Bill Text: AZ SB1451 | 2015 | Fifty-second Legislature 1st Regular | Engrossed
Bill Title: Investment of trust monies
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2015-04-01 - Chapter 171 [SB1451 Detail]
Download: Arizona-2015-SB1451-Engrossed.html
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Senate Engrossed |
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State of Arizona Senate Fifty-second Legislature First Regular Session 2015
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SENATE BILL 1451 |
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AN ACT
amending sections 35‑313, 35-315, 35-318 and 35‑324, Arizona Revised Statutes; relating to the handling of public funds.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 35-313, Arizona Revised Statutes, is amended to read:
35-313. Investment of trust and treasury monies; loan of securities
A. The state treasurer shall invest and reinvest trust and treasury monies in any of the following items:
1. Obligations issued or guaranteed by the United States or any of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities.
2. Collateralized repurchase agreements purchased from securities dealers that make markets in those securities listed in paragraph 1 of this subsection.
3. Bonds or other evidences of indebtedness of this state or any of the counties or incorporated cities, towns or duly organized school districts.
4. Commercial paper whose issuer is rated in one of the two highest rating categories for short‑term obligations by any two nationally recognized statistical rating organizations.
5. Bills of exchange or time drafts known as bankers acceptances that are drawn on and accepted by a commercial bank.
6. Negotiable certificates of deposit issued by a nationally or state chartered bank or savings and loan association.
7. Bonds, debentures, notes or other evidences of indebtedness that are denominated in United States dollars and that carry as a minimum one of the Baa ratings of Moody's investors service or one of the BBB ratings of Standard and Poor's rating service or their successors an investment grade rating by a nationally recognized bond rating agency.
8. Securities of or any other interests in any open‑end or closed‑end management type investment company or investment trust, including exchange traded products whose underlying investments are invested in securities allowed by state law, registered under the investment company act of 1940 (54 Stat. 789; 15 United States Code sections 80a‑1 through 80a‑64), as amended. For any treasurer investment pool that seeks to maintain a constant share price, both of the following apply:
(a) The investment company or investment trust takes delivery of the collateral for any repurchase agreement either directly or through an authorized custodian.
(b) The investment policy of the investment company or investment trust includes seeking to maintain a constant share price.
9. Certificates of deferred property taxes as provided by section 42‑17309.
10. Treasurer's warrant notes issued pursuant to section 35‑185.01 or registered warrants of a county issued pursuant to section 11‑605, if the yield is equal to or greater than yields on eligible investment instruments of comparable maturities.
11. Shares in the treasurer's local government investment pools pursuant to section 35‑326 provided that investment policies of the pool seek to maintain a constant share price.
12. Shares in the treasurer's long‑term local government investment pools, which terms are determined by the state board of investment, pursuant to section 35‑326.01.
13. Subject to subsection D of this section, state transportation board funding obligations delivered pursuant to section 28‑7678.
14. Deposits placed in accordance with the procedures prescribed in section 35‑323.01.
15. Institutional common trust funds whose underlying investments are invested in securities allowed by state law.
B. In case of default or failure to honor a county treasurer's warrant, the state treasurer may withhold the first state shared revenues that would otherwise be distributed to the defaulting county in the amount necessary to honor the note, including accrued interest to and beyond the date of default.
C. The state treasurer may contract to loan securities owned by the trust funds and operating monies deposited in the investment pools pursuant to section 35‑316, subsection B to the financial or dealer community through one or more of the entities listed in section 35‑317, subsection A, or authorized by the board of investment pursuant to section 35‑311, subsection E, if the borrower transfers collateral to the state treasurer or acting agent of the state in the form of cash or securities specified in subsection A of this section. Collateral posted in the form of cash shall be in an amount equal to at least one hundred per cent percent of the market value of the loaned securities as agreed. Collateral posted in the form of securities shall be in an amount of no more than one hundred ten per cent percent of the market value of the loaned securities as established from time to time by the board of investment. The loaned securities shall be valued as to market value daily, and, if necessary, the borrower shall post additional collateral, as agreed, to ensure that the required margin is maintained. The state treasurer may collect from the borrower all dividends, interest, premiums, rights and other distributions to which the lender of securities would otherwise be entitled. The state treasurer may terminate the contract on not less than five business days' notice, as agreed, and the borrower may terminate the contract on not less than two business days' notice, as agreed.
D. The state treasurer shall invest operating monies in state transportation board funding obligations delivered pursuant to section 28‑7678 pursuant to the following:
1. The state treasurer shall liquidate investments of operating monies if necessary in order to invest in state transportation board funding obligations, except that if operating monies in the state general fund fall below an eight hundred million dollar average over the previous twelve consecutive months, the state treasurer is not required to purchase state transportation board funding obligations pursuant to this subsection.
2. Each series of state transportation board funding obligations shall bear interest at a fixed interest rate equal to the mean bid‑ask price of the United States treasury obligation with a maturity date closest to the maturity date of the state transportation board funding obligation as published most recently in the Wall Street Journal determined by the pricing system used by the state treasurer before the date the state treasurer receives a certificate from the state transportation board that states the board's determination to deliver an obligation to the state treasurer and the anticipated delivery date of the obligation. The delivery date shall be between fifteen and sixty days after the day the state treasurer receives the certificate.
