Amended in Assembly March 21, 2013

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 amended, Dickinson. Financial affairs.

Existing law prescribes the instruments in begin delete , end delete and criteria by begin delete , end delete 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 begin delete a private sector entity that assists a selected depository institution of a local agency’s deposits under certain conditions end delete begin insert specified deposits required under these provisions end insert .

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 deposits 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 deposits, provided that the deposits
placed 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 deposits 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 deposit placed pursuant to this section
and the interest that may be accrued for each deposit 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 deposit.

(e) On the same date that the local agency’s funds are deposited
pursuant to this section, the selected depository institution shall
receive an amount of insured deposits from other financial
institutions 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 pursuant to this section.

(f)  Notwithstanding subdivisions (a) to (e), inclusive, a credit
union shall not 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 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 this section shall not
restrict competition among private sector entities that provide
placement services pursuant to this section.

(h) Deposits received by the selected depository institution from
other financial institutions pursuant to subdivision (e) are not
subject begin delete to this article or end delete to public funds reporting requirements
authorized under this article if the deposits are insured by the
Federal Deposit Insurance Corporation begin insert or the National Credit
Union Administration 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 deposits 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 deposits, provided that the deposits
placed 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 deposits 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 deposit placed pursuant to this section
and the interest that may be accrued for each deposit 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 deposit.

(e) On the same date that the local agency’s funds are deposited
pursuant to this section, the selected depository institution shall
receive an amount of insured deposits from other financial
institutions 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 pursuant
to this section.

(f) Notwithstanding subdivisions (a) to (e), inclusive, a credit
union shall not 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 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 this section shall not
restrict competition among private sector entities that provide
placement services pursuant to this section.

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