Can two or more Virginia counties or cities pool their cash into a single investment fund, and can that pool be organized as a trust fund?

Plain-English summary

Stafford County's treasurer asked the AG whether a group of Virginia political subdivisions could pool their public funds for collective investment, and whether the pool could be structured as a trust fund. The proposed entity, the "Virginia Investment Pool," would be exclusively for political subdivisions. It would aim for greater liquidity, broader diversification, and shared management and administrative costs. Investments would be in instruments authorized by the Investment of Public Funds Act (Va. Code §§ 2.2-4500 through 2.2-4519). Participating counties, cities, and towns would adopt enabling ordinances; other political subdivisions would adopt resolutions.

The AG said yes to both questions.

Joint investment authority. Virginia follows the Dillon Rule, so localities have only those powers expressly granted, necessarily implied, or essential. The relevant grants here are stacked:

• Article VII, § 3 of the Virginia Constitution authorizes the General Assembly to permit local governments to exercise their powers "jointly or in cooperation with the Commonwealth or any other unit of government."
• The Joint Powers Act (§§ 15.2-1300 et seq.) implements that authority: "Any power, privilege or authority exercised or capable of exercise by any political subdivision . . . may be exercised and enjoyed jointly with any other political subdivision . . . having a similar power, privilege or authority except where an express statutory procedure is otherwise provided for the joint exercise."
• The Investment of Public Funds Act gives each political subdivision the power to invest its own funds.

Since investment authority is a "power capable of exercise" by each subdivision, and no statute specifies a different joint-exercise procedure for investments, the Joint Powers Act permits joint investment. The AG cited two prior opinions applying the same logic: the 2000 opinion authorizing two or more counties to set up a joint department of real estate assessment, and the 2012 opinion (12-059) allowing multiple localities and school boards to form a single voluntary self-funded health insurance trust.

Trust-fund organization. The Joint Powers Act at § 15.2-1300(D)(2) lets the joint agreement specify "the manner of acquiring, holding (including how title to such property shall be held) and disposing of real and personal property used in the undertaking." This gives the subdivisions substantial discretion in how to structure the pool's legal form. Nothing in the Code prohibits a trust-fund arrangement. So the pool may be organized as a trust fund, with whatever governance and title-holding mechanisms the participating subdivisions agree on, subject to the procedural requirements of the Act (administrator or joint board, formal agreement, etc.).

The opinion confirmed that the resulting Virginia Investment Pool would be lawful, assuming the participating subdivisions complied with the Investment of Public Funds Act's substantive limits on what they could buy.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Virginia Investment Pool was in fact established after this opinion and is now an operating cash-management vehicle for Virginia local governments. Its current structure and offerings are governed by its own organizational documents and the current Code, not the 2013 opinion.

Common questions

What is a "pooled investment program"?
A collective fund through which multiple investors (here, multiple local governments) commit cash for joint management. The pool then invests across a diversified portfolio of securities, and each participant owns a pro-rata share of the pool. Pools are common for governmental cash management because they let smaller localities access scale and expertise that they couldn't afford individually.

Why use a trust fund structure?
Trust funds have a long-standing legal and operational framework. The trustees hold the assets for the benefit of the participating subdivisions, which simplifies certain accounting, tax, and legal questions. A trust framework can also offer protection from creditors of the individual participants. The choice between trust and other forms (joint venture, association, special-purpose entity) depends on legal, tax, and operational considerations the participating localities work out with counsel.

Is the Virginia Investment Pool the same as LGIP?
No, but it serves a related function. The Local Government Investment Pool (LGIP) is administered by the state Treasury under a different statutory framework and is widely used by Virginia local governments. The Virginia Investment Pool described in this opinion is a separate, locally-organized program created by the participating subdivisions under the Joint Powers Act. The two can coexist; localities can use either or both.

Can a school division participate?
The opinion doesn't address school boards directly, but school boards are political subdivisions for many purposes and the Joint Powers Act framework typically reaches them too. The 2012 health-insurance trust opinion cited by the AG (12-059) included school boards as participants. School-board participation in an investment pool would depend on the specific terms of the pool's organizational documents and the school board's own investment authority.

