(a) The governing body of any municipality, as defined in Kan. Stat. Ann. § 10-101, and amendments thereto, which has issued or may issue bonds or temporary notes for any purpose, is hereby authorized and empowered to invest any portion of the proceeds of such bonds, notes or funds held pursuant to the resolution or ordinance authorizing the issuance of such bonds or notes, which is not currently needed, in: (1) Investments authorized by Kan. Stat. Ann. § 12-1675, and amendments thereto, in the manner prescribed therein; (2) the municipal investment pool established pursuant to Kan. Stat. Ann. § 12-1677a, and amendments thereto; (3) direct obligations of the United States government or any agency thereof; (4) the municipality’s temporary notes issued pursuant to Kan. Stat. Ann. § 10-123, and amendments thereto; (5) interest-bearing time deposits in commercial banks located in the county or counties in which the municipality is located; (6) subject to the limitations provided in subsection (b), obligations of the federal national mortgage association, federal home loan banks, the federal home loan mortgage corporation or the government national mortgage association; (7) repurchase agreements for securities described in (3) or (6); (8) investment agreements with or other obligations of a financial institution the obligations of which at the time of investment are rated in either of the three highest rating categories by Moody’s investors service or Standard and Poor’s corporation; (9) investments in shares or units of a money market fund or trust the portfolio of which is comprised entirely of securities described in (3) or (6); (10) receipts evidencing ownership interests in securities or portions thereof described in (3) or (6); (11) municipal bonds or other obligations issued by any municipality of the state of Kansas as defined in Kan. Stat. Ann. § 10-1101, and amendments thereto, which are general obligations of the municipality issuing the same; or (12) bonds of any municipality of the state of Kansas as defined in Kan. Stat. Ann. § 10-1101, and amendments thereto, which have been refunded in advance of their maturity and are fully secured as to payment of principal and interest thereon by deposit in trust, under escrow agreement with a bank, of securities described in (3) or (6). The interest received on any such investment shall upon receipt thereof be set aside and used for the purpose of paying interest on the bonds or notes issued or used for paying the cost of the project for which the bonds or notes were issued.

(b) No moneys authorized to be invested pursuant to subsection (a) shall be invested in a derivative.

For the purposes of this section, “derivative” means any investment instrument whose market price is derived from the fluctuating value of an underlying asset, index, currency, futures contract, including futures, options and collateralized mortgage obligations.