71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 2282
Senate Bill 499
Sponsored by Senators FERRIOLI, METSGER (at the request of Credit
Union Association of Oregon)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Allows investment of public funds by public officers in credit
unions. Expands definition of custodian bank, depository bank and
pool manager to include credit unions. Prohibits public officers
from depositing in credit unions sums that exceed amounts insured
by National Credit Union Share Insurance Fund.
A BILL FOR AN ACT
Relating to public depositories; amending ORS 294.035, 295.005
and 295.025.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 294.035 is amended to read:
294.035. Subject to ORS 294.040 and 294.135 to 294.155, the
custodial officer may, after having obtained a written order from
the governing body of the county, municipality, political
subdivision or school district, which order shall be spread upon
the minutes or journal of the governing body, invest any sinking
fund, bond fund or surplus funds in the custody of the custodial
officer in the bank accounts, classes of securities at current
market prices, insurance contracts and other investments listed
in this section. However, the custodial officer of any county
shall make no such investment of funds belonging to any
municipality, political subdivision or school district, unless
and until the custodial officer has received a written order from
the governing body of the municipality, political subdivision or
school district to which the funds belong, which order authorizes
the custodial officer to invest the funds, and which order has
been spread upon the minutes or journal of the governing body.
This section, however, shall not limit the authority of the
custodial officer to invest surplus funds in other investments
when the investment is specifically authorized by another
statute. Investments authorized by this section are:
(1) Lawfully issued general obligations of the United States,
the agencies and instrumentalities of the United States or
enterprises sponsored by the United States Government.
(2) Lawfully issued debt obligations of the agencies and
instrumentalities of the State of Oregon and its political
subdivisions that have a long-term rating of A or an equivalent
rating or better or are rated on the settlement date in the
highest category for short-term municipal debt by a nationally
recognized statistical rating organization.
(3) Lawfully issued debt obligations of the States of
California, Idaho and Washington and political subdivisions of
those states if the obligations have a long-term rating of AA or
an equivalent rating or better or are rated on the settlement
date in the highest category for short-term municipal debt by a
nationally recognized statistical rating organization.
(4) Time deposit open accounts, certificates of deposit and
savings accounts in insured institutions as defined in ORS
706.008 { + , in credit unions as defined in ORS 723.006 or in
federal credit unions + } that maintain a head office or a branch
in this state.
(5) Share accounts and savings accounts in credit unions in the
name of, or for the benefit of, a member of the credit union
pursuant to a plan of deferred compensation.
(6) Fixed or variable life insurance or annuity contracts as
defined by ORS 731.170 and guaranteed investment contracts issued
by life insurance companies authorized to do business in this
state.
(7) Trusts in which deferred compensation funds from other
public employers are pooled, if:
(a) The purpose is to establish a deferred compensation plan;
(b) The trust is a public instrumentality of such public
employers and described in section (2)(b) of the Investment
Company Act of 1940, 15 U.S.C. 80a-2(b), as amended, in effect on
September 20, 1985, or the trust is a common trust fund described
in ORS 709.170;
(c) Under the terms of the plan the net income from or gain or
loss due to fluctuation in value of the underlying assets of the
trust, or other change in such assets, is reflected in an equal
increase or decrease in the amount distributable to the employee
or the beneficiary thereof and, therefore, does not ultimately
result in a net increase or decrease in the worth of the public
employer or the state; and
(d) The fidelity of the trustees and others with access to such
assets, other than a trust company, as defined in ORS 706.008, is
insured by a surety bond that is satisfactory to the public
employer, issued by a company authorized to do a surety business
in this state and in an amount that is not less than 10 percent
of the value of such assets.
(8)(a) Banker's acceptances, if the banker's acceptances are:
(A) Guaranteed by, and carried on the books of, a qualified
financial institution;
(B) Eligible for discount by the Federal Reserve System; and
(C) Issued by a qualified financial institution whose
short-term letter of credit rating is rated in the highest
category by one or more nationally recognized statistical rating
organizations.
