A.R.S. tit. 35 ch. 2 — Arizona Revised Statutes Title 35 Chapter 2 — Handling Of Public Funds

35-301. Duties and liabilities of custodian of public monies; violations; classification A public officer or other person, including justices of the peace and constables, who is charged with receiving, safekeeping, transferring or disbursing public monies is guilty of a class 4 felony who: 1. Without authority of law, appropriates the monies or any portion thereof to the person's own use or to the use of another. 2. Knowingly loans the monies or any portion thereof. 3. Knowingly fails to keep the monies in the person's possession until disbursed or paid by authority of law. 4. Without authority of law knowingly deposits the monies or any portion thereof in a bank, or with a banker or other person, except on special deposit for safekeeping. 5. Knowingly keeps a false account or makes a false entry or erasure in an account of or relating to the monies. 6. Alters, falsifies, conceals, destroys or obliterates such an account with an intent to defraud or deceive. 7. Knowingly refuses or omits to pay on demand public monies in the person's custody on presentation of a draft, order or warrant, check or substitute check, or electronic funds transfer voucher drawn on such monies by competent authority. 8. Knowingly omits or refuses to transfer the monies when a transfer is required by law. 9. Knowingly transfers the monies when not authorized or directed by law. 10. Knowingly omits or refuses to pay to an officer or person authorized by law to receive the monies any monies received by the person if a duty is imposed by law to pay the monies. 35-302. Public money defined The phrase "public money" as used in this article includes bonds and evidence of indebtedness, and money belonging to, received or held by, state, county, district, city or town officers in their official capacity. 35-310. Definitions In this article, unless the context otherwise requires: 1. "Eligible depository" means any commercial or savings bank or savings and loan association with its principal place of business in the United States which is insured by the federal deposit insurance corporation or any successor, or any other insuring instrumentality of the United States, in accordance with the applicable law of the United States or credit union which is insured by the national credit union administration. 2. "Operating monies" means those treasury monies the interest from which is paid to the state general fund. 3. "Permanent endowment funds" means those funds or any part of a fund, established by law, to retain trust monies, not wholly expendable by the beneficiary on a current basis. 4. "Treasury monies" means all monies in the treasury of this state or coming lawfully into the possession or custody of the state treasurer. 5. "Trust monies" means treasury monies, other than operating monies, that are entrusted to the state treasurer for preservation and investment. 35-311. State board of investment; membership; powers and duties A. The state board of investment is established consisting of the state treasurer, the director of the department of administration or the director of the department of administration's designee, the director of the department of insurance and financial institutions or the director of the department of insurance and financial institutions' designee and two individuals appointed by the state treasurer, one of whom has verifiable expertise in investment management and one of whom represents a public entity with current deposits in a local government investment pool. The state treasurer is chairperson of the board. The board shall keep an accurate record of its proceedings. A certified copy of the record is prima facie evidence of the matters appearing in the record in any court. A meeting of the board may be called at any time by the chairperson or a majority of the board members. B. The state board of investment shall: 1. Hold regular monthly meetings. 2. Review investments of treasury monies. 3. Serve as trustee of the permanent state land funds and manage the assets of the funds consistent with the requirements of article X, section 7, Constitution of Arizona. 4. Serve as trustee of any endowments established pursuant to section 35-314.03. 5. Serve as trustee of AZ529, Arizona's education savings plan established by title 15, chapter 14, article 7. 6. Serve as trustee of any pension prefunding plan investment accounts established pursuant to section 35-314.04. C. The state treasurer shall furnish to the board of investment at its regular monthly meeting a report of the performance of current investments and a report of the current investments as of the close of business of the preceding month. The state treasurer shall make these reports available for inspection by the public during normal working hours at the office of the state treasurer for a period of time of not less than two years after the date of the report. D. The board of investment may order the state treasurer to sell any of the securities, and any order shall specifically describe the securities and fix the time period during which they are to be sold. Securities so ordered to be sold shall be sold for cash by the state treasurer at the current market price. The state treasurer and the members of the board are not accountable for any loss occasioned by sales of securities at prices lower than their book value. Any loss shall be charged against earnings received from interest or capital gains on the applicable treasury monies. E. The board may establish standards in addition to those established by section 35-317, subsection A for the qualification of agents acting pursuant to section 35-317, subsection B. 35-312. Eligible depositories; collateral A. Any eligible depository that receives an investment or any deposit of treasury monies of more than the amount insured by an instrumentality of the United States shall collateralize those deposits with any of the following: 1. Securities listed in section 35-313, subsection A, paragraphs 1 and 3. 2. State treasurer's warrant notes. 3. The safekeeping receipt of a federal reserve bank or any bank located in a reserve city, or any bank authorized to do business in this state, whose combined capital, surplus and outstanding capital notes and debentures on the date of the safekeeping receipt are $100,000,000 or more, evidencing the deposit therein of any securities or instruments described in this section. A safekeeping receipt does not qualify as security if issued by a bank to secure its own public deposits unless issued directly through its trust department. The safekeeping receipt shall show on its face that it is issued for the account of the state treasurer and shall be delivered to the state treasurer. 