This bill would incorporate additional changes to Sections 27000.1 and 53600.5 of the Government Code proposed by SB 1438 to be operative only if this bill and SB 1438 are enacted and this bill is enacted last.

(1) Make a monthly report of transactions to the legislative body.

(2) Make a quarterly report as provided in subdivision (b) of Section 53646.

(b) The county treasurer shall thereafter assume full responsibility for those transactions until the board of supervisors revokes its delegation of authority.

(c) This section shall not limit the county treasurer’s authority pursuant to subdivision (h) of Section 53603 or pursuant to Section 53684.

(b) Except as provided in subdivision (a) of Section 27000.3, a local agency or a person authorized to make investment decisions on behalf of a local agency investing public funds pursuant to this chapter is a trustee and therefore a fiduciary subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.

(c) (1) A local agency purchasing or obtaining any securities prescribed in this article, in a negotiable, bearer, registered, or nonregistered format, shall require delivery of the securities to the local agency, including those purchased for the agency by financial advisers, consultants, or managers using the agency’s funds, by book entry, physical delivery, or by third-party custodial agreement.

(2) The transfer of securities to the counterparty bank’s customer book entry account may be used for book-entry delivery. A counterparty bank’s trust department or separate safekeeping department may be used for the physical delivery of the security if the security is held in the name of the local agency.

(d) Where this article specifies a percentage limitation for a particular category of investment, that percentage is applicable only at the date of purchase.

(e) (1) An investment’s term or remaining maturity shall be measured from the settlement date to final maturity. A security purchased in accordance with this section shall not have a forward settlement date exceeding 45 days from the time of investment.

(2) Where this section does not specify a limitation on the term or remaining maturity at the time of the investment, an investment shall not be made in any security, other than a security underlying a repurchase or reverse repurchase agreement or securities lending agreement authorized by this section, that at the time of the investment has a term remaining to maturity in excess of five years, unless the local agency has granted express authority to make that investment either specifically or as a part of an investment program approved by the local agency no less than three months before the investment.

(f) A local agency and a treasurer or other official of a local agency having legal custody of the moneys shall not invest local agency funds, or funds in the custody of the local agency, in negotiable certificates of deposit issued by a state or federal credit union if a member of the local agency, or a person with investment decisionmaking authority in the administrative office manager’s office, budget office, auditor-controller’s office, or treasurer’s office of the local agency also serves on the board of directors, or any committee appointed by the board of directors, or the credit committee or the supervisory committee of the state or federal credit union issuing the negotiable certificates of deposit.

(g) The base value of a local agency’s pool portfolio shall be that dollar amount obtained by totaling all cash balances placed in the pool by all pool participants, excluding any amounts obtained through selling securities by way of reverse repurchase agreements, securities lending agreements, or other similar borrowing methods.

(h) A local agency may purchase any investment authorized pursuant to Section 53601 or 53601.1, only from one of the following:

(1) Directly from the issuer.

(2) An institution licensed by the state as a broker-dealer, as defined in Section 25004 of the Corporations Code.

(3) A member of a federally regulated securities exchange.

(4) A national or state-chartered bank.

(5) A savings association or federal association.

(6) A brokerage firm designated as a primary government dealer by the Federal Reserve Bank.

(i) (1) A local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing with Section 53630) in inverse floaters, range notes, or mortgage-derived, interest-only strips.

(2) Except as provided in this paragraph, a local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing with Section 53630) in any security that could result in zero-interest accrual if held to maturity.

(A) A local agency may hold prohibited instruments until their maturity dates.

(B) The limitation in this subdivision shall not apply to local agency investments in shares of beneficial interest issued by diversified management companies registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.) that are authorized for investment pursuant to subdivision (l) of Section 53601.

(C) A local agency may invest in securities issued by, or backed by, the United States government that could result in zero- or negative-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates.

(j) (1) Except as provided in paragraph (2), a local agency shall invest only in notes, bonds, bills, certificates of indebtedness, warrants, or registered warrants which are legal investments for savings banks in the state.

(2) Notwithstanding paragraph (1), the board of supervisors of a county may, by a four-fifths vote thereof, invest in notes, warrants, or other evidences of indebtedness of public districts wholly or partly within the county, whether or not such notes, warrants, or other evidences of indebtedness are legal investments for savings banks.

(k) A local agency may make an investment by direct purchase of any issue of eligible securities at their original sale or after they have been issued.

(l) A local agency may sell, or exchange for other eligible securities, and reinvest the proceeds of, the securities purchased.

(m) From time to time, a local agency shall sell the securities in which it has invested so that the proceeds may be applied to the purposes for which the original purchase moneys were placed in the sinking fund or the treasury of the local agency.

(n) Any bonds purchased, which were issued by the purchaser, may be canceled either in satisfaction or sinking fund obligations or otherwise. When canceled, they are no longer outstanding, unless in its discretion the local agency holds them uncanceled. While held uncanceled, the bonds may be resold.

(o) Except as provided in Section 27000.1, the authority of the local agency to invest or to reinvest funds of a local agency, or to sell or exchange securities so purchased, may be delegated for a one-year period by the local agency to the treasurer of the local agency, who shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires, and shall make a monthly report of those transactions to the local agency. Subject to review, the local agency may renew the delegation of authority pursuant to this section each year.

(p) (1) A local agency may deposit for safekeeping with a financial institution set forth in this subdivision, the bonds, notes, bills, debentures, obligations, certificates of indebtedness, warrants, or other evidences of indebtedness in which the moneys of the local agency are invested pursuant to this article or pursuant to other legislative authority. The local agency shall take from that financial institution a receipt for securities so deposited. The authority of the local agency to deposit for safekeeping may be delegated by the local agency to the treasurer of the local agency. The treasurer shall not be responsible for securities delivered to and receipted for by a financial institution until they are withdrawn from the financial institution by the treasurer.

(2) For purposes of this subdivision, “financial institution” includes all of the following:

(A) A savings association or federal association.

(B) A trust company within this state.

(C) A state or national bank located within this state.

(D) The Federal Reserve Bank of San Francisco or any branch thereof within this state.

(E) Any Federal Reserve Bank.

(F) A state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System.

(q) (1) Notwithstanding the provisions of this chapter or any provision of this code, funds held by a local agency pursuant to a written agreement between the agency and employees of the agency to defer a portion of the compensation otherwise receivable by the agency’s employees and pursuant to a plan for such deferral as adopted by the local agency may be invested in the types of investments set forth in subdivision (j) of this section and in Section 53603 and may additionally be invested in corporate stocks, bonds, and securities, mutual funds, savings and loan accounts, credit union accounts, life insurance policies, annuities, mortgages, deeds of trust, or other security interests in real or personal property. This subdivision shall not be construed to permit any type of investment prohibited by the California Constitution.

(2) Deferred compensation funds are public pension or retirement funds for the purposes of Section 17 of Article XVI of the California Constitution.

Sections 1.5 and 2.5 of this bill incorporate amendments to Sections 27000.1 and 53600.5 of the Government Code proposed by both this bill and Senate Bill 1438. Those sections of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2027, (2) each bill amends Sections 27000.1 and 53600.5 of the Government Code, and (3) this bill is enacted after Senate Bill 1438, in which case Sections 1 and 2 of this bill shall not become operative.