An Act To Clarify the Financial Authority of Sewer and Sanitary Districts
Maine Legislature, Session 128, LD 0759
Committee Amendment CA_A_H343 (House)
Amends: 38 MRSA §1055, 38 MRSA §1164

COMMITTEE AMENDMENT "A " to H.P. 539, L.D. 759, Bill, "An Act To 
Clarify the Financial Authority of Sewer and Sanitary Districts" 
Amend the bill by striking out all of sections 5 and 6 and inserting the following: 
'Sec. 5. 38 MRSA §1055, as enacted by PL 2013, c. 555, §6, is amended to read: 
§1055. Investments 
A sewer district may invest its funds, including sinking funds, reserve funds and trust 
funds, to the e1ttent that the term of any instrument creating the funds does not prohibit 
the investment, in shares of an investment company registered UE:der the federal 
Investment Company Act of 1940, whose shares a.re registered under the United States 
Securities Act of 1933, only if the investments of the iE:vestment company a.re limited to 
obliga.tioE:s of the United States or a.ay ageaey or iastrumentali-ty, corporate or otherwise, 
of the United States or repurehase agreements secured by obligatioE:s of the United States 
or Elfij' a.geE:Sj' or instrumentality, corporate or othervt'ise, of the UE:ited States in 
accordance with this section. This section is in addition to, and not in limitation of, any 
power of a sewer district to invest its funds. 
1. Deposit or investment of funds. A sewer district may invest all district funds, 
including reserve funds and trust funds, if the terms of the instrument, order or article 
creating the fund do not prohibit the investment, as follows: 
A. In accounts or deposits of institutions insured by the Federal Deposit Insurance 
Corporation, the National Credit Union Share Insurance Fund or the successors to 
these federal programs. 
(1) Accounts and deposits exceeding an amount equal to 25% of the capital, 
surplus and undivided profits of any trust company or national bank or a sum 
exceeding an amount equal to 25% of the reserve fund and undivided profit 
account of a mutual savings bank or state or federal savings and loan association 
on deposit at any one time must be secured by the pledge of certain securities as 
collateral or fully covered by insurance. 
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~ 1 
COMMITTEE AMENDMENT" A 
"to H.P. 539, L.D. 759 
(a) The collateral must be in an amount equal to the excess deposit. The 
trustees shall determine the value of the pledged securities on the basis of 
market value and shall review the value of the pledged securities on the first 
business day of J anuaty and July of each year. 
(b) The collateral may consist only of securities in corporate bond and Maine 
corporate bond. The securities must be held in a depository institution 
approved by the trustees and pledged to indemnify the sewer district against 
any loss. The depository institution shall notify the trustees of the pledging 
when the securities are deposited; 
B. 
In repurchase agreements with respect to obligations of the United States 
Government, as described in Title 30-A, section 5712, subsection 1, as long as the 
market value of the underlying obligation is equal to or greater than the amount of the 
sewer district's investment and either the sewer district's security entitlement with 
respect to the underlying obligation is created pursuant to the provisions of Title 11, 
Article 8-A and other applicable law or the sewer district's security interest is 
perfected pursuant to Title 11, Article 9-A and other applicable law. except that. if the 
term of the repurchase agreement is not in excess of 96 hours, the sewer district's 
security interest with. respect to the underlying obligation need not be perfected as 
long as an executed Public Securities Association form of master repurchase 
agreement is on file with the counterparty prior to the date of the transaction; 
C. 
In the shares of an investment company registered under the United States 
Investment Company Act of 1940, Public Law 76-768, whose shares are registered 
under the United States Securities Act of 1933, Public Law 73-22, if the investments 
of the fund are limited to bonds and other direct obligations of the United States 
Government, as described in Title 30-A, section 5712, subsection 1, or repurchase 
agreements secured by bonds and other direct obligations of the United States 
Government, as described in Title 30-A, section 5712, subsection 1; or 
D. The trustees may enter into an agreement with any financial institution with trust 
powers authorized to do business in the State for the safekeeping of the reserve funds, 
or trust funds, of the sewer district. Services must consist of the safekeeping of the 
funds, collection of interest and dividends and any other fiscal service that is 
normally covered in a safekeeping agreement. Investment of reserve funds or trust 
funds deposited under a safekeeping agreement may be managed either by the 
financial institution with which the funds are deposited or by an investment advisor 
registered with the National Association of Securities Dealers, federal Securities and 
Exchange Commission or other governmental agency or instrumentality with 
jurisdiction over investment advisors, to act in such capacity pursuant to an 
investment advisory agreement providing for investment management and periodic 
review of portfolio investments. Investment of funds on behalf of the district under 
this paragraph is governed by the rule of prudence, according to Title 18-B, sections 
to 807 and Title 18-B, chapter 9. The contracting parties shall give assurance of 
proper safeguards that are usual to these contracts and shall furnish insurance 
protection satisfactory to both parties. 
