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 or a county that contains a city of that size. 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 government entity deals; and
(7) credit standards for investments made by the government 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
government 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 government entity may enter into repurchase
agreements as authorized under section
, provided that the exclusion of mortgage-backed
securities defined as "high-risk mortgage-backed securities" under section
, 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
118A.05, subdivision 2
, the county 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
. 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 government 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 counties, 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.
History: 1996 c 399 art 1 s 8