Bill Summary – FastDemocracy

HOUSE BILL NO. 6155
     November 26, 2024, Introduced by Rep. Fitzgerald and referred to the Committee on Local
       Government and Municipal Finance.
          A bill to amend 1943 PA 20, entitled
    "An act relative to the investment of funds of public corporations
    of the state; and to validate certain investments,"
    by amending sections 1, 5, 7, and 7a (MCL 129.91, 129.95, 129.97,
    and 129.97a), section 1 as amended by 2012 PA 152, section 5 as
    added by 1997 PA 196, section 7 as added by 2008 PA 220, and
    section 7a as added by 2008 PA 404.
                    THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
       Sec. 1. (1) Except as provided in section 5, the governing
 body by resolution may authorize its investment officer to invest
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 the funds of that the governing body's public corporation in 1 or
 more of the following:
         (a) Bonds, securities, and other obligations of the United
 States. or an agency or instrumentality of the United States.
         (b) Dollar-denominated bonds, notes, debentures, mortgage
 pass-throughs, debt securities, or other obligations of any
 enterprise sponsored by the United States, any agency of the United
 States, or any instrumentality of the United States, including, but
 not limited to, debt securities issued by the following:
         (i) The Government National Mortgage Association (GNMA).
         (ii) The Federal National Mortgage Association (FNMA).
         (iii) The Federal Home Loan Mortgage Corporation (FHLMC).
         (iv) The various Federal Home Loan Banks (FHLB).
         (v) The Federal Agricultural Mortgage Corporation (Farmer
 Mac).
         (vi) The Tennessee Valley Authority (TVA).
         (vii) The Small Business Association (SBA).
         (viii) The Federal Farm Credit Banks Funding Corporation (FFCB).
         (ix) The Export-Import Bank of the United States.
         (c) (b) Certificates of deposit, savings accounts, Savings
 accounts or depository receipts of a financial institution, but
 only if the financial institution complies with subsection (2), ;
 certificates of deposit obtained through a financial institution as
 provided in subsection (5); or deposit accounts of a financial
 institution as provided in under subsection (6).
         (d) Certificates of deposit of a finance business, but only if
 the finance business complies with subsection (2), or certificates
 of deposit obtained through a financial institution under
 subsection (5). As used in this subdivision, "finance business"
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 means a state or nationally chartered bank or a state or federally
 chartered savings and loan association, savings bank, or credit
 union whose deposits are insured by an agency of the United States
 under the laws of this state, any other state, or the United
 States.
       (e) (c) Commercial paper rated at the time of purchase within
 the 2 highest classifications established by not less than 2
 standard rating services and that matures not more than 270 days
 after the date of purchase.
       (f) The acquisition or holding of corporate bonds, notes,
 debentures, or debt securities with a credit rating at the time of
 purchase within the category of A or higher or the equivalent by
 not less than 1 nationally recognized statistical ratings
 organization and that matures not more than 5 years after the date
 of settlement. Investments under this subdivision must not exceed
 25% of public funds. Not more than 5% of public funds may be
 invested in securities under this subdivision from any 1 issuer. To
 purchase, acquire, or hold securities under this subdivision, 1 of
 the following conditions must be met:
       (i) The public corporation acquires the securities using a
 registered investment adviser, a state or nationally chartered
 bank, or an insurance company licensed to do business in this
 state. The relationship between the public corporation and the
 registered investment adviser, state or nationally chartered bank,
 or insurance company must be fiduciary in nature and is subject to
 the Michigan prudent investor rule, sections 1501 to 1512 of the
 estates and protected individuals code, 1998 PA 386, MCL 700.1501
 to 700.1512.
       (ii) The public corporation is a qualified institutional buyer
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 as that term is defined in 17 CFR 230.144A, and the investment
 officer and other designees who invest funds of the public
 corporation complete an approved training course and maintain the
 certification or designation as it relates to investing public
 funds. The state treasurer shall maintain and publish a list of
 approved certifications or designations. Approved certifications or
 designations include, but are not limited to, all of the following:
       (A) Certified public funds investment manager and advanced
 certified public funds investment manager by the Association of
 Public Treasurers of the United States and Canada.
       (B) Chartered financial analyst by the CFA Institute.
       (C) Certified financial planner by the Certified Financial
 Planner Board of Standards.