2. Government unit bonds. A sewer district may invest in: 
COMMITTEE AMENDMENT 
COMMITTEE AMENDMENT «/J," to H.P. 539, L.D. 759 
A. The bonds and other direct obligations of the United States, or the bonds and 
other direct obligations or participation certificates issued by any agency, association, 
authority or instrumentality created by the United States Congress or any executive 
order; 
B. The bonds and other direct obligations issued or guaranteed by any state or by any 
political subdivision, instrnmentality or agency of any state, if the securities are rated 
within the 3 highest grades by any rating service approved by the Superintendent of 
Financial Institutions; 
C. The bonds and other direct obligations issued or guaranteed by this State, or 
issued by any instrumentality or agency of this State, or any political subdivision of 
the State that is not in default on any of its outstanding funded obligations; or 
D. Prime bankers' acceptances and prime commercial paper. 
Investments made pursuant to this subsection are limited to direct obligations of the 
issuer in which the sewer district directly owns the underlying security. Obligations 
created from. or whose value depends on or is derived from, the value of one or more 
underlying assets or indexes of asset values in which the sewer district owns no direct 
interest do not qualify as investments under this subsection. 
3. Corporate securities. A sewer district may invest in: 
A. The bonds and other obligations of any United States or Canadian corporation if 
the securities are rated within the 3 highest grades by any rating service approved by 
the Superintendent of Financial Institutions and are payable in United States funds. 
Not more than 2% of the total assets of the permanent reserve fund. permanent trust 
fund or other permanent fund being invested may be invested in the securities of any 
one such corporation; and 
B. The bonds and other obligations of any Maine corporation, actually conducting in 
this State the business for which that corporation was created, that, for a period of 3 
successive fiscal years or for a period of 3 years immediately preceding the 
investment. has earned or received an average net income of not less than 2 times the 
interest on the obligations in question and all prior liens or, in the case of water 
companies subject to the jurisdiction of the Public Utilities Commission. an average 
net income of not less than 1 1/2 times the interest on the obligations in question and 
all prior liens. Not more than 20% of the total assets of the permanent reserve fund, 
permanent trust fund or other permanent fund being invested may be invested in these 
securities of Maine corporations and not more than 2% of that fund may be invested 
in the securities of any single corporation. 
4. - Retention of unauthorized securities. Sewer districts may acquire and hold 
securities not authorized by law but that have been acquired in settlements. 
reorganizations, recapitalizations. mergers or consolidations or by receipt of stock 
dividends or the exercise of rights applicable to securities held by sewer districts and may 
continue to hold these securities at the discretion of the trustees. Sewer districts may 
continue to hold at the discretion of the trustees securities under authorization oflaw. 
5. Standard of prudence. All investments made under this section must be made 
with the judgment and care that persons of prudence, discretion and intelligence, under 
COMMITTEE AMENDMENT 
i\,()~ $ 
COMMITTEE AMENDMENT" A" to H.P. 539, L.D. 759 
circumstances then prevailing, exercise in the management of their own affairs, not for 
speculation but for investment, considering: 
A. The safety of principal and preservation of capital in the overall portfolio; 
B. 
Maintenance of sufficient liquidity to meet all operating and other cash 
requirements with which a fund is charged that are reasonably anticipated; and 
C. The income to be derived throughout budgetary and economic cycles, taking into 
account prudent investment risk constraints and the cash flow characteristics of the 
portfolio. 
