100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB4573

 

Introduced , by Rep. Michael J. Zalewski

 

SYNOPSIS AS INTRODUCED:
 
30 ILCS 235/2  from Ch. 85, par. 902

    Amends the Public Funds Investment Act. Provides that any public agency may invest any public funds in obligations (currently, short term obligations) of corporations organized in the United States with assets exceeding $500,000,000 if such obligations mature not later than 3 years (currently, 270 days) from the date of purchase, in addition to other criteria. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB4573LRB100 16602 HLH 31738 b

1    AN ACT concerning finance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Public Funds Investment Act is amended by
5changing 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
9follows:
10        (1) in bonds, notes, certificates of indebtedness,
11    treasury bills or other securities now or hereafter issued,
12    which are guaranteed by the full faith and credit of the
13    United States of America as to principal and interest;
14        (2) in bonds, notes, debentures, or other similar
15    obligations of the United States of America, its agencies,
16    and its instrumentalities;
17        (3) in interest-bearing savings accounts,
18    interest-bearing certificates of deposit or
19    interest-bearing time deposits or any other investments
20    constituting direct obligations of any bank as defined by
21    the Illinois Banking Act;
22        (4) in short term obligations of corporations
23    organized in the United States with assets exceeding

 

 

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1    $500,000,000 if (i) such obligations are rated at the time
2    of purchase at one of the 3 highest classifications
3    established by at least 2 standard rating services and
4    which mature not later than 3 years 270 days from the date
5    of purchase, (ii) such purchases do not exceed 10% of the
6    corporation's outstanding obligations and (iii) no more
7    than one-third of the public agency's funds may be invested
8    in short term obligations of corporations; or
9        (5) in money market mutual funds registered under the
10    Investment Company Act of 1940, provided that the portfolio
11    of any such money market mutual fund is limited to
12    obligations described in paragraph (1) or (2) of this
13    subsection and to agreements to repurchase such
14    obligations.
15    (a-1) In addition to any other investments authorized under
16this Act, a municipality, park district, forest preserve
17district, conservation district, county, or other governmental
18unit may invest its public funds in interest bearing bonds of
19any county, township, city, village, incorporated town,
20municipal corporation, or school district, of the State of
21Illinois, of any other state, or of any political subdivision
22or agency of the State of Illinois or of any other state,
23whether the interest earned thereon is taxable or tax-exempt
24under federal law. The bonds shall be registered in the name of
25the municipality, park district, forest preserve district,
26conservation district, county, or other governmental unit, or

 

 

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1held under a custodial agreement at a bank. The bonds shall be
2rated at the time of purchase within the 4 highest general
3classifications established by a rating service of nationally
4recognized expertise in rating bonds of states and their
5political subdivisions.
6    (b) Investments may be made only in banks which are insured
7by the Federal Deposit Insurance Corporation. Any public agency
8may invest any public funds in short term discount obligations
9of the Federal National Mortgage Association or in shares or
10other forms of securities legally issuable by savings banks or
11savings and loan associations incorporated under the laws of
12this State or any other state or under the laws of the United
13States. Investments may be made only in those savings banks or
14savings and loan associations the shares, or investment
15certificates of which are insured by the Federal Deposit
16Insurance Corporation. Any such securities may be purchased at
17the offering or market price thereof at the time of such
18purchase. All such securities so purchased shall mature or be
19redeemable on a date or dates prior to the time when, in the
20judgment of such governing authority, the public funds so
21invested will be required for expenditure by such public agency
22or its governing authority. The expressed judgment of any such
23governing authority as to the time when any public funds will
24be required for expenditure or be redeemable is final and
25conclusive. Any public agency may invest any public funds in
26dividend-bearing share accounts, share certificate accounts or

 

 