4. Letters of credit issued by a federal home loan bank if: (a) The letter of credit has been delivered pursuant to this section or chapter 10, article 1 of this title to the statewide collateral pool administrator. (b) The letter of credit meets the required conditions of: (i) Being irrevocable. (ii) Being issued, presentable and payable at a federal home loan bank in United States dollars. Presentation may be made by the beneficiary submitting the original letter of credit, including any amendments, and the demand in writing, by overnight delivery. (iii) If the letter of credit is for purposes of chapter 10, article 1 of this title, containing a statement that identifies the statewide collateral pool administrator as the beneficiary. (iv) Containing an issue date and a date of expiration. (c) For the purposes of chapter 10, article 1 of this title, the eligible depository, if notified by the statewide collateral pool administrator, may not use new letters of credit issued by a federal home loan bank if that federal home loan bank fails to pay a draw request as provided for in the letters of credit or fails to properly complete a confirmation of the letters of credit. B. The securities, warrants or safekeeping receipt for those items shall be accepted at market value equal to one hundred two percent of the deposit liability to the state treasurer, and, if at any time their market value becomes less than one hundred two percent of the deposit liability to the state treasurer, additional items required to guarantee deposits shall be deposited immediately with the state treasurer by the eligible depository. When items pledged as collateral mature or are called for redemption, the cash received for the item shall be held in place of the items until the eligible depository has obtained a written release or provided substitute securities, instruments or warrants. C. The deposit of securities, warrants or a safekeeping receipt must be such that the eligible depository will promptly pay to the state treasurer monies in its custody on lawful demand and will, when required by law, pay the monies to the state treasurer. D. The securities, warrants or safekeeping receipt of an eligible depository shall be deposited with the state treasurer, and the state treasurer is the custodian of those items. The state treasurer may then deposit with the eligible depository monies then in the state treasurer's possession in accordance with this article. E. Eligible depositories shall report to the state treasurer monthly and on demand the par and market value of any pledged collateral and the total deposits of the state treasurer. 35-313. Investment of trust and treasury monies; loan of securities A. The state treasurer shall invest and reinvest trust and treasury monies in any of the following items: 1. Obligations issued or guaranteed by the United States or any of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities. 2. Repurchase agreements collateralized with securities that are authorized for investment pursuant to state law and that are purchased from authorized counterparties that have adequate capital and liquidity as determined by the state treasurer. 3. Bonds or other evidences of indebtedness of this state or any of the counties or incorporated cities, towns or duly organized school districts. 4. Commercial paper whose issuer is investment grade for short-term obligations by any two nationally recognized statistical rating organizations. 5. Bills of exchange or time drafts known as banker's acceptances that are drawn on and accepted by a commercial bank. 6. Negotiable certificates of deposit issued by a nationally or state-chartered bank or savings and loan association. 7. Bonds, debentures, notes or other evidences of indebtedness that are denominated in United States dollars and that carry an investment grade rating by a nationally recognized bond rating agency. 8. Securities of or any other interests in any open-end or closed-end management type investment company or investment trust, including exchange traded products whose underlying investments are invested in securities allowed by state law, registered under the investment company act of 1940 (54 Stat. 789; 15 United States Code sections 80a-1 through 80a-64), as amended. For any treasurer investment pool that seeks to maintain a constant share price, both of the following apply: (a) The investment company or investment trust takes delivery of the collateral for any repurchase agreement either directly or through an authorized custodian. (b) The investment policy of the investment company or investment trust includes seeking to maintain a constant share price. 9. Certificates of deferred property taxes as provided by section 42-17309. 10. Treasurer's warrant notes issued pursuant to section 35-185.01 or registered warrants of a county issued pursuant to section 11-605, if the yield is equal to or greater than yields on eligible investment instruments of comparable maturities. 11. Shares in the treasurer's local government investment pools pursuant to section 35-326 if investment policies of the pool seek to maintain a constant share price. 12. Shares in the treasurer's long-term local government investment pools, the terms of which are determined by the state board of investment, pursuant to section 35-326.01. 13. Subject to subsection D of this section, state transportation board funding obligations delivered pursuant to section 28-7678. 14. Deposits placed in accordance with the procedures prescribed in section 35-323.01. 15. Institutional common trust funds whose underlying investments are invested in securities allowed by state law. 16. Program funding obligations delivered by the credit enhancement eligibility board pursuant to section 41-5857. B. In case of default or failure to honor a county treasurer's warrant, the state treasurer may withhold the first state shared revenues that would otherwise be distributed to the defaulting county in the amount necessary to honor the note, including accrued interest to and beyond the date of default. C. The state treasurer may contract to loan securities owned by the trust funds and operating monies deposited in the investment pools pursuant to section 35-316, subsection B to the financial or dealer community through one or more of the entities listed in section 35-317, subsection A, or authorized by the board of investment pursuant to section 35-311, subsection E, if the borrower transfers collateral to the state treasurer or acting agent of the state in the form of cash or securities authorized for investment pursuant to state law. Collateral posted in the form of cash shall be in an amount equal to at least one hundred percent of the market value of the loaned securities as agreed. Collateral posted in the form of securities shall be in an amount of at least one hundred two percent of the market value of the loaned securities as established from time to time by the board of investment. The loaned securities shall be valued as to market value daily, and, if necessary, the borrower shall post additional collateral, as agreed, to ensure that the required margin is maintained. The state treasurer may collect from the borrower all dividends, interest, premiums, rights and other distributions to which the lender of securities would otherwise be entitled. The state treasurer may terminate the contract on at least five business days' notice, as agreed, and the borrower may terminate the contract on at least two business days' notice, as agreed. D. The state treasurer shall invest operating monies in state transportation board funding obligations delivered pursuant to section 28-7678 pursuant to the following: 1. The state treasurer shall liquidate investments of operating monies if necessary to invest in state transportation board funding obligations, except that if operating monies in the state general fund fall below an $800,000,000 average over the previous twelve consecutive months, the state treasurer is not required to purchase state transportation board funding obligations pursuant to this subsection. 