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First Substitute H.B. 376

Representative Eric K. Hutchings proposes the following substitute bill:


             1     
PUBLIC FUNDS AND ACCOUNTS AMENDMENTS

             2     
2013 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Eric K. Hutchings

             5     
Senate Sponsor: Mark B. Madsen

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies the State Money Management Act and Title 53B, State System of
             10      Higher Education.
             11      Highlighted Provisions:
             12          This bill:
             13          .    defines terms;
             14          .    allows deposits of certain institutions of higher education public funds in a foreign
             15      depository institution for educational purposes if the:
             16              .    laws of the foreign country require the money to be deposited in the foreign
             17      country; or
             18              .    terms of a grant, gift, or contract require the funds to be deposited in the foreign
             19      country;
             20          .    exempts public funds that are reciprocal deposits from public treasurer criteria for
             21      qualified depositories, subject to rules made by the State Money Management
             22      Council; and
             23          .    makes technical changes.
             24      Money Appropriated in this Bill:
             25          None


             26      Other Special Clauses:
             27          This bill takes effect on July 1, 2013.
             28      Utah Code Sections Affected:
             29      AMENDS:
             30          51-4-1, as last amended by Laws of Utah 2004, Chapter 115
             31          51-7-3, as last amended by Laws of Utah 2011, Chapter 342
             32          51-7-4, as last amended by Laws of Utah 2011, Chapter 46
             33          51-7-7, as last amended by Laws of Utah 1992, Chapter 285
             34          51-7-11, as last amended by Laws of Utah 2011, Chapter 276
             35          51-7-15, as last amended by Laws of Utah 1992, Chapter 285
             36          51-7-17, as last amended by Laws of Utah 2000, Chapter 246
             37          51-7-18.2, as last amended by Laws of Utah 1992, Chapter 285
             38      ENACTS:
             39          53B-7-601, Utah Code Annotated 1953
             40     
             41      Be it enacted by the Legislature of the state of Utah:
             42          Section 1. Section 51-4-1 is amended to read:
             43           51-4-1. Deposits by state officers, boards, commissions, institutions, departments,
             44      divisions, agencies, and similar instrumentalities.
             45          (1) As used in this section, "agency" means each officer, board, commission,
             46      institution, department, division, agency, and other similar instrumentality of the state of Utah.
             47          (2) [Unless an agency receives] Except as provided under Section 53B-7-601 , or
             48      through the receipt of a written variance from the state treasurer, each agency shall deposit
             49      daily, if practicable, but no later than once every three banking days, all collections of state
             50      money and other public funds with:
             51          (a) the state treasurer; or
             52          (b) a qualified depository for the credit of the state.
             53          (3) The state treasurer may make policies governing the reporting and remitting [to
             54      him] of these funds.
             55          Section 2. Section 51-7-3 is amended to read:
             56           51-7-3. Definitions.


             57          As used in this chapter:
             58          (1) "Agent" means "agent" as defined in Section 61-1-13 .
             59          (2) "Certified dealer" means:
             60          (a) a primary reporting dealer recognized by the Federal Reserve Bank of New York
             61      who is certified by the director as having met the applicable criteria of council rule; or
             62          (b) a broker dealer who:
             63          (i) has and maintains an office and a resident registered principal in the state;
             64          (ii) meets the capital requirements established by council rules;
             65          (iii) meets the requirements for good standing established by council rule; and
             66          (iv) is certified by the director as meeting quality criteria established by council rule.
             67          (3) "Certified investment adviser" means a federal covered adviser, as defined in
             68      Section 61-1-13 , or an investment adviser, as defined in Section 61-1-13 , who is certified by
             69      the director as having met the applicable criteria of council rule.
             70          (4) "Commissioner" means the commissioner of financial institutions.
             71          (5) "Council" means the State Money Management Council created by Section
             72      51-7-16 .
             73          (6) "Director" means the director of the Utah State Division of Securities of the
             74      Department of Commerce.
             75          (7) (a) "Endowment funds" means gifts, devises, or bequests of property of any kind
             76      donated to a higher education institution from any source.
             77          (b) "Endowment funds" does not mean money used for the general operation of a
             78      higher education institution that is received by the higher education institution from:
             79          (i) state appropriations;
             80          (ii) federal contracts;
             81          (iii) federal grants;
             82          (iv) private research grants; and
             83          (v) tuition and fees collected from students.
             84          (8) "First tier commercial paper" means commercial paper rated by at least two
             85      nationally recognized statistical rating organizations in the highest short-term rating category.
             86          (9) "Funds functioning as endowments" means funds, regardless of source, whose
             87      corpus is intended to be held in perpetuity by formal institutional designation according to the


