AN ACT Relating to local government; amending RCW 56.16.160 and 57.20.160; adding a new chapter to Title 43 RCW; adding a new section to chapter 36.29 RCW; and making an appropriation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The purpose of this chapter is to enable political subdivisions to participate with the state in providing maximum opportunities for the investment of surplus public funds consistent with the safety and protection of such funds. The legislature finds and declares that the public interest is found in providing maximum prudent investment of surplus funds, thereby reducing the need for additional taxation. The legislature also recognizes that not all political subdivisions are able to maximize the return on their temporary surplus funds. The legislature therefore provides in this chapter a mechanism whereby political subdivisions may, at their option, utilize the resources of the state treasurer's office to maximize the potential of surplus funds while ensuring the safety of public funds.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section shall apply throughout this chapter.

(1) "Public funds investment account" or "investment pool" means the aggregate of all funds from political subdivisions that are placed in the custody of the state treasurer for investment and reinvestment.

(2) "Political subdivision" means any county, city, town, municipal corporation, political subdivision, or special purpose taxing district in the state.

(3) "Local government official" means any officer or employee of a political subdivision who has been designated by statute or by local charter, ordinance, or resolution as the officer having the authority to invest the funds of the political subdivision. However, the county treasurer shall be deemed the only local government official for all political subdivisions for which the county treasurer has exclusive statutory authority to invest the funds thereof.

(4) "Funds" means public funds under the control of or in the custody of any local government official by virtue of the official's authority that are not immediately required to meet current demands.

NEW SECTION. Sec. 3. There is created a trust fund in the state treasury to be known as the public funds investment account. All moneys remitted by local government officials under this chapter shall be deposited in this account. The earnings on any balances in the public funds investment account shall be credited to the public funds investment account, notwithstanding RCW 43.84.090.

NEW SECTION. Sec. 4. If authorized by local ordinance or resolution, a local government official may place funds into the public funds investment account for investment and reinvestment by the state treasurer in those securities and investments set forth in RCW 43.84.080 and chapter 39.58 RCW. The state treasurer shall invest the funds in such manner as to effectively maximize the yield to the investment pool. In investing and reinvesting moneys in the public funds investment account and in acquiring, retaining, managing, and disposing of investments of the investment pool, there shall be exercised the judgment and care under the circumstances then prevailing which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of the funds considering the probable income as well as the probable safety of the capital.

NEW SECTION. Sec. 5. The state treasurer's office is authorized to employ such personnel as are necessary to administer the public funds investment account. The bond of the state treasurer as required by law shall be made to include the faithful performance of all functions relating to the investment pool.

NEW SECTION. Sec. 6. The state treasurer shall by rule prescribe the time periods for investments in the investment pool and the procedure for withdrawal of funds from the investment pool. The state treasurer shall promulgate such other rules as are deemed necessary for the efficient operation of the investment pool. The rules shall also provide for the administrative expenses of the investment pool, including repayment of the initial administrative costs financed out of the appropriation included in this act, to be paid from the pool's earnings and for the interest earnings in excess of the expenses to be credited or paid to the political subdivisions participating in the pool. The state treasurer may deduct the amounts necessary to reimburse the treasurer's office for the actual expenses the office incurs and to repay any funds appropriated and expended for the initial administrative costs of the pool. Any credits or payments to political subdivisions shall be calculated and made in a manner which equitably reflects the differing amounts of the political subdivisions' respective deposits in the investment pool fund and the differing periods of time for which the amounts were placed in the investment pool: PROVIDED, That the appropriated start-up costs of the pool must be repaid by June 30,1989.

NEW SECTION. Sec. 7. The state treasurer shall keep a separate account for each political subdivision having funds in the investment pool. Each separate account shall record the individual amounts deposited in the investment pool, the date of withdrawals, and the earnings credited or paid to the political subdivision. The state treasurer shall report monthly the status of the respective account to each local government official having funds in the pool during the previous month.

NEW SECTION. Sec. 8. At the end of each fiscal year, the state treasurer shall submit to the governor, the state auditor, and the legislative budget committee a summary of the activity of the investment pool. The summary shall indicate the quantity of funds deposited; the earnings of the pool; the investments purchased, sold, or exchanged; the administrative expenses of the investment pool; and such other information as the state treasurer deems relevant.

NEW SECTION. Sec. 9. The state finance committee shall administer this chapter and adopt appropriate rules.

NEW SECTION. Sec. 10. Local governments may not invest in repurchase agreements, nor have their money invested in repurchase agreements, unless the local government or its agent takes possession of the securities to be repurchased, or a third party holds the securities in trust for the local government.

NEW SECTION. Sec. 11. A new section is added to chapter 36.29 RCW to read as follows:

Upon the request of one or several units of local government that invest their money with the county under the provisions of RCW 36.29.020, the treasurer of that county may combine those units' moneys for the purposes of investment.

Sec. 12. Section 15, chapter 103, Laws of 1959 as last amended by section 21, chapter 66, Laws of 1983 and RCW 56.16.160 are each amended to read as follows:

Whenever there shall have accumulated in any general or special fund of a sewer district moneys, the disbursement of which is not yet due, the board of commissioners may, by resolution, authorize the county treasurer to deposit or invest such moneys in qualified public depositaries, or to invest such moneys in ((~~direct obligations of the United States government~~)) any investment permitted at any time by RCW 36.29.020: PROVIDED, That the county treasurer may refuse to invest any district moneys the disbursement of which will be required during the period of investment to meet outstanding obligations of the district.

Sec. 13. Section 16, chapter 108, Laws of 1959 as last amended by section 22, chapter 66, Laws of 1983 and RCW 57.20.160 are each amended to read as follows:

Whenever there shall have accumulated in any general or special fund of a water district moneys, the disbursement of which is not yet due, the board of water commissioners may, by resolution, authorize the county treasurer to deposit or invest such moneys in qualified public depositaries, or to invest such moneys in ((~~direct obligations of the United States government~~)) any investment permitted at any time by RCW 36.29.020: PROVIDED, That the county treasurer may refuse to invest any district moneys the disbursement of which will be required during the period of investment to meet outstanding obligations of the district.

NEW SECTION. Sec. 14. There is hereby appropriated for the biennium ending June 30, 1987, to the state treasurer from the state treasurer's service fund the sum of one hundred thousand dollars, or so much thereof as may be necessary, to defray the initial administrative costs of the public funds investment account. On or before June 30, 1991, the state treasurer's service fund shall be reimbursed for the amount of such money expended by the state treasurer to defray these initial administrative costs by transferring such money from the public funds investment account to the state treasurer's service fund.

NEW SECTION. Sec. 15. Sections 1 through 10 of this act shall constitute a new chapter in Title 43 RCW.