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                                                      PRINTER'S NO. 4450

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

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
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     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
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     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
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     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.






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