Senate Bill 1332c1
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Florida Senate - 1998 CS for SB 1332
By the Committee on Governmental Reform and Oversight and
Senator Latvala
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1 A bill to be entitled
2 An act relating to investment of public funds
3 (RAB); amending s. 215.835, F.S.; prescribing
4 rulemaking authority of the Division of Bond
5 Finance and State Board of Administration;
6 amending ss. 159.825, 218.405, 218.407,
7 218.409, F.S.; prescribing rulemaking authority
8 of the State Board of Administration; amending
9 s. 240.551, F.S.; prescribing rulemaking
10 authority of the Prepaid Postsecondary
11 Education Expense Board; providing an effective
12 date.
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14 Be It Enacted by the Legislature of the State of Florida:
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16 Section 1. Section 215.835, Florida Statutes, is
17 amended to read:
18 215.835 Rulemaking authority.--The Division of Bond
19 Finance and the State Board of Administration may adopt rules
20 as it deems necessary to carry out the provisions and intent
21 of this act.
22 Section 2. Section 159.825, Florida Statutes, is
23 amended to read:
24 159.825 Terms of bonds.--
25 (1) The ordinance, resolution, indenture, agreement,
26 or other instrument providing for the issuance of taxable
27 bonds may provide for any of the following:
28 (a)(1) The bonds shall be in such denominations, in
29 such form, either bearer or registered, and payable at such
30 place or places, either within or without the United States,
31 at such time or times, as, in each case, the governing body
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1 shall determine subject to any limitations on the maturity of
2 bonds set forth in the statutes under authority of which the
3 bonds are issued.
4 (b)(2) The bonds shall be payable in legal tender of
5 the United States, in a foreign currency, in commodities, or
6 in precious metals, as the governing body shall determine.
7 (c)(3) The governing body may appoint, in connection
8 with the bond issue, a cotrustee located outside of the
9 boundaries of the United States or its territories or
10 possessions so long as it shall also appoint a trustee
11 otherwise meeting the requirements of the statutes under
12 authority of which the bonds are issued. The governing body
13 may appoint, in connection with the bond issue, a paying agent
14 or a copaying agent located outside the boundaries of the
15 United States or its territories or possessions.
16 (d)(4) Bonds shall bear interest at a rate not to
17 exceed an average net interest cost rate, which shall be
18 computed by adding 500 basis points to the 30-year Treasury
19 Bond yield published in The Bond Buyer immediately preceding
20 the first day of the calendar month in which the bonds are
21 sold. If the interest rate on bonds bearing a floating or
22 variable rate of interest as calculated on the date of the
23 initial sale thereof does not exceed the limitation provided
24 by this section, so long as the basis, method, or formula for
25 computing the floating or variable rate does not change during
26 the life of the bonds, subsequent increases in the interest
27 rate in accordance with said basis, method, or formula shall
28 not cause the interest rate on the bonds to violate the
29 limitation provided by this paragraph subsection. A
30 certificate by the issuer of the bonds as to the computation
31 of the interest rate in compliance with this requirement shall
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Florida Senate - 1998 CS for SB 1332
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1 be deemed conclusive evidence of compliance with the
2 provisions of this paragraph subsection. Such maximum rate
3 does not apply to bonds rated by a nationally recognized
4 rating service in any one of the three highest
5 classifications, which rating services and classifications are
6 determined pursuant to rules adopted by the State Board of
7 Administration.
8 (e)(5) Upon the request of and application by a
9 governmental unit, the State Board of Administration may
10 authorize, for a specific issue or reissue of bonds, a rate of
11 interest in excess of the maximum rate prescribed in paragraph
12 (d) subsection (4). The governmental unit shall provide in
13 its application request:
14 1.(a) Relevant supporting data which shall include,
15 but not be limited to:
16 a.1. The official statement or prospectus, if
17 available, or similar information relating to the sale of the
18 bonds;
19 b.2. The resolution or ordinance authorizing the
20 issuance of the bonds;
21 c.3. Financial data relating to anticipated revenue,
22 debt service, and coverage; and
23 d.4. The most recent financial statement of the
24 governmental unit.
