Chapter 112 Oregon Laws 2005

AN ACT

HB 2033

Relating to public funds; creating new provisions; and amending ORS 295.005.

Be It Enacted by the People of the State of Oregon:

SECTION 1. 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, that is authorized to accept deposits or transact trust business in this state and that complies with section 3 of this 2005 Act; and [, provided, however, that no insured institution or trust company 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] an insured institution or trust company, as those terms are defined in ORS 706.008, a credit union, as 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, if the institution, trust company or credit union:

(a) Maintains a head office or a branch in this state in the capacity of an insured institution, trust company, credit union or federal credit union; and

(b) In the case of an insured institution or trust company, complies with section 3 of this 2005 Act. [However, an insured institution, trust company, credit union or federal credit union 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, trust company, credit union or federal credit union with the custodian as collateral for deposits of public funds held by the insured institution, 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, trust company, credit union or federal credit union and shall be continuously maintained as a written record of the institution, company, credit union or federal 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 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, if the institution, trust company or credit union:

(A) Is authorized to accept deposits or transact trust business in this state; and

(B) In the case of an insured institution or trust company, complies with section 3 of this 2005 Act;[. A depository bank may 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 an insured institution, trust company, credit union or federal credit union may not 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;]

(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 paying principal, interest or premium, if any, on bonds, like obligations and related costs or securing an obligation related to an agreement for exchange of interest rates entered into under ORS 287.025; 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;

(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 2. Sections 3 and 4 of this 2005 Act are added to and made a part of ORS 295.005 to 295.165.

SECTION 3. (1)(a) An insured institution or trust company described in ORS 295.005 (2)(c) may not be a custodian bank under ORS 295.005 to 295.165, 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.

(b) With the approval of the State Treasurer, a depository bank may be a custodian bank with respect to its own securities.

(2) An insured institution or trust company described in ORS 295.005 (4) may not be a depository bank under ORS 295.005 to 295.165, unless it:

(a) 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; and

(b) Except as provided in subsection (3) of this section, enters into a written agreement with the State Treasurer and a custodian that pledges the securities deposited by the insured institution or trust company with the custodian as collateral for deposits of public funds held by the insured institution or trust company. The agreement must be approved by the board of directors or loan committee of the insured institution or trust company and shall be continuously maintained as a written record of the insured institution or trust company.

(3) An insured institution or trust company described in ORS 295.005 (4) may be a depository bank under ORS 295.005 to 295.165 without entering into the agreement described in subsection (2) of this section if the insured institution or trust company does not hold any funds on deposit for a public official that exceed the limits specified in ORS 295.025 for that type of depository. The provisions of ORS 295.015, 295.018, 295.035, 295.045, 295.055, 295.065, 295.105 and 295.185 do not apply to an insured institution or trust company that is a depository bank under this subsection.

(4) An insured institution or trust company may 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 an insured institution or trust company may not 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.

SECTION 4. (1) The following public funds are not subject to the provisions of ORS 295.005 to 295.165:

(a) Funds that are deposited for the purpose of paying principal, interest or premium, if any, on bonds, like obligations and related costs or securing an obligation related to an agreement for exchange of interest rates entered into under ORS 287.025.

(b) Funds that are invested in authorized investments under provisions of law other than ORS 295.005 to 295.165. Funds invested under ORS 293.701 to 293.820 are invested in authorized investments for purposes of this subsection from the time the funds are transferred by the State Treasurer to a third party under the terms of a contract for investment or administration of the funds that requires such a transfer until the time the funds are returned to the treasurer or paid to another party under the terms of the contract.

(c) Negotiable certificates of deposit purchased by the State Treasurer under ORS 293.736 or by an investment manager under ORS 293.741.

(2) Notwithstanding subsection (1) of this section, funds deposited by a custodial officer under ORS 294.035 (4) are subject to the provisions of ORS 295.005 to 295.165.

Approved by the Governor June 6, 2005

Filed in the office of Secretary of State June 7, 2005

Effective date January 1, 2006

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