(Reprinted with amendments adopted on April 2, 2003)

 

Senate Bill No. 141–Committee on
Government Affairs

 

(On Behalf of the County Fiscal
Officers Association)

 

February 18, 2003

____________

 

Referred to Committee on Government Affairs

 

SUMMARY—Revises provisions relating to certain investments made by local governments. (BDR 31‑458)

 

FISCAL NOTE:  Effect on Local Government: No.

                           Effect on the State: No.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to local government finance; revising provisions relating to the investment by certain local governments of collateral obtained by the local government in exchange for lending securities from its investment portfolio; revising provisions relating to the investment and reinvestment by certain municipalities of the proceeds of bonds or other municipal securities; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1  Section 1. NRS 355.178 is hereby amended to read as follows:

1-2  355.178  1.  The governing body of a city whose population is

1-3  150,000 or more or a county whose population is 100,000 or more

1-4  may lend securities from its investment portfolio if:

1-5  (a) The investment portfolio has a value of at least

1-6  $100,000,000;

1-7  (b) The treasurer of the city or county:

1-8       (1) Establishes a policy for investment that includes

1-9  provisions which set forth the procedures to be used to lend

1-10  securities pursuant to this section; and

2-1       (2) Submits the policy established pursuant to subparagraph

2-2  (1) to the city or county manager and prepares and submits to the

2-3  city or county manager a monthly report that sets forth the securities

2-4  that have been lent pursuant to this section and any other

2-5  information relating thereto, including, without limitation, the terms

2-6  of each agreement for the lending of those securities; and

2-7  (c) The governing body receives collateral from the borrower in

2-8  the form of cash or marketable securities that are:

2-9       (1) Authorized pursuant to NRS 355.170, if the collateral is

2-10  in the form of marketable securities; and

2-11          (2) At least 102 percent of the value of the securities

2-12  borrowed.

2-13      2.  The governing body of a city or consolidated municipality

2-14  whose population is 60,000 or more but less than 150,000 may lend

2-15  securities from its investment portfolio if:

2-16      (a) The investment portfolio has a value of at least $50,000,000;

2-17      (b) The governing body is currently authorized to lend securities

2-18  pursuant to subsection 5;

2-19      (c) The treasurer of the city or consolidated municipality:

2-20          (1) Establishes a policy for investment that includes

2-21  provisions which set forth the procedures to be used to lend

2-22  securities pursuant to this section; and

2-23          (2) Submits the policy established pursuant to subparagraph

2-24  (1) to the manager of the city or consolidated municipality and

2-25  prepares and submits to the manager of the city or consolidated

2-26  municipality a monthly report that sets forth the securities that have

2-27  been lent pursuant to this section and any other information relating

2-28  thereto, including, without limitation, the terms of each agreement

2-29  for the lending of those securities; and

2-30      (d) The governing body receives collateral from the borrower in

2-31  the form of cash or marketable securities that are:

2-32          (1) Authorized pursuant to NRS 355.170, if the collateral is

2-33  in the form of marketable securities; and

2-34          (2) At least 102 percent of the value of the securities

2-35  borrowed.

2-36      3.  The governing body of a city, county or consolidated

2-37  municipality may enter into such contracts as are necessary to

2-38  extend and manage loans pursuant to this section.

2-39      4.  [Any] The total of investments made by a particular city,

2-40  county or consolidated municipality with collateral received

2-41  pursuant to subsection 1 or 2 must [mature not later] have an

2-42  average weighted maturity of not more than 90 days . [after the date

2-43  on which the securities are lent.]

2-44      5.  The governing body of a city or consolidated municipality

2-45  whose population is 60,000 or more but less than 150,000 shall not

3-1  lend securities from its investment portfolio unless it has been

3-2  authorized to do so by the State Board of Finance. The State Board

3-3  of Finance shall adopt regulations that establish minimum standards

3-4  for granting authorization pursuant to this subsection. Such an

3-5  authorization is valid for 2 years and may be renewed by the State

3-6  Board of Finance for additional 2-year periods.

3-7  6.  As used in this section, “average weighted maturity”

3-8  means the average length of time until the securities in which a

3-9  particular city, county or consolidated municipality has invested

3-10  with collateral received pursuant to subsection 1 or 2 will mature

3-11  or be redeemed by their issuers, with the length of time of each

3-12  individual security proportionally weighted according to the total

3-13  dollar amount that the particular city, county or consolidated

3-14  municipality has invested in that individual security with collateral

3-15  received pursuant to subsection 1 or 2.

3-16      Sec. 2.  NRS 350.659 is hereby amended to read as follows:

3-17      350.659  The governing body of a municipality whose

3-18  population is 50,000 or more, subject to any contractual limitations

3-19  from time to time imposed upon the municipality by any ordinance

3-20  authorizing the issuance of outstanding securities of the

3-21  municipality or by any trust indenture or other proceedings

3-22  appertaining thereto, may cause to be invested and reinvested,

3-23  except as otherwise provided in NRS 350.698, any proceeds of

3-24  taxes, any pledged revenues and any proceeds of bonds or other

3-25  municipal securities issued hereunder for which the amount of the

3-26  principal of the original issuance was [$40,000,000] $10,000,000 or

3-27  more in an investment contract that is collateralized with securities

3-28  issued by the Federal Government or agencies of the Federal

3-29  Government if:

3-30      1.  The collateral has a market value of at least 102 percent of

3-31  the amount invested and any accrued unpaid interest thereon;

3-32      2.  The municipality receives a security interest in the collateral

3-33  that is fully perfected and the collateral is held in custody for the

3-34  municipality or its trustee by a third-party agent of the municipality

3-35  which is a commercial bank authorized to exercise trust powers;

3-36      3.  The market value of the collateral is determined not less

3-37  frequently than weekly and, if the ratio required by subsection 1 is

3-38  not met, sufficient additional collateral is deposited with the agent of

3-39  the municipality to meet that ratio within 2 business days after the

3-40  determination; and

3-41      4.  The party with whom the investment contract is executed is

3-42  a commercial bank, or that party or a guarantor of the performance

3-43  of that party is:

3-44      (a) An insurance company which has a rating on its ability to

3-45  pay claims of not less than “Aa2” by Moody’s Investors Service,

4-1  Inc., or “AA” by Standard and Poor’s Ratings Services, or their

4-2  equivalent; or

4-3  (b) An entity which has a credit rating on its outstanding long-

4-4  term debt of not less than “A2” by Moody’s Investors Service, Inc.,

4-5  or “A” by Standard and Poor’s Ratings Services, or their equivalent.

4-6  Sec. 3.  This act becomes effective upon passage and approval.

 

4-7  H