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1class of share accounts of a credit union chartered under the
2laws of this State or the laws of the United States; provided,
3however, the principal office of any such credit union must be
4located within the State of Illinois. Investments may be made
5only in those credit unions the accounts of which are insured
6by applicable law.
7    (c) For purposes of this Section, the term "agencies of the
8United States of America" includes: (i) the federal land banks,
9federal intermediate credit banks, banks for cooperative,
10federal farm credit banks, or any other entity authorized to
11issue debt obligations under the Farm Credit Act of 1971 (12
12U.S.C. 2001 et seq.) and Acts amendatory thereto; (ii) the
13federal home loan banks and the federal home loan mortgage
14corporation; and (iii) any other agency created by Act of
15Congress.
16    (d) Except for pecuniary interests permitted under
17subsection (f) of Section 3-14-4 of the Illinois Municipal Code
18or under Section 3.2 of the Public Officer Prohibited Practices
19Act, no person acting as treasurer or financial officer or who
20is employed in any similar capacity by or for a public agency
21may do any of the following:
22        (1) have any interest, directly or indirectly, in any
23    investments in which the agency is authorized to invest.
24        (2) have any interest, directly or indirectly, in the
25    sellers, sponsors, or managers of those investments.
26        (3) receive, in any manner, compensation of any kind

 

 

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1    from any investments in which the agency is authorized to
2    invest.
3    (e) Any public agency may also invest any public funds in a
4Public Treasurers' Investment Pool created under Section 17 of
5the State Treasurer Act. Any public agency may also invest any
6public funds in a fund managed, operated, and administered by a
7bank, subsidiary of a bank, or subsidiary of a bank holding
8company or use the services of such an entity to hold and
9invest or advise regarding the investment of any public funds.
10    (f) To the extent a public agency has custody of funds not
11owned by it or another public agency and does not otherwise
12have authority to invest such funds, the public agency may
13invest such funds as if they were its own. Such funds must be
14released to the appropriate person at the earliest reasonable
15time, but in no case exceeding 31 days, after the private
16person becomes entitled to the receipt of them. All earnings
17accruing on any investments or deposits made pursuant to the
18provisions of this Act shall be credited to the public agency
19by or for which such investments or deposits were made, except
20as provided otherwise in Section 4.1 of the State Finance Act
21or the Local Governmental Tax Collection Act, and except where
22by specific statutory provisions such earnings are directed to
23be credited to and paid to a particular fund.
24    (g) A public agency may purchase or invest in repurchase
25agreements of government securities having the meaning set out
26in the Government Securities Act of 1986, as now or hereafter

 

 

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1amended or succeeded, subject to the provisions of said Act and
2the regulations issued thereunder. The government securities,
3unless registered or inscribed in the name of the public
4agency, shall be purchased through banks or trust companies
5authorized to do business in the State of Illinois.
6    (h) Except for repurchase agreements of government
7securities which are subject to the Government Securities Act
8of 1986, as now or hereafter amended or succeeded, no public
9agency may purchase or invest in instruments which constitute
10repurchase agreements, and no financial institution may enter
11into such an agreement with or on behalf of any public agency
12unless the instrument and the transaction meet the following
13requirements:
14        (1) The securities, unless registered or inscribed in
15    the name of the public agency, are purchased through banks
16    or trust companies authorized to do business in the State
17    of Illinois.
18        (2) An authorized public officer after ascertaining
19    which firm will give the most favorable rate of interest,
20    directs the custodial bank to "purchase" specified
21    securities from a designated institution. The "custodial
22    bank" is the bank or trust company, or agency of
23    government, which acts for the public agency in connection
24    with repurchase agreements involving the investment of
25    funds by the public agency. The State Treasurer may act as
26    custodial bank for public agencies executing repurchase

 

 

