The opinion
Mr. Bruce Campbell Opinion NO. JM-832
President
Brazes River Authority Re: The selection and quali-
P. 0. Box 7555 fication of depositories for
Waco, Texas 76714 the funds of River Authorities
(RQ-1034)
Dear Mr. Campbell:
At the request of the board of directors of the
Brazes River Authority, established in 1929 by special
law, see Acts 1929, 41st Leg., 2d C.S., Special Laws, ch.
13, at 22, you pose three questions about the power of the
river authority to make deposits of its funds. You ask:
P Under the provisions of article
44Gi34c) , can funds of the authority be
deposited in banks offering FDIC [Federal
Deposit Insurance Corporation] insurance to
the extent that the deposits are fully
covered by such insurance without requiring
pledge of securities to additionally secure
such deposits?
b. Under article 4413(34c), can the
authority enter into arrangements with
members of bank holding company families
which will take deposits in excess of
$100,000.00 and distribute them among other
members of the holding company families, so
that all of the deposits are fully insured
by FDIC insurance, without requiring each of
the depositories to qualify in the manner
provided for in county depositories?
C. Under article. 4413(34c) can the
authority deposit its funds in &counts of
or certificates of deposit issued by banks
which have not qualified as depositories of
authority funds in the manner provided for
C
county depositories if such deposits are
fully covered by FDIC insurance?
p. 3985
Mr. Bruce Campbell - Page 2 O-832)
Each of your questions concerns the intent and scope
of article 4413(34c), V.T.C.S., a 1979 act relating to
the investment of public funds in the custody of state
agencies and political subdivisions. See Acts 1979, 66th
Leg., ch. 810,. at 2071. The statute provides in pertinent
part:
Section 1. In this Act:
(1) 'Local funds' means public funds in
the custody of a state agency or political
subdivision that are not required by law to
be deposited in the state treasury and
that the aaencv subdivision has leaal
authoritv to invezg.
(2) 'State agency' means an office,
department, commission, board, or other
agency, including an institution of higher
education or a river authority, that is a
part of any branch of state government.
. . . .
Sec. 2. Each state agency or political
subdivision shall adopt rules,governing the
investment of local funds of the agency or
~subdivision. The rules shall clearly
specify the scope of authority of officers
and employees of the agency or subdivision
that are designated to invest the local
funds.
. . . .
Sec. 6. A state agency or political
subdivision shall invest local funds in
investments that yield the highest possible
rate of return while providing necessary
protection of the principal consistent with
the operating requirements as determined by
the governing body.
Sec. 7. This section does not prohibit
.h,
an investment specifically authorized by
other law nor authorize an investment soeci-
ficallv orohibited bv other law. (Emphasis
added.)
P
As this office observed in Attorney General Opinion
MB-224 (1980), article 4413(34c), V.T.C.S., applies only
p. 3986
Mr. Bruce Campbell - Page 3 (m-832)
to funds which the political subdivision or state agency
has authority to invest, and placing funds in a depository
is not an investment of those funds. Lawson v. Baker, 220
S.W. 260 (Tex. Civ. App. - Austin 1920, writ ref'd).
Thus, article 4413(34c), does not authorize the Brazes
River Authority to invest funds which other statutes
require to be placed in an official depository. See
Attorney General Opinion Nos. MW-343 (1981): H-1013
(1977): H-723 (1975). Nor does it in any way alter legal
requirements for official depositories.
The original designation of the Brasos River Authority
was "The Brazes River Conservation and Reclamation
District." Acts 1929, 41st Leg., 2d C.S., Special Laws,
ch. 13, at 22. The name was changed in 1953. See Acts
1953, 53rd Leg., ch. 194, 51, at 531. In 1939, this
office determined that article 7880-113, V.T.C.S.,
governed the selection and usage of a depository for the
San Jacinto River Conservation and Reclamation District, a
similar agency created by special act. See Attorney
General Opinion O-1707 (1939). The language found in the
statute creating the San Jacinto River district upon which
Attorney General Opinion O-1707 relied for its conclusion
is also found in the Brazes River Authority statute. We
conclude that both are governed by the same law respecting
depositories. Cf. Acts 1934, 43rd Leg., 4th C.S., ch. 7,
517, at 19, 31 (Lower Colorado River Authority Act -- "no
other law with regard to the . . . deposit of the proceeds
[of bonds] . . . shall be construed as applying"); Lower
Colorado River Authoritv v. Chemical Bank and Trust Co.
