51-7-17 - Criteria for investments.
51-7-17. Criteria for investments.
(1) As used in this section:
(a) "Affiliate" means, in relation to any provider:
(i) any entity controlled, directly or indirectly, by the provider;
(ii) any entity that controls, directly or indirectly, the provider; or
(iii) any entity directly or indirectly under common control with the provider.
(b) "Control" means ownership of a majority of the voting power of the entity orprovider.
(2) (a) All public treasurers shall consider and meet the following objectives whendepositing and investing public funds:
(i) safety of principal;
(ii) need for liquidity;
(iii) yield on investments;
(iv) recognition of the different investment objectives of operating and permanent funds;and
(v) maturity of investments, so that the maturity date of the investment does not exceedthe anticipated date of the expenditure of funds.
(b) Each public treasurer shall invest the proceeds of general obligation bond issues, taxanticipation note issues, and all funds pledged or otherwise dedicated to the payment of interestand principal of general obligation bonds and tax anticipation notes issued by the state or anypolitical subdivision of the state in accordance with Section 51-7-11 or in accordance with theterms of the borrowing instrument applicable to those issues and funds if those terms are morerestrictive than Section 51-7-11.
(c) Each public treasurer shall invest the proceeds of bonds other than general obligationbonds and the proceeds of notes other than tax anticipation notes issued by the state or anypolitical subdivision of the state, and all funds pledged or otherwise dedicated to the payment ofinterest and principal of those notes and bonds, in accordance with the terms of the borrowinginstruments applicable to those bonds or notes, or if none of those provisions are applicable, inaccordance with Section 51-7-11.
(d) Each public treasurer may invest proceeds of bonds, notes, or other money pledged orotherwise dedicated to the payment of debt service on the bonds or notes in investmentagreements if:
(i) the investment is permitted by the terms of the borrowing instrument applicable tothose bonds or notes or the borrowing instrument authorizes the investment as an investmentpermitted by the State Money Management Act;
(ii) either the provider of the investment agreement or an entity fully, unconditionally,and irrevocably guaranteeing the provider's obligations under the investment agreement hasreceived a rating of:
(A) at least "AA-" from S&P or "Aa3" from Moody's for investment agreements having aterm of more than one year; or
(B) at least "A-1+" from S&P or "P-1" from Moody's for investment agreements having aterm of one year or less;
(iii) the investment agreement contains provisions approved by the public treasurer thatprovide that, in the event of a rating downgrade of the provider or its affiliate guarantor, asapplicable, by either S&P or Moody's below the "A" category or its equivalent, or a rating
downgrade of a nonaffiliate guarantor by either S&P or Moody's below the "AA" category or itsequivalent, the provider must, within 30 days after receipt of notice of the downgrade, either:
(A) collateralize the investment agreement with direct obligations of or obligationsguaranteed by the United States of America having a market value at least equal to 105% of theamount of the money invested, valued at least quarterly, and deposit the collateral with athird-party custodian or trustee selected by the public treasurer; or
(B) terminate the agreement without penalty and repay all of the principal invested andthe interest accrued on the investment to the date of termination; and
(iv) the public treasurer receives an enforceability opinion from the legal counsel of theinvestment agreement provider and, if there is a guarantee, an enforceability opinion from thelegal counsel of the guarantor with respect to the guarantee.
(3) (a) As used in this Subsection (3), "interest rate contract" means interest rateexchange contracts, interest rate floor contracts, interest rate ceiling contracts, and other similarcontracts authorized by resolution of the governing board or issuing authority, as applicable.
(b) A public treasurer may:
(i) enter into interest rate contracts that the governing board or issuing authoritydetermines are necessary, convenient, or appropriate for the control or management of debt or forthe cost of servicing debt; and
(ii) use its public funds to satisfy its payment obligations under those contracts.
(c) Those contracts:
(i) shall comply with the requirements established by council rules; and
(ii) may contain payment, security, default, termination, remedy, and other terms andconditions that the governing board or issuing authority considers appropriate.
(d) Neither interest rate contracts nor public funds used in connection with these interestrate contracts may be considered a deposit or investment.
(4) It is the intent of the Legislature that all public funds invested in deposit instrumentsbe invested with qualified depositories within Utah, except that if national market rates oninstruments of similar quality and term exceed those offered by qualified depositories,investments in out-of-state deposit instruments may be made only with those institutions thatmeet quality criteria set forth by the rules of the council.
Amended by Chapter 246, 2000 General Session