             88      institution's policy for designating those funds.
             89          (10) "GASB" or "Governmental Accounting Standards Board" means the
             90      Governmental Accounting Standards Board that is responsible for accounting standards used
             91      by public entities.
             92          (11) "Hard put" means an unconditional sell-back provision or a redemption provision
             93      applicable at issue to a note or bond, allowing holders to sell their holdings back to the issuer
             94      or to an equal or higher-rated third party provider at specific intervals and specific prices
             95      determined at the time of issuance.
             96          (12) "Higher education institution" means the institutions specified in Section
             97      53B-1-102 .
             98          (13) "Investment adviser representative" means "investment adviser representative" as
             99      defined in Section 61-1-13 .
             100          (14) (a) "Investment agreement" means any written agreement that has specifically
             101      negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate.
             102          (b) "Investment agreement" includes any agreement to supply investments on one or
             103      more future dates.
             104          (15) "Local government" means a county, municipality, school district, local district
             105      under Title 17B, Limited Purpose Local Government Entities - Local Districts, special service
             106      district under Title 17D, Chapter 1, Special Service District Act, or any other political
             107      subdivision of the state.
             108          (16) "Market value" means market value as defined in the Master Repurchase
             109      Agreement.
             110          (17) "Master Repurchase Agreement" means the current standard Master Repurchase
             111      Agreement approved by the Public Securities Association or by any successor organization.
             112          (18) "Maximum amount" means, with respect to qualified depositories, the total
             113      amount of:
             114          (a) deposits in excess of the federal deposit insurance limit; and
             115          (b) nonqualifying repurchase agreements.
             116          (19) "Money market mutual fund" means an open-end managed investment fund:
             117          (a) that complies with the diversification, quality, and maturity requirements of Rule
             118      2a-7 or any successor rule of the Securities and Exchange Commission applicable to money


             119      market mutual funds; and
             120          (b) that assesses no sales load on the purchase of shares and no contingent deferred
             121      sales charge or other similar charges, however designated.
             122          (20) "Nationally recognized statistical rating organization" means an organization that
             123      has been designated as a nationally recognized statistical rating organization by the Securities
             124      and Exchange Commission's Division of Market Regulation.
             125          (21) "Nonqualifying repurchase agreement" means a repurchase agreement evidencing
             126      indebtedness of a qualified depository arising from the transfer of obligations of the United
             127      States Treasury or other authorized investments to public treasurers that is:
             128          (a) evidenced by a safekeeping receipt issued by the qualified depository;
             129          (b) included in the depository's maximum amount of public funds; and
             130          (c) valued and maintained at market value plus an appropriate margin collateral
             131      requirement based upon the term of the agreement and the type of securities acquired.
             132          (22) "Operating funds" means current balances and other funds that are to be disbursed
             133      for operation of the state government or any of its boards, commissions, institutions,
             134      departments, divisions, agencies, or other similar instrumentalities, or any county, city, school
             135      district, political subdivision, or other public body.
             136          (23) "Permanent funds" means funds whose principal may not be expended, the
             137      earnings from which are to be used for purposes designated by law.
             138          (24) "Permitted depository" means any out-of-state financial institution that meets
             139      quality criteria established by rule of the council.
             140          (25) "Public funds" means money, funds, and accounts, regardless of the source from
             141      which the money, funds, and accounts are derived, that are owned, held, or administered by the
             142      state or any of its boards, commissions, institutions, departments, divisions, agencies, bureaus,
             143      laboratories, or other similar instrumentalities, or any county, city, school district, political
             144      subdivision, or other public body.
             145          (26) (a) "Public money" means "public funds."
             146          (b) "Public money," as used in Article VII, Sec. 15, Utah Constitution, means the same
             147      as "state funds."
             148          (27) "Public treasurer" includes the state treasurer and the official of any state board,
             149      commission, institution, department, division, agency, or other similar instrumentality, or of


