HF4186

Purpose

• The bill allows qualifying local governments, including housing and redevelopment agencies, to use new long-term equity investment authority and expands the types of investments they may make. It aims to broaden how local governments can invest funds in ways that relate to housing development.

Main Provisions

• Amends Minnesota Statutes 2024 section 118A.09 subdivision 2 to add “Additional investment authority.”
• Eligible entities: qualifying governments (including housing and redevelopment agencies) may invest the amount described in subdivision 3.
• New investment categories: 1) Index mutual funds based in the United States that track a broad U.S. equity index. These must be purchased directly through the fund’s main sales office. 2) Shares of a company that meet all of the following:
  • Is registered with the U.S. Securities and Exchange Commission (SEC).
  • Concentrates in investment-grade fixed-income securities.
  • Holds at least 80% of its investments in federally insured or guaranteed securities, including those issued by government-sponsored entities.
  • Has a mission, in part, to provide direct investment in local multifamily housing development or to work with the Minnesota State Board of Investment, subject to terms and minimum amounts set by the board.
• Oversight/terms: The Minnesota State Board of Investment may set terms and minimum investment amounts for these new options.

Significant Changes to Existing Law

• Expands the allowable investment options for qualifying local governments beyond traditional investments to include:
  • US-based index mutual funds tied to broad U.S. equity markets, with direct fund purchases.
  • Investment in certain SEC-registered companies that focus on fixed-income securities, meet insured/guaranteed securities criteria, and have a housing development mission.
• Adds coordination with the Minnesota State Board of Investment for setting terms and minimums, introducing increased state oversight for these investments.

Practical Implications

• Local governments gain additional avenues to invest funds, potentially aligning investments with housing development goals.
• Investment choices now include certain index funds and purpose-driven companies, provided they meet specific criteria and board-approved terms.
• Purchases must follow specific procurement/oversight rules (e.g., direct purchases from fund offices; terms established by the State Board of Investment).

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Relevant Terms - qualifying governments - local government - housing and redevelopment agencies - long-term equity investment authority - Minnesota Statutes 2024 section 118A.09 subdivision 2 - subdivision 3 - index mutual funds - United States, broad market United States equity index - main sales office - United States Securities and Exchange Commission (SEC) - investment grade fixed income securities - federally insured or guaranteed securities - government sponsored entities - local multifamily housing development - Minnesota State Board of Investment - terms and minimum amounts (as adopted by the board)