AGO 1993-021.

• Case Date: October 27, 1993
• Court: Ohio

Ohio Attorney General Opinions 1993. AGO 1993-021. October 27, 1993OPINION NO. 1993-021The Honorable Thomas E. Ferguson Auditor of State P.O. Box 1140 Columbus, Ohio 43266-0040 Dear Auditor Ferguson: You have requested an opinion regarding the permissibility of investments by subdivisions in mortgaged-backed securities which are issued or guaranteed by the Federal National Mortgage Association ("FNMA"). Specifically, you have posed three questions, which may be paraphrased as follows:

1. Does R.C. 135.14 authorize a treasurer or governing board to invest in instruments that do not mature within two years from the date of purchase, but that can be sold within two years from the date of purchase?

2. Does R.C. 135.14(B) authorize a treasurer or governing board to invest in instruments issued by FNMA?

3. If a treasurer or governing board is not authorized, pursuant to R.C. 135.14(B), to invest in instruments issued by FNMA, does federal law supplant or preempt state law to allow such investments?

I. Investment of Moneys by Subdivisions

R.C. 135.01-.21 sets forth provisions concerning the investment of moneys by subdivisions.(fn1) R.C. 135.14, which authorizes the investment of interim moneys by subdivisions, provides, in part:

The treasurer or governing board may invest or deposit any part or all of the interim moneys, provided that such investments will mature or are redeemable within two years from the date of purchase, except as otherwise limited in this section. The following classifications of obligations shall be eligible for such investment or deposit:

(A) Bonds, notes, or other obligations of or guaranteed by the United States, or those for which the faith of the United States is pledged for the payment of principal and interest thereon;

(B) Bonds, notes, debentures, or other obligations or securities issued by any federal government agency, or the export-import bank of Washington;

(C) Interim deposits in the eligible institutions applying for interim moneys as provided in section 135.08 of the Revised Code....

(D) Bonds and other obligations of this state;

(E) No-load money market mutual funds consisting exclusively of obligations described in division (A) or (B) of this section and repurchase agreements secured by such obligations, provided that investments in securities described in this division are made only through eligible institutions mentioned in section 135.03 of the Revised Code.

The treasurer or governing board may also enter into a written repurchase agreement that sets forth the terms and conditions of the agreement between the parties for a period not to exceed thirty days with any eligible institution mentioned in section 135.03 of the Revised Code, under the terms of which agreement the treasurer or governing board purchases, and such institution agrees unconditionally to repurchase any of the securities listed in division (A) or (B) of this section that will mature or are redeemable within five years from the date of purchase. (Emphasis added.)

R.C. 135.14 thus authorizes a subdivision's treasurer or governing board to invest or deposit the subdivision's interim moneys in specific statutorily enumerated instruments that either will mature or are redeemable within two years from the date of purchase.

II. A Subdivision May Not Invest in Those Instruments Listed in R.C. 135.14 that Do Not Mature Within Two Years but that Can Be Sold in the Market at the Option of the Treasurer or Governing Board within Two Years from the Date of Purchase

In your first question you are concerned with the authority of a subdivision's treasurer or governing board to invest in instruments that do not mature within two years from the date of purchase, but that can be sold within two years from the date of purchase. As noted above, a subdivision's treasurer or governing board is specifically empowered to invest the subdivision's interim moneys in those instruments listed in R.C. 135.14 that are redeemable within two years from the date of purchase. While there is no...