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A bill to be entitled

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An act relating to local government finance; amending s.

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218.401, F.S.; clarifying purpose and intent; amending s.

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218.403, F.S.; defining the terms "board" and "trustees"

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for purposes of the Investment of Local Government Surplus

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Funds Act; amending s. 218.405, F.S.; providing for the

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administration of the Local Government Surplus Funds Trust

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Fund; providing duties of Trustees of the State Board of

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Administration; amending s. 218.407, F.S.; requiring that

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the board provide a unit of local government with certain

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information before such unit makes a determination that it

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is in the best interest of the local government unit to

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deposit surplus funds in the trust fund; requiring the

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filing of a resolution upon such determination; requiring

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that the resolution contain certain information; requiring

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that the board invest the moneys in the trust fund in a

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certain manner; amending s. 218.409, F.S.; providing

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duties of the board with regard to the administration of

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the trust fund; providing for the establishment of a

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reserve account; requiring monthly allocations to the

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reserve account; limiting the amount of monthly

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allocations; requiring that the board report annually to

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every participant having a beneficial interest in the

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trust fund; providing for the preparation of the report;

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providing that such report is subject to independent

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financial audit; requiring that the board provide a

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monthly statement to beneficiaries; requiring that such

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statement contain certain information; requiring that the

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Investment Advisory Council assist the board in investing

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moneys held in the trust fund; providing duties of the

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council; creating the Pool Participant Advisory Council;

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providing purposes for the council; providing for

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membership and composition of the council; requiring that

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the executive director of the State Board of

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Administration consider appropriate action and advise the

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trustees accordingly under certain circumstances;

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providing duties of the trustees under such circumstances;

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authorizing the trustees to perform certain actions for

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the purpose of ensuring the proper exercise of fiduciary

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responsibility; authorizing the trustees to place assets

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of the trust fund into a liquidating account; providing

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for the maintenance and administration of such liquidating

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accounts; providing powers and duties of trustees with

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regard to assets in a liquidating account; providing for

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distribution of cash received from income or liquidation

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of assets held in a liquidating account; requiring the

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audit of such accounts; authorizing certain reasonable

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expenses to be charged to a liquidating account; excluding

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certain information related to assets held in liquidating

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accounts from certain statements; requiring that separate

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statements be issued for such information; providing for

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the transfer of reserves held in a liquidating account;

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requiring that the status of such accounts be reported

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regularly to the trustees, participants in the fund, the

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Investment Advisory Council, and the Pool Participant

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Advisory Council; providing an effective date.

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Be It Enacted by the Legislature of the State of Florida:

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     Section 1.  Section 218.401, Florida Statutes, is amended to

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read:

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     218.401  Purpose.--It is the intent of this part to promote,

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through state assistance, the maximization of net interest

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earnings on invested surplus funds of local units of government,

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based on the principles of safety and liquidity, with the goal of

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thereby reducing the need for imposing additional taxes.

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     Section 2.  Section 218.403, Florida Statutes, is amended to

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read:

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     218.403  Definitions.--The following words or terms, when

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used in this part, shall have the following meanings:

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     (1) "Board" means the State Board of Administration.

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     (2)(1) "Chief financial officer" means the mayor, manager,

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administrator, clerk, comptroller, treasurer, director of

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finance, or other local government official, regardless of the

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title of his or her office, charged with administering the fiscal

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affairs of a unit of local government.

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     (3)(2) "Current expenses" means expenses to meet known cash

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needs and anticipated cash-flow requirements for the short term.     

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     (4)(3) "Governing body" means the body or board in which

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the legislative power of a unit of local government is vested.

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     (5)(4) "Short term" means a maximum of 6 months of

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operation.

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     (6)(5) "Surplus funds" means any funds in any general or

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special account or fund of a unit of local government, or funds

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held by an independent trustee on behalf of a unit of local

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government, which in reasonable contemplation will not be

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immediately needed for the purposes intended.