             150      any county, city, school district, political subdivision, or other public body who has the
             151      responsibility for the safekeeping and investment of any public funds.
             152          (28) "Qualified depository" means a Utah depository institution or an out-of-state
             153      depository institution, as those terms are defined in Section 7-1-103 that is authorized to
             154      conduct business in this state under Section 7-1-702 or Title 7, Chapter 19, Acquisition of
             155      Failing Depository Institutions or Holding Companies, whose deposits are insured by an
             156      agency of the federal government and that has been certified by the commissioner of financial
             157      institutions as having met the requirements established under this chapter and the rules of the
             158      council to be eligible to receive deposits of public funds.
             159          (29) "Qualifying repurchase agreement" means a repurchase agreement evidencing
             160      indebtedness of a financial institution or government securities dealer acting as principal
             161      arising from the transfer of obligations of the United States Treasury or other authorized
             162      investments to public treasurers only if purchased securities are:
             163          (a) delivered to the public treasurer's safekeeping agent or custodian as contemplated
             164      by Section 7 of the Master Repurchase Agreement; and
             165          (b) valued and maintained at market value plus an appropriate margin collateral
             166      requirement based upon the term of the agreement and the type of securities acquired.
             167          (30) "Reciprocal deposits" means deposits that are initially deposited into a qualified
             168      depository and are then redeposited through a deposit account registry service:
             169          (a) in one or more FDIC-insured depository institutions in amounts up to the relevant
             170      FDIC-insured deposit limit for a depositor in each depository institution; and
             171          (b) in exchange for reciprocal FDIC-insured deposits made through the deposit account
             172      registry service to the qualified depository.
             173          [(30)] (31) "Securities division" means Utah's Division of Securities created within the
             174      Department of Commerce by Section 13-1-2 .
             175          [(31)] (32) "State funds" means:
             176          (a) public money raised by operation of law for the support and operation of the state
             177      government; and
             178          (b) all other money, funds, and accounts, regardless of the source from which the
             179      money, funds, or accounts are derived, that are owned, held, or administered by the state or any
             180      of its boards, commissions, institutions, departments, divisions, agencies, bureaus, laboratories,


