§2955. Investments by political subdivisions
A.(1) All municipalities, parishes, school boards, and any other political subdivisions
of the state are hereby authorized and directed to invest such monies in any general fund or
special fund of the political subdivision, and any other funds under the control of the political
subdivision which they, in their discretion, may determine to be available for investment in
any of the following obligations:
(a) Direct United States Treasury obligations, the principal and interest of which are
fully guaranteed by the government of the United States.
(b)(i) Bonds, debentures, notes, or other evidence of indebtedness issued or
guaranteed by federal agencies and provided such obligations are backed by the full faith and
credit of the United States of America, which obligations include but are not limited to:
(aa) U.S. Export-Import Bank.
(bb) Farmers Home Administration.
(cc) Federal Financing Bank.
(dd) Federal Housing Administration Debentures.
(ee) General Services Administration.
(ff) Government National Mortgage Association - guaranteed mortgage-backed
bonds and guaranteed pass-through obligations.
(gg) U.S. Maritime Administration - guaranteed Title XI financing.
(hh) U.S. Department of Housing and Urban Development.
(ii) Bonds, debentures, notes, or other evidence of indebtedness issued or guaranteed
by U.S. government instrumentalities, which are federally sponsored, and such obligations
include but are not limited to:
(aa) Federal Home Loan Bank System.
(bb) Federal Home Loan Mortgage Corporation.
(cc) Federal National Mortgage Association.
(dd) Student Loan Marketing Association.
(ee) Resolution Funding Corporation.
(iii) Notwithstanding the foregoing list of investments, in no instance shall a political
subdivision invest in obligations described in Items (i) and (ii) of this Subparagraph which
are collateralized mortgage obligations that have been stripped into interest only or principal
only obligations, inverse floaters, or structured notes. For the purposes of this Item
"structured notes" shall mean securities of U.S. government agencies, instrumentalities, or
government-sponsored enterprises which have been restructured, modified, and/or reissued
by private entities.
(c) Direct security repurchase agreements of any federal book entry only securities
enumerated in Subparagraphs (a) and (b). "Direct security repurchase agreement" means an
agreement under which the political subdivision buys, holds for a specified time, and then
sells back those securities and obligations enumerated in Subparagraphs (a) and (b).
(d)(i) Time certificates of deposit of any bank domiciled or having a branch office
in the state of Louisiana, savings accounts or shares of savings and loan associations and
savings banks, as defined by R.S. 6:703(16) or (17), or share accounts and share certificate
accounts of federally or state-chartered credit unions issuing time certificates of deposit. For
those funds made available for investment in time certificates of deposit, the rate of interest
paid by the banks shall be established by contract between the bank and the political
subdivision; however, the interest rate at the time of investment shall be a rate not less than
fifty basis points below the prevailing market interest rate on direct obligations of the United
States Treasury with a similar length of maturity.
(ii) Notwithstanding any other provision of law to the contrary, the Southeast Water
District Number Two of Vermilion Parish shall be entitled to a rate of interest on funds made
available for investment in time certificates of deposits at a rate of not less than fifty basis
points below the prevailing market interest rate on direct obligations of the United States
Treasury with a similar length of maturity or the prevailing rate of interest on time
certificates of deposit that is offered by the bank to its other customers, whichever is greater.
(e) Mutual or trust fund institutions which are registered with the Securities and
Exchange Commission under the Securities Act of 1933 and the Investment Act of 1940, and
which have underlying investments consisting solely of and limited to securities of the
United States government or its agencies.
(f) Funds invested in accordance with the provisions of R.S. 33:2955(A)(1)(d) shall
not exceed at any time the amount insured by the Federal Deposit Insurance Corporation in
any one banking institution, or in any one savings and loan association, or National Credit
Union Administration, unless the uninsured portion is collateralized by the pledge of
securities in the manner provided in R.S. 39:1221.
(g) Guaranteed investment contracts issued by a bank, financial institution, insurance
company, or other entity having one of the two highest short-term rating categories of either
Standard & Poor's Corporation or Moody's Investors Service, provided that no such
investment may be made except in connection with a financing program for political
subdivisions which financing program is approved by the State Bond Commission and
offered by a public trust having the state as its beneficiary, provided further that no such
investment shall be for a term longer than eighteen months, and provided further that any
such guaranteed investment contract shall contain a provision providing that in the event the
issuer of the guaranteed investment contract is at any time no longer rated in either of the two
highest short-term rating categories of Standard & Poor's Corporation or Moody's Investors
Service, the investing unit of local government may either be released from the guaranteed
investment contract without penalty, or be entitled to require that the guaranteed investment
provider collateralize the guaranteed investment contract with any bonds or other obligations
which as to principal and interest constitute direct general obligations of, or are
unconditionally guaranteed by, the United States of America, including obligations set forth
in Subparagraphs (a) and (b) to the extent unconditionally guaranteed by the United States
of America.
(h) Investment grade commercial paper issued in the United States, traded in the
United States markets, denominated in United States dollars, with a short-term rating of at
least A-1 by Standard & Poor's Financial Services LLC or P-1 by Moody's Investor Service,
Inc. or the equivalent rating by a Nationally Recognized Statistical Rating Organization
(NRSRO).
(i) In a BIDCO, as authorized by R.S. 51:2395.1.
(j) Bonds, debentures, notes, or other evidence of indebtedness issued by the state
of Louisiana or any of its political subdivisions provided that all of the following conditions
are met:
(i) No political subdivision may purchase its own indebtedness.