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     (7)(6) "Trust fund" means the pooled investment fund

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created by s. 218.405 and known as the Local Government Surplus

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Funds Trust Fund. The term does not include a liquidating account

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created under s. 218.409.

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     (8) "Trustees" means the Trustees of the State Board of

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Administration.

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     (9)(7) "Unit of local government" means any governmental

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entity within the state not part of state government and shall

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include, but not be limited to, the following and the officers

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thereof: any county, municipality, school district, special

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district, clerk of the circuit court, sheriff, property

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appraiser, tax collector, supervisor of elections, authority,

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board, public corporations, or any other political subdivision of

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the state.

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     Section 3.  Section 218.405, Florida Statutes, is amended to

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read:

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     218.405  Local Government Surplus Funds Trust Fund;

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creation.--

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     (1) There is hereby created a Local Government Surplus

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Funds Trust Fund to be administered directly by the board or

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through a professional money management firm selected by the

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State board, of Administration and to be composed of local

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government surplus funds deposited therein by units of local

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government under the procedures established in this part.

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     (2) The trustees shall annually certify to the Joint

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Legislative Auditing Committee that the trust fund is in

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compliance with the requirements of this part and that the

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trustees have conducted a review of the trust fund and determined

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that the management of the trust fund is in accord with best-

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investment practices.

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     (3) The board may adopt rules to administer the provisions

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of this section.

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     Section 4.  Section 218.407, Florida Statutes, is amended to

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read:

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     218.407  Local government investment authority.--

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     (1) Before any determination by the governing body that it

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is in the interest of the unit of local government to deposit

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surplus funds in the trust fund, the board must provide to the

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governing body enrollment materials, including a trust fund

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profile containing impartial educational information describing

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the administration and investment policy of the trust fund

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including, but not limited to:

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     (a) Rights and conditions of participation, including

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potential restrictions on withdrawals.

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     (b) Historical performance, investment holdings, credit

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quality, and average maturity of the trust fund investments.

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     (c) Applicable administrative rules.

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     (d) Rate-determination processes for any deposit or

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withdrawal.

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     (e) Any fees, charges, penalties, and deductions that apply

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to the account.

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     (f) The most recently published financial statements or

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independent audit, if available, prepared according to generally

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accepted accounting principles.

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     (g) The disclosure statement for signature by the

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appropriate local government official.

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     (2) Upon review of the enrollment materials and

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determination by the governing body that it is in the interest of

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the unit of local government to deposit surplus funds in the

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trust fund, a resolution by the governing body and the signed

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acceptance of the disclosure statement by the local government

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official designated in the resolution, who may be the chief

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financial or administrative officer of the local government,

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shall be filed with the State Board of Administration authorizing

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investment of its surplus funds in the trust fund established by

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this part. The resolution shall name:

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     (a)  The local government official, who may be the chief

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financial or administrative officer of the local government who

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is responsible for deposit and withdrawal of such funds., or

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     (b)  An independent trustee holding funds on behalf of the

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unit of local government who is,

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responsible for deposit and withdrawal of such funds.

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     (c) The source and use of the funds to be invested in the

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trust fund and the schedule of distribution, if known.

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     (3)(2) The State board of Administration shall, upon the

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filing of the resolution, invest the moneys in the trust fund in

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the same manner and subject to the same restrictions as are set

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forth in s. 215.47. Except when authorized by the board, All

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units of local government which qualify to be participants in the

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Local Government Surplus Funds Trust Fund shall after January 1,

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1982, will normally have surplus funds deposited into a pooled

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investment account.

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     (4)(3) The provisions of this part shall not impair the

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power of a unit of local government to hold funds in deposit

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accounts with banking or savings institutions or to invest funds

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as otherwise authorized by law.

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     Section 5.  Section 218.409, Florida Statutes, is amended to

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read:

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     218.409  Administration of the trust fund.--

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     (1)  Upon receipt of the resolution from the local governing

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body, the State Board of Administration shall accept all wire

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transfers of funds into the trust fund. The State Board of

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Administration shall also wire-transfer invested local government

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funds to the local government upon request of the local

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government official named in the resolution.

