12-1677b.   Direct investments by cities, counties andschool districts, when; requirements;forfeiture of investment rights, when.(a) The governing body of any city,county or school districtwhich has a written investment policy approved by the governing body of suchcity, county or school districtand such written investment policy is approved bythe pooled money investment board as provided insubsection (b) mayinvest and reinvest pursuant to the approved investment policy in the followinginvestments,as authorized under paragraph (6) of subsection (b) of K.S.A.12-1675, andamendments thereto:

      (1)   Direct obligations of, or obligations that are insured as to principaland interest by, the United States of America or any agency thereof andobligations and securities of United States sponsored enterprises whichunder federal law may be accepted as security for public funds,except that such investments shall not be in mortgage-backed securities;

      (2)   interest-bearing time deposits in any banks, savings and loanassociations and savings banks; or

      (3)   repurchase agreements with banks,savings and loan associations and savings banks,or with aprimary government securities dealer which reports to the market reportsdivision of the federal reserve bank of New York for direct obligations of, orobligations that are insured as to principal and interest by, the United Statesgovernment or any agency thereof and obligations and securities of UnitedStates government sponsored enterprises which under federal law may be acceptedas security for public funds.

      (b)   In approving the investment policy of any city, county orschool district, the pooled money investment board shallrequire that such policyaddresses liquidity, diversification, safety of principal,yield, maturity and quality and capability of investment management staff. Inaddition, the policy shall provide procedures for compliance with subsection(c) of K.S.A. 12-1675, and amendments thereto, and a certification from theinvestment management staff that those procedures have been followed.

      (c)   The investment policy of any city,county or schooldistrict approved by the pooled moneyinvestment board under this section shall be reviewed and approved at leastannually bysuch board or when such city, county or school districtmakes changes in such investment policy.On condition of approving the investment policy, the pooled money investmentboard shall review the policy to assure that it addresses liquidity,diversification, safety of principal, yield, maturity and quality andcapability of investment management staff. In addition, the policy shallprovide procedures for compliance withsubsection (c) of K.S.A. 12-1675, and amendments thereto, a certification fromthe investment management staff that those procedures have been followed and alisting of the banks, savings and loan associations and savings banks fromwhichthe city, county or school district requested bids in the preceding year.

      (d) (1)   All security purchases shall occur on a delivery versus paymentbasis.

      (2)   All securities shall be perfected in the name of the city, county orschool district andshall be delivered to the purchaser or a third party custodian which may be thestate treasurer.

      (3)   Investment transactions shall only be conducted with banks, savings andloanassociations andsavings banks; or with primarygovernment securitiesdealers which report to the market report division of the federal reserve bankof New York;or anybroker-dealer which is registered in compliance with the requirements ofsection 15C of the securities exchange act of 1934 and registered pursuant toK.S.A. 17-12a401, and amendments thereto.

      (4)   The maximum maturity for investments undersubsection (a) shall be four years.

      (e)   Investments in securities under paragraph (1) of subsection (a) shallbe limited to securities which do not have any more interest rate risk than dodirect United States government obligations of similar maturities. For purposesof thissubsection, "interest rate risk" means market value changes due to changes incurrent interest rates.

      (f)   A city, county or school district which violatessubsection(c) or (d) of K.S.A. 12-1675, and amendments thereto, or therules and regulations ofthe pooled money investment board shall forfeit its rights under this sectionfor a two year period and shall be reinstated only after a complete review ofits investment policy as provided for in subsection (b).Such forfeiture shall be determined by the pooled money investment board afternotice and opportunity to be heard in accordance with the Kansas administrativeprocedure act.

      History:   L. 1992, ch. 146, § 2;L. 1993, ch. 207, § 4;L. 1996, ch. 254, § 5;L. 1997, ch. 180, § 17;L. 2004, ch. 154, § 54;L. 2009, ch. 77, § 1; Apr. 23.