2. Each series of state transportation board funding obligations shall bear interest at a fixed interest rate equal to the mean bid-ask price of the United States treasury obligation with a maturity date closest to the maturity date of the state transportation board funding obligation as determined by the pricing system used by the state treasurer before the date the state treasurer receives a certificate from the state transportation board that states the board's determination to deliver an obligation to the state treasurer and the anticipated delivery date of the obligation. The delivery date shall be between fifteen and sixty days after the day the state treasurer receives the certificate. 3. The state treasurer shall notify the state transportation board and the director of the department of transportation in writing when the operating monies fall below $400,000,000. If operating monies fall below $200,000,000, the state treasurer may call the investment in the state transportation board funding obligations in $25,000,000 increments up to the amount that the operating monies are below $200,000,000. The state treasurer shall give the state transportation board and the director of the department of transportation at least fifteen days' notice of the call. 35-314. Equity investment of trust and treasury monies; definition A. The state treasurer may invest and reinvest monies in equity securities for any fund for which equity investment is authorized. B. The state treasurer shall exercise prudence, judgment and care under the prevailing circumstances when investing in equity securities and may reduce the portion of equity securities held by any fund in order to avoid a reduction in current return on investments. C. Equity securities that are eligible for purchase are restricted to stocks listed on any national stock exchange or eligible for trading through the United States national association of securities dealers automated quotation system, or successor institutions, except as may be prohibited by general criteria or by a restriction on investment in a specific security adopted pursuant to this section. D. Not more than five per cent of a fund at cost may be invested in equity securities issued by the same institution, agency or corporation, other than securities issued as direct obligations of and fully guaranteed by the United States government or any of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities. E. For the purposes of this section, "equity securities" means shares of stock, certificates of stock or any other evidence of equity interest in a corporation. Equity securities do not include exchange traded products whose underlying investments are fixed income securities that are allowed by state law. 35-314.01. Permanent state land fund monies; investment In addition to the investment authority in section 35-313, the state treasurer may invest and reinvest monies of the state land funds established in sections 37-521 through 37-525 in equity securities pursuant to section 35-314, except that not more than sixty per cent of the monies in each of the funds may be invested in equity securities at any time. The percentage of investment shall be calculated at cost. 35-314.02. Budget stabilization fund monies; investment In addition to the investment authority in section 35-313, the state treasurer may invest and reinvest monies of the budget stabilization fund established in section 35-144 in equity securities pursuant to section 35-314, except that not more than twenty-five per cent of the monies may be invested in equity securities at any time. The percentage of investment shall be calculated at cost. 35-314.03. State, tribal and political subdivision endowment funds; state investment authority A. In addition to the investment authority in section 35-313, the state treasurer may invest and reinvest trust monies of this state, state agencies, political subdivisions and tribal nations in equity securities pursuant to section 35-314 for long-term endowment funds. B. Monies shall not be taken from one endowment fund for deposit in any other endowment fund. C. All monies in these endowment funds shall be invested in safe interest-bearing securities and prudent equity securities consistent with the requirements of section 35-314. D. The earnings, interest, dividends and realized capital gains and losses from investment of each endowment fund shall be credited to that fund. E. The governing body of any political subdivision, public trust or public entity, including tribal nations, by the adoption of a resolution of continuing effect, may authorize and request the state treasurer to invest trust monies into a long-term endowment and set forth the terms of the distributions from such endowment for the governing body pursuant to this section. 35-314.04. Pension prefunding plan investment accounts; state treasurer; investment authority; definitions A. In addition to the investment authority pursuant to section 35-313, the state treasurer may invest and reinvest pension prefunding plan monies in equity securities pursuant to section 35-314 for pension prefunding plan investment accounts. B. All pension prefunding plan monies shall be accounted for separately from all other funds. Monies may not be taken from one investment account for deposit in any other investment account. C. All monies in pension prefunding plan investment accounts shall be invested in safe interest-bearing securities and prudent equity securities consistent with the requirements of section 35-314. D. The earnings, interest, dividends and realized capital gains and losses from the investment of each investment account shall be credited to that investment account. E. Pension prefunding plan monies are for the purpose of allowing employers that provide a defined benefit pension plan to their employees to prefund the employer's required defined benefit pension payments. F. Pension prefunding plan monies are an integral part of this state and of the political subdivisions of this state and perform an essential governmental function. Investments of pension prefunding plan monies are intended to be structured and administered in a manner that results in the tax-exempt status of the pension prefunding plan's income. The state board of investment may adopt rules, policies and procedures as the board deems necessary to ensure that the prefunding plan's income is not subject to federal income tax. G. The governing body of an employer may authorize and request the state treasurer to invest pension prefunding plan monies in a pension prefunding plan investment account and set forth the terms of the distributions from such investment account for the employer pursuant to this section. H. Pension prefunding plan investment accounts established pursuant to this section or any other section in this title and the pension prefunding plan monies in such accounts are separate and apart from the Arizona employers' pension prefunding plan established by title 38, chapter 5, article 7.1 and the assets, receipts, earnings and income of that plan. I. For the purposes of this section: 1. "Defined benefit pension" means: (a) The Arizona state retirement system established by title 38, chapter 5, articles 2 and 2.1. (b) The elected officials' retirement plan established by title 38, chapter 5, article 3. (c) The public safety personnel retirement system established by title 38, chapter 5, article 4. (d) The corrections officer retirement plan established by title 38, chapter 5, article 6. (e) Any defined benefit pension plan established by the governing body of any political subdivision of this state for its employees. 