             181      or other similar instrumentalities.
             182          Section 3. Section 51-7-4 is amended to read:
             183           51-7-4. Transfer of functions, powers, and duties relating to public funds to state
             184      treasurer -- Exceptions -- Deposit of income from investment of state money.
             185          (1) Unless otherwise required by the Utah Constitution or applicable federal law, the
             186      functions, powers, and duties vested by law in each [and every] state officer, board,
             187      commission, institution, department, division, agency, [and] or other similar [instrumentalities]
             188      instrumentality relating to the deposit, investment, or reinvestment of public funds, and the
             189      purchase, sale, or exchange of [any] investments or securities of, or for [any], funds or accounts
             190      under the control and management of each of these instrumentalities, are transferred to and
             191      shall be exercised by the state treasurer, except:
             192          (a) funds assigned to the Utah State Retirement Board for investment under Section
             193      49-11-302 ;
             194          (b) funds of member institutions of the state system of higher education:
             195          (i) acquired by gift, devise, or bequest, or by federal or private contract or grant;
             196          (ii) derived from student fees or from income from operations of auxiliary enterprises,
             197      which fees and income are pledged or otherwise dedicated to the payment of interest and
             198      principal of bonds issued by [such institutions] an institution of higher education; [and]
             199          (iii) subject to rules made by the council, under Section 51-7-18 , deposited in a foreign
             200      depository institution as defined in Section 7-1-103 ; and
             201          [(iii) any] (iv) other funds [which] that are not included in the institution's work
             202      program as approved by the State Board of Regents;
             203          (c) inmate funds as provided in Section 64-13-23 or in Title 64, Chapter 9b, Work
             204      Programs for Prisoners;
             205          (d) trust funds established by judicial order;
             206          (e) funds of the Workers' Compensation Fund;
             207          (f) funds of the Utah Housing Corporation;
             208          (g) endowment funds of higher education institutions; and
             209          (h) the funds of the Utah Educational Savings Plan.
             210          (2) All public funds held or administered by the state or [any of] its boards,
             211      commissions, institutions, departments, divisions, agencies, or similar instrumentalities and not


             212      transferred to the state treasurer as provided by this section shall be:
             213          (a) deposited and invested by the custodian in accordance with this chapter, unless
             214      otherwise required by statute or by applicable federal law; and
             215          (b) reported to the state treasurer in a form prescribed by the state treasurer.
             216          (3) Unless otherwise provided by the constitution or laws of this state or by contractual
             217      obligation, the income derived from the investment of state money by the state treasurer shall
             218      be deposited in and become part of the General Fund.
             219          Section 4. Section 51-7-7 is amended to read:
             220           51-7-7. Securities and evidence of deposits and investments -- Custody -- Deposit
             221      for safekeeping.
             222          (1) (a) (i) The public treasurer shall have custody of all securities purchased or held and
             223      all evidence of deposits and investments of public funds.
             224          (ii) All securities shall be delivered versus payment to the public treasurer or to the
             225      treasurer's safekeeping bank.
             226          (b) The public treasurer may deposit any of these securities with a bank or trust
             227      company to be held in safekeeping by that custodian.
             228          (c) The provisions of this section do not apply to securities acquired under a
             229      nonqualifying repurchase agreement as defined in Section 51-7-3 .
             230          (d) The provisions of this section apply to any book-entry-only deposit or security the
             231      ownership records of which are maintained with a securities depository, in the Federal Book
             232      Entry system authorized by the U.S. Department of Treasury, or in the book-entry records of
             233      the issuer, as follows:
             234          (i) the direct ownership of the deposit or security by the public treasurer shall be
             235      reflected in the book-entry records and represented by a receipt, confirmation, or statement
             236      issued to the public treasurer by the custodian of the book-entry system; or
             237          (ii) the ownership of the deposit or security by the public treasurer's custodial bank or
             238      trust company shall be reflected in the book-entry records and the public treasurer's ownership
             239      shall be represented by a receipt, confirmation, or statement issued by the custodial bank or
             240      trust company.
             241          (2) The public treasurer may maintain accounts with money center banks only for the
             242      purposes of settling investment transactions, safekeeping, and collecting those investments.


