Amended in Senate June 26, 2013

Amended in Senate June 11, 2013

Amended in Senate May 29, 2013

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, repeal, and add 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 insert , end insert and criteria by which begin insert , end insert a local agency, as defined, may invest and deposit its funds, including its surplus funds. Existing law authorizes a local agency to invest in begin delete specified end delete certificates of deposit begin insert provided that they do not exceed 30% of the agency’s funds that may be invested for this purpose, as specified end insert .

This bill would, until January 1, 2017, remove the term “certificates of deposit” and instead authorize a local agency to invest in deposits, as specified, and limit the amount of its funds that an agency may place with any one 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. begin insert The bill would prescribe requirements for the financial institutions that a private sector entity is authorized to use. 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. 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 begin delete submit the funds to
a private sector entity that assists in the placement of deposits end delete begin insert use
a private sector entity to help place local agency 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 begin delete ,
for the local agency’s account end delete begin insert and are within the network used by
the private sector entity for this purpose end insert .

begin delete

(c) The full amount of the deposit placed pursuant to subdivision
(b) by the private sector entity and the interest that may be accrued
for each such deposit shall at all times be insured by the Federal
Deposit Insurance Corporation or the National Credit Union
Administration.

end delete begin insert

(c) Any private sector entity used by a selected depository
institution to help place its local agency deposits shall maintain
policies and procedures requiring both of the following:

end insert begin insert

(1) The full amount of each deposit placed pursuant to
subdivision (b) and the interest that may accrue on each such
deposit shall at all times be insured by the Federal Deposit
Insurance Corporation or the National Credit Union
Administration.

end insert begin insert

(2) Every depository institution where funds are placed shall
be capitalized at a level that is sufficient, and be otherwise eligible,
to receive such deposits pursuant to regulations of the Federal
Deposit Insurance Corporation or the National Credit Union
Administration, as applicable.

end insert

(d) The selected depository institution shall serve as a custodian
for each such deposit.

(e) On the same date that the local agency’s funds are placed
pursuant to subdivision (b) by the private sector entity, 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
subdivision (b).

(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) The deposits placed pursuant to this section and Section
53635.8 shall not, in total, exceed 30 percent of the agency’s funds
that may be invested for this purpose.

(i) Purchases of certificates of deposit pursuant to this section,
Section 53635.8, and subdivision (i) of Section 53601 shall not,
in total, exceed 30 percent of the agency’s funds that may be
invested for this purpose.

(j) Excluding purchases of certificates of deposit pursuant to
this section, no more than 10 percent of the agency’s funds that
may be invested for this purpose may be submitted, pursuant to
subdivision (b), to any one 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.

(k) This section shall remain in effect only until January 1, 2017,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2017, deletes or extends that date.

SEC. 2.  

Section 53601.8 is added to the Government Code, 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 may, at its discretion, invest a portion of its surplus
funds in certificates of deposit 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 certificates of deposit,
provided that the purchases of certificates of deposit 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 certificates
of deposit 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 principal and the interest that may
be accrued during the maximum term of each certificate of 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 certificate of deposit that is issued with the placement
service for the local agency’s account.

(e) At the same time the local agency’s funds are deposited and
the certificates of deposit are issued, the selected depository
institution shall receive an amount of deposits from other
commercial banks, savings banks, savings and loan associations,
or credit unions 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.

(f) Notwithstanding subdivisions (a) to (e), inclusive, no credit
union may 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 certificate of 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) This section shall become operative on January 1, 2017.

SEC. 3.  

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. 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 begin delete submit the funds to
a private sector entity that assists in the placement of deposits with end delete
begin insert use a private sector entity to help place local agency deposits with end insert
one or more commercial banks, savings banks, savings and loan
associations, or credit unions that are located in the United States begin delete ,
for the local agency’s account end delete begin insert and are within the network used by
the private sector entity for this purpose end insert .

begin delete

(c) The full amount of the deposit placed pursuant to subdivision
(b) by the private sector entity and the interest that may be accrued
for each such deposit shall at all times be insured by the Federal
Deposit Insurance Corporation or the National Credit Union
Administration.

end delete begin insert

(c) Any private sector entity used by a selected depository
institution to help place its local agency deposits shall maintain
policies and procedures requiring both of the following:

end insert begin insert

(1) The full amount of each deposit placed pursuant to
subdivision (b) and the interest that may accrue on each such
deposit shall at all times be insured by the Federal Deposit
Insurance Corporation or the National Credit Union
Administration.

end insert begin insert

(2) Every depository institution where funds are placed shall
be capitalized at a level that is sufficient, and be otherwise eligible,
to receive such deposits pursuant to regulations of the Federal
Deposit Insurance Corporation or the National Credit Union
Administration, as applicable.

end insert

(d) The selected depository institution shall serve as a custodian
for each such deposit.

(e) On the same date that the local agency’s funds are placed
pursuant to subdivision (b) by the private sector entity, 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 subdivision (b).

(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) The deposits placed pursuant to this section and Section
53601.8 shall not, in total, exceed 30 percent of the agency’s funds
that may be invested for this purpose.

(i) Purchases of certificates of deposit pursuant to this section,
Section 53601.8, and subdivision (i) of Section 53601 shall not,
in total, exceed 30 percent of the agency’s funds that may be
invested for this purpose.

(j) Excluding purchases of certificates of deposit pursuant to
this section, no more than 10 percent of the agency’s funds that
may be invested for this purpose may be submitted, pursuant to
subdivision (b), to any one 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.

(k) This section shall remain in effect only until January 1, 2017,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2017, deletes or extends that date.

SEC. 4.  

Section 53635.8 is added to the Government Code, 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 certificates of deposit 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 certificates of deposit,
provided that the purchases of certificates of deposit 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 certificates
of deposit 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 principal and the interest that may
be accrued during the maximum term of each certificate of 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 certificate of deposit that is issued with the placement
service for the local agency’s account.

(e) At the same time the local agency’s funds are deposited and
the certificates of deposit are issued, the selected depository
institution shall receive an amount of deposits from other
commercial banks, savings banks, savings and loan associations,
or credit unions 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.

(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 certificate of 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) This section shall become operative on January 1, 2017.