2. "Employer" means an employer as defined in section 38-711, 38-801, 38-842 or 38-881 or any governing body of a political subdivision of this state that has established a defined benefit pension plan for its employees. 3. "Tax-exempt status of pension prefunding plan's income" means that the prefunding plan's income is excluded from gross income for the purposes of the assessment of federal income tax under section 115 of the internal revenue code, intergovernmental immunity or similar grounds. 35-315. Servicing banks; qualifications; proposals; definitions A. Any bank that is eligible to become an eligible depository having a total capital structure of $10,000,000 or more and assets of $100,000,000 or more and that is otherwise in a sound condition is eligible to be the servicing bank for the state. B. The state board of investment shall provide for public notice to the banks qualified to be a servicing bank of the time and place at which servicing proposals will be received. Requests for proposals shall clearly specify all services required to be performed by the servicing bank. The servicing proposal submitted shall be the compensation for which the qualified bank will agree to perform the required services as a servicing bank for the ensuing period of designation as established by the board of investment. The award shall be made for a period of not more than five years and may be paid from state general fund interest earnings according to rules adopted by the board of investment. C. The state treasurer shall receive the servicing proposals in writing. Only those proposals that conform to the specifications set forth in the request for proposals shall be considered. The qualified bank submitting the proposal with the highest value to this state, as determined by the state treasurer and the board of investment, shall be designated as the servicing bank. Designations shall be evidenced by the signing of the final proposal by the state treasurer, the board of investment and the designee bank. The state treasurer may maintain a bank account in conjunction with the servicing bank account, which must always have on deposit a sum of money approximating the average dollar value of daily warrants paid by the bank the previous month. D. The state treasurer may request and qualified banks may submit proposals for any or all of the services required. The state treasurer may specify differing contract periods for any of the services required. E. The state treasurer or servicing bank may terminate a servicing bank contract at any time after sixty days' prior written notice is given. F. In addition to the services required of the servicing bank, the state treasurer shall contract for all other financial services required by any state agency. A state agency shall not contract for financial services except with the written permission of the state treasurer. G. This section does not require the state treasurer to use a servicing bank. H. This section or the specifications set forth in the request for proposals do not require the servicing bank to purchase warrants. I. Deposits and withdrawals of monies shall be made by the state treasurer on the servicing bank. J. A merchant servicer or payment service provider may provide payment processing and gateway services. K. For the purposes of this section: 1. "Financial services" means banking and merchant services provided by a bank, credit union, financial institution, financial services company or financial technology company and includes: (a) Establishing bank accounts. (b) Depository services. (c) Electronic payment services. (d) Providing merchant card equipment. (e) Payment processing and gateway services. 2. "Payment processing and gateway services" means a payment gateway that facilitates a payment transaction by transferring information between a payment portal, including a website, mobile phone or interactive voice response service, and the front-end processor or acquiring bank. 35-316. Investment pools; deduction; state treasurer's operating fund A. The state treasurer may establish and maintain investment pools for the collective investment of trust monies in this state. B. The state treasurer may deposit operating monies in the investment pools and receive into such pools any monies a state agency, county, city or town or any other political subdivision or public entity in this state may supply. When a depositor provides monies, the state treasurer may ask the depositor to specify the date or dates on which the monies will be withdrawn. All investment pools shall be invested by the state treasurer for such periods as will facilitate the highest return on the monies deposited and provide the required liquidity to the depositors. C. The state treasurer shall compute on a monthly basis the rate of earnings on the investment pools for that month, and, except as provided in subsection D of this section, each depositor shall be credited with an amount determined by applying the calculated monthly rate to the principal amount of its deposit balance for the period of the deposit. Interest shall be credited monthly promptly after calculation. D. The state treasurer may deduct monthly a management fee not to exceed six-hundredths of one percent from the rate of earnings calculated pursuant to subsection C of this section on investment pools other than permanent endowment funds for the operating budget appropriated to the state treasurer's office each fiscal year. E. The state treasurer's operating fund is established consisting of monies collected pursuant to subsection D of this section and section 35-326.01. The state treasurer's office shall administer the state treasurer's operating fund. Monies in the fund are subject to legislative appropriation. Any management fees collected in excess of the amount appropriated to the state treasurer's office from the state treasurer's operating fund shall be deposited in the state general fund. 35-317. State treasurer; duties; safekeeping of securities; interest; exemptions; responsibilities A. The state treasurer is responsible for the safekeeping of all securities acquired by him under this article and those for which he is the lawful custodian. Securities may be deposited for safekeeping with any bank eligible to be the state servicing bank pursuant to section 35-315 or any trust company or trust department of any bank qualified to do business in this state. B. The state treasurer may at the expense of the state enter into an agreement with any of those entities listed in subsection A of this section or authorized by section 35-311, subsection E for the safekeeping and handling of securities. The agreement shall be entered into under terms and conditions which secure the proper safeguarding, inventory, withdrawal and handling of the securities and lending of securities to the financial or dealer community pursuant to section 35-313, subsection C. Access to deposits or withdrawals of the securities from any place of deposit selected by the officers shall not be permitted or made except as the terms of the agreement provide. The agreement need not require that