             243          Section 5. Section 51-7-11 is amended to read:
             244           51-7-11. Authorized deposits or investments of public funds.
             245          (1) (a) Except as provided in [Subsection] Subsections (1)(b) and (1)(c), a public
             246      treasurer [may] shall conduct investment transactions [only] through qualified depositories,
             247      certified dealers, or directly with issuers of the investment securities.
             248          (b) A public treasurer may designate a certified investment adviser to make trades on
             249      behalf of the public treasurer.
             250          (c) A public treasurer may make a deposit in accordance with Section 53B-7-601 in a
             251      foreign depository institution as defined in Section 7-1-103 .
             252          (2) The remaining term to maturity of the investment may not exceed the period of
             253      availability of the funds to be invested.
             254          (3) Except as provided in Subsection (4), all public funds [may] shall be deposited or
             255      invested [only] in the following assets that meet the criteria of Section 51-7-17 :
             256          (a) negotiable or nonnegotiable deposits of qualified depositories;
             257          (b) qualifying or nonqualifying repurchase agreements and reverse repurchase
             258      agreements with qualified depositories using collateral consisting of:
             259          (i) Government National Mortgage Association mortgage pools;
             260          (ii) Federal Home Loan Mortgage Corporation mortgage pools;
             261          (iii) Federal National Mortgage Corporation mortgage pools;
             262          (iv) Small Business Administration loan pools;
             263          (v) Federal Agriculture Mortgage Corporation pools; or
             264          (vi) other investments authorized by this section;
             265          (c) qualifying repurchase agreements and reverse repurchase agreements with certified
             266      dealers, permitted depositories, or qualified depositories using collateral consisting of:
             267          (i) Government National Mortgage Association mortgage pools;
             268          (ii) Federal Home Loan Mortgage Corporation mortgage pools;
             269          (iii) Federal National Mortgage Corporation mortgage pools;
             270          (iv) Small Business Administration loan pools; or
             271          (v) other investments authorized by this section;
             272          (d) commercial paper that is classified as "first tier" by two nationally recognized
             273      statistical rating organizations, one of which [must] shall be Moody's Investors Service or


             274      Standard and Poor's, which has a remaining term to maturity of:
             275          (i) 270 days or less for paper issued under 15 U.S.C. Sec. 77c(a)(3); or
             276          (ii) 365 days or less for paper issued under 15 U.S.C. Sec. 77d(2);
             277          (e) bankers' acceptances that:
             278          (i) are eligible for discount at a Federal Reserve bank; and
             279          (ii) have a remaining term to maturity of 270 days or less;
             280          (f) fixed rate negotiable deposits issued by a permitted depository that have a
             281      remaining term to maturity of 365 days or less;
             282          (g) obligations of the United States Treasury, including United States Treasury bills,
             283      United States Treasury notes, and United States Treasury bonds;
             284          (h) obligations other than mortgage pools and other mortgage derivative products
             285      issued by, or fully guaranteed as to principal and interest by, the following agencies or
             286      instrumentalities of the United States in which a market is made by a primary reporting
             287      government securities dealer, unless the agency or instrumentality has become private and is no
             288      longer considered to be a government entity:
             289          (i) Federal Farm Credit banks;
             290          (ii) Federal Home Loan banks;
             291          (iii) Federal National Mortgage Association;
             292          (iv) Federal Home Loan Mortgage Corporation;
             293          (v) Federal Agriculture Mortgage Corporation; and
             294          (vi) Tennessee Valley Authority;
             295          (i) fixed rate corporate obligations that:
             296          (i) are rated "A" or higher or the equivalent of "A" or higher by two nationally
             297      recognized statistical rating organizations, one of which [must] shall be [by] Moody's Investors
             298      Service or Standard and Poor's;
             299          (ii) are senior unsecured obligations of the issuer;
             300          (iii) are publicly traded; and
             301          (iv) have a remaining term to final maturity of 13 months or less or [is] are subject to a
             302      hard put at par value or better, within 365 days;
             303          (j) tax anticipation notes and general obligation bonds of the state or [of any] a county,
             304      incorporated city or town, school district, or other political subdivision of [this] the state,


