CHAPTER 105. DEPOSITORIES FOR MUNICIPAL FUNDS - Texas Statutes

LOCAL GOVERNMENT CODE

TITLE 4. FINANCES

SUBTITLE A. MUNICIPAL FINANCES

CHAPTER 105. DEPOSITORIES FOR MUNICIPAL FUNDS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 105.001. DEFINITIONS. In this chapter:

(1) "Bank" means a state bank or a national bank that has its

main office or a branch office in this state.

(2) "Credit union" means a state credit union or federal credit

union domiciled in this state.

(3) "Demand deposit" means a deposit of funds that may be

withdrawn on the demand of the depositor.

(4) "Depository" means the bank, credit union, or savings

association selected by the municipality to provide depository

services.

(5) "Time deposit" means a deposit of funds subject to a

contract between the depositor and the depository under which the

depositor may not withdraw any of the funds by check or by

another manner until the expiration of a certain period following

written notice of the depositor's intent to withdraw the funds.

(6) "Depository services" means the receipt and disbursement of

funds by a depository in accordance with the terms of a

depository services contract.

(7) "Depository services contract" means a contract executed by

a municipality and a depository containing terms and conditions

relating to the depository services to be provided by the

depository.

(8) "Designated officer" means the treasurer of a municipality

or other officer of the municipality so designated by the

governing body of a municipality.

(9) "Federal credit union" means a credit union organized under

the Federal Credit Union Act (12 U.S.C. Section 1751 et seq.).

(10) "Federal savings association" means a savings and loan

association or a savings bank organized under federal law.

(11) "National bank" means a banking corporation organized under

the provisions of 12 U.S.C. Section 21.

(12) "Savings association" means a savings association or

savings bank organized under the laws of this state, another

state, or federal law that has its main office or a branch office

in this state.

Text of subsec. (13) as amended by Acts 1999, 76th Leg., ch. 62,

Sec. 7.79

(13) "State bank" has the meaning assigned by Section 31.002(a),

Finance Code.

Text of subsec. (13) as amended by Acts 1999, 76th Leg., ch. 344,

Sec. 5.008

(13) "State bank" means a bank organized under the laws of this

state or another state.

(14) "State credit union" means a credit union organized under

Subtitle D, Title 3, Finance Code.

(15) "State savings association" means any savings and loan

association or savings bank organized under the laws of this

state.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993; Acts 1995, 74th Leg., ch. 914, Sec. 9, eff. Sept. 1, 1995;

Acts 1999, 76th Leg., ch. 62, Sec. 7.79, eff. Sept. 1, 1999; Acts

1999, 76th Leg., ch. 344, Sec. 5.008, eff. Sept. 1, 1999.

Sec. 105.002. FUNDS AFFECTED. This chapter applies to the

funds, including school funds, of any municipality or any

department or agency of the municipality.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

SUBCHAPTER B. ESTABLISHMENT OF DEPOSITORY

Sec. 105.011. DEPOSITORY AUTHORIZED. (a) Before awarding a

depository services contract to a depository, the governing body

of a municipality shall receive applications for the performance

of depository services from one or more banks, credit unions, or

savings associations.

(b) The governing body may consider the application of a bank,

credit union, or savings association that is not doing business

within the municipality if:

(1) the bank, credit union, or savings association maintains a

place of business within the state and offers within the state

the services required by the depository services contract; and

(2) the governing body, prior to giving the notice required by

Section 105.012, has adopted a written policy expressly

permitting the consideration of applications received by the

municipality from a bank, credit union, or savings association

that is not doing business within the municipality, after taking

into consideration what is in the best interest of the

municipality in establishing a depository.

(c) The designated officer shall request, receive, and review

applications for the performance of depository services. The

designated officer shall present the specifications of each

application to the governing body who will then select a

depository.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1989, 71st Leg., ch. 1, Sec. 14(a), eff. Aug. 28,

1989; Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1, 1993.

Sec. 105.012. NOTICE. (a) The designated officer shall give

notice to banks, credit unions, and savings associations

requesting the submission of applications for the performance of

depository services.

(b) The notice must contain:

(1) the name and address of the designated officer receiving the

applications;

(2) the date and time the applications are to be received by the

designated officer; and

(3) the date, time, and place the governing body of the

municipality will consider the selection of one or more

depositories.

(c) Notice of the request shall be published at least once no

later than 21 days prior to the deadline for receipt of

applications for depository services contracts (i) in a newspaper

of general circulation in the municipality and (ii) in a

financial publication of general circulation published within

this state; provided, that the notice required by clause (ii)

shall not be required if the governing body has not adopted the

written policy described in Section 105.011.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.013. APPLICATION. The designated officer may not

consider an application if it is received after the date

specified in the notice for receiving applications by the

designated officer.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.014. REVIEW OF APPLICATIONS. In reviewing the

applications, the designated officer shall consider the terms and

conditions for the performance of depository services, including

the type and cost of services to be provided to the municipality,

consistent with any policy guidelines adopted by the governing

body regarding the selection of one or more depositories.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.015. SELECTION OF DEPOSITORY. (a) The governing body

of a municipality may authorize the designated officer to execute

on the municipality's behalf one or more depository services

contracts.

