Public Act 93-0360

HB0273 Enrolled                      LRB093 04311 MKM 04358 b

    AN ACT concerning bonds.

    Be it enacted by the People of  the  State  of  Illinois,
represented in the General Assembly:

    Section  5. The Public Funds Investment Act is amended by
changing Section 2 as follows:

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

    Section  10.  The  Investment  of  Municipal Funds Act is
amended by changing Section 1 as follows:

    (50 ILCS 340/1) (from Ch. 146 1/2, par. 3.1)
    Sec. 1.  Every county, park district, sanitary  district,
or other municipal corporation, holding in its treasury funds
which   are  set  aside  for  use  for  particular  purposes,
including any  funds  that  are  disbursed  to  a  county  or
municipality  as their share of the taxes collected under the
"Motor Fuel Tax Law", but which are not immediately necessary
for those purposes, by ordinance, may use those funds, or any
of them, in the purchase of tax anticipation warrants  issued
by  the  county,  park  district, sanitary district, or other
municipal corporation  possessing  the  funds  against  taxes
levied  by  that county, park district, sanitary district, or
other municipal  corporation.    These  warrants  shall  bear
interest  not  to exceed four percent annually.  All interest
upon these warrants, and all  money  paid  in  redemption  of
these warrants, or received from the resale thereof, shall at
once be credited to and placed in the particular fund used to
purchase the specified warrants. Likewise, every county, park
district,  sanitary district, or other municipal corporation,
by resolution or ordinance may use the money in the specified
funds in the  purchase  of  municipal  bonds  issued  by  the
county,  park district, sanitary district, or other municipal
corporation,  possessing  the  funds  and   representing   an
obligation  and  pledging  the  credit  of  that county, park
district, sanitary district, or other municipal  corporation,
or bonds and other interest bearing obligations of the United
States, or of the State of Illinois, or of any other state or
of  any  political  subdivision  or  agency  of  the State of
Illinois or of any other state, whether the  interest  earned
thereon is taxable or tax-exempt under federal law, including
savings  accounts  and savings certificates of deposit of any
State or National Bank if such accounts and certificates  are
fully  insured  by the Federal Deposit Insurance Corporation,
withdrawable capital accounts or deposits of State or federal
chartered savings  and  loan  associations  which  are  fully
insured   by   the   Federal   Savings   and  Loan  Insurance
Corporation, or treasury notes and other securities issued by
agencies of the United States.  All interest upon these bonds
or obligations and all money  paid  in  redemption  of  these
bonds  or  obligations  or realized from the sale thereof, if
afterwards sold, shall at once be credited to and  placed  in
the  particular  fund used to purchase the specified bonds or
obligations.
    No bank or savings and  loan  association  shall  receive
public  funds  as  permitted  by  this Section, unless it has
complied  with  the  requirements  established  pursuant   to
Section  6  of  "An  Act  relating  to certain investments of
public funds by public agencies", approved July 23, 1943,  as
now or hereafter amended.
    This  amendatory  Act  of 1975 is not a limit on any home
rule unit.
(Source: P.A. 84-1308.)

    Section 99. Effective date. This Act  takes  effect  upon
becoming law.