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     (2)  The State Board of Administration shall administer the

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investment trust funds on behalf of the participants and shall

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have the power to invest such funds. A fee may be charged on any

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transaction that is not in accord with the close of business as

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set by the board.

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     (3)  The State Board of Administration may purchase such

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surety or other bonds or borrow funds from others that may be

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secured by the assets held in such trust fund, and give and renew

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notes for such borrowed funds as may be necessary for its

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officials in order to protect the trust fund. A reserve account

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shall fund may be established and maintained through deductions

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from pooled investment earnings in order to protect the trust

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fund from credit-related losses in investments or declare one-

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time dividends to be allocated to participants on an equitable

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basis. Regular monthly allocations to the reserve fund may not

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exceed, on an annualized basis, one-tenth of 1 percent of the

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trust fund's investments until the reserve fund equals 1 percent

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of investments. However, other allocations to the reserve fund

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may be declared by the trustees of the State Board of

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Administration. Any use of the reserve fund must be authorized by

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the trustees to fulfill this purpose.

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     (4) All investments may be purchased jointly for the

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participants in the trust fund. The board shall may also purchase

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investments for a pooled investment account in which all

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participants may share pro rata, as determined by rule of the

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board, in the capital gain, income, or losses, subject to any

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penalties for early withdrawal. The board shall determine the

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rate of return for the pooled investment account. A system may be

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developed by the board to keep current account balance

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information and to apportion pooled investment earnings back to

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individual accounts.

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     (5)  The State Board of Administration shall keep a separate

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account, designated by name and number of each participating

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local government. A maximum number of accounts allowed for each

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participant may be established by the board. Individual

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transactions and totals of all investments, or the share

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belonging to each participant, shall be recorded in the accounts.

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     (6) The State Board of Administration shall report annually

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for the period ending June 30 semiannually or upon request to

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every participant having a beneficial interest in the trust fund.

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The report shall be prepared in accordance with generally

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accepted accounting principals show the changes in investments

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made during the preceding period. Such The report shall be

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subject to annual independent external financial audit delineate,

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in a manner which is in accordance with generally accepted

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governmental accounting procedures, those funds on deposit, the

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manner in which the funds are invested, and the interest earnings

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thereon. The State Board of Administration shall furnish upon

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request the details of an investment transaction to any

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participant. The board shall provide to each participant a

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monthly statement accounting for the contributions made on behalf

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of such participant, the interest and investment earnings

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thereon, the value of the account, and any fees, penalties, or

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other deductions applying thereto. The board shall make available

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ongoing multimedia educational materials and communications

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detailing historical performance, investment holdings, amortized

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cost and market value of the trust fund, credit quality, and

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average maturity of the trust fund investments. Additional

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reporting may be made to pool participants.

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     (7)  Costs incurred in carrying out the provisions of this

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part shall be deducted from the interest earnings accruing to the

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trust fund. Such deductions shall be prorated among the

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participant local governments in the percentage that each

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participant's deposits bear to the total trust fund.

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     (8)(a)  The principal, and any part thereof, of each and

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every account constituting the trust fund shall be subject to

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payment at any time from the moneys in the fund or as otherwise

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provided in this section by agreement between the State Board of

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Administration and the investing unit.

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     (b)  An order or warrant may not be issued upon any account

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for a larger amount than the share of the particular account to

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which it applies; and if such order or warrant is issued, the

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responsible official shall be personally liable under his or her

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bond for the entire overdraft resulting from the payment if made.

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     (9) The Investment Advisory Council, as created pursuant to

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s. 215.444, shall assist the board in investing moneys held in

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the trust fund. The council shall regularly review the investment

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status and performance of the trust fund, including credit

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quality, liquidity and cash flow, risk management, investment

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policy guidelines, compliance exceptions, and any other policies,

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procedures, or activities that the council deems relevant. Before

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presenting the investment policy guidelines or any recommended

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changes thereto to the Trustees of the State Board of

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Administration for approval, the executive director of the board

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shall present such guidelines or changes to the council for

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review. The council shall present the results of its review to

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the trustees before the board's final approval of the guidelines

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or any changes thereto.

