California Legislature—2013–14 Regular Session

Assembly Bill No. 279

Introduced by Assembly Member Dickinson

February 11, 2013

An act to amend Sections 53601.8 and 53635.8 of the Government Code, relating to local government.

LEGISLATIVE COUNSEL’S DIGEST

AB 279, as introduced, Dickinson. Financial affairs.

Existing law prescribes the instruments in, and criteria by, which a local agency, as defined, may invest and deposit its funds, including its surplus funds. Existing law authorizes a local agency to invest in specified certificates of deposit.

This bill would remove the term “certificates of deposit” and instead authorize a local agency to invest in deposits. This bill would also exclude from public funds reporting requirements a private sector entity that assists a selected depository institution of a local agency’s deposits under certain conditions.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 53601.8 of the Government Code is
amended to read:

53601.8.  

Notwithstanding Section 53601 or any other provision
of this code, a local agency that has the authority under law to
invest funds, at its discretion, may invest a portion of its surplus
funds in begin delete certificates of deposit end delete begin insert deposits end insert at a commercial bank,
savings bank, savings and loan association, or credit union that
uses a private sector entity that assists in the placement of
begin delete certificates of deposit, end delete begin insert deposits, end insert provided that the begin delete purchases of
certificates of deposit end delete begin insert deposits placed end insert pursuant to this section,
Section 53635.8, and subdivision (i) of Section 53601 do not, in
total, exceed 30 percent of the agency’s funds that may be invested
for this purpose. The following conditions shall apply:

(a) The local agency shall choose a nationally or state chartered
commercial bank, savings bank, savings and loan association, or
credit union in this state to invest the funds, which shall be known
as the “selected” depository institution.

(b) The selected depository institution may submit the funds to
a private sector entity that assists in the placement of begin delete certificates
of deposit end delete begin insert deposits end insert with one or more commercial banks, savings
banks, savings and loan associations, or credit unions that are
located in the United States, for the local agency’s account.

(c) The full amount of the begin delete principal end delete begin insert deposit placed pursuant to
this section end insert and the interest that may be accrued begin delete during the
maximum term of each certificate of deposit end delete begin insert for each deposit end insert shall
at all times be insured by the Federal Deposit Insurance
Corporation or the National Credit Union Administration.

(d) The selected depository institution shall serve as a custodian
for each begin delete certificate of end delete deposit begin delete that is issued with the placement
service for the local agency’s account end delete .

(e)  begin delete At the same time the local agency’s funds are deposited and
the certificates of deposit are issued, end delete begin insert On the same date that the
local agency’s funds are deposited pursuant to this section, end insert the
selected depository institution shall receive an amount of begin insert insured end insert
deposits from other begin delete commercial banks, savings banks, savings and
loan associations, or credit unions end delete begin insert financial institutions end insert that, in
total, are equal to, or greater than, the full amount of the principal
that the local agency initially deposited through the selected
depository institution begin delete for investment end delete begin insert pursuant to this section end insert .

(f)  Notwithstanding subdivisions (a) to (e), inclusive, begin delete no end delete begin insert a end insert credit
union begin delete may end delete begin insert shall not end insert act as a selected depository institution under
this section or Section 53635.8 unless both of the following
conditions are satisfied:

(1) The credit union offers federal depository insurance through
the National Credit Union Administration.

(2) The credit union is in possession of written guidance or other
written communication from the National Credit Union
Administration authorizing participation of federally insured credit
unions in one or more begin delete certificate of end delete deposit placement services
and affirming that the moneys held by those credit unions while
participating in a deposit placement service will at all times be
insured by the federal government.

(g) It is the intent of the Legislature that begin delete nothing in end delete this section
shall begin insert not end insert restrict competition among private sector entities that
provide placement services pursuant to this section.

begin insert

(h) Deposits received by the selected depository institution from
other financial institutions pursuant to subdivision (e) are not
subject to this article or to public funds reporting requirements
authorized under this article if the deposits are insured by the
Federal Deposit Insurance Corporation.

end insert

SEC. 2.  

Section 53635.8 of the Government Code is amended
to read:

53635.8.  

Notwithstanding Section 53601 or any other provision
of this code, a local agency that has the authority under law to
invest funds, at its discretion, may invest a portion of its surplus
funds in begin delete certificates of deposit end delete begin insert deposits end insert at a commercial bank,
savings bank, savings and loan association, or credit union that
uses a private sector entity that assists in the placement of
begin delete certificates of deposit, end delete begin insert deposits, end insert provided that the begin delete purchases of
certificates of deposit end delete begin insert deposits placed end insert pursuant to this section,
Section 53601.8, and subdivision (i) of Section 53601 do not, in
total, exceed 30 percent of the agency’s funds that may be invested
for this purpose. The following conditions shall apply:

(a) The local agency shall choose a nationally or state-chartered
commercial bank, savings bank, savings and loan association, or
credit union in this state to invest the funds, which shall be known
as the “selected” depository institution.

(b) The selected depository institution may submit the funds to
a private sector entity that assists in the placement of begin delete certificates
of deposit end delete begin insert deposits end insert with one or more commercial banks, savings
banks, savings and loan associations, or credit unions that are
located in the United States, for the local agency’s account.

(c) The full amount of the begin delete principal end delete begin insert deposit placed pursuant to
this section end insert and the interest that may be accrued begin delete during the
maximum term of each certificate of deposit end delete begin insert for each deposit end insert shall
at all times be insured by the Federal Deposit Insurance
Corporation or the National Credit Union Administration.

(d) The selected depository institution shall serve as a custodian
for each begin delete certificate of end delete deposit begin delete that is issued with the placement
service for the local agency’s account end delete .

(e)  begin delete At the same time the local agency’s funds are deposited and
the certificates of deposit are issued, end delete begin insert On the same date that the
local agency’s funds are deposited pursuant to this section end insert begin insert , end insert the
selected depository institution shall receive an amount of begin insert insured end insert
deposits from other begin delete commercial banks, savings banks, savings and
loan associations, or credit unions end delete begin insert financial institutions end insert that, in
total, are equal to, or greater than, the full amount of the principal
that the local agency initially deposited through the selected
depository institution for investment begin insert pursuant to this section end insert .

(f) Notwithstanding subdivisions (a) to (e), inclusive, begin delete no end delete begin insert a end insert credit
union begin delete may end delete begin insert shall not end insert act as a selected depository institution under
this section or Section 53601.8 unless both of the following
conditions are satisfied:

(1) The credit union offers federal depository insurance through
the National Credit Union Administration.

(2) The credit union is in possession of written guidance or other
written communication from the National Credit Union
Administration authorizing participation of federally insured credit
unions in one or more begin delete certificate of end delete deposit placement services
and affirming that the moneys held by those credit unions while
participating in a deposit placement service will at all times be
insured by the federal government.

(g) It is the intent of the Legislature that begin delete nothing in end delete this section
shall begin insert not end insert restrict competition among private sector entities that
provide placement services pursuant to this section.

begin insert

(h) Deposits received by the selected depository institution from
other financial institutions pursuant to subdivision (e) are not
subject to this article or to public funds reporting requirements
authorized under this article if the deposits are insured by the
Federal Deposit Insurance Corporation.

end insert