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DRAFT ONLY
NOT APPROVED FOR
INTRODUCTION
HOUSE BILL NO.
Local government funds-pooled equity investments.
Sponsored by: Select Committee on Capital Financing &
Investments
A BILL
for
1 AN ACT relating to public funds; authorizing local
2 governments to form a pool for purposes of investing local
3 government funds in equities; specifying requirements for
4 the establishment and operation of the local government
5 equity investment pool; establishing a board for the pool
6 and an investment advisory committee; providing
7 requirements for the board and committee; requiring
8 reports; providing definitions; and providing for an
9 effective date.
10
11 Be It Enacted by the Legislature of the State of Wyoming:
12
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3 STAFF COMMENT
4
5 Under Article 16, Section 6(a)(ii)(C) of the Wyoming
6 Constitution, this bill draft would require a 2/3 vote of
7 each house voting separately to be enacted. The text of the
8 provision follows:
9
10 Article 16, Section 6 Loan of credit; donations
11 prohibited; investment of funds; works of internal
12 improvement.
13
14 (a) Neither the state nor any county, city, township,
15 town, school district, or any other political subdivision,
16 shall:
17
18 (ii) Subscribe to or become the owner of the
19 capital stock of any association or corporation, except
20 that:
21
22 (C) The legislature may provide by law for
23 the investment of county, city, township, town, school
24 district, or any other political subdivision's funds in the
25 capital stock of any association or corporation and may
26 designate which of these funds may be invested. The
27 legislature may prescribe different investment conditions
28 for each type and class of political subdivision and for
29 each type of fund. Any legislation establishing or
30 increasing the percentage of any fund that may be invested
31 under this subparagraph shall be passed only by a two-
32 thirds (2/3) vote of all the members of each of the two (2)
33 houses voting separately.
34
35
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38
39 Section 1. W.S. 9-4-1401 through 9-4-1404 are created
40 to read:
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1 ARTICLE 14
2 INVESTMENT OF LOCAL FUNDS
3
4 9-4-1401. Definitions.
5
6 (a) As used in this article:
7
8 (i) "Board" means the local government equity
9 investment pool joint powers board formed under this
10 article;
11
12 (ii) "Investment advisory committee" means the
13 investment advisory committee created by W.S. 9-4-1404;
14
15 (iii) "Local government" means a county, city and
16 town;
17
18 (iv) "Pool" means the local government equity
19 investment pool.
20
21 9-4-1402. Local government equity investment pool;
22 creation.
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1 There is created the local government equity investment
2 pool program to provide a mechanism for local governments
3 to pool funds for investment in equities, including stocks
4 of corporations. It is the intent of the legislature that
5 the local government equity investment pool shall be
6 operated by a joint powers board formed by local
7 governments participating in the pool and administered in
8 accordance with the provisions of this article.
9
10 9-4-1403. Local government equity investment pool;
11 board; duties and powers.
12
13 (a) The local government equity investment pool joint
14 powers board shall consist of a number of members as
15 determined by the local governments that participate in the
16 pool. Board members shall serve terms as determined by the
17 participating local governments and shall include members
18 from the different types of local governments that
19 participate in the pool.
20
21 (b) The participating local governments may provide
22 salary, per diem and mileage to board members and members
23 of the investment advisory committee for expenses incurred
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1 in the performance of their duties in an amount not to
2 exceed the amounts provided in W.S. 28-5-101.
3
4 (c) The board shall:
5
6 (i) Administer the pool;
7
8 (ii) Consult with and receive advice from the
9 investment advisory committee created by W.S. 9-4-1404 and
10 in accordance with this article;
11
12 (iii) Establish assessments and fees for
13 participating local governments to operate the pool.
14 Assessments may be calculated as a percentage of investment
15 earnings from the pool and may be assessed from the pool's
16 earnings, as determined by the board;
17
18 (iv) Apportion and collect assessments from each
19 participating local government. Assessments collected under
20 this subsection shall be used only for administrative
21 expenses of the board and investment advisory committee,
22 fees for investments under this section and expenses
23 specified in subsection (b) of this section;
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2 (v) Adopt rules governing the administration of
3 the pool.
4
5 (d) The board shall, in consultation with the
6 investment advisory committee:
7
8 (i) Establish procedures for the investment of
9 the participating local governments' funds in appropriate
10 investment assets and classes, including equities and
11 stocks of corporations. Procedures established under this
12 paragraph shall provide:
13
14 (A) That any investments made under this
15 article shall be made with a person who has:
16
17 (I) Not less than ten (10) years of
18 investment experience involved in the management of a
19 portfolio in excess of one hundred ten million dollars
20 ($110,000,000.00);
21
22 (II) A broad understanding of financial
23 markets;
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1
2 (III) Not been convicted of or pleads
3 guilty or nolo contendere to a felony violation or been the
4 subject of any disciplinary action involving moral
5 turpitude;
6
7 (IV) No conflicts of interest that
8 would lead to a violation of W.S. 6-5-106, 6-5-118, 16-6-
9 118 or other comparable provision of law.