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1    agreements. To the extent the Treasurer acts in this
2    capacity, he is hereby authorized to pass through to such
3    public agencies any charges assessed by the Federal Reserve
4    Bank.
5        (3) A custodial bank must be a member bank of the
6    Federal Reserve System or maintain accounts with member
7    banks. All transfers of book-entry securities must be
8    accomplished on a Reserve Bank's computer records through a
9    member bank of the Federal Reserve System. These securities
10    must be credited to the public agency on the records of the
11    custodial bank and the transaction must be confirmed in
12    writing to the public agency by the custodial bank.
13        (4) Trading partners shall be limited to banks or trust
14    companies authorized to do business in the State of
15    Illinois or to registered primary reporting dealers.
16        (5) The security interest must be perfected.
17        (6) The public agency enters into a written master
18    repurchase agreement which outlines the basic
19    responsibilities and liabilities of both buyer and seller.
20        (7) Agreements shall be for periods of 330 days or
21    less.
22        (8) The authorized public officer of the public agency
23    informs the custodial bank in writing of the maturity
24    details of the repurchase agreement.
25        (9) The custodial bank must take delivery of and
26    maintain the securities in its custody for the account of

 

 

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1    the public agency and confirm the transaction in writing to
2    the public agency. The Custodial Undertaking shall provide
3    that the custodian takes possession of the securities
4    exclusively for the public agency; that the securities are
5    free of any claims against the trading partner; and any
6    claims by the custodian are subordinate to the public
7    agency's claims to rights to those securities.
8        (10) The obligations purchased by a public agency may
9    only be sold or presented for redemption or payment by the
10    fiscal agent bank or trust company holding the obligations
11    upon the written instruction of the public agency or
12    officer authorized to make such investments.
13        (11) The custodial bank shall be liable to the public
14    agency for any monetary loss suffered by the public agency
15    due to the failure of the custodial bank to take and
16    maintain possession of such securities.
17    (i) Notwithstanding the foregoing restrictions on
18investment in instruments constituting repurchase agreements
19the Illinois Housing Development Authority may invest in, and
20any financial institution with capital of at least $250,000,000
21may act as custodian for, instruments that constitute
22repurchase agreements, provided that the Illinois Housing
23Development Authority, in making each such investment,
24complies with the safety and soundness guidelines for engaging
25in repurchase transactions applicable to federally insured
26banks, savings banks, savings and loan associations or other

 

 

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1depository institutions as set forth in the Federal Financial
2Institutions Examination Council Policy Statement Regarding
3Repurchase Agreements and any regulations issued, or which may
4be issued by the supervisory federal authority pertaining
5thereto and any amendments thereto; provided further that the
6securities shall be either (i) direct general obligations of,
7or obligations the payment of the principal of and/or interest
8on which are unconditionally guaranteed by, the United States
9of America or (ii) any obligations of any agency, corporation
10or subsidiary thereof controlled or supervised by and acting as
11an instrumentality of the United States Government pursuant to
12authority granted by the Congress of the United States and
13provided further that the security interest must be perfected
14by either the Illinois Housing Development Authority, its
15custodian or its agent receiving possession of the securities
16either physically or transferred through a nationally
17recognized book entry system.
18    (j) In addition to all other investments authorized under
19this Section, a community college district may invest public
20funds in any mutual funds that invest primarily in corporate
21investment grade or global government short term bonds.
22Purchases of mutual funds that invest primarily in global
23government short term bonds shall be limited to funds with
24assets of at least $100 million and that are rated at the time
25of purchase as one of the 10 highest classifications
26established by a recognized rating service. The investments

 

 

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1shall be subject to approval by the local community college
2board of trustees. Each community college board of trustees
3shall develop a policy regarding the percentage of the
4college's investment portfolio that can be invested in such
5funds.
6    Nothing in this Section shall be construed to authorize an
7intergovernmental risk management entity to accept the deposit
8of public funds except for risk management purposes.
9(Source: P.A. 97-129, eff. 7-14-11; 98-297, eff. 1-1-14;
1098-390, eff. 8-16-13; 98-756, eff. 7-16-14.)
 
11    Section 99. Effective date. This Act takes effect upon
12becoming law.