2023 New York Laws › GMU - General Municipal › Article 2 - General Municipal Finances › 10 - Deposits of Public Money; Security.

§  10.  Deposits  of  public  money; security. 1. For purposes of this
section:
a. "Local government" shall mean  any  municipal  corporation,  school
district,   board   of   cooperative   educational   services,  district
corporation, special improvement district governed by a  separate  board
of commissioners, industrial development agency or authority or a public
library.
b. "Public funds" shall mean funds of a local government.
c.  "Public deposits" shall mean deposits of public funds in a bank or
trust company which are available for all uses  generally  permitted  by
the  bank  or  trust  company  to  the  depositing  local government for
actually and finally collected funds under the bank's or trust company's
account agreement or policies.
d. "Bank" shall mean a bank  as  defined  by  the  banking  law  or  a
national  banking  association  located and authorized to do business in
New York.
e. "Trust company" shall mean  a  trust  company  as  defined  by  the
banking law and located and authorized to do business in New York.
f. "Eligible securities" shall mean any of the following:
(i)  Obligations  issued  by  the  United States of America, an agency
thereof  or  a  United  States  government  sponsored   corporation   or
obligations  fully  insured or guaranteed as to the payment of principal
and interest by the United States of America, an  agency  thereof  or  a
United States government sponsored corporation.
(ii)  Obligations issued or fully guaranteed by the International Bank
for Reconstruction and Development, the Inter-American Development Bank,
the Asian Development Bank, and the African Development Bank.
(iii) Obligations partially insured or guaranteed by any agency of the
United States of America, at a proportion of the  market  value  of  the
obligation that represents the amount of the insurance or guaranty.
(iv)  Obligations issued or fully insured or guaranteed by this state,
obligations issued  by  a  municipal  corporation,  school  district  or
district  corporation of this state or obligations of any public benefit
corporation which under a specific state  statute  may  be  accepted  as
security for deposit of public moneys.
(v) Obligations issued by states (other than this state) of the United
States  rated  in one of the three highest rating categories by at least
one nationally recognized statistical rating organization.
(vi) Obligations of Puerto Rico rated in  one  of  the  three  highest
rating  categories  by  at  least  one nationally recognized statistical
rating organization.
(vii) Obligations of counties, cities and other governmental  entities
of  another  state having the power to levy taxes that are backed by the
full faith and credit of such governmental entity and rated  in  one  of
the   three  highest  rating  categories  by  at  least  one  nationally
recognized statistical rating organization.
(viii) Obligations of domestic corporations rated in one of  the  four
highest   rating  categories  by  at  least  one  nationally  recognized
statistical rating organization.
(ix) Any mortgage related securities, as  defined  in  the  Securities
Exchange  Act of 1934, as amended, which may be purchased by banks under
the limitations established by federal bank regulatory agencies.
(x) Commercial paper and bankers' acceptances issued by a bank  (other
than the bank with which the money is being deposited or invested) rated
in the highest short-term category by at least one nationally recognized
statistical rating organization and having maturities of not longer than
sixty days from the date they are pledged.
(xi)  Zero-coupon obligations of the United States government marketed
as "Treasury STRIPS".
g.  "Eligible  surety bond" shall mean a bond executed by an insurance
company authorized to do  business  in  this  state,  the  claims-paying
ability of which is rated in the highest rating category by at least two
nationally recognized statistical rating organizations.
h.  "Eligible  letter  of  credit" shall mean an irrevocable letter of
credit issued in favor of the local government for a term not to  exceed
ninety days by a bank (other than the bank with which the money is being
deposited  or  invested)  whose  commercial  paper  and  other unsecured
short-term debt obligations (or, in the case of  a  bank  which  is  the
principal  subsidiary  of  a  holding  company,  whose holding company's
commercial paper and other unsecured short-term  debt  obligations)  are
rated in one of the three highest rating categories (based on the credit
of  such  bank or holding company) by at least one nationally recognized
statistical rating organization or by a bank (other than the  bank  with
which  the  money  is  being deposited or invested) that is incompliance
with applicable federal minimum risk-based capital requirements.
2. a.  (i)  The  governing  board  of  every  local  government  shall
designate one or more banks or trust companies for the deposit of public
funds,  the  disposition  of which is not otherwise provided for by law,
received by the chief fiscal officer or any other officer authorized  by
law  to  make  deposits.  Such designation shall be by resolution of the
governing board or, in the case of a city, such other  body  as  may  be
authorized or required by law to designate depositaries. Such resolution
shall  specify  the  maximum  amount which may be kept on deposit at any
time in each such bank or trust company. Such designations  and  amounts
may be changed at any time by further resolution.