             305      including bonds offered on a when-issued basis without regard to the limitation in Subsection
             306      (7);
             307          (k) bonds, notes, or other evidence of indebtedness of [any] a county, incorporated city
             308      or town, school district, or other political subdivision of the state that are payable from
             309      assessments or from revenues or earnings specifically pledged for payment of the principal and
             310      interest on these obligations, including bonds offered on a when-issued basis without regard to
             311      the limitation in Subsection (7);
             312          (l) shares or certificates in a money market mutual fund as defined in Section 51-7-3 ;
             313          (m) variable rate negotiable deposits that:
             314          (i) are issued by a qualified depository or a permitted depository;
             315          (ii) are repriced at least semiannually; and
             316          (iii) have a remaining term to final maturity not to exceed two years; [and]
             317          (n) variable rate securities that:
             318          (i) (A) are rated "A" or higher or the equivalent of "A" or higher by two nationally
             319      recognized statistical rating organizations, one of which [must] shall be [by] Moody's Investors
             320      Service or Standard and Poor's;
             321          (B) are senior unsecured obligations of the issuer;
             322          (C) are publicly traded;
             323          (D) are repriced at least semiannually; and
             324          (E) have a remaining term to final maturity not to exceed two years or are subject to a
             325      hard put at par value or better, within 365 days; [and]
             326          (ii) are not mortgages, mortgage-backed securities, mortgage derivative products, or
             327      [any] a security making unscheduled periodic principal payments other than optional
             328      redemptions[.]; and
             329          (o) reciprocal deposits made in accordance with Subsection 51-7-17 (4).
             330          (4) The following public funds are exempt from the requirements of Subsection (3):
             331          (a) the Employers' Reinsurance Fund created in Section 34A-2-702 ;
             332          (b) the Uninsured Employers' Fund created in Section 34A-2-704 ; [and]
             333          (c) a local government other post-employment benefits trust fund under Section
             334      51-7-12.2 [.]; and
             335          (d) a nonnegotiable deposit made in accordance with Section 53B-7-601 in a foreign


             336      depository institution as defined in Section 7-1-103 .
             337          (5) If any of the deposits authorized by Subsection (3)(a) are negotiable or
             338      nonnegotiable large-time deposits issued in amounts of $100,000 or more, the interest shall be
             339      calculated on the basis of the actual number of days divided by 360 days.
             340          (6) A public treasurer may maintain fully insured deposits in demand accounts in a
             341      federally insured nonqualified depository only if a qualified depository is not reasonably
             342      convenient to the entity's geographic location.
             343          (7) The public treasurer shall ensure that all purchases and sales of securities are settled
             344      within:
             345          (a) 15 days of the trade date for outstanding issues; and
             346          (b) 30 days [on] for new issues.
             347          Section 6. Section 51-7-15 is amended to read:
             348           51-7-15. Bonds of state treasurer and other public treasurers -- Reports to
             349      council.
             350          (1) (a) The state treasurer, county, city, and town treasurers, the clerk or treasurer of
             351      each school district, and [any] other public treasurers that the council designates by rule shall
             352      be bonded in an amount of not less than that established by the council.
             353          (b) The council shall base the minimum bond amount on the amount of public funds
             354      normally in the treasurer's possession or control.
             355          (2) (a) When a public treasurer deposits or invests public funds as authorized by this
             356      chapter, [he and his] the public treasurer and the public treasurer's bondsmen are not liable for
             357      any loss of public funds invested or deposited unless the loss is caused by the malfeasance of
             358      the public treasurer or [of any] a member of [his] the public treasurer's staff.
             359          (b) A public treasurer and [his] the public treasurer's bondsmen are liable for [any] a
             360      loss for any reason from deposits or investments not made in conformity with this chapter and
             361      the rules of the council.
             362          (3) (a) [Each] A public treasurer shall file a written report with the council on or before
             363      January 31 and July 31 of each year.
             364          (b) The report shall contain:
             365          (i) the information about the deposits and investments of that public treasurer during
             366      the preceding six months ending December 31 and June 30, respectively, that the council