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     (10) There is created a six-member Pool Participant

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Advisory Council for the purposes of regularly reviewing the

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administration of the trust fund and making recommendations

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regarding such administration to the trustees. The members of the

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council shall be appointed by the board and subject to

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confirmation by the Senate. Members must possess special

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knowledge, experience, and familiarity obtained through active,

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long-standing, and material participation in the dealings of the

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trust fund. Each member shall serve a 4-year term. Any vacancy

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shall be filled for the remainder of the unexpired term. The

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council shall annually elect a chair and vice chair from within

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its membership. A member may not serve consecutive terms as chair

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or vice chair.

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     (11) If at the close of any 2 consecutive business days the

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ratio of the trust fund's market value to amortized cost is below

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.995 or above 1.005, or during a major market disruption causing

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a suspension of trading, or if liquidity is impaired, the

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executive director of the board shall promptly consider what

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action, if any, shall be initiated, and advise the trustees of

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the State Board of Administration accordingly. If the trustees

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believe the extent of any deviation from the trust fund's

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amortized cost price per share may result in material dilution or

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other unfair results to participants, the trustees shall take

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such action as they deem appropriate to eliminate or reduce, to

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the extent reasonably practicable, such dilution or unfair

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results. In order to ensure the proper exercise of fiduciary

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responsibility, the trustees may:

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     (a) Limit contributions to the trust fund or withdrawals

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from the trust fund;

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     (b) Impose early redemption fees; and

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     (c) Create a liquidating account under subsection (12).

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     (12) At any time and at their discretion, the trustees may

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segregate and place any assets of the trust fund, including any

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reserve fund proceeds established in the trust fund, in a

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liquidating account to be held and disposed of in accordance with

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this subsection.

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     (a) Each liquidating account established by the segregation

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of an asset of the trust fund pursuant to this paragraph shall be

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maintained and administered solely for the benefit of, and the

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proceeds thereof shall be distributed ratably to, all

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participants in the trust fund at the time such assets are set

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apart in such liquidating account, except as set forth below with

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respect to reserves. The trustees shall have, with respect to any

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such assets held in any such liquidating account or any

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investment received in exchange for such assets, the same power

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and authority as set forth in this section. The trustees shall

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liquidate the investments held in any liquidating account if such

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liquidation is in the best interests of the participants.

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     (b) Additional money or future interest earnings from the

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trust fund may not be invested in a liquidating account.

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     (c) Distributions of cash received from income or

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liquidation of any asset held in a liquidating account shall be

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made at such intervals as the trustees deem appropriate, but not

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less frequently than monthly. All such distributions as of any

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one time shall be made ratably and on the same basis among the

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participants' beneficial interest in such liquidating account.

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     (d) Each liquidating account shall be audited in the manner

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provided in subsection (6).

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     (e) All reasonable expenses incurred in the administration

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of a liquidating account which would be chargeable to the

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respective trust fund from which the asset held in such

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liquidating account was segregated if incurred in the

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administration of such trust fund may be charged to such

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liquidating account.

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     (f) For the purpose of deposits to and withdrawals from the

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trust fund, as well as determining the value of the units of the

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trust fund and the income, gains, or losses of the trust fund

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allocated among participants pursuant to this section, the value,

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income, gains, or losses of any assets held in any liquidating

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account shall be excluded, and separate financial statements

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shall be prepared to reflect such for purposes of state and local

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government financial reporting. Any reserves held in a

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liquidating account may be transferred by the trustees at their

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sole discretion back to the trust fund from which the assets were

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originally segregated, to the extent that participants are

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returned their original principal amount in the liquidating

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account as such amount existed at the time of segregation.

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Regular reports regarding the status of a liquidating account

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shall be provided to the trustees, participants, Investment

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Advisory Council, and Pool Participant Advisory Council.

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     Section 6.  This act shall take effect upon becoming a law.