25 2.(b) Information relating to sale of the bonds,
26 including the amount of the discount, if any. In making the
27 determination to exceed the maximum interest rate, the State
28 Board of Administration shall consider, but not be limited to
29 considering, comparable sales of other taxable bonds of other
30 governmental units and evidence that the objectives and intent
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Florida Senate - 1998 CS for SB 1332
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1 of the issuing of such bonds will be realized. This
2 subparagraph does paragraph shall not apply to:
3 a.1. Bonds which have been sold prior to June 30,
4 1987, and which are delivered pursuant to said sale on or
5 after June 30, 1987.
6 b.2. Bonds issued to finance projects under part II,
7 part III, or part V of this chapter or health facilities under
8 part III of chapter 154.
9 c.3. Limit or restrict the rate of interest on bonds
10 or other obligations of municipal utilities or agencies
11 thereof issued or made pursuant to authority provided in part
12 II of chapter 166 and s. 215.431.
13 (f)(6) In connection with, or incidental to, the sale
14 and issuance of bonds, the governmental unit may enter into
15 any contracts which the governing body determines to be
16 necessary or appropriate to achieve a desirable effective
17 interest rate in connection with the bonds by means of, but
18 not limited to, contracts commonly known as investment
19 contracts, funding agreements, interest rate swap agreements,
20 currency swap agreements, forward payment conversion
21 agreements, futures, or contracts providing for payments based
22 on levels of or changes in interest rates, or contracts to
23 exchange cash flows or a series of payments, or contracts,
24 including, without limitation, options, puts, or calls to
25 hedge payment, rate, spread, or similar exposure. Such
26 contracts or arrangements may also be entered into by
27 governmental units in connection with, or incidental to,
28 entering into any agreement which secures bonds or provides
29 liquidity therefor. Such contracts and arrangements shall be
30 made upon the terms and conditions established by the
31 governing body, after giving due consideration for the credit
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1 worthiness of the counterparties, where applicable, including
2 any rating by a nationally recognized rating service or any
3 other criteria as may be appropriate.
4 (g)(7) In connection with, or incidental to, the sale
5 and issuance of the bonds, or entering into any of the
6 contracts or arrangements referred to in paragraph (f)
7 subsection (6), the governmental unit may enter into such
8 credit enhancement or liquidity agreements, with such payment,
9 interest rate, security, default, remedy, and other terms and
10 conditions as the governing body shall determine.
11 (h)(8) Notwithstanding any provisions of state law
12 relating to the investment or reinvestment of surplus funds of
13 any governmental unit, proceeds of the bonds and any moneys
14 set aside or pledged to secure payment of the principal of,
15 premium, if any, and interest on the bonds, or any of the
16 contracts entered into pursuant to paragraph (f) subsection
17 (6), may be invested in securities or obligations described in
18 the ordinance or resolution providing for the issuance of the
19 bonds.
20 (2) The State Board of Administration may adopt rules
21 necessary to administer this section.
22 Section 3. Section 218.405, Florida Statutes, is
23 amended to read:
24 218.405 Local Government Surplus Funds Trust Fund;
25 creation.--There is hereby created a Local Government Surplus
26 Funds Trust Fund to be administered by the State Board of
27 Administration and to be composed of local government surplus
28 funds deposited therein by units of local government under the
29 procedures established in this part. The board may adopt rules
30 to administer the provisions of this section.
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1 Section 4. Section 218.407, Florida Statutes, is
2 amended to read:
3 218.407 Local government investment authority.--
4 (1) Upon determination by the governing body that it
5 is in the interest of the unit of local government to deposit
6 surplus funds in the trust fund, a resolution by the governing
7 body shall be filed with the State Board of Administration
8 authorizing investment of its surplus funds in the trust fund
9 established by this part. The resolution shall name:
10 (a) The local government official, who may be the
11 chief financial or administrative officer of the local
12 government, or
13 (b) An independent trustee holding funds on behalf of
14 the unit of local government,
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16 responsible for deposit and withdrawal of such funds and shall
17 state the approximate cash-flow requirements of the local
18 government for the surplus funds to be invested.
