THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY HICKERNELL, AUMENT, BEAR, BOYD, CALTAGIRONE, CLYMER, CUTLER, DENLINGER, FARRY, FLECK, GEIST, GINGRICH, GODSHALL, GROVE, HENNESSEY, HESS, HORNAMAN, MILLARD, MILLER, MURT, ROSS, SCAVELLO AND STERN, FEBRUARY 17, 2011

REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, FEBRUARY 17, 2011  

AN ACT

Amending the act of February 1, 1966 (1965 P.L.1656, No.581),

entitled "An act concerning boroughs, and revising, amending

and consolidating the law relating to boroughs," further

providing for investment of borough funds.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 1316 of the act of February 1, 1966 (1965

P.L.1656, No.581), known as The Borough Code, amended or added

November 2, 1979 (P.L.458, No.94) and December 13, 1982 (P.L.

1145, No.261), is amended to read:

Section 1316.  Investment of Funds.--(a)  Council shall

invest borough funds consistent with sound business practice.

(b)  Council shall provide for an investment program subject

to restrictions contained in this act and in any other

applicable statute and any rules and regulations adopted by

council.

(c)  Authorized types of investments for borough funds shall

be:

(i)  United States Treasury bills.

(ii)  Short-term obligations of the United States Government

or its agencies or instrumentalities.

(iii)  Deposits in savings accounts or time deposits, other

than certificates of deposit, or share accounts of institutions

insured by the Federal Deposit Insurance Corporation or the

Federal Savings and Loan Insurance Corporation or the National

Credit Union Share Insurance Fund or the Pennsylvania Deposit

Insurance Corporation or the Pennsylvania Savings Association

Insurance Corporation to the extent that such accounts are so

insured, and, for any amounts above the insured maximum,

provided that approved collateral as provided by law therefore

shall be pledged by the depository.

(iv)  Obligations of the United States of America or any of

its agencies or instrumentalities backed by the full faith and

credit of the United States of America, the Commonwealth of

Pennsylvania or any of its agencies or instrumentalities backed

by the full faith and credit of the Commonwealth, or of any

political subdivision of the Commonwealth of Pennsylvania or any

of its agencies or instrumentalities backed by the full faith

and credit of the political subdivision.

(v)  Shares of an investment company registered under the

Investment Company Act of 1940, whose shares are registered

under the Securities Act of 1933, provided that the only

investments of that company are in the authorized investments

for borough funds listed in (i) through (iv).

(vi)  Certificates of deposit purchased from institutions

insured by the Federal Deposit Insurance Corporation or the

Federal Savings and Loan Insurance Corporation or the National

Credit Union Share Insurance Fund or the Pennsylvania Deposit

Insurance Corporation or the Pennsylvania Savings Association

Insurance Corporation to the extent that such accounts are so

insured. However, for any amounts above the insured maximum,

such certificates of deposit shall be collateralized by a pledge

or assignment of assets of the institution, and such collateral

may include loans (including interest in pools of loans) secured

by first mortgage liens on real property. Certificates of

deposit purchased from commercial banks shall be limited to an

amount equal to twenty percent of a bank's total capital and

surplus. Certificates of deposit purchased from savings and loan

associations or savings banks shall be limited to an amount

equal to twenty percent of an institution's assets minus

liabilities.

(vii)  Any investment authorized by 20 Pa.C.S. Ch.73 

(relating to fiduciaries investments) shall be an authorized

investment for any pension or retirement fund.

(viii)  Bankers' acceptances issued by domestic banks to

secure international trade transactions, provided that the

bankers' acceptances are guaranteed by the full faith and credit

of the domestic bank and the United States of America importer.

(ix)  Commercial paper and prime commercial paper as defined

in subsection (e), provided that the treasurer shall not, at any

time, have invested in prime commercial paper more than an

aggregate of such total sum as the council shall have

prescribed.

(d)  In making investments of borough funds, council shall

have authority:

(i)  To permit assets pledged as collateral under subsection

(c)(iii), to be pooled in accordance with the act of August 6,

1971 (P.L.281, No.72), entitled "An act standardizing the

procedures for pledges of assets to secure deposits of public

funds with banking institutions pursuant to other laws;

establishing a standard rule for the types, amounts and

valuations of assets eligible to be used as collateral for

deposits of public funds; permitting assets to be pledged

against deposits on a pooled basis; and authorizing the

appointment of custodians to act as pledgees of assets," 

relating to pledges of assets to secure deposits of public

funds.

(ii)  To combine moneys from more than one fund under borough

control for the purchase of a single investment, provided that

each of the funds combined for the purpose shall be accounted

for separately in all respects and that the earnings from the

investment are separately and individually computed and

recorded, and credited to the accounts from which the investment

was purchased.

(iii)  To join with one or more other political subdivisions

and municipal authorities in accordance with [the act of July

12, 1972 (P.L.762, No.180), entitled "An act relating to

intergovernmental cooperation,"] 53 Pa.C.S. Ch. 23 Subch. A 

(relating to intergovernmental cooperation) in the purchase of a

single investment, provided that the requirements of subclause

(ii) on separate accounting of individual funds and separate

computation, recording and crediting of the earnings therefrom

are adhered to.

(e)  As used in this section, "commercial paper" shall mean

unsecured promissory notes issued at a discount from par by any

industrial, common carrier, public utility or finance company

and "prime commercial paper" shall mean notes issued by

corporations whose credit has been approved by a nationally

recognized credit rating service. The treasurer shall have

obtained the following prior to any commitment to purchase

commercial paper:

(i)  A certification or other evidence that the commercial

paper is rated prime by a nationally recognized credit rating

service.

(ii)  A certification or other evidence that the commercial

paper proposed to be delivered is not subordinate to any other

debt of the issuer.

(iii)  A certificate or other evidence that there is no

litigation pending or threatened affecting the commercial paper.

(iv)  A certificate or other evidence that the issuer is not

in default as to the payment of principal and interest upon any

of its outstanding obligations.

(v)  A certificate or other evidence that the issuer was

incorporated within the United States of America, is transacting

business within the United States of America, and has assets of

one billion dollars ($1,000,000,000) or more, or is a wholly

owned subsidiary of a Pennsylvania corporation having assets of

one billion dollars ($1,000,000,000) or more.

Section 2.  This act shall take effect in 60 days.