093_HB0273eng HB0273 Engrossed LRB093 04311 MKM 04358 b 1 AN ACT concerning bonds. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Public Funds Investment Act is amended by 5 changing Section 2 as follows: 6 (30 ILCS 235/2) (from Ch. 85, par. 902) 7 Sec. 2. Authorized investments. 8 (a) Any public agency may invest any public funds as 9 follows: 10 (1) in bonds, notes, certificates of indebtedness, 11 treasury bills or other securities now or hereafter 12 issued, which are guaranteed by the full faith and credit 13 of the United States of America as to principal and 14 interest; 15 (2) in bonds, notes, debentures, or other similar 16 obligations of the United States of America or its 17 agencies; 18 (3) in interest-bearing savings accounts, 19 interest-bearing certificates of deposit or 20 interest-bearing time deposits or any other investments 21 constituting direct obligations of any bank as defined by 22 the Illinois Banking Act; 23 (4) in short term obligations of corporations 24 organized in the United States with assets exceeding 25 $500,000,000 if (i) such obligations are rated at the 26 time of purchase at one of the 3 highest classifications 27 established by at least 2 standard rating services and 28 which mature not later than 180 days from the date of 29 purchase, (ii) such purchases do not exceed 10% of the 30 corporation's outstanding obligations and (iii) no more 31 than one-third of the public agency's funds may be HB0273 Engrossed -2- LRB093 04311 MKM 04358 b 1 invested in short term obligations of corporations; or 2 (5) in money market mutual funds registered under 3 the Investment Company Act of 1940, provided that the 4 portfolio of any such money market mutual fund is limited 5 to obligations described in paragraph (1) or (2) of this 6 subsection and to agreements to repurchase such 7 obligations. 8 (a-1) In addition to any other investments authorized 9 under this Act, a municipality may invest its public funds in 10 interest bearing bonds of any county, township, city, 11 village, incorporated town, municipal corporation, or school 12 district, of the State of Illinois, of any other state, or of 13 any political subdivision or agency of the State of Illinois 14 or of any other state, whether the interest earned thereon is 15 taxable or tax-exempt under federal law. The bonds shall be 16 registered in the name of the municipality or held under a 17 custodial agreement at a bank. The bonds shall be rated at 18 the time of purchase within the 4 highest general 19 classifications established by a rating service of nationally 20 recognized expertise in rating bonds of states and their 21 political subdivisions. 22 (b) Investments may be made only in banks which are 23 insured by the Federal Deposit Insurance Corporation. Any 24 public agency may invest any public funds in short term 25 discount obligations of the Federal National Mortgage 26 Association or in shares or other forms of securities legally 27 issuable by savings banks or savings and loan associations 28 incorporated under the laws of this State or any other state 29 or under the laws of the United States. Investments may be 30 made only in those savings banks or savings and loan 31 associations the shares, or investment certificates of which 32 are insured by the Federal Deposit Insurance Corporation. Any 33 such securities may be purchased at the offering or market 34 price thereof at the time of such purchase. All such HB0273 Engrossed -3- LRB093 04311 MKM 04358 b 1 securities so purchased shall mature or be redeemable on a 2 date or dates prior to the time when, in the judgment of such 3 governing authority, the public funds so invested will be 4 required for expenditure by such public agency or its 5 governing authority. The expressed judgment of any such 6 governing authority as to the time when any public funds will 7 be required for expenditure or be redeemable is final and 8 conclusive. Any public agency may invest any public funds in 9 dividend-bearing share accounts, share certificate accounts 10 or class of share accounts of a credit union chartered under 11 the laws of this State or the laws of the United States; 12 provided, however, the principal office of any such credit 13 union must be located within the State of Illinois. 14 Investments may be made only in those credit unions the 15 accounts of which are insured by applicable law. 16 (c) For purposes of this Section, the term "agencies of 17 the United States of America" includes: (i) the federal land 18 banks, federal intermediate credit banks, banks for 19 cooperative, federal farm credit banks, or any other entity 20 authorized to issue debt obligations under the Farm Credit 21 Act of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory 22 thereto; (ii) the federal home loan banks and the federal 23 home loan mortgage corporation; and (iii) any other agency 24 created by Act of Congress. 25 (d) Except for pecuniary interests permitted under 26 subsection (f) of Section 3-14-4 of the Illinois Municipal 27 Code or under Section 3.2 of the Public Officer Prohibited 28 Practices Act, no person acting as treasurer or financial 29 officer or who is employed in any similar capacity by or for 30 a public agency may do any of the following: 31 (1) have any interest, directly or indirectly, in 32 any investments in which the agency is authorized to 33 invest. 34 (2) have any interest, directly or indirectly, in HB0273 Engrossed -4- LRB093 04311 MKM 04358 b 1 the sellers, sponsors, or managers of those investments. 2 (3) receive, in any manner, compensation of any 3 kind from any investments in which the agency is 4 authorized to invest. 