N.Y. Comp. Codes R. & Regs. tit. 9 § 1645-1.2
The Public Housing Law permits authorities to invest funds held in reserves, or any funds not required for immediate disbursement in property or securities which are legal investments for savings banks. The law, however, imposes a further restriction on the investment of development funds of State-aided projects. Such development funds may be invested only in such securities as are approved by the State Comptroller. In most instances, the Comptroller has limited development fund investments to U.S. government obligations maturing not more than one year from date of purchase. In some instances, however, the Comptroller has permitted development funds to be invested in 13-month obligations. The Law, in effect directs local agencies to place safety and security of the principal above all other considerations. The investments (other than development fund investments), which may be made by a local agency, are therefore, limited to deposits in savings banks, savings and loan associations, certain types of bonds and similar obligations so that the income element to be accounted for will, ordinarily, be in the form of interest. Local agencies should consult with the division, and secure its approval prior to making investments. The division is prepared to make recommendations of legal investments at all times. While the division will insist on the prompt investment of all excess funds, its recommendations with respect to specific investments are strictly advisory and not mandatory. For the investment of development fund or administration fund balances in excess of immediate needs and a reasonable allowance for working capital, the division recommends short-term U.S. government securities, such as U.S. treasury bills, treasury notes and certificates of indebtedness. For the investment of replacement reserve funds the division recommends long-term U.S. government securities, Federal National Mortgage Association Notes and deposits in savings accounts of savings banks insured by the Federal Deposit Insurance Corporation and savings and loan associations insured by the Federal Savings and Loan Insurance Corporation. For painting and decorating reserve funds or operating improvement reserve funds, short term U.S. government securities and Federal Home Loan Bank Notes are recommended. For vacancy and collection loss reserves the division recommends these funds be invested in three to five year U.S. government securities and Federal National Mortgage Association Notes. The division does not recommend the investment of security deposit funds. All securities recommended by the division will be normally selected with a view to obtaining the maximum yield over the period it is anticipated the security will be held, inasmuch as there is ordinarily a direct relationship between the yield and both the maturity date of the security and the time it is held. The date on which it is anticipated that the invested funds will be required is, therefore, an important factor in the selection of securities for investment. For example, the yield on a series "K" United States savings bond, redeemed after one year from purchase date is only 1.16 per cent. The yield on the same bond, if held 12 years to maturity is 2.76 per cent. It is evident that series "K" bonds would be suitable for long term investments, such as replacement reserve funds, but not for investment, such as painting and decorating reserve funds, which has a maximum turnover of three years. For the latter investment, a security having a shorter maturity, such as a treasury note or certificate of indebtedness, would give a higher yield over the anticipated holding period. In selecting securities for investment, the division also considers diversification of the portfolio held by each local agency. This results in greater flexibility when the need arises for the "cashing in" of securities to meet current reserve fund needs. In compliance with New York State Banking Department regulations [see 3 NYCRR Banking], all reserve funds deposited in savings banks and savings and loan associations must be of a long-term investment nature. To comply with this directive the division recommends deposit of funds in these savings institutions only if it is anticipated that such funds will remain on deposit a minimum of five years.
N.Y. Comp. Codes R. & Regs. Tit. 9 § 1645-1.2