3. The state treasurer shall provide written notice to the state transportation board and the director of the department of transportation when the operating monies fall below four hundred million dollars. If operating monies fall below two hundred million dollars, the state treasurer may call the investment in the state transportation board funding obligations in twenty‑five million dollar increments up to the amount that the operating monies are below two hundred million dollars. The state treasurer shall give the state transportation board and the director of the department of transportation at least fifteen days' notice of the call.
Sec. 2. Section 35-315, Arizona Revised Statutes, is amended to read:
35-315. Servicing banks; qualifications; proposals
A. Any bank eligible to become an eligible depository having a total capital structure of ten million dollars or more and assets of two ONE hundred million dollars or more and being otherwise in a sound condition is eligible to be the servicing bank for the state.
B. On the first Monday in March of each year of award, The state board of investment shall provide for public notice to the banks qualified to be a servicing bank of the time and place at which servicing proposals will be received. Requests for proposals shall clearly specify all services required to be performed by the servicing bank. The servicing proposal submitted shall be the compensation for which the qualified bank will agree to perform the required services as a servicing bank for the ensuing period of designation as established by the board of investment. The award shall be made for a period not to exceed five years and may be paid from general fund interest earnings according to rules adopted by the board of investment.
C. On the fourth Monday in April of the year of the award, The state treasurer shall receive the servicing proposals in writing. Only those proposals that conform to the specifications set forth in the request for proposals shall be considered. The qualified bank submitting the proposal with the highest value to this state, as determined by the state treasurer and the board of investment, shall be designated as the servicing bank. Designations shall be evidenced by the signing of the final proposal by the state treasurer, the board of investment and the designee bank. The state treasurer may maintain a bank account in conjunction with the servicing bank account, which must have on deposit at all times a sum of money approximating the average dollar value of daily warrants paid by the bank the previous month.
D. The state treasurer may request and qualified banks may submit proposals for any or all of the services required. The state treasurer may specify differing contract periods for any or all of the services required.
E. The state treasurer or servicing bank may terminate a servicing bank contract at any time after sixty days' prior written notice is given.
F. In addition to the services required of the servicing bank, the state treasurer shall contract for all other banking services required by any state agency. No state agency shall contract for banking services except with the written permission of the state treasurer.
G. This section does not require the state treasurer to utilize a servicing bank.
H. This section or the specifications set forth in the request for proposals shall not be construed to require the servicing bank to purchase warrants.
I. Deposits and withdrawals of monies shall be made by the state treasurer on the servicing bank.
Sec. 3. Section 35-318, Arizona Revised Statutes, is amended to read:
35-318. Investment managers and advisors; treasury monies; investment services account
A. The state treasurer may enter into an agreement with investment managers to invest treasury monies or with advisors to recommend investment strategies or tactics for the investment of treasury monies, including legal advisors and software to assist with the analysis, tracking and trading of securities. Qualification and selection of investment managers or advisors pursuant to this section are exempt from title 41, chapter 23 but must be conducted by a process that is substantially equivalent to procedures prescribed by title 41, chapter 23. Managers or advisors who enter into a contract pursuant to this section shall be paid from earnings on investments. A contract established pursuant to this section may be annually renewable but shall be limited to a period of not more than three years. A contract may be cancelled by the treasurer with forty‑five days' written notice.
B. An agreement established pursuant to subsection A of this section shall require the investment manager to regularly account for, itemize and inventory all securities under management consistent with the requirements of section 35‑317, subsections C, D and E and report the findings to the state treasurer at least monthly or on demand.
C. The state treasurer shall maintain an investment services account consisting of all monies for payment of contractual financial services authorized by this section. The account shall consist of monies apportioned from the investment earnings of assets under management that are necessary for the payment of current contractual obligations.
D. Expenditures for investment management and advisory fees required by contract pursuant to subsection A of this section shall be paid on approval of the state treasurer from the investment services account established by subsection C of this section.
Sec. 4. Section 35-324, Arizona Revised Statutes, is amended to read:
35-324. Investment of trust funds; loan of securities; sale of permanent endowment securities
A. The treasurer shall invest and reinvest monies of trust funds in:
1. Any and all of those securities permitted for the investment of public monies.
2. Fixed income securities of corporations organized and doing business in any state of the United States or the District of Columbia which carry one of the two highest ratings of Moody's investors service and Standard and Poor's rating service or their successors. If only one of the above mentioned services rates the security, it must carry the highest rating of that service. If a rating change occurs after purchase, it is not mandatory to sell the security.
B. Securities owned by the permanent endowment funds may be loaned to the financial or dealer community if securities which qualify under subsection A, paragraph 1 of this section are transferred to the state treasurer as collateral with market value from one hundred two per cent percent to one hundred ten per cent percent as established from time to time by the board of deposit of the par value of the securities loaned. The securities used as collateral shall be "valued as to market value" weekly, and if necessary the borrower shall post additional collateral to insure that the excess margin is maintained.
C. Permanent endowment securities may be sold at a price below par or cost if the proceeds of the sale are reinvested in securities whose incremental yield will recover the dollar loss on the old securities. The recovery period is from the time of sale until the shorter of the maturities of the sold securities or purchased securities.