securities be physically located in this state, if the securities are represented by safekeeping receipts issued for the account of the state treasurer by a federal reserve bank or any bank located in a reserve city whose combined capital and surplus on the date of the safekeeping receipt are ten million dollars or more. C. The state treasurer shall regularly account for, itemize and inventory according to general public fund accounting practices all securities coming lawfully into his possession. Such practice shall be audited by the auditor general at the time of the regular audit as prescribed by law. D. When securities acquired under this article mature and become due and payable, the state treasurer shall present them for payment according to their terms and collect the monies payable on them. The monies collected shall be treated as treasury monies subject to reinvestment under the appropriate section of this article. E. Interest and appreciation realized on any investment authorized by this article shall be collected by the state treasurer and credited by him in accordance with general public fund accounting practices. F. All interest realized on any investment of treasury monies not otherwise apportioned by law shall be credited to the general fund of this state. G. The investment of treasury monies as provided in this article is exempt from the provisions of section 35-142, subsection B and sections 35-154, 35-181.01, 35-181.02, 35-182 through 35-185, 35-185.01, 35-185.02, 35-186 through 35-192, 35-192.01, 35-192.02, 35-193, 35-193.02 and 41-732. H. The state treasurer is responsible for the safekeeping, management and disbursement of any investment made and any interest received in compliance with this article. 35-318. Investment managers and advisors; treasury monies; investment services account A. The state treasurer may enter into an agreement with investment managers to invest treasury monies or with advisors to recommend investment strategies or tactics for the investment of treasury monies, including legal advisors and software to assist with the analysis, tracking and trading of securities. Qualification and selection of investment managers or advisors pursuant to this section are exempt from title 41, chapter 23 but must be conducted by a process that is substantially equivalent to procedures prescribed by title 41, chapter 23. Managers or advisors who enter into a contract pursuant to this section shall be paid from earnings on investments. A contract established pursuant to this section may be annually renewable but shall be limited to a period of not more than three years. A contract may be cancelled by the treasurer with forty-five days' written notice. B. An agreement established pursuant to subsection A of this section shall require the investment manager to regularly account for, itemize and inventory all securities under management consistent with the requirements of section 35-317, subsections C, D and E and report the findings to the state treasurer at least monthly or on demand. C. The state treasurer shall maintain an investment services account consisting of all monies for payment of contractual financial services authorized by this section. The account shall consist of monies apportioned from the investment earnings of assets under management that are necessary for the payment of current contractual obligations. D. Expenditures for investment management and advisory fees required by contract pursuant to subsection A of this section shall be paid on approval of the state treasurer from the investment services account established by subsection C of this section. 35-321. Definitions In this article, unless the context otherwise requires: 1. "Agency pool participant" means a subdivision or an entity of a subdivision that has monies maintained by the treasurer and that has the authority to draw negotiable instruments on the treasurer or make other disbursements from monies that the treasurer holds for the subdivision or entity. 2. "Board of deposit" means, in the case of a county, the board of supervisors, and in the case of a city or town, the common council. 3. "Capital structure" means the amount of the capital of the eligible depository shown by the latest call statement of condition as defined by rule of the department of insurance and financial institutions for the purpose of administration of this article. 4. "Collecting entity" means the entity from which the treasurer receives general funding including the county for collections performed by a county treasurer, the city for collections performed by a city treasurer or the district for collections performed by a district treasurer. 5. "Eligible depository" means any: (a) Commercial or savings bank or savings and loan association that has either a branch in this state or its principal place of business in this state and that is insured by the federal deposit insurance corporation or its successor or any other insuring instrumentality of the United States according to the applicable federal law. (b) Credit union that is insured by the national credit union administration or its successor. 6. "Involuntary pool participant" means a subdivision that only receives the principal ratio of the monies collected, for which the principal monies are mandated to be distributed on a specific date and for which the interest earned on the monies between the time of collection and other statutory requirements reverts to the general fund of the collecting entity. 7. "Permissible rate of interest" means a rate of interest that an eligible financial institution is permitted to pay by state or federal law or valid state rules or federal regulations. 8. "Public deposit" means public monies deposited in an eligible depository pursuant to this article. 9. "Public monies" includes subdivision monies. 10. "State monies" means all monies in the treasury of this state or coming lawfully into the possession or custody of the state treasurer. 11. "Subdivision" means any county, noncharter city or town. Cities governed by charter have the option of operating under this article. 12. "Subdivision monies" means all monies in the treasury of a subdivision or coming lawfully into the possession or custody of the treasurer. 13. "Treasurer" includes the treasurer or officer exercising the functions of treasurer of any subdivision but excludes the state treasurer. 14. "Trust funds" means those monies entrusted to a public body or official for preservation and investment, as prescribed by the instrument establishing such funds. 35-323. Investment of public monies; bidding; security and other requirements A. The treasurer shall invest and reinvest public monies in securities and deposits with a maximum maturity of five years. All public monies shall be invested in eligible investments. Eligible investments are: 1. Certificates of deposit in eligible depositories. 2. Deposits in one or more federally insured banks or savings and loan associations placed in accordance with the procedures prescribed in section 35-323.01. 3. Interest bearing savings accounts in banks and savings and loan institutions doing business in this state whose accounts are insured by federal deposit insurance for their industry, but only if deposits of more than the insured amount are secured by the eligible depository to the same extent and in the same manner as required under this article. 