(ii) The governing board of a local government that has designated one
or  more  banks  or  trust  companies  for  the  deposit of public funds
pursuant to subparagraph (i) of this paragraph may, in  its  discretion,
authorize  the  designated  bank  or  trust  company  to arrange for the
redeposit of the  local  government's  funds  in  one  or  more  banking
institutions,  as  defined in section nine-r of the banking law, for the
account of the local government, through  a  deposit  placement  program
that meets all of the following conditions:
(A)  On  or  after  the  date  that  the  local government's funds are
received, the designated bank or trust  company  (I)  arranges  for  the
redeposit  of  such  funds  into deposit accounts in one or more banking
institutions and (II) serves as custodian for the local government  with
respect to the funds redeposited into such accounts.
(B)  Local  government  funds  deposited in a designated bank or trust
company in accordance with this subparagraph and held in the  designated
bank  or  trust  company  in excess of the amount insured by the federal
deposit insurance corporation pending redeposit of the funds pursuant to
this subparagraph shall be secured in accordance with subdivision  three
of this section.
(C)  The  full  amount  of  local  government funds redeposited by the
designated bank or  trust  company  into  deposit  accounts  in  banking
institutions  pursuant  to  this subparagraph (plus accrued interest, if
any) shall be insured by the federal deposit insurance corporation.
(D) At the same time  that  the  money  of  the  local  government  is
redeposited  pursuant  to  this  subparagraph,  the  selected depository
receives an  amount  of  deposits  from  customers  of  other  financial
institutions pursuant to the deposit placement program that are at least
equal  to  the amount of the local government's funds redeposited by the
designated bank or trust company.
b. Except as otherwise provided by law, all deposits shall be made  to
the credit of the local government. The deposit of public funds pursuant
to this subdivision shall release the officer making the deposit and his
or her surety from any liability for loss of such public funds by reason
of the default or insolvency of any such bank or trust company.
c.  The  governing  board  of  a  local government, in which a banking
development district  has  been  designated  by  the  superintendent  of
financial  services pursuant to section ninety-six-d of the banking law,
may designate a bank, trust company or national  bank  located  in  such
district  for  the  deposit of public funds, the disposition of which is
not otherwise provided for by law, received by the chief fiscal  officer
or  other  officer  authorized  by  law  to  make  such  deposits.  Such
designation shall be by resolution of the governing  board  or,  in  the
case  of a city, such other body as may be authorized or required by law
to designate depositories. Such resolution  shall  specify  the  maximum
amount  which  may  be kept on deposit at any time with such bank, trust
company or national  bank  located  in  such  district.  Subject  to  an
agreement  between  such  governing  board and such banking institution,
public funds deposited in such banking  institution  may  earn  a  fixed
interest rate which is at or below such banking institution's posted two
year certificate of deposit rate. In those instances where there is such
an  agreement,  its  terms and conditions shall also be specified in the
resolution. Any such designation, amount, or agreement provisions may be
changed at any time by further resolution.
3. All public deposits in excess  of  the  amount  insured  under  the
provisions  of  the  Federal  Deposit  Insurance Act as now or hereafter
amended shall be secured in accordance with this subdivision:
a. The officers making a deposit  may  accept  a  pledge  of  eligible
securities  having in the aggregate a market value at least equal to the
aggregate amount of public deposits from such officers, or a pledge of a
pro rata portion  of  a  pool  of  eligible  securities  having  in  the
aggregate  a  market  value  at  least  equal to the aggregate amount of
public deposits from all such officers within the state at such bank  or
trust company, together with a security agreement from the bank or trust
company.  The  security  agreement  and  custodial agreement referred to
below may be the same agreement including when the bank or trust company
holding the public deposits holds the collateral for  the  public  body.
The  security  agreement  shall provide that such eligible securities or
pro rata portion of a pool of eligible securities are being  pledged  by
the  bank or trust company as security for the public deposits, together
with agreed upon interest, if any, and any costs or expenses arising out
of the collection of such deposit upon a default. It shall also  provide
for  the  conditions under which the securities or pro rata portion of a
pool of eligible securities held may be  sold,  presented  for  payment,
substituted  or released and the events of default which will enable the
local government to exercise its rights against the pledged  securities.
