SB1950 EnrolledLRB098 10590 HLH 40852 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 Sections 1 and 2 as follows:
 
6    (30 ILCS 235/1)  (from Ch. 85, par. 901)
7    Sec. 1. The words "public funds", as used in this Act, mean
8current operating funds, special funds, interest and sinking
9funds, and funds of any kind or character belonging to or in
10the custody of any public agency.
11    The words "public agency", as used in this Act, mean the
12State of Illinois, the various counties, townships, cities,
13towns, villages, school districts, educational service
14regions, special road districts, public water supply
15districts, fire protection districts, drainage districts,
16levee districts, sewer districts, housing authorities, the
17Illinois Bank Examiners' Education Foundation, the Chicago
18Park District, and all other political corporations or
19subdivisions of the State of Illinois, now or hereafter
20created, whether herein specifically mentioned or not. This Act
21does not apply to the Illinois Prepaid Tuition Trust Fund,
22private funds collected by the Illinois Conservation
23Foundation, or pension funds or retirement systems established

 

 

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1under the Illinois Pension Code, except as otherwise provided
2in that Code.
3    The words "governmental unit", as used in this Act, have
4the same meaning as in the Local Government Debt Reform Act.
5(Source: P.A. 91-669, eff. 1-1-00; 92-797, eff. 8-15-02.)
 
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
24    $500,000,000 if (i) such obligations are rated at the time
25    of purchase at one of the 3 highest classifications

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1funds.
2    Nothing in this Section shall be construed to authorize an
3intergovernmental risk management entity to accept the deposit
4of public funds except for risk management purposes.
5(Source: P.A. 96-741, eff. 8-25-09; 97-129, eff. 7-14-11.)
 
6    Section 10. The Illinois Municipal Code is amended by
7changing Section 3.1-35-50 as follows:
 
8    (65 ILCS 5/3.1-35-50)  (from Ch. 24, par. 3.1-35-50)
9    Sec. 3.1-35-50. Treasurer; deposit of funds.
10    (a) The municipal treasurer may be required to keep all
11funds and money in the treasurer's custody belonging to the
12municipality in places of deposit designated by ordinance. When
13requested by the municipal treasurer, the corporate
14authorities shall designate one or more banks or savings and
15loan associations in which may be kept the funds and money of
16the municipality in the custody of the treasurer. When a bank
17or savings and loan association has been designated as a
18depository, it shall continue as a depository until 10 days
19have elapsed after a new depository is designated and has
20qualified by furnishing the statements of resources and
21liabilities as required by this Section. When a new depository
22is designated, the corporate authorities shall notify the
23sureties of the municipal treasurer of that fact in writing at
24least 5 days before the transfer of funds. The treasurer shall

 

 

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1be discharged from responsibility for all funds or money that
2the treasurer deposits in a designated bank or savings and loan
3association while the funds and money are so deposited.
4    (b) The municipal treasurer may require any bank or savings
5and loan association to deposit with the treasurer securities
6or mortgages that have a market value at least equal to the
7amount of the funds or moneys of the municipality deposited
8with the bank or savings and loan association that exceeds the
9insurance limitation provided by the Federal Deposit Insurance
10Corporation or the Federal Savings and Loan Insurance
11Corporation.
12    (c) The municipal treasurer may enter into agreements of
13any definite or indefinite term regarding the deposit,
14redeposit, investment, reinvestment, or withdrawal of
15municipal funds.
16    (d) Notwithstanding any other provision of this Act or any
17other law, each official custodian of municipal funds,
18including, without limitation, each municipal treasurer or
19finance director or each person properly designated as the
20official custodian for municipal funds, including, without
21limitation, each person properly designated as official
22custodian for funds held by an intergovernmental risk
23management entity, self-insurance pool, waste management
24agency, or other intergovernmental entity composed solely of
25participating municipalities, is permitted to:
26        (i) combine moneys from more than one fund of a single

 

 

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1    municipality, risk management entity, self-insurance pool,
2    or other intergovernmental entity composed solely of
3    participating municipalities for the purpose of investing
4    such moneys;
5        (ii) join with any other official custodians or
6    treasurers of municipal, intergovernmental risk management
7    entity, self-insurance pool, waste management agency, or
8    other intergovernmental entity composed solely of
9    participating municipalities for the purpose of jointly
10    investing the funds of which the official custodians or
11    treasurers have custody; and
12        (iii) enter into agreements of any definite or
13    indefinite term regarding the redeposit, investment, or
14    withdrawal of municipal, risk management entity,
15    self-insurance agency, waste management agency, or other
16    intergovernmental entity funds.
17    When funds are combined for investment purposes as
18authorized in this Section, the moneys combined for those
19purposes shall be accounted for separately in all respects, and
20the earnings from such investment shall be separately and
21individually computed, recorded, and credited to the fund,
22municipality, intergovernmental risk management entity,
23self-insurance pool, waste management agency, or other
24intergovernmental entity, as the case may be, for which the
25investment was acquired.
26    Joint investments shall be made only in investments

 

 

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1authorized by law for investment of municipal funds. The grant
2of authority contained in this subsection is cumulative,
3supplemental, and in addition to all other power or authority
4granted by any other law and shall not be construed as a
5limitation of any power and authority otherwise granted.
6    (e) No bank or savings and loan association shall receive
7public funds as permitted by this Section unless it has
8complied with the requirements established by Section 6 of the
9Public Funds Investment Act.
10    (f) In addition to any other investments or deposits
11authorized under this Code, municipalities are authorized to
12invest the funds and public moneys in the custody of the
13municipal treasurer in accordance with the Public Funds
14Investment Act.
15(Source: P.A. 89-592, eff. 8-1-96.)