       (D) Chartered financial consultant by the American College of
 Financial Services.
       (E) Accredited asset management specialist by the College for
 Financial Planning.
       (F) Certified investment management analyst by the Investments
 and Wealth Institute.
       (G) Certified fixed income practitioner by the Fixed Income
 Academy.
       (H) Certified government investment professional by the
 Government Investment Officers Association.
       (g) (d) Repurchase agreements consisting of instruments listed
 in subdivision (a).
       (h) (e) Bankers' acceptances of United States banks.
       (i) (f) Obligations of this state or any of its this state's
 political subdivisions that at the time of purchase are rated as
 investment grade by not less than 1 standard rating
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 service.nationally recognized statistical ratings organization.
       (j) Obligations of any state other than this state or any
 political subdivision of any state other than this state that at
 the time of purchase have a credit rating within the category of AA
 or higher or the equivalent by not less than 1 nationally
 recognized statistical ratings organization.
       (k) (g) Mutual funds registered under the investment company
 act of 1940, 15 USC 80a-1 to 80a-64, with authority to purchase
 only investment vehicles that are legal for direct investment by a
 public corporation. However, a mutual fund is not disqualified as a
 permissible investment solely by reason of any of the following:
       (i) The purchase of securities on a when-issued or delayed
 delivery basis.
       (ii) The ability to lend portfolio securities as long as if the
 mutual fund receives collateral at all times equal to at least 100%
 of the value of the securities loaned.
       (iii) The limited ability to borrow and pledge a like portion of
 the portfolio's assets for temporary or emergency purposes.
       (l) (h) Obligations described in subdivisions (a) through to
 (g) if purchased through an interlocal agreement under the urban
 cooperation act of 1967, 1967 (Ex Sess) PA 7, MCL 124.501 to
 124.512.
       (m) (i) Investment pools organized under the surplus funds
 investment pool act, 1982 PA 367, MCL 129.111 to 129.118.
       (n) (j) The investment pools organized under the local
 government investment pool act, 1985 PA 121, MCL 129.141 to
 129.150.
       (2) Except as provided in subsection (5), a public corporation
 that invests its funds under subsection (1) shall not deposit or
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 invest the funds in a financial institution that is not eligible to
 be a depository of funds belonging to this state under a law or
 rule of this state or the United States.
       (3) Assets acceptable for pledging to secure deposits of
 public funds are limited to assets authorized for direct investment
 under subsection (1).
       (4) The governing body by resolution may authorize its
 investment officer to enter into written agreements with other
 public corporations to pool or coordinate the funds to be invested
 under this section with the funds of other public corporations.
 Agreements allowed under this subsection shall must include all of
 the following:
       (a) The types of investments permitted to be purchased with
 pooled funds.
       (b) The rights of members of the pool to withdraw funds from
 the pooled investments without penalty.
       (c) The duration of the agreement and the requirement that the
 agreement shall must not commence until at least not less than 60
 days after the public corporations entering the agreement give
 written notice to an existing local government investment pool
 which that is organized under the local government investment pool
 act, 1985 PA 121, MCL 129.141 to 129.150, in those counties where
 such a local government investment pool is operating and accepting
 deposits on or before September 29, 2006.
       (d) The method by which the pool will be administered.
       (e) The manner by which the public corporations will respond
 to liabilities incurred in conjunction with the administration of
 the pool.
       (f) The manner in which strict accountability for all funds
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 will be provided for, including an annual statement of all receipts
 and disbursements.
       (g) The manner by which the public corporations will adhere to
 the requirements of section 5.
       (5) In addition to the investments authorized under subsection
 (1), the governing body by resolution may authorize its investment
 officer to invest the funds of the public corporation in
 certificates of deposit in accordance with if all of the following
 conditions are met:
       (a) The funds are initially invested through a financial
 institution that is not ineligible to be a depository of surplus
 funds belonging to this state under section 6 of 1855 PA 105, MCL
 21.146.
       (b) The financial institution arranges for the investment of
 the funds in certificates of deposit in 1 or more insured
 depository institutions, as defined in 12 USC 1813, or 1 or more
 insured credit unions, as defined in 12 USC 1752, for the account
 of the public corporation.
       (c) The full amount of the principal and any accrued interest
 of each certificate of deposit is insured by an agency of the
 United States.