4. Repurchase agreements with a maximum maturity of one hundred eighty days. 5. The pooled investment funds established by the state treasurer pursuant to section 35-326. 6. Obligations issued or guaranteed by the United States or any of the senior debt of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities. 7. Bonds, notes or other evidences of indebtedness of this state or any of its counties, incorporated cities or towns, school districts or special taxing districts, including registered warrants, substitute checks, and electronic funds transfer vouchers that bear interest pursuant to section 11-635. 8. Bonds, notes or evidences of indebtedness of any county, municipal district, municipal utility or special taxing district of any state that are payable from revenues, earnings or a special tax specifically pledged for the payment of the principal of and interest on the obligations, and for the payment of which a lawful sinking fund or reserve fund has been established and is being maintained, but only if a default in payment on principal or interest on the obligations to be purchased has not occurred within five years after the date of investment, or, if such obligations were issued less than five years before the date of investment, a default in payment of principal or interest has not occurred on the obligations to be purchased or any other obligations of the issuer within five years after the investment. 9. Bonds, notes or evidences of indebtedness issued by any county improvement district or municipal improvement district of any state to finance local improvements authorized by law, if the principal and interest of the obligations are payable from assessments on real property within the improvement district. An investment shall not be made if: (a) The face value of all such obligations, and similar obligations outstanding, exceeds fifty percent of the market value of the real property, and if improvements on which the bonds or the assessments for the payment of principal and interest on the bonds are liens inferior only to the liens for general ad valorem taxes. (b) A default in payment of principal or interest on the obligations to be purchased has occurred within five years after the date of investment, or, if the obligations were issued less than five years before the date of investment, a default in the payment of principal or interest has occurred on the obligations to be purchased or on any other obligation of the issuer within five years after the investment. 10. Commercial paper of prime quality that is rated within the top two ratings by a nationally recognized rating agency. All commercial paper must be issued by corporations organized and doing business in the United States. 11. Bonds, debentures, notes or other evidences of indebtedness that are denominated in United States dollars and that carry at a minimum an "A" or better rating, at the time of purchase, from at least two nationally recognized rating agencies. 12. Negotiable or brokered certificates of deposit issued by a nationally or state-chartered bank or savings and loan association. 13. Securities of or any other interests in any open-end or closed-end management type investment company or investment trust, including exchange traded funds whose underlying investments are invested in securities allowed by state law, registered under the investment company act of 1940 (54 Stat. 789; 15 United States Code sections 80a-1 through 80a-64), as amended. B. Certificates of deposit shall be purchased from the eligible depository bidding the highest permissible rate of interest. Monies over $100,000 may not be awarded at any interest rate less than one hundred three percent of the equivalent bond yield of the offer side of United States treasury bills having a similar term. If the eligible depository offering to pay the highest rate of interest has bid only for a portion of the monies to be awarded, the remainder of the monies shall be awarded to eligible depositories bidding the next highest rates of interest. C. An eligible depository is not eligible to receive total aggregate deposits from this state and all its subdivisions in an amount exceeding twice its capital structure as outlined in the last call of condition of the deputy director of the financial institutions division of the department of insurance and financial institutions. D. If two or more eligible depositories submit bids of an identical rate of interest for all or any portion of the monies to be deposited, the award of the deposit of the monies shall be made to the eligible depository among those submitting identical bids having, at the time of the bid opening, the lowest ratio of total public deposits in relation to its capital structure. E. Each bid that is submitted and not withdrawn before the time specified constitutes an irrevocable offer to pay interest as specified in the bid on the deposit, or portion bid for, and the award of a deposit in accordance with this section obligates the depository to accept the deposit and pay interest as specified in the bid pursuant to which the deposit is awarded. F. The treasurer shall maintain a record of all bids received and shall make available to the board of deposit at its next regularly scheduled meeting a correct list showing the bidders, the bids received and the amount awarded. These records shall be available to the public and shall be kept in the possession of the treasurer for at least two years after the date of the report. G. Any eligible depository, before receiving a deposit of more than the insured amount under this article, shall deliver collateral for the purposes of this subsection equal to at least one hundred two percent of the deposit. The collateral shall be any of the following: 1. A bond executed by a surety company that is approved by the treasury department of the United States and authorized to do business in this state. The bond shall be approved as to form by the legal advisor of the treasurer. 2. Securities or instruments of the following character: (a) United States government or agency obligations. (b) State, county, school district and other district municipal bonds. 3. The safekeeping receipt of a federal reserve bank or any bank located in a reserve city, or any bank authorized to do business in this state, whose combined capital, surplus and outstanding capital notes and debentures on the date of the safekeeping receipt are $10,000,000 or more, evidencing the deposit therein of any securities or instruments described in this section. A safekeeping receipt shall not qualify as security, if issued by a bank to secure its own public deposits, unless issued directly through its trust department. The safekeeping receipt shall show on its face that it is issued for the account of the treasurer and shall be delivered to the treasurer. The safekeeping receipt may provide for the substitution of securities or instruments that qualify under this section with the affirmative act of the treasurer. 