(b) For the purposes of this subsection, 'qualified financial
institution' means:
(A) A financial institution that is located and licensed to do
banking business in the State of Oregon; or
(B) A financial institution that is wholly owned by a bank
holding company that owns a financial institution that is located
and licensed to do banking business in the State of Oregon.
(c) A custodial officer shall not permit more than 25 percent
of the moneys of a local government that are available for
investment, as determined on the settlement date, to be invested
in banker's acceptances of any qualified financial institution.
(9)(a) Corporate indebtedness subject to a valid registration
statement on file with the Securities and Exchange Commission or
issued under the authority of section 3(a)(2) or 3(a)(3) of the
Securities Act of 1933, as amended. Corporate indebtedness
described in this subsection does not include banker's
acceptances. The corporate indebtedness must be issued by a
commercial, industrial or utility business enterprise, or by or
on behalf of a financial institution, including a holding company
owning a majority interest in a qualified financial institution.
(b) Corporate indebtedness must be rated on the settlement date
P-1 or Aa or better by Moody's Investors Service or A-1 or AA or
better by Standard & Poor's Corporation or equivalent rating by
any nationally recognized statistical rating organization.
(c) Notwithstanding paragraph (b) of this subsection, the
corporate indebtedness must be rated on the settlement date P-2
or A or better by Moody's Investors Service or A-2 or A or better
by Standard & Poor's Corporation or equivalent rating by any
nationally recognized statistical rating organization when the
corporate indebtedness is:
(A) Issued by a business enterprise that has its headquarters
in Oregon, employs more than 50 percent of its permanent
workforce in Oregon or has more than 50 percent of its tangible
assets in Oregon; or
(B) Issued by a holding company owning not less than a majority
interest in a qualified financial institution, as defined in
subsection (8) of this section, located and licensed to do
banking business in Oregon or by a holding company owning not
less than a majority interest in a business enterprise described
in subparagraph (A) of this paragraph.
(d) A custodial officer shall not permit more than 35 percent
of the moneys of a local government that are available for
investment, as determined on the settlement date, to be invested
in corporate indebtedness, and shall not permit more than five
percent of the moneys of a local government that are available
for investment to be invested in corporate indebtedness of any
single corporate entity and its affiliates or subsidiaries.
(10) Securities of any open-end or closed-end management
investment company or investment trust, if the securities are of
the types specified in subsections (1) to (3), (8) and (9) of
this section and if the investment does not cause the county,
municipality, political subdivision or school district to become
a stockholder in a joint company, corporation or association. A
trust company or trust department of a national bank while acting
as indenture trustee may invest funds held by it as indenture
trustee in any open-end or closed-end management investment
company or investment trust for which the trust company or trust
department of a national bank or an affiliate of the trust
company or trust department of a national bank acts as investment
adviser or custodian or provides other services. However, the
securities of the investment company or investment trust in which
such funds are invested must be of the types specified in
subsections (1) to (3), (8) and (9) of this section and the
investment must not cause the county, municipality, political
subdivision or school district whose funds are invested to become
a stockholder in a joint company, corporation or association. For
purposes of this subsection, companies are affiliated if they are
members of the same affiliated group under section 1504 of the
Internal Revenue Code of 1986 (26 U.S.C. 1504).
(11) Repurchase agreements whereby the custodial officer
purchases securities from a financial institution or securities
dealer subject to an agreement by the seller to repurchase the
securities. The repurchase agreement must be in writing and
executed in advance of the initial purchase of the securities
that are the subject of the repurchase agreement. Only securities
described in subsection (1) of this section shall be used in
conjunction with a repurchase agreement and such securities shall
have a maturity of not longer than three years. The price paid by
the custodial officer for such securities may not exceed amounts
or percentages prescribed by written policy of the Oregon
Investment Council or the Oregon Short Term Fund Board created by
ORS 294.885.