(ii) The indebtedness shall have a long-term rating of Baa3 or higher by Moody's
Investors Service, a long-term rating of BBB- or higher by Standard & Poor's or a long-term
rating of BBB- or higher by Fitch, Inc. or a short-term rating of M1G1 or VM1G1 by
Moody's Investors Service, a short-term rating of A-1 or A-1+ by Standard & Poor's, or a
short-term rating of F1 or F1+ by Fitch, Inc.
(iii) The indebtedness has a final maturity, mandatory tender, or a continuing
optional tender of no more than five years, except that such five-year limitation shall not
apply to either of the following:
(aa) Funds held by a trustee, escrow agent, paying agent, or other third party
custodian in connection with a bond issue.
(bb) Investment of funds held by either a hospital service district, a governmental
501(c)(3), or a public trust authority.
(k) Bonds, debentures, notes, or other indebtedness issued by a state of the United
States of America other than Louisiana or any such state's political subdivisions provided that
all of the following conditions are met:
(i) The indebtedness shall have a long-term rating of A3 or higher by Moody's
Investors Service, a long-term rating of A- or higher by Standard & Poor's or a long-term
rating of A- or higher by Fitch, Inc., or a short-term rating of M1G1 or VM1G1 by Moody's
Investors Service, a short-term rating of A-1 or A-1+ by Standard & Poor's, or a short-term
rating of F1 or F1+ by Fitch, Inc.
(ii) The indebtedness has a final maturity, mandatory tender, or a continuing optional
tender of no more than five years, except that such five-year limitation shall not apply to
funds held by a trustee, escrow agent, paying agent, or other third-party custodian in
connection with a bond issue nor to investment of funds held by either a hospital service
district, a governmental 501(c)(3) organization, or a public trust authority.
(iii) Prior to purchase of any such indebtedness and at all times during which such
indebtedness is owned, the purchasing Louisiana political subdivision retains the services of
an investment advisor registered with the United States Securities and Exchange
Commission; a trust department of an institution that is insured by the Federal Deposit
Insurance Corporation, that exercises trust powers in Louisiana, and that has a main office
or a bank branch in Louisiana; or a trust company that has offices in Louisiana, that is
regulated by the Office of Financial Institutions or the applicable federal agency, and that
owes a fiduciary duty to act solely in the best interest of the political subdivision.
(l) Bonds, debentures, notes, or other indebtedness issued by domestic United States
corporations provided that all of the following conditions are met:
(i) The indebtedness shall have a long-term rating of Aa3 or higher by Moody's
Investors Service, a long-term rating of AA- or higher by Standard & Poor's, or a long-term
rating of AA- or higher by Fitch Ratings, Inc.
(ii) The indebtedness has a final maturity, mandatory tender, or a continuing optional
tender of no more than five years.
(iii) Prior to purchase of any such indebtedness and at all times during which such
indebtedness is owned, the purchasing Louisiana political subdivision retains the services of
an investment advisor registered with the United States Securities and Exchange
Commission; a trust department of an institution that is insured by the Federal Deposit
Insurance Corporation, that exercises trust powers in Louisiana, and that has a main office
or a bank branch in Louisiana; or a trust company that has offices in Louisiana, that is
regulated by the Office of Financial Institutions or the applicable federal agency, and that
owes a fiduciary duty to act solely in the best interest of the political subdivision.
(2) Investment of funds in such mutual or trust fund institutions shall be limited to
twenty-five percent of the monies considered available for investment as provided by this
Section. In no event shall monies be considered available for investment under the authority
of this Section unless and until such funds are determined by the treasurer or chief financial
officer of said subdivisions, in the exercise of prudent judgment, to be in excess of the
immediate cash requirements of the fund to which the monies are credited. As a criteria in
making such a determination, any amount of money exceeding ten thousand dollars which
is on demand deposit to the credit of a subdivision, or to the credit of any fund and which is
not required to meet an obligation for at least forty-five days, or any amount of money
exceeding one hundred thousand dollars which is on demand to the credit of a subdivision
or to the credit of any fund and which is not required to meet an obligation for at least fifteen
days shall be construed available for investment.
(3) Nothing in this Section shall be construed as to abrogate, impair, or supersede
the ability of a subdivision from combining monies from several funds in order to invest such
monies at a better rate of return.
B. The interest earned on bonds, notes or certificates, time certificates of deposit, or
mutual or trust fund investments, so purchased shall be credited by the respective subdivision
to the fund from which the bonds, notes or certificates, time certificates of deposit, or mutual
or trust fund investments, were acquired, or it may be applied to the payment of the principal
and interest of the outstanding bonded indebtedness of the respective subdivision.
C. At any time that may be deemed advisable the subdivision may cash and liquidate
any of the investments authorized herein which are purchased for any particular fund. The
proceeds of any such liquidation shall be credited to the fund from which the authorized
investments were originally purchased.
D. All political subdivisions of the state, as that term is defined in Article VI, Section
44 of the Constitution of Louisiana, shall develop and adopt an investment policy that details
and clarifies investment objectives and the procedures and constraints necessary to reach
those objectives. All such investment policies should:
(1) Reflect the mandate to manage public funds prudently.
(2) Place appropriate emphasis on the goals of safety of principal first, liquidity
second, and yield third.
(3) Establish internal controls for any derivatives in use to ensure that the risks
inherent in derivatives are adequately managed. For the purposes of this Section, the term
"derivative" shall be defined to mean any financial instrument created from or whose value
depends on the value of one or more underlying assets or indexes of asset value.
E. After August 15, 1995, the investment of monies by a municipality, parish, school
board, or other political subdivision of the state in violation of the provision of this Section
shall constitute an intentional performance of a duty in an unlawful manner and may be
prosecuted pursuant to R.S. 14:134.