### THE ATTORNEY GEXEIRAL OF 

### ?FEXAS

December 30, 1986 x,TQRXRY QEXRRAL

@mrabIe F. A. Cerda OpinionNo. ~~-604 DistrictAttorney P. 0. Box 340 Re: Whether a political subdivision Eebbronville,Texas 78361 may designate a credit union as a

Dear Mr. Cerda:

as aYou ask whether a general law city may designate a credit union depository formunicipal funds. We conclude that itmay not.
Your question arises because of a conflict between article depositoryof public funds

2+61-4.01(a)(S),V.T.C.S.. setting forth the powers of a creditunion and articles 2559et seq.., V.T.C.S., governinga city’s selectionof a depository. Article 2559, V.T.C.S., p.rovides the following in pertinentpart:

The governingbody of every city, townandvillage in the State of Texas. incorporatedunder either the General or Special Laws, including those operating under special charter or amendments of charter adopted pursuant to the ‘Eome Rule’ provisions of the Constitution, is authorized to receiveapplicationsfor the custodyof city funds .from any banking corporation, association or Individual banker that may desire to be selected as a depository of the city, town or village. (Emphasisadded). Article 2560.V.T.C.S., sets forth the following in pertinentpart:

Upon considering the applications submitted, the novernina bodv shall select as the deuositorv or depositoiies bf such funds the banking - corpora- tions,associationor individualbanker or bankers offering the most favorable terms and conditions for thehandling of such funds. (Emphasisadded). Article 2461-4.01,V.T.C.S., sets forth the generalpowers of a credit union. Subsection (a) specificallyprovides that

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[a]credit'unionmay exerciseall powers nacessary or appropriate to accomplish the purposes for which it is organized and all powers granted corporations authorized to do business in this state. These powers include,but are not limited to, thepower to:

. . . . (8) act as agent or depository of the United States, any agent or instrumentalityof theUnited States, this or any other state, ot any city, town. village, county, school district.municipal corporation, political subdivision, or taxing authority of this or any other state, accept for deposit the funds of such an entity or both.
. . . (Emphasisadded).
V.T.C.S. art. 2461-4.01(a)(8). It is clear that a credit union is authorized to act as a depository of a city's public funds. At issue is whether a city may choose a credit union as a depository and specifically whether a credit union is a "banking corporation, sssociation or.individual banker" for purposes of article 2559 c s, V.T.C.S. On the basis of .priorauthority, we conclude that it is not. Article 2461-4.01. V.T.C.S., authorizes credit unions to .receivedeposits from political subdivisions; it does not authorize political subdivisions to make such deposits in. credit unions. SeeAttorney General OpinionH-723 (1975). - Ii Attorney General Opinion MW-534 (1982).this office concluded that neither a credit union nor a'ssvings and loan could serve as a depository for a hospital district. Citing prior opinions of this officewhich hold that savingsand loan associationswere not embraced .bythe phrase "banking corporation,association or individualbanker" for purposes of articles 2544 through 2558a. V.T.C.S., governing a county's selection of a depository (made applicable to hospital districts by article 4494n. 110,V.T.C.S.), the opinion extended the same rationale to credit unions as well. See Attorney General Opinions MW-272 (1980) (reaches credit unions aGel as savings and loan associations); E-1013 (1977) (soil and water conservation district not authorized to deposit funds in savings and loan associations); E-723 (1975) (same with regard to political subdivisions); M-22 (1967) (concluding that "banking corporations, associations or individual banker" does not include savings and loan associations for purposes of the depository statutes). Cf. Attorney General Opinion JM-42 (1983) (PTA funds may be depositedin credit union where statutesdo not governdisposition of funds). The opinion relied in part upon the policy considerations set forth In an earlier opinion of this office, Attorney General Opinion WW-838-A (1961). which held inapplicable to credit unions an article of the banking

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code which prohibits "branch banking." In that earlier opinion this officedeclared:

[Although]creditunions exercise two of the most important functions of banking, the receiving of deposits and the lending of money, it must be recognized that credit unions or associations are not 'banks'as that term is defined in the Texas Banking Code of 1943
. . . [citation omitted1 or as that term is commonly used or understood. Furthermore, the operations of a credit union In receiving deposits or lending money are substantially different from the corresponding operations of a commercialbank, snd in fact, the functionsandunderlying concept of a creditunion arebasicallydifferent from those of a commercial bank. The opinion then detailed other basic functions distinguishboth banks from credit unions and banks loan associations. Cf. Attorney General Opinion withdrawn and replaced by Attorney General Opinion (also indexed as-Attorney-Generalbpinion C-87 we conclude that a city may not designate depository. of banking that from savings and NW-1498 (1962)) NW-1498-A (1963) (1963)). Accordingly, a credit union as a

SUMMARY Article 2559, V.T.C.S., does not city to designate a credit union as for city funds. authorize s a depository

JIM MATTOX AttorneyGeneral of Teras
JACK HIGHTONER FirstAssistantAttorney General
MARY KFLLER ExecutiveAssistantAttorneyGeneral
RICK GILPIN Chairman,Opinion Committee Preparedby JimMoellinger AssistantAttorneyGeneral

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