             367      requires by rule; and
             368          (ii) information detailing the nature and extent of interest rate contracts permitted by
             369      Subsection 51-7-17 [(2)](3).
             370          (c) [The] A public treasurer shall make copies of the report available to the public at
             371      [his offices] the public treasurer's office during normal business hours.
             372          Section 7. Section 51-7-17 is amended to read:
             373           51-7-17. Criteria for investments.
             374          (1) As used in this section:
             375          (a) "Affiliate" means, in relation to [any] a provider:
             376          (i) [any] an entity controlled, directly or indirectly, by the provider;
             377          (ii) [any] an entity that controls, directly or indirectly, the provider; or
             378          (iii) [any] an entity directly or indirectly under common control with the provider.
             379          (b) "Control" means ownership of a majority of the voting power of the entity or
             380      provider.
             381          (2) (a) [All] A public [treasurers] treasurer shall consider and meet the following
             382      objectives when depositing and investing public funds:
             383          (i) safety of principal;
             384          (ii) need for liquidity;
             385          (iii) yield on investments;
             386          (iv) recognition of the different investment objectives of operating and permanent
             387      funds; and
             388          (v) maturity of investments, so that the maturity date of the investment does not exceed
             389      the anticipated date of the expenditure of funds.
             390          (b) [Each] A public treasurer shall invest the proceeds of general obligation bond
             391      issues, tax anticipation note issues, and [all] funds pledged or otherwise dedicated to the
             392      payment of interest and principal of general obligation bonds and tax anticipation notes issued
             393      by the state or [any] a political subdivision of the state in accordance with:
             394          (i) Section 51-7-11 ; or [in accordance with]
             395          (ii) the terms of the borrowing instrument applicable to those issues and funds, if those
             396      terms are more restrictive than Section 51-7-11 .
             397          (c) [Each] A public treasurer shall invest the proceeds of bonds other than general


             398      obligation bonds and the proceeds of notes other than tax anticipation notes issued by the state
             399      or [any] a political subdivision of the state, and all funds pledged or otherwise dedicated to the
             400      payment of interest and principal of those notes and bonds[,]:
             401          (i) in accordance with the terms of the borrowing instruments applicable to those bonds
             402      or notes[,]; or
             403          (ii) if none of those provisions are applicable, in accordance with Section 51-7-11 .
             404          (d) [Each] A public treasurer may invest proceeds of bonds, notes, or other money
             405      pledged or otherwise dedicated to the payment of debt service on the bonds or notes in
             406      investment agreements if:
             407          (i) the investment is permitted by the terms of the borrowing instrument applicable to
             408      those bonds or notes or the borrowing instrument authorizes the investment as an investment
             409      permitted by the State Money Management Act;
             410          (ii) either the provider of the investment agreement or an entity fully, unconditionally,
             411      and irrevocably guaranteeing the provider's obligations under the investment agreement has
             412      received a rating of:
             413          (A) at least "AA-" from S&P or "Aa3" from Moody's for investment agreements having
             414      a term of more than one year; or
             415          (B) at least "A-1+" from S&P or "P-1" from Moody's for investment agreements
             416      having a term of one year or less;
             417          (iii) the investment agreement contains provisions approved by the public treasurer that
             418      provide that, in the event of a rating downgrade of the provider or its affiliate guarantor, as
             419      applicable, by either S&P or Moody's below the "A" category or its equivalent, or a rating
             420      downgrade of a nonaffiliate guarantor by either S&P or Moody's below the "AA" category or
             421      its equivalent, the provider must, within 30 days after receipt of notice of the downgrade[,
             422      either]:
             423          (A) collateralize the investment agreement with direct obligations of, or obligations
             424      guaranteed by, the United States of America having a market value at least equal to 105% of
             425      the amount of the money invested, valued at least quarterly, and deposit the collateral with a
             426      third-party custodian or trustee selected by the public treasurer; or
             427          (B) terminate the agreement without penalty and repay all of the principal invested and
             428      the interest accrued on the investment to the date of termination; and


