Bill Text: CA AB945 | 2019-2020 | Regular Session | Chaptered

California Assembly Bill 945 (Prior Session Legislation)

Bill Title: Local government: financial affairs: surplus funds.

Spectrum: Slight Partisan Bill (Democrat 2-1)

Status: (Passed) 2019-10-08 - Chaptered by Secretary of State - Chapter 619, Statutes of 2019. [AB945 Detail]

Download: California-2019-AB945-Chaptered.html

Assembly Bill No. 945

CHAPTER 619

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

[ Approved by Governor October 08, 2019. Filed with Secretary of State October 08, 2019. ]

LEGISLATIVE COUNSEL'S DIGEST

AB 945, McCarty. Local government: financial affairs: surplus funds.

Existing law prescribes the instruments and criteria by which a local agency, as defined, may invest and deposit its funds, including its surplus funds. Existing law, until January 1, 2021, authorizes a local agency, under certain conditions, to invest up to 30% of the agency’s surplus funds in deposits at specified types of financial institutions that use a private sector entity to assist in the placement of deposits, as specified. Existing law, on and after January 1, 2021, authorizes a local agency, under certain conditions, to invest up to 30% of the agency’s surplus funds in certificates of deposit at specified types of financial institutions.

This bill would instead, commencing January 1, 2020, authorize a local agency to invest and deposit the agency’s surplus funds in deposits at specified types of financial institutions whether those investments are in certificates of deposit or another form. The bill, from January 1, 2020, until January 1, 2026, also would increase to 50% the percentage of funds that can be so invested by a city, district, or other local agency that does not pool money in deposits or investments with other local agencies with a different governing body. The bill would, on and after January 1, 2026, authorize those same cities, districts, and agencies to invest up to 30% of the agency’s surplus funds in the same manner described above. The bill would make additional conforming changes.

Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO

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

SECTION 1.

Section 53601.8 of the Government Code, as amended by Section 1 of Chapter 181 of the Statutes of 2015, is amended to read:

53601.8.

Notwithstanding 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 use a private sector entity to help place local agency deposits with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States and are within the network used by the private sector entity for this purpose.

(c) The selected depository institution shall request that the local agency inform it of depository institutions at which the local agency has other deposits, and the selected depository institution shall provide that information to the private sector entity.

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

(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.

(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.

(3) At the time of the local agency’s investment with a selected depository institution and no less than monthly thereafter, the private sector entity shall ensure that the local agency is provided with an inventory of all depository institutions in which deposits have been placed on the local agency’s behalf, that are within the private sector entity’s network.

(4) Within its network, the private sector entity shall ensure that it does not place additional deposits from a particular local agency with any depository institution identified pursuant to subdivision (c) as holding that local agency’s deposits if those additional deposits would result in that local agency’s total amount on deposit at that depository institution exceeding the Federal Deposit Insurance Corporation or the National Credit Union Administration insurance limit.

(e) If a selected depository uses two or more private sector entities to assist in the placement of a local agency’s deposits, the selected depository shall ensure that it does not place additional deposits from a particular local agency with a depository institution if those additional deposits would result in that local agency’s total amount on deposit at that depository institution exceeding the Federal Deposit Insurance Corporation or the National Credit Union Administration insurance limit.

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

(g) 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).

(h) Notwithstanding subdivisions (a) to (g), inclusive, a credit union shall not act as a selected depository institution under this section 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.

(i) 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.

(j) The deposits placed pursuant to this section shall be subject to Section 53638 and shall not, in total, exceed 50 percent of the agency’s funds that may be invested for this purpose.

(k) This section shall remain in effect until January 1, 2026, and as of that date is repealed.

SEC. 2.

Section 53601.8 of the Government Code, as amended by Section 2 of Chapter 181 of the Statutes of 2015, is repealed.

SEC. 3.

Section 53601.8 is added to the Government Code, to read:

53601.8.

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

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

(h) Notwithstanding subdivisions (a) to (g), inclusive, a credit union shall not act as a selected depository institution under this section unless both of the following conditions are satisfied:

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

(i) 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.

(j) The deposits placed pursuant to this section shall be subject to Section 53638 and shall not, in total, exceed 30 percent of the agency’s funds that may be invested for this purpose.

(k) This section shall become operative on January 1, 2026.

SEC. 4.

Section 53635.8 of the Government Code, as amended by Section 3 of Chapter 181 of the Statutes of 2015, is amended to read:

53635.8.

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

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

(h) Notwithstanding subdivisions (a) to (g), inclusive, a credit union shall not act as a selected depository institution under this section unless both of the following conditions are satisfied:

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

(i) 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.

(j) The deposits placed pursuant to this section shall be subject to Section 53638 and shall not, in total, exceed 30 percent of the agency’s funds that may be invested for this purpose.