5 (e) Any public agency may also invest any public funds 6 in a Public Treasurers' Investment Pool created under Section 7 17 of the State Treasurer Act. Any public agency may also 8 invest any public funds in a fund managed, operated, and 9 administered by a bank, subsidiary of a bank, or subsidiary 10 of a bank holding company or use the services of such an 11 entity to hold and invest or advise regarding the investment 12 of any public funds. 13 (f) To the extent a public agency has custody of funds 14 not owned by it or another public agency and does not 15 otherwise have authority to invest such funds, the public 16 agency may invest such funds as if they were its own. Such 17 funds must be released to the appropriate person at the 18 earliest reasonable time, but in no case exceeding 31 days, 19 after the private person becomes entitled to the receipt of 20 them. All earnings accruing on any investments or deposits 21 made pursuant to the provisions of this Act shall be credited 22 to the public agency by or for which such investments or 23 deposits were made, except as provided otherwise in Section 24 4.1 of the State Finance Act or the Local Governmental Tax 25 Collection Act, and except where by specific statutory 26 provisions such earnings are directed to be credited to and 27 paid to a particular fund. 28 (g) A public agency may purchase or invest in repurchase 29 agreements of government securities having the meaning set 30 out in the Government Securities Act of 1986 subject to the 31 provisions of said Act and the regulations issued thereunder. 32 The government securities, unless registered or inscribed in 33 the name of the public agency, shall be purchased through 34 banks or trust companies authorized to do business in the HB0273 Engrossed -5- LRB093 04311 MKM 04358 b 1 State of Illinois. 2 (h) Except for repurchase agreements of government 3 securities which are subject to the Government Securities Act 4 of 1986, no public agency may purchase or invest in 5 instruments which constitute repurchase agreements, and no 6 financial institution may enter into such an agreement with 7 or on behalf of any public agency unless the instrument and 8 the transaction meet the following requirements: 9 (1) The securities, unless registered or inscribed 10 in the name of the public agency, are purchased through 11 banks or trust companies authorized to do business in the 12 State of Illinois. 13 (2) An authorized public officer after ascertaining 14 which firm will give the most favorable rate of interest, 15 directs the custodial bank to "purchase" specified 16 securities from a designated institution. The "custodial 17 bank" is the bank or trust company, or agency of 18 government, which acts for the public agency in 19 connection with repurchase agreements involving the 20 investment of funds by the public agency. The State 21 Treasurer may act as custodial bank for public agencies 22 executing repurchase agreements. To the extent the 23 Treasurer acts in this capacity, he is hereby authorized 24 to pass through to such public agencies any charges 25 assessed by the Federal Reserve Bank. 26 (3) A custodial bank must be a member bank of the 27 Federal Reserve System or maintain accounts with member 28 banks. All transfers of book-entry securities must be 29 accomplished on a Reserve Bank's computer records through 30 a member bank of the Federal Reserve System. These 31 securities must be credited to the public agency on the 32 records of the custodial bank and the transaction must be 33 confirmed in writing to the public agency by the 34 custodial bank. HB0273 Engrossed -6- LRB093 04311 MKM 04358 b 1 (4) Trading partners shall be limited to banks or 2 trust companies authorized to do business in the State of 3 Illinois or to registered primary reporting dealers. 4 (5) The security interest must be perfected. 5 (6) The public agency enters into a written master 6 repurchase agreement which outlines the basic 7 responsibilities and liabilities of both buyer and 8 seller. 9 (7) Agreements shall be for periods of 330 days or 10 less. 11 (8) The authorized public officer of the public 12 agency informs the custodial bank in writing of the 13 maturity details of the repurchase agreement. 14 (9) The custodial bank must take delivery of and 15 maintain the securities in its custody for the account of 16 the public agency and confirm the transaction in writing 17 to the public agency. The Custodial Undertaking shall 18 provide that the custodian takes possession of the 19 securities exclusively for the public agency; that the 20 securities are free of any claims against the trading 21 partner; and any claims by the custodian are subordinate 22 to the public agency's claims to rights to those 23 securities. 24 (10) The obligations purchased by a public agency 25 may only be sold or presented for redemption or payment 26 by the fiscal agent bank or trust company holding the 27 obligations upon the written instruction of the public 28 agency or officer authorized to make such investments. 29 (11) The custodial bank shall be liable to the 30 public agency for any monetary loss suffered by the 31 public agency due to the failure of the custodial bank to 32 take and maintain possession of such securities. 