AN ACT ALLOWING TOWNS TO CREATE SCHOLARSHIP FUNDS THROUGH MUNICIPAL BONDING.

AN ACT ALLOWING TOWNS TO CREATE SCHOLARSHIP FUNDS THROUGH MUNICIPAL BONDING.

This bill authorizes municipalities to issue bonds, notes, or other debt obligations, according to state law governing municipal bond issues, to fund scholarships for municipal residents or their children attending public or private colleges and universities in the state. The bill limits the scholarship amount for students attending private colleges and universities to UConn's annual in-state tuition rate for the scholarship year.

The bill requires any municipality that issues scholarship bonds to (1) propose creating a fund for such purpose and (2) hold a confirming referendum at its next regular election before establishing the fund or issuing any bonds for it. It subjects any scholarship bonds to the municipality's bond cap. Municipalities include towns, cities, boroughs, metropolitan districts, special taxing districts, and any other municipal corporations with taxing and bonding power.

The bill authorizes the fund to accept gifts, donations, bequests, and funds from any other legal sources. It specifies how the municipality may invest the money in, and discontinue, the fund. And it requires the municipality to annually report on the fund's condition.

The municipality's budget-making authority may direct the municipal treasurer to invest a portion of the fund it considers advisable within the parameters set by the bill. The treasurer may invest up to 40% of the fund in equity securities and the remaining amount in:

1. bonds or obligations (a) of the U. S. government or its agencies or instrumentalities, (b) of Connecticut, or (c) guaranteed by the state or U. S. government;

2. certificates of deposit, commercial paper, savings accounts, and bank acceptances;

3. obligations of any state or political subdivision, or its instrumentalities, authorities, or agencies, as long as, at time of the investment, it is rated in the top rating categories of any nationally recognized rating service or one service the banking commissioner recognizes;

4. obligations of any Connecticut municipality, regional school district, or metropolitan district, as long as, at the time of the investment, it is rated in one of the two highest rating categories by a nationally recognized rating service or one the banking commissioner recognizes;

5. any U. S. -registered investment company or investment trust (a) whose portfolio is limited to U. S. government obligations and repurchase agreements fully collateralized by such obligations and (b) is rated in one of the two highest rating categories by a nationally recognized rating service;

6. investment agreements with a financial institution whose (a) long-term obligations are rated in one of the two highest rating categories by a nationally recognized rating service or one the banking commissioner recognizes and (b) short-term obligations are rated in the top rating category by such a rating service; or

7. U. S. -secured or –guaranteed investment agreements.

The municipal treasurer must annually submit a complete and detailed report on the fund's condition to the municipality's chief executive officer, budget-making authority, and legislative body. The municipality must include that report in its annual report.

The bill allows the fund to be discontinued upon recommendation of the chief executive officer and budget-making authority with the approval of the municipality's legislative body. Once it is discontinued, the remaining money must be (1) converted or added to a sinking fund to retire the municipality's debt or (2) transferred to its general fund if the municipality has no debt.