             429          (iv) the public treasurer receives an enforceability opinion from the legal counsel of the
             430      investment agreement provider and, if there is a guarantee, an enforceability opinion from the
             431      legal counsel of the guarantor with respect to the guarantee.
             432          (3) (a) As used in this Subsection (3), "interest rate contract" means interest rate
             433      exchange contracts, interest rate floor contracts, interest rate ceiling contracts, [and] or other
             434      similar contracts authorized by resolution of the governing board or issuing authority, as
             435      applicable.
             436          (b) A public treasurer may:
             437          (i) enter into interest rate contracts that the governing board or issuing authority
             438      determines are necessary, convenient, or appropriate for the control or management of debt or
             439      for the cost of servicing debt; and
             440          (ii) use its public funds to satisfy its payment obligations under those contracts.
             441          (c) Those contracts:
             442          (i) shall comply with the requirements established by council rules; and
             443          (ii) may contain payment, security, default, termination, remedy, and other terms and
             444      conditions that the governing board or issuing authority considers appropriate.
             445          (d) Neither interest rate contracts nor public funds used in connection with these
             446      interest rate contracts may be considered a deposit or investment.
             447          (4) [It is the intent of the Legislature] A public treasurer shall ensure that all public
             448      funds invested in deposit instruments [be] are invested with qualified depositories within Utah,
             449      except [that]:
             450          (a) for deposits made in accordance with Section 53B-7-601 in a foreign depository
             451      institution as defined in Section 7-1-103 ;
             452          (b) reciprocal deposits, subject to rules made by the council under Subsection
             453      51-7-18 (2); or
             454          (c) if national market rates on instruments of similar quality and term exceed those
             455      offered by qualified depositories, investments in out-of-state deposit instruments may be made
             456      only with [those] institutions that meet quality criteria set forth by the rules of the council.
             457          Section 8. Section 51-7-18.2 is amended to read:
             458           51-7-18.2. Public treasurer's reports -- Contents.
             459          (1) The council may:


             460          (a) require [any] a public treasurer to prepare and file [with it] a written report in a
             461      form prescribed by the council containing the information required by this section; and
             462          (b) specify that the report will contain the information required by this section for any
             463      date.
             464          (2) The council shall require the report to include information:
             465          (a) specifying the amount of public funds in the public treasurer's possession or
             466      control;
             467          (b) detailing the nature and extent of the deposit and investment of those funds;
             468          (c) detailing the rate of return on each deposit or investment; and
             469          (d) detailing the nature and extent of interest rate contracts authorized by Subsection
             470      51-7-17 [(2)](3).
             471          (3) The public treasurer shall file the report with the council within 10 days after [he]
             472      the day on which the public treasurer receives the council's request.
             473          (4) [Each] A public treasurer shall make copies of [any reports] a report required by
             474      this section available for inspection by the public at [his] the public treasurer's office during
             475      normal business hours.
             476          Section 9. Section 53B-7-601 is enacted to read:
             477     
Part 6. Foreign Bank Accounts for Higher Education Purposes

             478          53B-7-601. Foreign bank accounts for higher education purposes.
             479          (1) As used in this section, "foreign depository institution" is as defined in Section
             480      7-1-103 .
             481          (2) In accordance with Subsection 51-7-4 (1)(b)(iii), a higher education institution may
             482      deposit funds in a foreign depository institution for purposes of conducting academic, research,
             483      or clinical activities in the foreign country, if the:
             484          (a) laws of the foreign country require the money to be deposited in the foreign
             485      country; or
             486          (b) terms of a grant, gift, or contract require the funds to be deposited in the foreign
             487      country.
             488          (3) The foreign depository institution in which funds are deposited under this section
             489      shall meet the requirements of rules made by the State Money Management Council under
             490      Section 51-7-18 .


             491          Section 10. Effective date.
             492          This bill takes effect on July 1, 2013.


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