33 (i) Notwithstanding the foregoing restrictions on 34 investment in instruments constituting repurchase agreements HB0273 Engrossed -7- LRB093 04311 MKM 04358 b 1 the Illinois Housing Development Authority may invest in, and 2 any financial institution with capital of at least 3 $250,000,000 may act as custodian for, instruments that 4 constitute repurchase agreements, provided that the Illinois 5 Housing Development Authority, in making each such 6 investment, complies with the safety and soundness guidelines 7 for engaging in repurchase transactions applicable to 8 federally insured banks, savings banks, savings and loan 9 associations or other depository institutions as set forth in 10 the Federal Financial Institutions Examination Council Policy 11 Statement Regarding Repurchase Agreements and any regulations 12 issued, or which may be issued by the supervisory federal 13 authority pertaining thereto and any amendments thereto; 14 provided further that the securities shall be either (i) 15 direct general obligations of, or obligations the payment of 16 the principal of and/or interest on which are unconditionally 17 guaranteed by, the United States of America or (ii) any 18 obligations of any agency, corporation or subsidiary thereof 19 controlled or supervised by and acting as an instrumentality 20 of the United States Government pursuant to authority granted 21 by the Congress of the United States and provided further 22 that the security interest must be perfected by either the 23 Illinois Housing Development Authority, its custodian or its 24 agent receiving possession of the securities either 25 physically or transferred through a nationally recognized 26 book entry system. 27 (j) In addition to all other investments authorized 28 under this Section, a community college district may invest 29 public funds in any mutual funds that invest primarily in 30 corporate investment grade or global government short term 31 bonds. Purchases of mutual funds that invest primarily in 32 global government short term bonds shall be limited to funds 33 with assets of at least $100 million and that are rated at 34 the time of purchase as one of the 10 highest classifications HB0273 Engrossed -8- LRB093 04311 MKM 04358 b 1 established by a recognized rating service. The investments 2 shall be subject to approval by the local community college 3 board of trustees. Each community college board of trustees 4 shall develop a policy regarding the percentage of the 5 college's investment portfolio that can be invested in such 6 funds. 7 Nothing in this Section shall be construed to authorize 8 an intergovernmental risk management entity to accept the 9 deposit of public funds except for risk management purposes. 10 (Source: P.A. 90-319, eff. 8-1-97.) 11 Section 10. The Investment of Municipal Funds Act is 12 amended by changing Section 1 as follows: 13 (50 ILCS 340/1) (from Ch. 146 1/2, par. 3.1) 14 Sec. 1. Every county, park district, sanitary district, 15 or other municipal corporation, holding in its treasury funds 16 which are set aside for use for particular purposes, 17 including any funds that are disbursed to a county or 18 municipality as their share of the taxes collected under the 19 "Motor Fuel Tax Law", but which are not immediately necessary 20 for those purposes, by ordinance, may use those funds, or any 21 of them, in the purchase of tax anticipation warrants issued 22 by the county, park district, sanitary district, or other 23 municipal corporation possessing the funds against taxes 24 levied by that county, park district, sanitary district, or 25 other municipal corporation. These warrants shall bear 26 interest not to exceed four percent annually. All interest 27 upon these warrants, and all money paid in redemption of 28 these warrants, or received from the resale thereof, shall at 29 once be credited to and placed in the particular fund used to 30 purchase the specified warrants. Likewise, every county, park 31 district, sanitary district, or other municipal corporation, 32 by resolution or ordinance may use the money in the specified HB0273 Engrossed -9- LRB093 04311 MKM 04358 b 1 funds in the purchase of municipal bonds issued by the 2 county, park district, sanitary district, or other municipal 3 corporation, possessing the funds and representing an 4 obligation and pledging the credit of that county, park 5 district, sanitary district, or other municipal corporation, 6 or bonds and other interest bearing obligations of the United 7 States,orof the State of Illinois, or of any other state or 8 of any political subdivision or agency of the State of 9 Illinois or of any other state, whether the interest earned 10 thereon is taxable or tax-exempt under federal law, including 11 savings accounts and savings certificates of deposit of any 12 State or National Bank if such accounts and certificates are 13 fully insured by the Federal Deposit Insurance Corporation, 14 withdrawable capital accounts or deposits of State or federal 15 chartered savings and loan associations which are fully 16 insured by the Federal Savings and Loan Insurance 17 Corporation, or treasury notes and other securities issued by 18 agencies of the United States. All interest upon these bonds 19 or obligations and all money paid in redemption of these 20 bonds or obligations or realized from the sale thereof, if 21 afterwards sold, shall at once be credited to and placed in 22 the particular fund used to purchase the specified bonds or 23 obligations. 24 No bank or savings and loan association shall receive 25 public funds as permitted by this Section, unless it has 26 complied with the requirements established pursuant to 27 Section 6 of "An Act relating to certain investments of 28 public funds by public agencies", approved July 23, 1943, as 29 now or hereafter amended. 30 This amendatory Act of 1975 is not a limit on any home 31 rule unit. 32 (Source: P.A. 84-1308.) 33 Section 99. Effective date. This Act takes effect upon HB0273 Engrossed -10- LRB093 04311 MKM 04358 b 1 becoming law.