Bill drafts would let local governments enter stock market
By Hannah Shields
Wyoming Tribune Eagle
Via Wyoming News Exchange
CHEYENNE — State lawmakers are considering two bill drafts that would allow local cities, counties and towns to invest a portion of their reserve funds in stock markets and local equities.
The Wyoming Legislature’s Select Committee on Capital Financing and Investments reviewed two draft bills during its Friday meeting in Casper. Each bill proposes different structures that would let local municipalities invest funds, such as reserves, in stocks.
Bill draft 125, “Local government funds-direct investment in equities,” would allow local governments to autonomously invest directly into stocks and equities within specified conditions set forth in the bill, said Legislative Service Office senior attorney Brian Fuller.
Bill draft 126, “Local government funds-pooled equity investments,” would allow local governments to pool their funds for the purpose of investment in stocks and equities, Fuller said. The bill is “loosely based” on the local government liability pool program, Fuller said, and was drafted off a memo submitted by the Wyoming County Commissioners Association.
“It would require each pool to create an investment advisory committee and a (joint powers board) to oversee the investment of these funds, pretty similar to the (Investment Funds Committee),” Fuller said.
The two draft bills originally contained language that would allow local governments to establish their own investment advisory committees. These committees would “establish and review the local government’s investment policies and procedures” and report to the local governing body on these policies.
State Treasurer Curt Meier advised lawmakers not to “get prescriptive” if they consider an investment pool structure.
“I think a great deal of education has to be put in place, especially in the area of liquidity,” Meier said. “If you put everything in equities, and you have a severe downturn, you don’t have any dry powder to actually buy in when the market’s low.”
It’s difficult to legislate the construction of an investment portfolio, Meier said, but “you can put sideboards around it.”
More than four years ago, the city of Casper established its own Investment Advisory Committee, which advises the city on liquidity and return on investments.
Brenda Janikowski, a financial advisor who sits on the committee, clarified the committee doesn’t select the types of investments — it simply advises the city treasurer and city council members on the process of selecting an investment manager and the appropriate approach to investing.
“We are not making those decisions,” Janikowski said.
However, Sen. Larry Hicks, R-Baggs, said he was concerned about the potential of setting up 25 to 30 different advisory committees across the state.
“I’m worried about actually setting these up and then making sure it meets the intent of the legislation,” Hicks said. “I’m assuming it’s just a local responsibility, but there’s no ... mechanism for compliance.”
It was also pointed out that smaller communities in Wyoming may struggle to find available individuals with the required expertise and qualifications to make up these committees.
An investment manager
Chairman Rep. Tom Walters, R-Casper, agreed with Hicks’ concern that multiple IFC-like committees around the state could run into issues of consistency.
As lawmakers walked through the bill, Sen. Mike Gierau, D-Jackson, suggested eliminating the IFC language in both bills and “just beef up the broker threshold.”
Instead, lawmakers made a note to up the ante on requirements for an investment manager, who would oversee the investments made by the local governing body.
A qualified person must be registered under the Federal Investment Advisors Act and have at least one physical office in Wyoming, according to the language of both draft bills. Committee members added that the person must have at least 10 years of experience in management of a portfolio in excess of $110 million.
“We did hear some concern that that might eliminate a lot of our local firms up and down Main Street in Wyoming,” Walters said. “Maybe we could look into a concept of how, if that firm partners with, let’s say, a large brokerage house like JP Morgan, or somebody like that.”
Time is money
Both bill drafts set a minimum time frame on equity holdings for the duration of no less than five years. Fuller explained this was a placeholder time frame in the bill that was subject to the committee’s direction.
WCCA Executive Director Jerimiah Rieman suggested flexibility in the bills’ language to allow for different time frames for different kinds of investments. In general, Rieman said the WCCA strongly supports the provision.
“Certain investments might have a five-year time frame associated with a specific dollar amount that they would put in, and others may have a 20-year horizon,” Rieman said. “Having that provision is one of the best safeguards that we can have in this legislation, because, as you all know, time is our best friend in these sorts of investments.”
Janikowski was concerned over the five-year provision. Casper invests “a lot of money … for much longer periods of time,” she said.
Sen. Dan Furphy, R-Laramie, said the five-year duration “doesn’t make sense in most stock investments.”
“If they’re dealing with a local broker who’s putting their funds in an exchange-traded fund, they can pull out at any time without an impact on that exchange-traded fund or municipal fund,” Furphy said.
Lawmakers successfully voted to remove the five-year duration requirement, with two “no” votes. Walters made a note to revisit the conversation during the committee’s next meeting in October.
Both bills were forwarded for further discussion during the committee’s next meeting in Cheyenne on Oct. 30. For more information on the meeting and how to livestream, visit wyoleg.gov.
This story was published on September 7, 2024.