4. Letters of credit issued by a federal home loan bank if: (a) The letter of credit has been delivered pursuant to this section or chapter 10, article 1 of this title to the statewide collateral pool administrator. (b) The letter of credit meets the required conditions of: (i) Being irrevocable. (ii) Being issued, presentable and payable at a federal home loan bank in United States dollars. Presentation may be made by the beneficiary submitting the original letter of credit, including any amendments, and the demand in writing, by overnight delivery. (iii) If the letter of credit is for purposes of chapter 10, article 1 of this title, containing a statement that identifies the statewide collateral pool administrator as the beneficiary. (iv) Containing an issue date and a date of expiration. (c) For the purposes of chapter 10, article 1 of this title, the eligible depository, if notified by the statewide collateral pool administrator, is not allowed to use new letters of credit issued by a federal home loan bank if that federal home loan bank fails to pay a draw request as provided for in the letters of credit or fails to properly complete a confirmation of such letters of credit. H. The securities, instruments or safekeeping receipt for the securities and instruments shall be accepted at market value if not above par, and, if at any time their market value becomes less than the deposit liability to that treasurer, additional securities or instruments required to guarantee deposits shall be deposited immediately with the treasurer who made the deposit and deposited by the eligible depository in which the deposit was made. I. The condition of the surety bond, or the deposit of securities, instruments or a safekeeping receipt, must be such that the eligible depository will promptly pay to the parties entitled public monies in its custody, on lawful demand, and will, when required by law, pay the monies to the treasurer making the deposit. J. Notwithstanding the requirements of this section, any institution qualifying as an eligible depository may accept deposits of public monies to the total then authorized insurance of accounts, insured by federal deposit insurance, without depositing a surety bond or securities in lieu of the surety bond. K. An eligible depository shall report monthly to the treasurer the total deposits of that treasurer and the par value and the market value of any pledged collateral securing those deposits. L. When a security or instrument pledged as collateral matures or is called for redemption, the cash received for the security or instrument shall be held in place of the security until the depository has obtained a written release or provided substitute securities or instruments. M. The surety bond, securities, instruments or safekeeping receipt of an eligible depository shall be deposited with the treasurer making the deposit, and the treasurer is the custodian of the bond, securities, instruments or safekeeping receipt. The treasurer may then deposit with the depository public monies then in the treasurer's possession in accordance with this article, but not in an amount of more than the surety bond, securities, instruments or safekeeping receipt deposited, except for federal deposit insurance. N. The following restrictions on investments apply: 1. Public operating fund monies shall not be invested for a maturity of longer than five years. 2. The board of deposit may order the treasurer to sell any of the securities, and any order shall specifically describe the securities and fix the date on which they are to be sold. Securities so ordered to be sold shall be sold for cash by the treasurer on the date fixed in the order, at the then-current market price. The treasurer and the members of the board are not accountable for any loss occasioned by sales of securities at prices lower than their cost. Any loss or expense shall be charged against earnings received from investment of public monies. 3. Investments shall not be made in companies identified pursuant to section 35-392, subsection A, paragraph 1. O. If the total amount of subdivision monies available for deposit at any time is less than the maximum coverage amount of the federal deposit insurance corporation, the subdivision board of deposit shall award the deposit of the monies to an eligible depository in accordance with an ordinance or resolution of the governing body of the subdivision. Deposits of less than the maximum coverage amount of the federal deposit insurance corporation are not subject to the requirements of this chapter. 35-323.01. Investment of government monies in deposits; conditions; definition A. If an investing entity invests in deposits pursuant to this section, the investing entity shall invest those monies in accordance with all of the following conditions: 1. The monies are initially invested through an eligible depository in this state selected by the investing entity. 2. The selected eligible depository arranges for the deposit of the monies in one or more federally insured banks or savings and loan associations wherever located, for the account of the investing entity. 3. The full amount of principal and any accrued interest of each such deposit is insured by the federal deposit insurance corporation. 4. The selected eligible depository acts as custodian for the investing entity with respect to such deposits. 5. On the same date that the investing entity's monies are deposited pursuant to paragraph 2 of this subsection, the selected eligible depository receives an amount of federally insured deposits from customers of other financial institutions equal to or greater than the amount of the monies initially invested by the investing entity through the selected eligible depository. B. Monies invested in accordance with all of the conditions prescribed in this section are not subject to any security or collateral requirements. C. For the purposes of this section, "investing entity" means this state, a political subdivision, the governing body of a municipality or the governing body of a school district. 35-324. Investment of trust funds The treasurer shall invest and reinvest monies of trust funds in: 1. Any securities allowed for the investment of public monies. 2. Fixed income securities of corporations organized and doing business in any state of the United States or the District of Columbia that carry one of the two highest ratings of Moody's investors service and Standard and Poor's rating service or their successors. If only one of these services rates the security, it must carry the highest rating of that service. If a rating change occurs after purchase, it is not mandatory to sell the security. 35-325. Servicing bank of public monies A. Any bank that qualifies to become an eligible depository of the deposits of public monies, that has a total capital structure of ten million dollars or more, resources of one hundred million dollars or more and that is otherwise in a sound condition is eligible to be the servicing bank for the deposits of state and county monies. B. No later than the first Monday in March of each year of award, the county boards of deposit shall in writing notify each of the banks qualified to be a servicing bank of the time and place at which servicing bids will be received. Notification of bids shall clearly specify all services required to be performed by the servicing bank. The servicing bid solicited shall be the sum of dollars for which the qualified bank will agree to perform the required services as a servicing bank for the ensuing period of designation as established by the board of deposit. The award shall be made for an initial period of not more than three years with the option to renew for two years on the mutual consent of the parties and may be paid from general fund interest earnings according to rules adopted by the board of deposit. C. No later than the fourth Monday in April of the year of the award, county boards of deposit shall meet and receive the servicing bids in writing. Only those bids which conform to the specifications set forth in the notification of bids shall be considered. Bids shall be evaluated based on response, price, services, qualifications and other scope of work factors that are detailed in the bid documents. The qualified bank representing the highest rated bid shall be designated as the servicing bank. Designations shall be evidenced by the signing of the notification of bid by the treasurer and the designee bank. D. A treasurer or servicing bank may terminate a servicing bank contract at any time after one hundred eighty days' prior written notice is given. E. This section does not require any treasurer to utilize a servicing bank. F. This section or the specifications set forth in the notification of bids shall not be construed to require the servicing bank to purchase warrants. 