185 S.W.Zd 461 (Tex. Civ. App. - Austin), aff'd, 190
S.W.2d 48 (Tex. 1945).
With the enactment of the Water Code in 1971, see
Acts 1971, 62d Leg., ch. 58, at 110, portions of article
7880-113 became sections 51.356 and 51.357 of the code.
Section 51.356 provides:
(a) The board shall select a depository
for the district in the manner provided for
the selection of a county depository and
shall perform all duties provided by law for
the selection of a depository, acceptance
and approval of bonds, and other acts.
(b) The depository shall execute a good
and sufficient bond or security that will be
the same as provided by law for a county
depository approved by the board to fully
protect the district and to guarantee the
preservation of the funds and the
p. 3987
Mr. Bruce Campbell - Page 4 (~~-832)
.-
accountability of the depository as provided
by law. The bond or security shall be
recorded in the district office and kept in
a fireproof vault or safe.
(c) Except as otherwise provided, the
duties and the bond and security of the
depository shall be the same as provided by
law for a county depository.
Section 51.357 reads:
(a) Funds of the district shall be
deposited in the depository and shall be
paid out as provided in this chapter.
(b) The funds shall be deposited in the
interest and sinking fund account, the
construction account, or the maintenance
account, and each account shall be main-
tained separately.
(c) No money may be paid from the
P
interest and sinking fund account except to
pay interest and principal on bonds and to
pay the expenses of assessing and collecting
taxes to pay for the bonds.
(d) The depository shall make a report
of all money received and paid out by it at
the end of each month and shall file the
report and the vouchers with the records of
the district in the depository vault. A
copy of the report shall be made available
for inspection by any taxpayer and shall be
delivered to the successor of the
depository.
Sub:;ection (b) of section 51.356 specifies that the
depository shall execute a bond or security "that will he
the same as provided by law for a county depository." The
law that controls the bond or security to be furnished by
a county depository is now found in chapters 116, 117, 130
and 131 of the Local Government Code. Section 116.060
thereof reads:
P
A depository is not required to provide
security for the deposit of county funds to
the extent the deposits are insured under 12
U.S.C.A. Sections 1811-1832.
p. 3988
Mr. Bruce Campbell - Page 5 (JM-832)
Sections 1811-1832 of 12 U.S.C. deal with the Federal
Deposit Insurance Corporation. Consequently, in reply to
your first question, to qualify as the depository for the
river authority, the selected depository need not furnish
bonds or pledge securities to protect the amount to be
deposited that will be insured by the Federal Deposit
Insurance Corporation.
In response to your second question, we advise that
the authority cannot arrange with a bank holding company
to distribute the authority's deposits among member banks
that have not qualified according to law as official
depositories of the authority. See Attorney General
Opinion Nos. JM-383 (1985); H-1185 (1978).
We answer your third question in the same vein. The
authority may not deposit its funds in accounts .of banks
which have not qualified as depositories of the authority,
nor purchase certificates of deposit from any bank in lieu
of following the requirements of law for the selection of
depositories. @g Attorney General Opinion Nos. JM-383
(1985) ; MW-343 (1981); MW-224 (1980); H-1013 (1977). cf.
Local Gov't Code 5116.112(a), (b) (withdrawal of deposits
in certain circumstances exclusively for investment in
direct debt securities of the United States or fully
collateralized repurchase agreements): V.T.C.S. art.
6252-5a. (permissible investments in other circumstances).
SUMMARY
Article 4413(34c), V.T.C.S., does not
alter legal requirements for official
depositories. The Brazes River Authority
cannot directly or indirectly deposit its
funds in depositories that have not
qualified according to law, but in order to
qualify as an official depository the
depository selected need not furnish bonds
or pledge securities to protect deposits
that are insured by the Federal Deposit
Insurance Corporation.
JIM MATTOX
Attorney General of Texas
MARY KELLER
Executive Assistant Attorney General
p. 3989
,
Mr. Bruce Campbell - Page 6 (JM-832)
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Bruce Youngblood
Assistant Attorney General
p. 3990