Michigan CLASS and Bond Proceeds: When a Competitively Bid Investment Earns More

Whether a Michigan issuer should keep a given bond fund in Michigan CLASS is decided by the fund's spending calendar, its bond documents and the federal arbitrage rules rather than by the pool's FAQ, which does not mention bond proceeds.

Michigan CLASS is an investment pool open to any Michigan county, city, village, township, school district, authority, the State of Michigan or other political subdivision, and it processes requests received by 3:00 p.m., eastern time, the same day.

This page takes the questions in order, from eligibility to how a pool balance and a bid can be combined.

What is Michigan CLASS and who can invest?

Michigan CLASS is an investment pool introduced in 1991, overseen by a thirteen-member Board of Trustees elected by the participants, and the Board retains Public Trust Advisors, LLC as its administrator and investment advisor.

The same firm is named as administrator or investment advisor by COLOTRUST and Texas CLASS on their own sites.

Participation is open to any Michigan county, city, village, township, school district, authority, the State of Michigan or other political subdivision, and an entity joins by submitting its investment policy and adopting the Participation Agreement by board resolution.

That policy is a statutory document rather than a formality: MCL 129.95(1) requires a Michigan governing body, in consultation with its investment officer, to adopt an investment policy covering at least purpose, scope and objectives, delegation of authority, a list of authorized instruments, and safekeeping, custody and prudence, and to state whether only $1.00 net asset value funds are allowed if mutual funds are authorized.

On the investment side, MCL 129.91(1) lets a governing body by resolution authorize its investment officer to invest in, among other instruments, U.S. and agency obligations, repurchase agreements consisting of those instruments, 1940-Act mutual funds limited to legal investments, and pools under the Surplus Funds Investment Pool Act (MCL 129.111 to 129.118) and the Local Government Investment Pool Act (MCL 129.141 to 129.150); the fuller list is on the Michigan permitted investments page.

The pool's FAQ does not cite the statute under which the trust itself is organized, so this page does not classify Michigan CLASS within those acts, and the general mechanics of local government investment pools, including registration, insurance and accounting status, are covered in the pool guide.

Michigan CLASS runs two funds: the Prime Fund, which the pool describes as a stable $1.00 net asset value pool rated AAAm by S&P Global Ratings, and the separate EDGE Fund, which it describes as rated AAAf/S1 by Fitch and not a stable-NAV fund, and whose features the FAQ says differentiate it from a traditional $1.00 stable NAV fund.

The FAQ dates neither rating, and it states that EDGE investments comply with Public Acts 20 of 1943, 451 of 1976, 331 of 1966 and 94 of 1933.

Where is the Michigan CLASS rate published, and why is no figure on this page?

Michigan CLASS publishes its current rates on its own rates page, and no figure belongs on this page, because a pool rate is current only on the day it is published.

mGIC publishes today's reinvestment rates each business day, covering Treasury yields, SOFR and SLGS links, so a pool's posted rate can be set beside the Treasury market the same day it is checked.

What happens to arbitrage and rebate tracking for proceeds held in a pool?

The analysis starts from a definition: Treasury Regulation §1.148-1(b) defines a commingled fund as a fund holding gross proceeds together with more than twenty-five thousand dollars of other amounts invested collectively, and it states that an open-end regulated investment company, such as a mutual fund, is not a commingled fund.

Where a particular state pool falls in that definition, and what its earnings count for yield restriction and rebate, is a determination for bond counsel and tax counsel, and the mechanics live in the arbitrage rebate rules.

Michigan CLASS gives a treasurer little to work from on this point: its FAQ does not mention bond proceeds and describes no bond-proceeds accounts, arbitrage tracking or rebate reporting.

Michigan law adds a segregation layer that can reach bond funds: MCL 141.2705(1)(a) to (c) requires debt retirement funds to be accounted for separately and used only to retire the securities they were created for, and lets them be pooled for deposit or investment only with other debt retirement funds created for the same category of debt, whether voted debt, nonvoted debt other than special assessment, or special assessment debt.

The act carries an exception for a school district's common debt retirement fund under MCL 380.1223, and MCL 141.2707 requires sinking funds for mandatory-redemption refunding securities to be accounted for separately.

Whether a given bond fund is a debt retirement fund within that act, and whether a pool deposit fits a particular issue's indenture and arbitrage position, are conclusions for the issuer's counsel.

Liquidity: same-day access or a draw-matched agreement?

Michigan CLASS processes requests received by 3:00 p.m., eastern time, the same day, sets no minimum or maximum investment, places no limit on the number of transactions, and charges no banking fees on wires or ACH.

A bid agreement trades that open-ended access for terms written for one fund: a guaranteed investment contract is, in the MSRB glossary's definition, an investment secured by a contract with a financial institution that guarantees a fixed rate of return and a fixed maturity, and Treasury Regulation §1.148-1(b) reads the term to include any nonpurpose investment with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate.

The drawdown schedule is not optional detail: for GIC purchases, Treasury Regulation §1.148-5(d)(6)(iii)(A)(5) requires the terms of the solicitation to take into account the issuer's reasonably expected deposit and drawdown schedule for the amounts to be invested.

A full-flex repurchase agreement is a sale of securities combined with an agreement to repurchase them on a specified future date at a prearranged price, and the same regulation's GIC definition can reach it when its withdrawal or reinvestment provisions and its interest rate are specifically negotiated, a classification that belongs to bond counsel and tax counsel.

A structured Treasury portfolio consists of Treasury securities matched to the fund's anticipated cash needs, with a money-market fund allocation behind them for faster-than-expected spend-down.

What happens when actual draws miss the schedule is the subject of the GIC withdrawal provisions guide.

The 2a-7 liquidity floors are money-market-fund rules: 17 CFR 270.2a-7(d)(4)(ii) and (iii) bar a money market fund from buying a non-daily-liquid asset if that would leave it with less than 25 percent of total assets in daily liquid assets, or a non-weekly-liquid asset if that would leave it with less than 50 percent in weekly liquid assets, and the daily minimum does not apply to tax-exempt funds.

The withdrawal terms quoted on this page are the pool FAQ's, and the document to read for the full terms is the Participation Agreement the entity adopted by board resolution when it joined.

When does a GIC, flex repo or Treasury portfolio beat Michigan CLASS?

No page can promise that any of the three pays more, because the outcome is a market result; what a bid changes is the basis of the rate, from the pool's published rate to a price struck for one fund's size, term and draw schedule.

The features that drive the difference are the inputs of a bid specification: how much of the fund will sit still, for how long, on what draw pattern, and on what credit and collateral terms.

A draw schedule built from the project budget is the working document behind those terms, and the general LGIP vs GIC comparison lays the two structures out feature by feature.

The direct test for a balance already in the pool is to compare your pool yield with real bids for that balance's own size and draw schedule.

Can an issuer use both: the pool for near-term draws and a bid for the rest?

The pool's stated terms do not force an all-or-nothing decision: there is no minimum or maximum investment and no limit on the number of transactions, so the pool's rules do not by themselves exclude a partial balance, though whether a split fits a fund is governed by its bond documents.

mGIC is an independent, SEC-registered municipal advisor and Bidding Agent that sells no investment product and does not act as principal, so it can run the competitive bid for the balance an issuer wants priced.

Its fee is paid by the winning provider rather than the issuer, at or below the safe-harbor maximum in the Treasury arbitrage regulations, and it is disclosed.

For a second opinion on a current pool balance, an issuer can request a free, no-obligation reinvestment review or conversation.

The final calls on permitted investments, indenture authority and arbitrage treatment belong to bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.