Court Opinion

ID: 4130637
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:06:41.882653+00
Date Added: 2024-06-11T14:31:42.026558
License: Public Domain

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