SECTION 2. ORS 295.005 is amended to read:
295.005. As used in ORS 295.005 to 295.165, unless the context
requires otherwise:
(1) 'Certificate of participation' or 'certificate' means a
nonnegotiable document issued by a pool manager to a public
official.
(2) 'Custodian bank' or 'custodian' means the following
institutions designated by the depository bank for its own
account:
(a) The Federal Reserve Bank designated to serve this state, or
any branch of that bank;
(b) The Federal Home Loan Bank designated to serve this state,
or any branch of that bank;
(c) Any insured institution or trust company, as those terms
are defined in ORS 706.008, { + a credit union, as that term is
defined in ORS 723.006, the shares and deposits of which are
insured by the National Credit Union Share Insurance Fund, or a
federal credit union, + } that is authorized to accept deposits
or transact trust business in this state, provided, however, that
no insured institution { + , + } { - or - } trust
company { + , credit union or federal credit union + } may be a
custodian bank unless it certifies in writing to the State
Treasurer that it will furnish the reports required under ORS
714.075 to the Director of the Department of Consumer and
Business Services. With the approval of the State Treasurer, a
depository bank may be a custodian bank with respect to its own
securities; and
(d) The fiscal agency of the State of Oregon, duly appointed
and acting as such agency pursuant to ORS 288.010 to 288.110.
(3) 'Custodian's receipt' or 'receipt' means a document issued
by a custodian bank to a pool manager describing the securities
deposited with it by a depository bank to secure public fund
deposits.
(4) 'Depository bank' or 'depository' means any insured
institution or trust company, as those terms are defined in ORS
706.008, { + credit union, as that term is defined in ORS
723.006, or federal credit union, + } that maintains a head
office or a branch in this state in the capacity of an insured
institution { + , + } { - or - } trust company { + , credit
union or federal credit union + }. However, an insured
institution or trust company is not a depository bank unless it
has:
(a) Certified in writing to the State Treasurer that it will
furnish the reports required under ORS 714.075 to the Director of
the Department of Consumer and Business Services; and
(b) Entered into a written agreement with the State Treasurer
and a custodian that pledges the securities deposited by the
insured institution { + , + } { - or - } trust company { + ,
credit union or federal credit union + } with the custodian as
collateral for deposits of public funds held by the insured
institution { + , + } { - or - } trust company { + , credit
union or federal credit union + }. The agreement shall be
approved by the board of directors or loan committee of the
insured institution { + , + } { - or - } trust company { + ,
credit union or federal credit union + } and shall be
continuously maintained as a written record of the
institution { + , + } { - or - } company { + or credit
union + }.
(5) 'Pool manager' means:
(a) The State Treasurer;
(b) Any insured institution or trust company, as those terms
are defined in ORS 706.008, { + a credit union, as that term is
defined in ORS 723.006, the shares and deposits of which are
insured by the National Credit Union Share Insurance Fund, or a
federal credit union, + } that is authorized to accept deposits
or transact trust business in this state; but a depository bank
shall not be a pool manager with respect to securities that it
deposits with its custodians as collateral for the security of
public fund deposits and no insured institution or trust company
may be a pool manager unless it certifies in writing to the State
Treasurer that it will furnish the reports required under ORS
714.075 to the Director of the Department of Consumer and
Business Services;
(c) The Federal Reserve Bank designated to serve this state, or
any branch of that bank; or
(d) The Federal Home Loan Bank designated to serve this state,
or any branch of that bank.
(6) 'Public funds' or 'funds' means the funds under the control
or in the custody of a public official by virtue of office, other
than those that, under law other than ORS 295.005 to 295.165,
are:
(a) Deposited for the purpose of meeting the payment of
principal or interest on bonds or like obligations; or
(b) Invested in authorized investments. Funds invested under
ORS 293.701 to 293.820 are invested in authorized investments for
purposes of this paragraph when the funds are transferred by the
State Treasurer to a third party under the terms of a contract
for investment of funds that requires such a transfer.