This standard must be applied to the overall investment portfolio of the sewer district and 
not to individual items within a diversified portfolio. 
Sec. 6. 38 MRSA §1164, as enacted by PL 1993, c. 651, §7, is amended to read: 
§1164. Investments 
A sanitary district may invest its funds, including sinking funds, reserve funds and 
trust funds, to the extent that the te~s of any instFament creating the funds do not 
prohibit the investment, in shares of an investment company registered under the federal 
Investment Company Aot of 1940, vthose shares are registered under the United States 
Seearities Aot of 1933, only if the investments of the investment eompany are limited to 
obligations of the United States or any ageney or instrumentality, eorporate or othenvise, 
of the United States or repurehase agreements secured by obligations of the United States 
or any ageney or instrumentality, corporate or otherwise, of the United States in 
accordance with this section. This section is in addition to, and not in limitation of, any 
power of a sanitary district to invest its funds. 
1. Deposit or investment of funds. A sanitary district may invest all district funds, 
including reserve funds and trust funds, if the terms of the instrument, order or article 
creating the fund do not prohibit the investment, as follows: 
A. In accounts or deposits of institutions insured by the Federal Deposit Insurance 
Corporation, the National Credit Union Share Insurance Fund or the successors to 
these federal programs. 
(1) Accounts and deposits exceeding an amount equal to 25% of the capital, 
surplus and undivided profits of any trust company or national bank or a sum 
exceeding an amount equal to 25% of the reserve fund and undivided profit 
account of a mutual savings bank or state or federal savings and loan association 
on deposit at any one time must be secured by the pledge of certain securities as 
collateral or fully covered by insurance. 
(a) The collateral must be in an amount equal to the excess deposit. The 
trustees shall dete1mine the value of the pledged securities on the basis of 
market value and shall review the value of the pledged securities on the first 
business day of January and July of each year. 
(b) The collateral may consist only of securities in corporate bond and Maine 
corporate bond. The securities must be held in a depository institution 
approved by the trustees and pledged to indemnify the sanitary district 
COMMITTEE AMENDMENT 
"'of s 
COMMITIEE AMENDMENT" A 
"to H.P. 539, L.D. 759 
against any loss. The depository institution shall notify the trustees of the 
pledging when the securities are deposited; 
B. 
In repurchase agreements with respect to obligations of the United States 
Government, as described in Title 30-A, section 5712, subsection 1, as long as the 
market value of the underlying obligation is equal to or greater than the amount of the 
sanitary district's investment and either the sanitary district's security entitlement 
with respect to the underlying obligation is created pursuant to the provisions of Title 
11, Article 8-A and other applicable law or the sanitary district's security interest is 
perfected pursuant to Title 11, Article 9-A and other applicable law, except that, if the 
term of the repurchase agreement is not in excess of 96 hours, the sanitary district's 
security interest with respect to the underlying obligation need not be perfected as 
long as an executed Public Securities Association form of master repurchase 
agreement is on file with the counterparty prior to the date of the transaction; 
C. 
In the shares of an investment company registered under the United States 
Investment Company Act of 1940, Public Law 76-768, whose shares are registered 
under the United States Securities Act of 1933, Public Law 73-22, if the investments 
of the fund are limited to bonds and other direct obligations of the United States 
Government, as described in Title 30-A, section 5712, subsection 1, or repurchase 
agreements secured by bonds and other direct obligations of the United States 
Government, as described in Title 30-A, section 5712, subsection 1; or 
D. The trustees may enter into an agreement with any financial institution with trust 
powers authorized to do business in the State for the safekeeping of the reserve funds, 
or trust funds, of the sanitmy district. Services must consist of the safekeeping of the 
funds, collection of interest and dividends and any other fiscal service that is 
normally covered in a safekeeping agreement. Investment of reserve funds or trust 
funds deposited under a safekeeping agreement may be managed either by the 
financial institution with which the funds are deposited or by an investment advisor 
registered with the National Association of Securities Dealers, federal Securities and 
Exchange Commission or other governmental agency or instrumentality with 
jurisdiction over investment advisors, to act in such capacity pursuant to an 
investment advisory agreement providing for investment management and periodic 
review of portfolio investments. Investment of funds on behalf of the district under 
this paragraph is governed by the rule of prudence, according to Title 18-B, sections 
to 807 and Title 18-B, chapter 9. The contracting parties shall give assurance of 
proper safeguards that are usual to these contracts and shall furnish insurance 
protection satisfactory to both parties. 
