Proposal to Expand Municipal Investment Authority Advances

February 22, 2022

The bill would allow limited investment with the State Board of Investment or index mutual funds.

The House Local Government Division considered a bill on Feb. 16 that would extend investment options to cities with credit ratings of at least AA from a national rating organization (e.g. Moody’s, S&P, Fitch).

The expanded options would include certain long-term equity investments, such as index mutual funds and available investments with the State Board of Investment.

The committee approved the bill, HF 3176 (Rep. Mike Freiberg, DFL-Golden Valley) on a vote of 9-0, and sent it to the full House State Government Finance and Elections Committee.

Expanding on a 2017 law

In 2017, the Legislature authorized local governments with populations over 100,000 and those with ratings of AAA to invest up to 15% percent of certain reserves, including unassigned cash, cash equivalents, deposits, and investment, in these equities. The 2017 law was supported, in part, by several counties with long-term “other post employment benefit” liabilities such as retiree health care obligations.

During the 2017 hearings, legislators raised concerns about the risks inherent in holding local government funds in stock market investments when those jurisdictions’ investment time horizons may be uncertain. The new legislation would extend the 2017 authorization to AA-rated jurisdictions.

City official testifies in support

Robbinsdale Mayor Bill Blonigan, who testified in support of the bill, indicated that Robbinsdale has only been able to realize limited return on invested taxpayer funds under current investment restrictions in state law and in the recent low-interest rate environment.

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