19 (2) The State Board of Administration shall, upon the
20 filing of the resolution, invest the moneys in the trust fund
21 in the same manner and subject to the same restrictions as are
22 set forth in s. 215.47. Except when authorized by the board,
23 all units of local government which qualify to be participants
24 in the Local Government Surplus Funds Trust Fund after January
25 1, 1982, will normally have surplus funds deposited into a
26 pooled investment account.
27 (3) The provisions of this part shall not impair the
28 power of a unit of local government to hold funds in deposit
29 accounts with banking or savings institutions or to invest
30 funds as otherwise authorized by law.
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1 Section 5. Subsections (2), (3), (4), (5), and (6) of
2 section 218.409, Florida Statutes, are amended to read:
3 218.409 Administration of the trust fund.--
4 (2) The State Board of Administration shall administer
5 the investment trust funds on behalf of the participants and
6 shall have the power to invest such funds. A fee may be
7 charged on any transaction that is not in accord with the
8 close of business as set by the board.
9 (3) The State Board of Administration may purchase
10 such surety or other bonds as may be necessary for its
11 officials in order to protect the fund. A reserve fund may be
12 established to fulfill this purpose.
13 (4) All investments may be purchased jointly for the
14 participants in the trust fund. The board may also purchase
15 investments for a pooled investment account in which all
16 participants may share pro rata, as determined by rule of the
17 board, in the capital gain, income, or losses, subject to any
18 penalties for early withdrawal. The board shall determine the
19 rate of return for the pooled investment account. A system may
20 be developed by the board to keep current account balance
21 information and to apportion pooled investment earnings back
22 to individual accounts.
23 (5) The State Board of Administration shall keep a
24 separate account, designated by name and number of each
25 participating local government. A maximum number of accounts
26 allowed for each participant may be established by the board.
27 Individual transactions and totals of all investments, or the
28 share belonging to each participant, shall be recorded in the
29 accounts.
30 (6) The State Board of Administration shall report
31 semiannually or upon request to every participant having a
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1 beneficial interest in the trust fund. The report shall show
2 the changes in investments made during the preceding period.
3 The report shall delineate, in a manner which is in accordance
4 with generally accepted governmental accounting procedures,
5 those funds on deposit, the manner in which the funds are
6 invested, and the interest earnings thereon. The State Board
7 of Administration shall furnish upon request the details of an
8 investment transaction to any participant. Additional
9 reporting may be made to pool participants.
10 Section 6. Paragraph (c) of subsection (5) of section
11 240.551, Florida Statutes, is amended to read:
12 240.551 Florida Prepaid Postsecondary Education
13 Expense Program.--
14 (5) The Florida Prepaid Postsecondary Education
15 Expense Program shall be administered by the Prepaid
16 Postsecondary Education Expense Board as an agency of the
17 state. The Prepaid Postsecondary Education Expense Board is
18 hereby created as a body corporate with all the powers of a
19 body corporate for the purposes delineated in this section.
20 For the purposes of s. 6, Art. IV of the State Constitution,
21 the board shall be assigned to and administratively housed
22 within the State Board of Administration, but it shall
23 independently exercise the powers and duties specified in this
24 section. The board shall consist of seven members to be
25 composed of the Insurance Commissioner and Treasurer, the
26 Comptroller, the Chancellor of the Board of Regents, the
27 Executive Director of the State Board of Community Colleges,
28 and three members appointed by the Governor and subject to
29 confirmation by the Senate. Each member appointed by the
30 Governor shall possess knowledge, skill, and experience in the
31 areas of accounting, actuary, risk management, or investment
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1 management. Each member of the board not appointed by the
2 Governor may name a designee to serve the board on behalf of
3 the member; however, any designee so named shall meet the
4 qualifications required of gubernatorial appointees to the
5 board. Members appointed by the Governor shall serve terms of
6 3 years except that, in making the initial appointments, the
7 Governor shall appoint one member to serve for 1 year, one
8 member to serve for 2 years, and one member to serve for 3
9 years. Any person appointed to fill a vacancy on the board
10 shall be appointed in a like manner and shall serve for only
11 the unexpired term. Any member shall be eligible for
12 reappointment and shall serve until a successor qualifies.