What kinds of investments can the pool make?
Only investments authorized by the Investment of Public Funds Act, §§ 2.2-4500 through 2.2-4519. That statute lists specific permissible categories: certain treasury obligations, agency securities, money market funds meeting credit-rating requirements, repurchase agreements, and so on. The pool inherits those limits; pooling does not unlock investment options the individual participants couldn't take on their own.

What governance does the Joint Powers Act require?
Section 15.2-1300(B) and (C) specify how the joint agreement must be entered into. Section 15.2-1300(D) lists permitted contents, including the manner of administering the undertaking. Subsection (D)(1) lets the agreement create "an administrator or a joint board responsible for administering the undertaking," with specified organization, composition, term, powers, and duties. The pool's organizers must put those structures into the agreement.

Background and statutory framework

The legal stack:

• Va. Const. art. VII, § 3: constitutional authorization for joint exercise of local powers.
• Va. Code §§ 15.2-1300 through 15.2-1310: Joint Powers Act. § 15.2-1300(A) is the substantive authorization; subsections (B), (C), and (D) specify procedural requirements and permissible agreement contents.
• Va. Code §§ 2.2-4500 through 2.2-4519: Investment of Public Funds Act. Authorizes political subdivisions to invest funds belonging to or under their control, in specified categories of securities.

The Dillon Rule frame: Richmond v. Confrere Club of Richmond, Inc. confirms that "[m]unicipal corporations possess and can exercise only those powers expressly granted by the General Assembly, those necessarily or fairly implied therefrom, and those that are essential and indispensable." Board of Supervisors v. Countryside Investment Co. extends the same logic to counties. The AG worked entirely within the Dillon framework, identifying express grants for both joint exercise (Constitution + Joint Powers Act) and investment authority (Investment of Public Funds Act).

Citations

• Va. Const. art. VII, § 3
• Va. Code §§ 15.2-1300 through 15.2-1310
• Va. Code §§ 2.2-4500 through 2.2-4519
• Richmond v. Confrere Club of Richmond, Inc., 239 Va. 77, 387 S.E.2d 471 (1990)
• Bd. of Supvrs. v. Countryside Inv. Co., 258 Va. 497, 522 S.E.2d 610 (1999)
• 2000 Op. Va. Att'y Gen. 68
• 2012 Op. Va. Att'y Gen. No. 12-059

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2013/13-001_Rudy.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

February 8, 2013

The Honorable Laura M. Rudy
Treasurer, Stafford County
Post Office Box 68
Stafford, Virginia 22555

Dear Ms. Rudy:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You ask two questions regarding the development of a pooled investment program for the use of local governments and other political subdivisions.[1] Specifically, you ask whether two or more political subdivisions may invest in a jointly administered investment pool, and if so, whether any such pooled investment program can be established in the form of a trust fund.

Response

It is my opinion that two or more political subdivisions may exercise their investment powers by investing in a jointly administered investment pool and that such pooled investment program may be organized in the form of a trust fund.

Background

You relate that a number of political subdivisions in the Commonwealth are interested in establishing a pooled investment program for the exclusive use of political subdivisions, to be named the "Virginia Investment Pool." You project that this pool will provide greater liquidity and diversity in investment portfolios for individual participants, as well as allowing participating political subdivisions to share investment management and administrative expenses.

You indicate that the Virginia Investment Pool will be focused on investing assets that are available for investment for periods of six months or longer. The program will select investments with an estimated average duration of 1.5 years. Investments made with the pooled funds will be only in securities or instruments listed as authorized investments in the Investment of Public Funds Act of the Code of Virginia. Counties, cities, and towns wanting to join will be required to approve an ordinance authorizing execution of an agreement for participation in the Virginia Investment Pool. Other political subdivisions would be required to adopt a resolution for that purpose.

