PRINTER'S NO. 4450
No. 2876 Session of 2004
INTRODUCED BY HICKERNELL, ARMSTRONG, BALDWIN, BARD, BENNINGHOFF, BOYD, DALEY, DeWEESE, GEIST, GINGRICH, HARPER, HERSHEY, NICKOL, PAYNE, SCAVELLO AND TRUE, OCTOBER 4, 2004
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, OCTOBER 4, 2004
AN ACT 1 Amending the act of February 1, 1966 (1965 P.L.1656, No.581), 2 entitled "An act concerning boroughs, and revising, amending 3 and consolidating the law relating to boroughs," further 4 providing for investment of borough funds. 5 The General Assembly of the Commonwealth of Pennsylvania 6 hereby enacts as follows: 7 Section 1. Section 1316 of the act of February 1, 1966 (1965 8 P.L.1656, No.581), known as The Borough Code, added November 2, 9 1979 (P.L.458, No.94) and amended December 13, 1982 (P.L.1145, 10 No.261), is amended to read: 11 Section 1316. Investment of Funds.--(a) Council shall 12 invest borough funds consistent with sound business practice. 13 (b) Council shall provide for an investment program subject 14 to restrictions contained in this act and in any other 15 applicable statute and any rules and regulations adopted by 16 council. 17 (c) Authorized types of investments for borough funds shall 18 be:
1 (i) United States Treasury bills. 2 (ii) Short-term obligations of the United States Government 3 or its agencies or instrumentalities. 4 (iii) Deposits in savings accounts or time deposits, other 5 than certificates of deposit, or share accounts of institutions 6 insured by the Federal Deposit Insurance Corporation or the 7 Federal Savings and Loan Insurance Corporation or the National 8 Credit Union Share Insurance Fund or the Pennsylvania Deposit 9 Insurance Corporation or the Pennsylvania Savings Association 10 Insurance Corporation to the extent that such accounts are so 11 insured, and, for any amounts above the insured maximum, 12 provided that approved collateral as provided by law therefore 13 shall be pledged by the depository. 14 (iv) Obligations of the United States of America or any of 15 its agencies or instrumentalities backed by the full faith and 16 credit of the United States of America, the Commonwealth of 17 Pennsylvania or any of its agencies or instrumentalities backed 18 by the full faith and credit of the Commonwealth, or of any 19 political subdivision of the Commonwealth of Pennsylvania or any 20 of its agencies or instrumentalities backed by the full faith 21 and credit of the political subdivision. 22 (v) Shares of an investment company registered under the 23 Investment Company Act of 1940, whose shares are registered 24 under the Securities Act of 1933, provided that the only 25 investments of that company are in the authorized investments 26 for borough funds listed in (i) through (iv). 27 (vi) Certificates of deposit purchased from institutions 28 insured by the Federal Deposit Insurance Corporation or the 29 Federal Savings and Loan Insurance Corporation or the National 30 Credit Union Share Insurance Fund or the Pennsylvania Deposit 20040H2876B4450 - 2 -
1 Insurance Corporation or the Pennsylvania Savings Association 2 Insurance Corporation to the extent that such accounts are so 3 insured. However, for any amounts above the insured maximum, 4 such certificates of deposit shall be collateralized by a pledge 5 or assignment of assets of the institution, and such collateral 6 may include loans (including interest in pools of loans) secured 7 by first mortgage liens on real property. Certificates of 8 deposit purchased from commercial banks shall be limited to an 9 amount equal to twenty percent of a bank's total capital and 10 surplus. Certificates of deposit purchased from savings and loan 11 associations or savings banks shall be limited to an amount 12 equal to twenty percent of an institution's assets minus 13 liabilities. 14 (vii) Any investment authorized by 20 Pa.C.S. Ch.73 15 (relating to fiduciaries investments) shall be an authorized 16 investment for any pension or retirement fund. 17 (viii) Bankers' acceptances issued by domestic banks to 18 secure international trade transactions, provided that the 19 bankers' acceptances are guaranteed by the full faith and credit 20 of the domestic bank and the United States of America importer. 21 (ix) Commercial paper and prime commercial paper as defined 22 in subsection (e), provided that the treasurer shall not, at any 23 time, have invested in prime commercial paper more than an 24 aggregate of such total sum as the council shall have 25 prescribed. 26 (d) In making investments of borough funds, council shall 27 have authority: 28 (i) To permit assets pledged as collateral under subsection 29 (c)(iii), to be pooled in accordance with the act of August 6, 30 1971 (P.L.281, No.72), entitled "An act standardizing the 20040H2876B4450 - 3 -
1 procedures for pledges of assets to secure deposits of public 2 funds with banking institutions pursuant to other laws; 3 establishing a standard rule for the types, amounts and 4 valuations of assets eligible to be used as collateral for 5 deposits of public funds; permitting assets to be pledged 6 against deposits on a pooled basis; and authorizing the 7 appointment of custodians to act as pledgees of assets," 8 relating to pledges of assets to secure deposits of public 9 funds. 10 (ii) To combine moneys from more than one fund under borough 11 control for the purchase of a single investment, provided that 12 each of the funds combined for the purpose shall be accounted 13 for separately in all respects and that the earnings from the 14 investment are separately and individually computed and 15 recorded, and credited to the accounts from which the investment 16 was purchased. 17 (iii) To join with one or more other political subdivisions 18 and municipal authorities in accordance with [the act of July 19 12, 1972 (P.L.762, No.180), entitled "An act relating to 20 intergovernmental cooperation,"] 53 Pa.C.S. Ch. 23 Subch. A 21 (relating to intergovernmental cooperation) in the purchase of a 22 single investment, provided that the requirements of subclause 23 (ii) on separate accounting of individual funds and separate 24 computation, recording and crediting of the earnings therefrom 25 are adhered to. 26 (e) As used in this section, "commercial paper" shall mean 27 unsecured promissory notes issued at a discount from par by any 28 industrial, common carrier, public utility or finance company 29 and "prime commercial paper" shall mean notes issued by 30 corporations whose credit has been approved by a nationally 20040H2876B4450 - 4 -
1 recognized credit rating service. The treasurer shall have 2 obtained the following prior to any commitment to purchase 3 commercial paper: 4 (i) A certification or other evidence that the commercial 5 paper is rated prime by a nationally recognized credit rating 6 service. 7 (ii) A certification or other evidence that the commercial 8 paper proposed to be delivered is not subordinate to any other 9 debt of the issuer. 10 (iii) A certificate or other evidence that there is no 11 litigation pending or threatened affecting the commercial paper. 12 (iv) A certificate or other evidence that the issuer is not 13 in default as to the payment of principal and interest upon any 14 of its outstanding obligations. 15 (v) A certificate or other evidence that the issuer was 16 incorporated within the United States of America, is transacting 17 business within the United States of America, and has assets of 18 one billion dollars ($1,000,000,000) or more, or is a wholly 19 owned subsidiary of a Pennsylvania corporation having assets of 20 one billion dollars ($1,000,000,000) or more. 21 Section 2. This act shall take effect in 60 days. H12L08DMS/20040H2876B4450 - 5 -