984, section 475.76, 
subdivision 1, is amended to read: 
    Subdivision 1.  A reverse repurchase agreement may be 
entered into by a municipality, subject to the provisions of 
this section, only with a bank qualified as depository of funds 
of the municipality, or with any national or state bank in the 
United States which is a member of the federal reserve system 
and whose combined capital and surplus equals or exceeds 
$10,000,000, or with a primary reporting dealer in United States 
government securities to the federal reserve bank of New York. 
    Approved May 24, 1985