10
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13 STAFF COMMENT
14
15 Below are the two qualification requirements for who can
16 invest funds for local governments that were in the
17 previous version of this bill draft; they are included here
18 for Committee consideration, per the Committee's
19 discussion:
20
21 (I) Is registered under the Investment
22 Advisor's Act of 1940, as amended, if the person is
23 required to be registered by the terms of that act;
24
25 (II) Has and maintains at least one (1)
26 physical office in Wyoming.
27
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6 STAFF COMMENT
7
8 At the Select Committee's September meeting, the Select
9 Committee voted to delete a paragraph concerning the
10 duration of investments made under this section. Per
11 discussion, that language is included in this staff comment
12 for further consideration.
13
14 (B) Each investment made under this section
15 shall be for a duration of not less than five (5) years;
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18
19 (B) That funds provided for investment by
20 each participating local government shall not exceed the
21 amount specified in subsection (e) of this section;
22
23 (C) For the monitoring, controlling,
24 depositing and retaining of investments;
25
26 (D) For agreements to be made between the
27 pool and a person to invest the funds in appropriate
28 investment assets and classes, including stocks and
29 equities, in accordance with this article;
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2 (E) For implementing investment policy
3 statements for the pool's investments developed under this
4 article and for ensuring that investments are made to
5 strive for the highest possible risk-adjusted total net
6 return consistent with an appropriate level of safety and
7 liquidity;
8
9 (F) For standards for competitive bidding to
10 be used to select a person or persons to invest the pool's
11 funds, in accordance with this article.
12
13 (ii) Establish a process by which participating
14 local governments enter into an agreement with the board
15 for the investment of funds in the pool, including
16 agreements and requirements for:
17
18 (A) How funds may be deposited or
19 transferred to the pool;
20
21 (B) How funds may be withdrawn from the
22 pool, including limitations on withdrawal and penalties to
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1 be imposed on the local government for the early withdrawal
2 of funds from the pool;
3
4 (C) Ensuring that funds provided by
5 participating local governments may be invested to meet the
6 investment objectives specified in this article.
7
8 (iii) Establish procedures for the calculation
9 and disposition of earnings, including how earnings are
10 apportioned to each participating local government and how
11 earnings are deposited with or transferred to each
12 participating local government, in accordance with the
13 requirements of subsection (g) of this section.
14
15 (e) Each local government participating in the pool
16 shall only provide funds for investment in the pool in
17 accordance with the following:
18
19 (i) The amount of monies invested at any one (1)
20 time by the pool shall not exceed thirty percent (30%) of
21 the total amount of each participating local government's
22 reserves that are available for investment;
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1 (ii) For purposes of this subsection, earnings
2 earned by the pool from funds invested under this section
3 shall not count toward the limits specified in this
4 subsection and may be reinvested in stocks and equities in
5 accordance with this section.
6
7 (f) The board may deny a local government
8 participation in or may terminate a local government from
9 the program for:
10
11 (i) A failure to pay the assessments required
12 under this article;
13
14 (ii) The early withdrawal of funds from the pool.
15
16 (g) Earnings on funds invested by the pool under this
17 article shall be credited in accordance with the following:
18
19 (i) Interest, dividends and rents earned shall
20 be credited not later than at the end of the second month
21 following each fiscal quarter;
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1 (ii) Subject to paragraph (iii) of this
2 subsection, other realized earnings shall be credited as
3 soon as practicable after the end of the fiscal year but
4 not later than ninety (90) days after the end of the fiscal
5 year in which the earnings were realized;
6
7 (iii) Any debit against the pool that exists as
8 a result of realized investment losses from a prior year's
9 investments of the pool shall be paid before distributions
10 under paragraph (ii) of this subsection;
11
12 (iv) Subject to the requirements of paragraph
13 (iii) of this subsection, the board, in consultation with
14 the investment advisory committee, may credit any earnings
15 at earlier times than provided in this subsection and in
16 such amounts as may be advantageous for the pool's
17 investment program and cash management.
18
19 9-4-1404. Local government equity investment pool;
20 investment advisory committee.
21
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24 STAFF COMMENT
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1
2 Most of the provisions of this section come from current
3 law establishing and governing the Investment Funds
4 Committee. The Select Committee will need to determine the
5 appropriate structure and requirements for this investment
6 advisory committee.
7
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