Bill Text: IL SB1950 | 2013-2014 | 98th General Assembly | Chaptered

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Bill Title: Amends the Public Funds Investment Act. Provides that any unit of local government (now, municipalities and counties only) 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. Amends the Municipal Code to provide that municipalities are authorized to invest the funds and public moneys in the custody of the municipal treasurer in accordance with the Public Funds Investment Act.

Spectrum: Slight Partisan Bill (Democrat 2-1)

Status: (Passed) 2013-08-09 - Public Act . . . . . . . . . 98-0297 [SB1950 Detail]

Download: Illinois-2013-SB1950-Chaptered.html

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Public Act 098-0297
SB1950 Enrolled LRB098 10590 HLH 40852 b
AN ACT concerning finance.
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 Sections 1 and 2 as follows:
(30 ILCS 235/1) (from Ch. 85, par. 901)
Sec. 1. The words "public funds", as used in this Act, mean
current operating funds, special funds, interest and sinking
funds, and funds of any kind or character belonging to or in
the custody of any public agency.
The words "public agency", as used in this Act, mean the
State of Illinois, the various counties, townships, cities,
towns, villages, school districts, educational service
regions, special road districts, public water supply
districts, fire protection districts, drainage districts,
levee districts, sewer districts, housing authorities, the
Illinois Bank Examiners' Education Foundation, the Chicago
Park District, and all other political corporations or
subdivisions of the State of Illinois, now or hereafter
created, whether herein specifically mentioned or not. This Act
does not apply to the Illinois Prepaid Tuition Trust Fund,
private funds collected by the Illinois Conservation
Foundation, or pension funds or retirement systems established

under the Illinois Pension Code, except as otherwise provided
in that Code.
The words "governmental unit", as used in this Act, have
the same meaning as in the Local Government Debt Reform Act.
(Source: P.A. 91-669, eff. 1-1-00; 92-797, eff. 8-15-02.)
(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, its agencies,
and its instrumentalities;
(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 270 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, or a county, or other governmental
unit 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 county, or other governmental unit, 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, as now or hereafter
amended or succeeded, 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, as now or hereafter amended or succeeded, 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. 96-741, eff. 8-25-09; 97-129, eff. 7-14-11.)
Section 10. The Illinois Municipal Code is amended by
changing Section 3.1-35-50 as follows:
(65 ILCS 5/3.1-35-50) (from Ch. 24, par. 3.1-35-50)
Sec. 3.1-35-50. Treasurer; deposit of funds.
(a) The municipal treasurer may be required to keep all
funds and money in the treasurer's custody belonging to the
municipality in places of deposit designated by ordinance. When
requested by the municipal treasurer, the corporate
authorities shall designate one or more banks or savings and
loan associations in which may be kept the funds and money of
the municipality in the custody of the treasurer. When a bank
or savings and loan association has been designated as a
depository, it shall continue as a depository until 10 days
have elapsed after a new depository is designated and has
qualified by furnishing the statements of resources and
liabilities as required by this Section. When a new depository
is designated, the corporate authorities shall notify the
sureties of the municipal treasurer of that fact in writing at
least 5 days before the transfer of funds. The treasurer shall

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

municipality, risk management entity, self-insurance pool,
or other intergovernmental entity composed solely of
participating municipalities for the purpose of investing
such moneys;
(ii) join with any other official custodians or
treasurers of municipal, intergovernmental risk management
entity, self-insurance pool, waste management agency, or
other intergovernmental entity composed solely of
participating municipalities for the purpose of jointly
investing the funds of which the official custodians or
treasurers have custody; and
(iii) enter into agreements of any definite or
indefinite term regarding the redeposit, investment, or
withdrawal of municipal, risk management entity,
self-insurance agency, waste management agency, or other
intergovernmental entity funds.
When funds are combined for investment purposes as
authorized in this Section, the moneys combined for those
purposes shall be accounted for separately in all respects, and
the earnings from such investment shall be separately and
individually computed, recorded, and credited to the fund,
municipality, intergovernmental risk management entity,
self-insurance pool, waste management agency, or other
intergovernmental entity, as the case may be, for which the
investment was acquired.
Joint investments shall be made only in investments

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