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Mr. Bruce Campbell 

President 

Brazes River Authority 

P. 0. Box 7555 

Waco, Texas 76714 

Opinion NO. JM-832 

Re: The selection and qualification of depositories for 

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: 

Under the 

44Gi34c) 

provisions of article 

, 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 

county depositories if such deposits are 

fully covered by FDIC insurance? 

p. 3985 
Mr. Bruce Campbell - Page 2 O-832) 

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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 

authoritv to invezg. 

subdivision has leaal 

(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 

an investment specifically authorized by 

other law nor authorize an investment soecificallv orohibited bv other law. (Emphasis 

added.) 

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. this 

office determined 

In 1939, 

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 

General Opinion O-1707 (1939). 

Attorney 

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 
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Mr. Bruce Campbell - Page 4 (~~-832) 

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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 maintained separately. 

(c) No money may be paid from the 

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: 

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 

Insurance Corporation. 

Deposit 

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 

Local Gov't Code 5116.112(a), (b) (withdrawal 

(1977). cf. 

in certain circumstances 

of deposits 

investment in 

direct debt 

exclusively for 

securities of the United States or 

collateralized 

fully 

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 

cannot directly 

River Authority 

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 

that are insured by the Federal 

deposits 

Deposit 

Insurance Corporation. 

JIM MATTOX 

Attorney General of Texas 

MARY KELLER 

Executive Assistant Attorney General 

p. 3989 
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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