2. Government unit bonds. A sanita1y district may invest in: 
A. The bonds and other direct obligations of the United States, or the bonds and 
other direct obligations or participation certificates issued by any agency, association, 
authority or instrumentality created by the United States Congress or any executive 
order; 
B. The bonds and other direct obligations issued or guaranteed by any state or by any 
political subdivision, instrumentality or agency of any state, if the securities are rated 
COMMITTEE AMENDMENT 
\t.of 
.. 
COMMITIEE AMENDMENT" Ir to H.P. 539, L.D. 759 
within the 3 highest grades by any rating service approved by the Superintendent of 
Financial Institutions; 
C. 
The bonds and other direct obligations issued or guaranteed by this State, or 
issued by any instrumentality or agency of this State, or any political subdivision of 
the State that is not in default on any of its outstanding funded obligations; or 
D. Prime bankers' acceptances and prime commercial paper. 
Investments made pursuant to this subsection are limited to direct obligations of the 
issuer in which the sanitary district directly owns the underlying security. Obligations 
created from, or whose value depends on or is derived from, the value of one or more 
underlying assets or indexes of asset values in which the sanitary district owns no direct 
interest do not qualify as investments under this subsection. 
3. Corporate securities. A sanitary district may invest in: 
A. The bonds and other obligations of any United States or Canadian corporation if 
the securities are rated within the 3 highest grades by any rating service approved by 
the Superintendent of Financial Institutions and· are payable in United States funds. 
Not more than 2% of the total assets of the permanent reserve fund, permanent trust 
fund or other permanent fund being invested may be invested in the securities of any 
one such corporation; and 
B. The bonds and other obligations of any Maine corporation, actually conducting in 
this State the business for which that corporation was created, that, for a period of 3 
successive fiscal years or for a period of 3 years immediately preceding the 
investment, has earned or received an average net income of not less than 2 times the 
interest on the obligations in question and all prior liens or, in the case of water 
companies subject to the jurisdiction of the Public Utilities Commission, an average 
net income of not less than 1 1/2 times the interest on the obligations in question and 
all prior liens. Not more than 20% of the total assets of the permanent reserve fund, 
permanent trust fund or other pe1manent fund being invested may be invested in these 
securities of Maine corporations and not more than 2% of that fund may be invested 
in the securities of any single corporation. 
4. Retention of unauthorized securities. Sanitary districts may acquire and hold 
securities not authorized by law but that have been acquired in settlements, 
reorganizations, recapitalizations, mergers or consolidations or by receipt of stock 
dividends or the exercise of rights applicable to securities held by sanitary districts and 
may continue to hold these securities at the discretion of the trustees. Sanita1y districts 
may continue to hold at the discretion of the trustees securities under authorization of 
law. 
5. Standard of prudence. All investments made under this section must be made 
with the judgment and care that persons of prudence, discretion and intelligence, under 
circumstances then prevailing, exercise in the management of their own affairs, not for 
speculation but for investment, considering: 
A. The safety of principal and preservation of capital in the overall portfolio; 
B. 
Maintenance of sufficient liquidity to meet all operating and other cash 
requirements with which a fund is charged that are reasonably anticipated; and 
COMMITTEE AMENDMENT 
-'.'\~ 
1tO¥ ~ 
COMMITTEE AMENDMENT "fl "to H.P. 539, L.D. 759 
C. The income to be derived throughout budgetary and economic cycles, taking into 
account prudent investment risk constraints and the cash flow characteristics of the 
portfolio. 
This standard must be applied to the overall investment portfolio of the sanitary district 
and not to individual items within a diversified portfolio .
SUMMARY 
Instead of simply stating that a sewer or sanitary district may invest its funds to the 
same extent as a municipality, this amendment includes the applicable provisions from 
the Maine Revised Statutes, Title 30-A, chapter 223, subchapter 3-A in the statutes 
governing sewer and sanitary districts. 
COMMITTEE AMENDMENT