13 Members of the board shall serve without compensation but
14 shall be reimbursed for per diem and travel in accordance with
15 s. 112.061. Each member of the board shall file a full and
16 public disclosure of his or her financial interests pursuant
17 to s. 8, Art. II of the State Constitution and corresponding
18 statute.
19 (c) The board shall have the powers necessary or
20 proper to carry out the provisions of this section, including,
21 but not limited to, the power to:
22 1. Adopt an official seal and rules.
23 2. Sue and be sued.
24 3. Make and execute contracts and other necessary
25 instruments.
26 4. Establish agreements or other transactions with
27 federal, state, and local agencies, including state
28 universities and community colleges.
29 5. Invest funds not required for immediate
30 disbursement.
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1 6. Appear in its own behalf before boards,
2 commissions, or other governmental agencies.
3 7. Hold, buy, and sell any instruments, obligations,
4 securities, and property determined appropriate by the board.
5 8. Require a reasonable length of state residence for
6 qualified beneficiaries.
7 9. Restrict the number of participants in the
8 community college plan, university plan, and dormitory
9 residence plan, respectively. However, any person denied
10 participation solely on the basis of such restriction shall be
11 granted priority for participation during the succeeding year.
12 10. Segregate contributions and payments to the fund
13 into various accounts and funds.
14 11. Contract for necessary goods and services, employ
15 necessary personnel, and engage the services of private
16 consultants, actuaries, managers, legal counsel, and auditors
17 for administrative or technical assistance.
18 12. Solicit and accept gifts, grants, loans, and other
19 aids from any source or participate in any other way in any
20 government program to carry out the purposes of this section.
21 13. Require and collect administrative fees and
22 charges in connection with any transaction and impose
23 reasonable penalties, including default, for delinquent
24 payments or for entering into an advance payment contract on a
25 fraudulent basis.
26 14. Procure insurance against any loss in connection
27 with the property, assets, and activities of the fund or the
28 board.
29 15. Impose reasonable time limits on use of the
30 tuition benefits provided by the program. However, any such
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1 limitation shall be specified within the advance payment
2 contract.
3 16. Delineate the terms and conditions under which
4 payments may be withdrawn from the fund and impose reasonable
5 fees and charges for such withdrawal. Such terms and
6 conditions shall be specified within the advance payment
7 contract.
8 17. Provide for the receipt of contributions in lump
9 sums or installment payments.
10 18. Establish other policies, procedures, and criteria
11 to implement and administer the provisions of this section.
12 19. Require that purchasers of advance payment
13 contracts verify, under oath, any requests for contract
14 conversions, substitutions, transfers, cancellations, refund
15 requests, or contract changes of any nature. Verification
16 shall be accomplished as authorized and provided for in s.
17 92.525(1)(a).
18 20. Adopt procedures to govern contract dispute
19 proceedings between the board and its vendors.
20 Section 7. This act shall take effect upon becoming a
21 law.
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23 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
24 Senate Bill 1332
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26 Deletes all references to law enforcement and service awards.
Makes technical changes to provide supplementary rulemaking
27 authority pursuant to Ch. 120, Florida Statutes, for existing
rules and to correct cross-references relating to bond terms,
28 Local Government Surplus Funds Trust Fund, local government
investment authority, administration of the trust fund, and
29 the Florida Prepaid Postsecondary Education Expense Program.
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