(1) It is lawful
to invest public funds in any of the following securities:
(a) Any security issued by, fully guaranteed by, or for which the full credit of
the United States treasury is pledged for payment and, notwithstanding paragraph
(a) of subsection (1.3) of this section, inflation indexed securities issued by the
United States treasury. The period from the date of settlement of this type of
security to its maturity date shall be no more than five years unless the governing
body of the public entity authorizes investment for a period in excess of five years.
(b) (I) Any security issued by, fully guaranteed by, or for which the full credit
of the following is pledged for payment: The federal farm credit bank, the federal
land bank, a federal home loan bank, the federal home loan mortgage corporation,
the federal national mortgage association, the export-import bank, the Tennessee
valley authority, the government national mortgage association, the world bank, or
an entity or organization that is not listed in this paragraph (b) but that is created
by, or the creation of which is authorized by, legislation enacted by the United
States congress and that is subject to control by the federal government that is at
least as extensive as that which governs an entity or organization listed in this
paragraph (b). The period from the date of settlement of this type of security to its
maturity date shall be no more than five years unless the governing body of the
public entity authorizes investment for a period in excess of five years.
(II) No subordinated security may be purchased pursuant to this paragraph
(b).
(c) (Deleted by amendment, L. 2006, p. 552, � 3, effective August 7, 2006.)
(d) (I) Any security that is a general obligation of any state of the United
States, the District of Columbia, or any territorial possession of the United States or
of any political subdivision, institution, department, agency, instrumentality, or
authority of any of such governmental entities.
(II) No security may be purchased pursuant to this subsection (1)(d) unless:
(A) At the time of purchase, the security carries at least two credit ratings at
or above A- or A3 or its equivalent from NRSROs if it is a general obligation of this
state or of any political subdivision, institution, department, agency,
instrumentality, or authority of this state or carries at least two credit ratings at or
above AA- or Aa3 or its equivalent from such NRSROs if it is a general obligation
of any other governmental entity listed in subsection (1)(d)(I) of this section;
(B) (Deleted by amendment, L. 2006, p. 552, � 3, effective August 7, 2006.)
(C) The period from the date of settlement of this type of security to its
maturity date or date of optional redemption that has been exercised as of the date
the security is purchased is no more than five years unless the governing body of
the public entity authorizes investment for a period in excess of five years.
(e) (I) Any security that is a revenue obligation of any state of the United
States, the District of Columbia, or any territorial possession of the United States or
of any political subdivision, institution, department, agency, instrumentality, or
authority of any of such governmental entities.
(II) No security may be purchased pursuant to this subsection (1)(e) unless, at
the time of purchase, the security carries at least two credit ratings at or above A-
or A3 or its equivalent from NRSROs if it is a revenue obligation of this state or of
any political subdivision, institution, department, agency, instrumentality, or
authority of this state or carries at least two credit ratings at or above AA- or Aa3
or its equivalent from such NRSROs if it is a revenue obligation of any other
governmental entity listed in subsection (1)(e)(I) of this section.
(III) The period from the date of settlement of this type of security to its
maturity date or date of optional redemption that has been exercised as of the date
the security is purchased shall be no more than five years.
(f) and (g) (Deleted by amendment, L. 2006, p. 552, � 3, effective August 7,
2006.)
(h) Any security of the investing public entity or any certificate of
participation or other security evidencing rights in payments to be made by the
investing public entity under a lease, financed purchase of an asset agreement, or
similar arrangement;
(h.5) Any certificate of participation or other security evidencing rights in
payments to be made by a school district under a lease, financed purchase of an
asset agreement, or similar arrangement if the security, at the time of purchase,
carries at least two credit ratings from NRSROs and is rated at or above A- or A3
or its equivalent by all such organizations that have provided a rating;
(i) Any interest in any local government investment pool organized pursuant
to part 7 of this article;
(j) The purchase of any repurchase agreement concerning any securities
referred to in paragraph (a) or (b) of this subsection (1) that can otherwise be
purchased under this section if all of the conditions of subparagraphs (I) to (VI) of
this paragraph (j) are met:
(I) The securities subject to the repurchase agreement must be marketable.
(II) The title to or a perfected security interest in such securities along with
any necessary transfer documents must be transferred to the investing public
entity or to a custodian acting on behalf of the investing public entity.
(III) Such securities must be actually delivered versus payment to the public
entity's custodian or to a third-party custodian or third-party trustee for
safekeeping on behalf of the public entity.
