More local governments could broaden their investment opportunities – Session Daily

A 2017 law limits the types of cities and counties that can use certain long-term equity investments to those whose population exceeds 100,000 or have the highest available bond rating of AAA.

Currently, that number totals about 30.

To provide more opportunities for local units of government, and as a matter of fairness, Rep. Mike Freiberg (DFL-Golden Valley) would like state statute expanded to counties and cities with a general obligation bond rating of at least AA.  

He sponsors HF159 that would both expand the investment opportunity and authorize certain self-insurance pools to invest in the same securities as the State Board of Investment.

The bill was held over Tuesday by the House State and Local Government Finance and Policy Committee for possible omnibus bill inclusion. Freiberg said the provision received bipartisan support in the past and was in last year’s omnibus bill that failed to become law.

“Cities and counties have a limited number of investment options, such as U.S. treasuries and certificates of deposit from banks that are FDIC-insured,” Freiberg said. “These investments work well for short-term investments, but do not work as well for long-term investments, such as when a city is setting aside long-term capital funds to pay for replacing a water treatment plant. The fixed-income investments have not kept up with inflation for over a decade. The result is these local governments are falling behind financially.”

Eligible cities and counties can now invest up to 15% of their cash and savings in index mutual funds based in the United States and indexed to a broad market United States equity index, he said. “This (bill) allows those qualifying local governments more choice to invest their cash for long-term obligations and projects and to keep up with inflation while ensuring that risk is minimized.”

An estimated 60 additional local units of government would be eligible.

In a letter, Robbinsdale Mayor Bill Blonigan…

Read complete post here:
Source link