Applicable Law and Discussion

In determining whether localities possess a particular power, Virginia follows the Dillon Rule, which provides that "[m]unicipal corporations possess and can exercise only those powers expressly granted by the General Assembly, those necessarily or fairly implied therefrom, and those that are essential and indispensable."[2]

The Constitution of Virginia states that,

The General Assembly may provide by general law or special act that any county, city, town or other unit of government may exercise any of its powers or perform any of its functions and may participate in the financing thereof jointly or in cooperation with the Commonwealth or any other unit of government within or without the Commonwealth.[3]

Pursuant to that enabling authority, the Joint Powers Act provides that,

Any power, privilege or authority exercised or capable of exercise by any political subdivision of this Commonwealth may be exercised and enjoyed jointly with any other political subdivision of this Commonwealth having a similar power, privilege or authority except where an express statutory procedure is otherwise provided for the joint exercise.[5]

The Investment of Public Funds Act expressly authorizes political subdivisions to invest funds belonging to them or within their control and enumerates the types of securities in which such funds may be invested.[6] It is thus clear that political subdivisions are authorized to make and manage independently the investments you describe. Moreover, I am not aware of any statutory procedures specifically governing the potential joint exercise of the investment powers afforded localities separately.

The Joint Powers Act also prescribes how agreements to exercise powers jointly are to be entered into and particular elements that must be contained in the agreement.[7] You indicate that the Virginia Investment Pool will adhere to these statutory requirements. I therefore conclude that the Code of Virginia authorizes two or more political subdivisions to exercise their investment powers by investing in a jointly administered investment pool.

Having answered your first question in the affirmative, I turn to your next question regarding whether such a pooled investment program can be organized as a trust fund. In authorizing local governments to enter into agreements to execute their authorized powers jointly, the Joint Powers Act provides that the agreement, in addition to the items enumerated as required, may contain "the manner of acquiring, holding (including how title to such property shall be held) and disposing of real and personal property used in the undertaking."[8] Political subdivisions are thus given substantial discretion in determining how to title and manage funds pooled in the joint execution of their powers. Nowhere does the Code prohibit a trust fund arrangement. I therefore conclude that political subdivisions lawfully may establish a trust fund as the form of organization for the pooled investment program.

Conclusion

Accordingly, it is my opinion that two or more political subdivisions may exercise their investment powers by investing in a jointly administered investment pool and that such pooled investment program may be organized in the form of a trust fund.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General

[1] For purposes of this opinion, I will refer to both municipal corporations (cities, towns, and service authorities) and counties as "political subdivisions."

[2] Richmond v. Confrere Club of Richmond, Inc., 239 Va. 77, 79, 387 S.E.2d 471, 473 (1990) (citations omitted). A corollary of this rule applies to counties. See Bd. of Supvrs. v. Countryside Inv. Co., 258 Va. 497, 503, 522 S.E.2d 610, 613 (1999) ("In Virginia, the powers of boards of supervisors are fixed by statute and are limited to those conferred expressly or by necessary implication. This rule is a corollary to Dillon's Rule that municipal corporations have only those powers expressly granted, those necessarily or fairly implied therefrom, and those that are essential and indispensable.").

[3] Va. Const. art. VII, § 3.

[4] Va. Code Ann. §§ 15.2-1300 through 1310 (2012).

[5] Section 15.2-1300(A). Previous opinions of the Attorney General have interpreted this provision, for example, to allow two or more counties to establish a joint department of real estate assessment, 2000 Op. Va. Att'y Gen. 68, and to authorize multiple localities and school boards to create a single voluntary, self-funded trust to insure health benefits for their employees and the families of their employees, 2012 Op. Va. Att'y Gen. No. 12-059.

[6] The Investment of Public Funds Act, Va. Code Ann. §§ 2.2-4500 through 2.2-4519 (2011). You indicate that any investments made by the Virginia Investment Pool will be made in accordance to and in compliance with this list of authorized securities or instruments. I therefore do not address what investments are authorized by this Act, and will assume for purposes of this opinion that all investments are to be made pursuant to this statutory authority and that no investment will be made in any category not specifically authorized therein.

[7] Section 15.2-1300(B), (C).

[8] Section 15.2-1300(D)(2). In addition, subsection (D)(1) enables the participating political subdivisions to provide by agreement for "an administrator or a joint board responsible for administering the undertaking. The precise organization, composition, term, powers and duties of any administrator or joint board shall be specified."