       (d) The financial institution acts as custodian for the public
 corporation with respect to each certificate of deposit.
       (e) At the same time that When the funds of the public
 corporation are deposited and the certificate or certificates of
 deposit are issued, the financial institution receives an amount of
 deposits from customers of other insured depository institutions or
 insured credit unions equal to or greater than the amount of the
 funds initially invested by the public corporation through the
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 financial institution.
       (6) In addition to the investments authorized under subsection
 (1), the governing body by resolution may authorize its investment
 officer to invest the funds of the public corporation in deposit
 accounts that meet if all of the following conditions are met:
       (a) The funds are initially deposited in a financial
 institution that is not ineligible to be a depository of surplus
 funds belonging to this state under section 6 of 1855 PA 105, MCL
 21.146.
       (b) The financial institution arranges for the deposit of the
 funds in deposit accounts in 1 or more insured depository
 institutions, as defined in 12 USC 1813, or 1 or more insured
 credit unions, as defined in 12 USC 1752, for the account of the
 public corporation.
       (c) The full amount of the principal and any accrued interest
 of each deposit account is insured by an agency of the United
 States.
       (d) The financial institution acts as custodian for the public
 corporation with respect to each deposit account.
       (e) On the same date that When the funds of the public
 corporation are deposited under subdivision (b), the financial
 institution receives an amount of deposits from customers of other
 insured depository institutions or insured credit unions equal to
 or greater than the amount of the funds initially deposited by the
 public corporation in the financial institution.
       (7) A public corporation that initially invests its funds
 through a financial institution that maintains an office located in
 this state may invest the funds in certificates of deposit as
 provided under subsection (5).
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        (8) As used in this section, "financial institution" means a
 state or nationally chartered bank or a state or federally
 chartered savings and loan association, savings bank, or credit
 union whose deposits are insured by an agency of the United States
 government and that maintains a principal office or branch office
 located in this state under the laws of this state or the United
 States.
        (9) As used in this act:
        (a) "Governing body" means the legislative body, council,
 commission, board, or other body having legislative powers of a
 public corporation.
        (b) "Funds" means the money of a public corporation, the
 investment of which is not otherwise subject to a public act of
 this state or bond authorizing ordinance or resolution of a public
 corporation that permits investment in fewer than all of the
 investment options listed in subsection (1) or imposes 1 or more
 conditions upon an investment in an option listed in subsection
 (1).
        (c) "Investment officer" means the treasurer or other person
 designated by statute or charter of a public corporation to act as
 the investment officer. In the absence of a statutory or charter
 designation, the governing body of a public corporation shall
 designate the investment officer.
        (d) "Public corporation" means a county, city, village,
 township, port district, drainage district, special assessment
 district, or metropolitan district of this state, or a board,
 commission, or another authority or agency created by or under an
 act of the legislature of this state.
        Sec. 5. (1) Not more than 180 days after the end of a public
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 corporation's first fiscal year that ends after the effective date
 of the amendatory act that repealed section 2, added subsection
 (3), a governing body, in consultation with the investment officer,
 shall adopt an investment policy that, at a minimum, includes all
 of the following:
       (a) A statement of the purpose, scope, and objectives of the
 policy, including safety, diversification, liquidity, and return on
 investment.
       (b) A delegation of authority to make investments.
       (c) A list of authorized investment instruments. If the policy
 authorizes an investment in mutual funds, it shall must indicate
 whether the authorization is limited to securities whose intention
 is to maintain a net asset value of $1.00 per share or also
 includes securities whose net asset value per share may fluctuate
 on a periodic basis.
       (d) A statement concerning safekeeping, custody, and prudence.
       (2) A governing body that as of the effective date of the
 amendatory act that repealed section 2 added subsection (3) has
 adopted an investment policy that substantially complies with the
 minimum requirements under subsection (1) is not in violation of
 this section as long as that policy remains in effect.
       (3) Beginning no later than 1 year after the end of the public
 corporation's first fiscal year that ends after the effective date
 of the amendatory act that added this subsection, public
 corporations shall file their approved investment policy under this
 section annually with the Michigan department of treasury. If a
 public corporation has approved an amendment to their investment
 policy under this section, the public corporation shall file their
 investment policy, as amended, with the department of treasury of
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 this state no later than 180 days after the en