Such  agreement  shall  include  all  provisions  deemed  necessary  and
sufficient to secure in a satisfactory  manner  the  local  government's
interest  in  the collateral. The custodial agreement shall provide that
the pledged securities or  pro  rata  portion  of  a  pool  of  eligible
securities  will be held by the custodial bank or trust company as agent
of, and custodian for, the local government, and will be  kept  separate
and apart from the general assets of the custodial bank or trust company
and  it shall also provide for the manner in which the custodial bank or
trust company shall confirm the receipt, substitution or release of  the
collateral.   Such   agreement   shall  provide  for  the  frequency  of
revaluation of collateral by the custodial bank or trust company and the
substitution of collateral when a change in the  rating  of  a  security

causes  ineligibility pursuant to paragraph f of subdivision one of this
section. Such agreement shall include all  provisions  deemed  necessary
and sufficient to secure in a satisfactory manner the local government's
interest  in  the collateral. Such agreement may also contain such other
provisions as the governing board may deem necessary.
b. Whenever eligible securities delivered to a custodial bank or trust
company pursuant to this paragraph are transferred  by  entries  on  the
books of a federal reserve bank or other book-entry system operated by a
federally  regulated entity without physical delivery of the evidence of
such obligations, the records of the custodial  bank  or  trust  company
shall  show,  at all times, the interest of the local government in such
securities or pro rata portion of a pool of eligible securities  as  set
forth in the security agreement.
c.  (i)  In  lieu  of  or  in  addition  to  the  deposit  of eligible
securities, the officers making a deposit may accept an eligible  surety
bond payable to such local government as security for the payment of one
hundred  percent,  or an eligible letter of credit payable to such local
government as security for the payment of one hundred forty percent,  of
the  aggregate  amount  of  public  deposits  from such officers and the
agreed upon interest, if any. The terms and conditions of  any  eligible
surety bond shall be approved by the governing board.
(ii)  In lieu of or in addition to the deposit of eligible securities,
the officers making a deposit may, in the case of an irrevocable  letter
of credit issued in favor of the local government by a federal home loan
bank   whose  commercial  paper  and  other  unsecured  short-term  debt
obligations are rated in the highest rating category  by  at  least  one
nationally  recognized  statistical  rating  organization,  accept  such
letter of credit payable to such local government as  security  for  the
payment  of  one  hundred  percent  of  the  aggregate  amount of public
deposits from such officers and the agreed upon interest, if any.
d. For purposes of determining  the  market  value  of  securities  as
required by this subdivision:
(i) The eligible securities described in subparagraphs (viii), (x) and
(xi)  of  paragraph f of subdivision one of this section shall be valued
at eighty percent of their market value.
(ii)  The  eligible  securities  described  in  subparagraph  (ix)  of
paragraph  f  of  subdivision  one  of  this  section shall be valued at
seventy percent of their market value.
(iii) Of the eligible securities described in subparagraphs (v),  (vi)
and  (vii)  of  paragraph  f  of  subdivision one of this section, those
securities rated in the highest category shall be valued at one  hundred
percent  of  their  market  value;  those securities rated in the second
highest rating category shall be  valued  at  ninety  percent  of  their
market  value;  and  those  securities rated in the third highest rating
category shall be valued at eighty percent of their market  value.  When
two  nationally  recognized  statistical  rating  organizations  rate  a
security in two different categories, the security shall  be  considered
to be rated in the higher of the two categories.
4. (a) Notwithstanding any other provision of law to the contrary, the
chief  fiscal  officer,  or  other  officer  authorized  by  law to make
deposits, may, subject to the approval of the governing body of a  local
government,  by resolution, enter into a contract with a courier service
for the purpose of causing the deposit of public funds with  a  bank  or
trust company as provided in this section.
(b)  The  entrusting of public funds for deposit pursuant to paragraph
(a) of this subdivision shall release the officer entrusting the  public
funds  to  the  courier service and his or her surety from any liability

for loss of such public funds by the courier service in the  process  of
delivering such public funds to the designated bank or trust company.
(c)  The local government authorizing the deposit of public funds by a
courier service pursuant to paragraph  (a)  of  this  subdivision  shall
require  the courier service to obtain a surety bond for the full amount
entrusted to the courier, payable to the local government  and  executed
by  an  insurance  company  authorized to do business in this state, the
claims paying ability of which is rated in the highest  rating  category
by  at least two nationally recognized statistical rating organizations,
to insure against any loss of public  funds  entrusted  to  the  courier
service  for  deposit or failure to deposit the full amount entrusted to
the courier.
(d) A deposit made by a courier on behalf of a local government  shall
be  deemed  to  be  a  deposit made by the chief fiscal officer or other
officer entrusting such funds for purposes of the requirements contained
in this section for securing public deposits.
(e) A bank or trust company may, from time to time and as agreed  upon
with  a  local  government, reimburse all or part of, but not more than,
the actual cost incurred by the local government in  transporting  cash,
negotiable  instruments  or  other  items  for deposit through a courier
service.  Any  such  reimbursement  agreement  shall  apply  only  to  a
specified  deposit  transaction,  and  may  be  subject  to  such terms,
conditions and limitations as the bank or trust company deems  necessary
to  ensure  sound  banking practices, including, but not limited to, any
terms, conditions or limitations that may be required by the  department
of financial services or other federal or state authority.