(IV) The collateral securities of the repurchase agreement must be
collateralized at no less than one hundred two percent and marked to market no
less frequently than weekly.
(V) The securities subject to the repurchase agreement may have a maturity
in excess of five years.
(VI) The period from the date of settlement of a repurchase agreement to its
maturity date shall be no more than five years unless the governing body of the
public entity authorizes investment for a period in excess of five years.
(j.5) Any reverse repurchase agreement concerning any securities referred
to in paragraph (a) or (b) of this subsection (1) that can otherwise be purchased
under this section if all of the conditions of subparagraphs (I) to (VII) of this
paragraph (j.5) are met:
(I) Any necessary transfer documents must be transferred to the investing
public entity.
(II) Cash must be received by the investing public entity or a custodian acting
on behalf of the investing public entity in a deliver versus payment settlement.
(III) The cash received from a reverse repurchase agreement must be
collateralized at no more than one hundred and five percent and marked to market
no less frequently than weekly.
(IV) The repurchase agreement is not greater than ninety days in maturity
from the date of settlement unless the governing body of the public entity
authorizes investment for a period in excess of ninety days.
(V) The counter-party meets the credit conditions of an issuer that would
qualify under paragraph (m) of this subsection (1).
(VI) The value of all securities reversed under this paragraph (j.5) does not
exceed eighty percent of the total deposits and investments of the public entity.
(VII) No securities are purchased with the proceeds of the reverse
repurchase agreement that are greater in maturity than the term of the reverse
repurchase agreement.
(j.7) A securities lending agreement in which the public entity lends
securities in exchange for securities authorized for investment in this section, if all
of the following conditions are met:
(I) Any necessary transfer documents must be transferred to the investing
public entity.
(II) Securities must be received by the investing public entity or a custodian
acting on behalf of the investing public entity in a simultaneous settlement.
(III) The securities received in the securities lending agreement must be no
less than one hundred two percent of the value of the securities lent and marked to
market no less frequently than weekly.
(IV) The counter-party meets the conditions of an issuer specified in
paragraph (m) of this subsection (1).
(V) In the case of a local government, the securities lending agreement shall
be approved and designated by written resolution adopted by a majority vote of the
governing body of the local government, which resolutions shall be recorded in its
minutes.
(k) Any money market fund that is registered as an investment company
under the federal Investment Company Act of 1940, as amended, if, at the time
the investing public entity invests in such fund:
(I) The investment policies of the fund include seeking to maintain a constant
share price;
(II) No sales or load fee is added to the purchase price or deducted from the
redemption price of the investments in the fund and no fee may be charged unless
the governing body of the public entity authorizes such a fee at the time of the
initial purchase;
(III) The fund operates in accordance with rule 2a-7 under the federal
Investment Company Act of 1940, as amended, or any successor regulation under
that act regulating money market funds. The fund must have an investment policy
or objective which seeks to maintain a stable net asset value of one dollar per
share.
(IV) Repealed.
(l) (I) Any guaranteed investment contract, guaranteed interest contract,
annuity contract, or funding agreement if, at the time the contract or agreement is
entered into, the long-term credit rating, financial obligations rating, claims paying
ability rating, or financial strength rating of the party, or of the guarantor of the
party, with whom the public entity enters the contract or agreement is, at the time
of issuance, rated in one of the two highest rating categories by two or more
NRSROs.
(II) (Deleted by amendment, L. 2004, p. 950, � 7, effective May 21, 2004.)
(III) (A) Except as provided in sub-subparagraph (B) of this subparagraph (III),
the contracts or agreements purchased under this paragraph (l) shall not have a
maturity period greater than three years.
(B) Contracts or agreements with a maturity period greater than three years
shall only be purchased with proceeds of the sale of securities of a public entity
and proceeds of certificates of participation or other securities evidencing rights in
payments to be made by a public entity under a lease, financed purchase of an
asset agreement, or other similar arrangement or if purchased by revenues pledged
to the payment of such securities or certificates; except that no contract or
agreement may be purchased pursuant to this subsection (1)(l) with the proceeds of
any of the foregoing that are held in an escrow or otherwise for the purpose of
refunding bonds or other obligations of a public entity.
(m) (I) Any corporate or bank security that is denominated in United States
dollars, that matures within three years from the date of settlement, that at the
time of purchase carries at least two credit ratings from any of the NRSROs, and
that is not rated below:
(A) A1, P1, or F1 or their equivalents by either rating used to fulfill the
requirements of this subparagraph (I) if the security is a money market instrument
such as commercial paper or bankers' acceptance; or
(B) AA- or Aa3 or their equivalents by either rating used to fulfill the
requirements of this subparagraph (I) if the security is any other kind of security.