35-326. Local government investment pool: definition A. The state treasurer may maintain one or more pooled investment funds for the collective investment of monies in this state. Securities or other instruments in which the monies may be invested are those that are provided for in article 2 of this chapter. B. The state treasurer may deposit state monies in a pooled investment fund and may also receive into a fund monies that are deposited by any political subdivision or public entity in this state or public trust that is legally authorized or required to deposit monies with the state treasurer for investment. When a depositor provides monies to a pooled investment fund, the state treasurer may require the depositor to specify the date or dates on which it will require the monies. The assets of a pooled investment fund shall be invested by the state treasurer for such periods as will facilitate the return of the monies to the depositing entities in accordance with the instructions received at the time of deposit. Earnings shall be credited promptly after calculation. C. The state treasurer shall compute on a monthly basis the rate of earnings on the pooled investment fund for that month, and each depositor shall be credited with an amount determined by applying the calculated monthly rate to the principal amount of its deposit balance for the period of the deposit. Interest shall be credited monthly. D. The governing body of any political subdivision, public trust or public entity, by adopting a resolution of continuing effect, may authorize and request the state treasurer to invest monies for the governing body pursuant to this section. E. For the purposes of this section, "political subdivision" means any governmental entity operating under the authority of this state, including a city, town, county, school district or community college district or any other entity organized under state law. 35-326.01. Long-term local government investment pools; management fees; deposit A. The state treasurer may establish new long-term local government investment pools for trust and treasury monies, cities, towns, tribal governments, counties and political subdivisions of this state. The terms of the investment pools shall be as determined by the state board of investment. B. Monies received by the state treasurer from management fees of the long-term local government investment pools shall be deposited in the state treasurer's operating fund established by section 35-316. 35-327. Treasurer; duties; safekeeping of securities; warrants of financial officers; earnings; exemptions; responsibilities A. In investing trust monies, the responsible financial officer shall draw a warrant, check or electronic funds transfer voucher at the direction of the treasurer, payable from the proper fund to pay for the security purchased. B. A treasurer is responsible for the safekeeping of all securities acquired by the treasurer under this section. Any such securities may be deposited for safekeeping with any trust company that has its principal place of business in this state or that is qualified to do a trust business in this state. C. A treasurer shall regularly account for, itemize and inventory according to general public fund accounting practices all securities coming lawfully into the treasurer's possession. Such practice shall be audited by the auditor general for the counties and by an independent auditor for cities and towns at the time of the regular audit as prescribed by law. D. The treasurer, at the expense of the subdivision and with the approval of the governing board, may enter into an agreement with the trust department of any bank or banks authorized to do a trust business in this state for safekeeping and handling securities of which the treasurer is lawful custodian. The agreement shall be entered into under terms and conditions that secure the proper safeguarding, inventory, withdrawal and handling of the securities. Access to, deposits of or withdrawals of the securities from any place of deposit selected by the officers shall not be permitted or made except as the terms of the agreement provide. The agreement need not require that securities be physically located in this state if the securities are represented by safekeeping receipts issued for the account of the treasurer by a federal reserve bank or any bank located in a reserve city whose combined capital and surplus on the date of the safekeeping receipt is $10,000,000 or more. E. When securities acquired under this section mature and become due and payable, the treasurer shall present them for payment according to their terms and collect the monies payable on them. The monies collected shall be treated as subdivision monies subject to reinvestment or operating needs or trust monies subject to the provisions of the trust. F. The treasurer shall allocate pooled income earnings on a pro rata basis to agency pool participants. Involuntary pool participants shall have the income earnings for their monies deposited in the general fund of the collecting entity. G. As provided in this article, the governing body of any subdivision or of any agency, department, board or commission of this state or of any subdivision, by adopting a resolution of continuing effect, may authorize the treasurer to invest monies collected for the governing body. H. The investment of public monies as provided in this section is exempt from section 35-142, subsection B and sections 35-154, 35-181.01, 35-181.02, 35-182, 35-183, 35-184, 35-185, 35-185.01, 35-185.02, 35-186, 35-187, 35-188, 35-189, 35-190, 35-191, 35-192, 35-192.01, 35-192.02, 35-193, 35-193.02 and 41-732. I. A treasurer is responsible for safekeeping, managing and disbursing any investment made and any interest received in compliance with this article. 35-328. Investment of sinking funds A. All sinking funds of this state, or a county, city, town or school district, or hospital, irrigation or drainage district organized as provided by law may be invested and reinvested by the governing body or officer in charge of the sinking funds. The investment shall be made for the best interests of the state or political subdivision described in this subsection. B. In the absence of specific direction in the bond indenture, the funds may be invested or reinvested in any of the investment securities allowed for trust funds. 35-329. Funds of charter cities The provisions of this