(7) 'Security' or 'securities' means:
(a) Obligations of the United States, including those of its
agencies and instrumentalities;
(b) Obligations of the International Bank for Reconstruction
and Development;
(c) Bonds of any state of the United States (A) that are rated
in one of the four highest grades by a recognized investment
service organization that has been engaged regularly and
continuously for a period of not less than 10 years in rating
state and municipal bonds or, (B) having once been so rated are
ruled to be eligible securities for the purposes of ORS 295.005
to 295.165, notwithstanding the loss of such rating;
(d) Bonds of any county, city, school district, port district
or other public body in the United States payable from ad valorem
taxes levied generally on substantially all property within the
issuing body and that meet the rating requirement or are ruled to
be eligible securities as provided in paragraph (c) of this
subsection;
(e) Bonds of any county, city, school district, port district
or other public body issued pursuant to the Constitution or
statutes of the State of Oregon or the charter or ordinances of
any county or city within the State of Oregon, if the issuing
body has not been in default with respect to the payment of
principal or interest on any of its bonds within the preceding 10
years or during the period of its existence if that is less than
10 years;
(f) Bond anticipation notes issued, sold or assumed by an
authority under ORS 441.560;
(g) One-family to four-family housing mortgage loan notes
related to property situated in the State of Oregon, which are
owned by a depository bank, no payment on which is more than 90
days past due, and which are eligible collateral for loans from
the Federal Reserve Bank of San Francisco under section 10(b) of
the Federal Reserve Act and regulations thereunder;
(h) Bonds, notes, letters of credit or other securities or
evidence of indebtedness constituting the direct and general
obligation of a federal home loan bank or Federal Reserve bank;
(i) Debt obligations of domestic corporations that are rated in
one of the three highest grades by a recognized investment
service organization that has been engaged regularly and
continuously for a period of not less than 10 years in rating
corporate debt obligations;
(j) Collateralized mortgage obligations and real estate
mortgage investment conduits that are rated in one of the two
highest grades by a recognized investment service organization
that has been engaged regularly and continuously for a period of
not less than 10 years in rating corporate debt obligations; and
(k) One-family to four-family housing mortgages that have been
secured by means of a guarantee as to full repayment of principal
and interest by an agency of the United States Government,
including the Government National Mortgage Association, the
Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation.
(8) 'Public official' means each officer or employee of this
state or any agency, political subdivision or public or municipal
corporation thereof who by law is made the custodian of or has
control of any public funds.
(9) 'Value' means the current market value of securities.
SECTION 3. ORS 295.025 is amended to read:
295.025. (1) Any public official may retain undeposited such
reasonable cash working fund as is fixed by the governing body of
the political subdivision or public corporation for which the
public official acts. Except to the extent of such cash working
fund, each public official shall deposit public funds in the
custody or control of the public official in one or more
depositories currently qualified pursuant to ORS 295.005 to
295.165. The public official, without procuring certificates of
participation issued by the pool manager of the depository in an
amount equal to the excess deposit, shall not have on deposit in
any one depository bank and its branches a sum in excess of:
(a) The amount insured by the Federal Deposit Insurance
Corporation { + or the National Credit Union Share Insurance
Fund + }; or
(b) For any amount over the amount insured by the Federal
Deposit Insurance Corporation { + or the National Credit Union
Share Insurance Fund + }, the amount insured or guaranteed by
private deposit insurance or a deposit guaranty bond issued by an
insurance company rated A- or better by a recognized insurance
rating service.
(2) Whenever a public official holds a certificate of
participation issued by a pool manager in an amount exceeding the
amount required by subsection (1) of this section, upon the
written request of the depository bank the public official shall
surrender it to the pool manager or direct the pool manager in
writing to cancel it in whole or in a designated part.
(3) Compliance with ORS 295.005 to 295.165 relieves the public
official of personal liability on account of the loss of the
public funds in the custody or control of the public official.
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