(C) These rating requirements first apply to the security being purchased
and second, if the security itself is unrated, to the issuer, provided the security
contains no provisions subordinating it from being a senior debt obligation of the
issuer.
(II) At no time shall the book value of a public entity's investment in notes
evidencing a debt pursuant to this paragraph (m) exceed the following:
(A) Fifty percent of the book value of the public entity's investment portfolio
unless the governing body of the public entity authorizes a greater percent of such
book value; or
(B) Five percent of the book value of the public entity's investment portfolio
if the notes are issued by a single corporation or bank unless the governing body of
the public entity authorizes a greater percent of such book value.
(III) No subordinated security may be purchased pursuant to this paragraph
(m). No security issued by a corporation or bank that is not organized and operated
within the United States may be purchased pursuant to this paragraph (m) unless
the governing body of the public entity authorizes investment in such securities.
(IV) As used in this subsection (1)(m), the term bank security includes
negotiable certificates of deposit issued by banks organized and chartered within
the United States. Public entities must consider these bank securities as
investments and not deposits subject to the protections of the Public Deposit
Protection Act, article 10.5 of title 11, or insured by the federal deposit insurance
corporation.
(n) (Deleted by amendment, L. 2006, p. 552, � 3, effective August 7, 2006.)
(1.3) (a) Except as provided in subsections (1)(a) and (1.3)(b) of this section,
public funds must not be invested in any security on which the coupon rate is not
fixed, or a schedule of specific fixed coupon rates is not established, from the time
the security is settled until its maturity date, other than shares in qualified money
market mutual funds, unless the coupon rate is:
(I) Established by reference to the United States dollar London interbank
offer rate of one year or less maturity, the secured overnight financing rate, the
federal funds rate, or other reference rates which are similar to the United States
dollar London interbank offer rate, the secured overnight financing rate, the federal
funds rate, the cost of funds index, or the prime rate as published by the federal
reserve; and
(II) Expressed as a positive value of the referenced index plus or minus a
fixed number of basis points.
(b) A municipal index may be used for the investment of bond or note
accounts from issues with coupons linked to the same index.
(c) For purposes of this section, maturity date means the last possible date,
barring default, that principal can be repaid to the purchaser.
(1.5) Any firm that sells any financial instrument that fails to comply with the
provisions of this section to any public entity in the state of Colorado shall, upon
demand of the public entity through the state treasurer, repurchase such
instruments for the greater of the original purchase principal amount or the original
face value, plus any and all accrued interest, within one business day of the
demand.
(2) Investments made pursuant to this section shall be made in conformance
with the standard set forth in section 15-1-304, C.R.S.
(2.3) Public entities shall adopt criteria designating eligible broker-dealers
for the purchase of term securities, except for bond proceed investments, under
this section.
(2.5) (a) If a public entity invests public moneys through an investment firm
offering for sale corporate stocks, bonds, notes, debentures, or a mutual fund that
contains corporate securities, the investment firm shall disclose, in any research or
other disclosure documents provided in support of the securities being offered, to
the public entity whether the investment firm has an agreement with a for-profit
corporation that is not a government-sponsored enterprise, whose securities are
being offered for sale to the public entity and because of such agreement the
investment firm:
(I) Had received compensation for investment banking services within the
most recent twelve months; or
(II) May receive compensation for investment banking services within the
next three consecutive months.
(b) For the purposes of this subsection (2.5), investment firm means a bank,
brokerage firm, or other financial services firm conducting business within this
state, or any agent thereof.
(3) Nothing in this section is intended to limit:
(a) The power of any public entity to invest any public funds in any security
or other investment permitted to such public entities under any other valid law of
the state; or
(b) The power of any home rule city, city and county, town, or county to
invest any public funds in any security or other investment permitted under the
charter or ordinance of such home rule city, city and county, town, or county; or
(c) The authority of the state board of regents to invest any funds available
to the board in any security or other investment otherwise provided by law.
(3.5) (Deleted by amendment, L. 2006, p. 552, � 3, effective August 7, 2006.)
(4) Nothing in this section is intended to apply to public funds held or
invested as part of any pension plan, full or supplemental retirement plan, or
deferred compensation plan.
(5) Nothing in this section applies to public funds held or invested as part of
any payment or settlement to offset the socioeconomic impacts to a community or
government from the closure of a coal mine or coal power generating station.