Request By:
Mr. Douglas L. Greenburg
Mercer County Attorney
Courthouse, Main Street
Harrodsburg, Kentucky 40330
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
In representing Mercer County, you request an opinion as to what types of investments the fiscal court can make as to surplus funds carried over from previous years. Currently the county has deposits with a local bank and a Savings and Loan Association.
Of course your budgetary demands will dictate whether such investments will be of short or long duration in general.
KRS 386.020 sets forth authorized investments of such "trust" funds. Note that the list includes certificates of deposit and savings accounts of any state or national bank whose deposits are insured by the F.D.I.C. Such investments shall be insured by the Federal Deposit Insurance Corporation and the amount of the investments shall not exceed the limits of insurance of the F.D.I.C.
The list of permissible investments includes United States government securities or United States government agency securities the payment of the principal and interest on which the full faith and credit of the United States is pledged, said investments being made under the terms of a repurchase agreement between the fiscal court and any state or national bank. See also KRS 66.480(2), relating to deposit accounts with banking institutions.
Under KRS 386.030(1)(c) and (2), any county may invest its funds and money in its possession, eligible for investment, in notes or bonds described in KRS 386.030(1)(c). Such notes or bonds are those secured by mortgage or trust deed insured by the secretary of housing and urban development, the federal housing administrator or administrator of veterans' affairs; and any county may invest in debentures issued by the secretary of housing and urban development, the federal housing administrator or administrator of veterans' affairs, and may invest in securities issued by the National Mortgage Associations.
KRS 386.040 authorizes a county to invest its money in notes and bonds secured by mortgage or trust deed insured and debentures issued by the federal housing administrator, debentures issued by National Mortgage Associations, and any electric revenue bonds or other obligations issued by the Tennessee Valley Authority.
In addition to the foregoing, specifically the fiscal court of any county may invest and reinvest county money in the categories of investments set forth in KRS 66.480, which include obligations of the United States and of its agencies and instrumentalities; bonds or certificates of indebtedness of the state of Kentucky and of its agencies and instrumentalities; shares of any savings and loan association insured by an agency of the government of the United States up to the amount insured; interest-bearing deposits in national or state banks chartered in Kentucky and insured by an agency of the government of the United States up to the amount insured, and in larger amounts providing such bank shall pledge as security obligations of the United States government, its agencies and instrumentalities.
As we said above, KRS 66.480(1)(b) permits a county to invest in bonds and certificates of indebtedness of the Commonwealth of Kentucky and its agencies. That would not include the bonds and notes of other counties and municipalities. A county and a city are political subdivisions of the state, not state agencies in the technical sense.
KRS 386.050 authorizes counties to invest its moneys in any bonds or other obligations issued by a housing authority pursuant to the Municipal Housing Commission Act or the Rural Housing Commission Act, and any additional amendments thereto, or issued by any public housing authority or agency in the United States, when such bonds or other obligations are secured by a pledge of annual contributions to be paid by the United States or any agency thereof, or in any electric revenue bonds or other obligations issued by the Tennessee Valley Authority.
Where the special object of a tax has been accomplished, any amount remaining in the special fund shall become a part of the general fund of the county. Where such reverted general fund money remains unexpended and not commingled with other funds, the county may return the money to a special reserve fund for an object similar to that for which the fund was originally accumulated and may invest such money in investments as permitted by statute until such time as it is necessary to expend the fund for such purpose.
Of course, in setting up investment programs, the fiscal court must be sensitive to the time element, in connection with budgetary demands. In other words, the county's debts must be settled within a reasonable time frame and in observing the sanctity of contract. However, within the interstitial time element (when obligations are not required to be paid) the fiscal court must be sensitive to getting the most possible from the county's money.
Keep in mind that the state local finance officer is authorized and directed to assist local government (except school districts) in investing funds that are temporarily in excess of operating needs by explaining investment opportunities and providing technical assistance in investment of idle funds when such help is requested.
In making investments of county money the fiscal court must strictly observe the above statutes concerning the permissible kinds of investments. In addition, the members of fiscal court must keep in mind that the trust is limited by the duties imposed on the trustees, such as good faith, diligence and the like. See Alexander v. Hicks, Ky., 488 S.W.2d 336 (1972).