(b) The governing body may reject any of the applications and

readvertise if all applications are rejected.

(c) The conflict of interests provisions of Section 131.903

apply to the selection of the depositories.

Added by Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1,

1987. Renumbered from Sec. 105.014 and amended by Acts 1993, 73rd

Leg., ch. 234, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1993,

73rd Leg., ch. 268, Sec. 25, eff. Sept. 1, 1993.

Sec. 105.016. DESIGNATION OF DEPOSITORY. (a) The governing

body shall designate, by an order recorded in its minutes, the

bank, credit union, or savings association to serve as a

depository for the municipality's funds.

(b) If a bank, credit union, or savings association selected as

a municipal depository does not provide security by the deadline

prescribed by Section 105.031, the selection of the bank, credit

union, or savings association as a depository is void, and the

governing body may consider the application it deems to be the

next most advantageous depository services application.

Added by Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1,

1987. Renumbered from Sec. 105.015 and amended by Acts 1993, 73rd

Leg., ch. 234, Sec. 1, eff. Sept. 1, 1993.

Sec. 105.017. TERM OF DEPOSITORY CONTRACT. A municipality may

approve, execute, and deliver any depository services contract

whose term does not exceed five years. The depository services

contract may only contain terms and conditions approved by the

governing body of the municipality.

Added by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.018. ADDITIONAL SERVICES. In addition to depository

services, a municipality may contract with financial

institutions, including banks, credit unions, and savings

associations, for additional financial services under a separate

contract if the governing body of the municipality determines

that additional financial services are necessary in the

administration, collection, investment, and transfer of municipal

funds.

Added by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

SUBCHAPTER C. SECURITY FOR FUNDS HELD BY DEPOSITORY

Sec. 105.031. QUALIFICATION AS DEPOSITORY. (a) The bank or

savings association, to qualify as a municipal depository, must,

not later than five days before the commencement of the term of

the depository services contract, provide security for the

municipal funds to be deposited in accordance with the terms of

the depository services contract.

(b) Chapter 2257, Government Code governs the type, level,

substitution, possession, release, and method of valuation of the

security necessary to secure the deposit of municipal funds.

(c) Repealed by Acts 2001, 77th Leg., ch. 402, Sec. 20(a), eff.

Sept. 1, 2001.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993; Acts 1995, 74th Leg., ch. 76, Sec. 5.95(12), eff. Sept. 1,

1995; Acts 2001, 77th Leg., ch. 402, Sec. 20(a), eff. Sept. 1,

2001.

Sec. 105.033. SURETY BOND. (a) One or more bonds issued and

executed by one or more solvent surety companies authorized to do

business in this state, payable to the municipality and filed

with the secretary and the designated officer of the

municipality, qualify as security under this subchapter if the

bonds are approved by the governing body.

(b) After the governing body approves a surety bond, it shall be

filed with the secretary and the designated officer of the

municipality.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.034. CONDITIONS TO ACTING AS DEPOSITORY. (a) The

depository shall:

(1) keep the municipal funds covered by the depository services

contract;

(2) perform all duties and obligations imposed on the depository

by law and under the depository services contract;

(3) pay on presentation all checks drawn and properly payable on

a demand deposit account with the depository;

(4) pay all transfers properly payable as directed by a

designated officer;

(5) provide and maintain security at the level required by the

provisions of Chapter 2257, Government Code; and

(6) account for the municipal funds as required by law.

(b) Any suit brought in connection with a depository services

contract must be tried in the county in which the city hall of

the municipality is located.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993; Acts 1995, 74th Leg., ch. 76, Sec. 5.95(12), eff. Sept. 1,

1995.

SUBCHAPTER D. MAINTENANCE AND MODIFICATION OF SECURITY

Sec. 105.051. MAINTENANCE OF SECURITY. (a) A depository

services contract shall contain terms and conditions relating to

the possession, substitution, or release of security, including:

(1) requiring the depository to execute a new bond or pledge

additional securities for the deposit of municipal funds;

(2) substituting one security for another;

(3) releasing securities pledged by a depository in excess of

the amount required by this chapter;

(4) the time period in which such addition, substitution, or

release of security by a depository may occur; and

(5) other matters relating to the possession, substitution, or

release of security the municipality considers necessary for its

protection.

(b) If a depository fails for any reason to comply with the

requirements governing the possession, substitution, or release

of security, the governing body may select a new depository in

the manner provided in this chapter.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.053. SOLVENCY OF SURETY COMPANY AND ADEQUACY OF

SECURITIES. At any time the governing body of the municipality

considers it necessary for the protection of the municipality,

the governing body may direct the designated officer to

investigate the solvency of a surety company that issues a bond

on behalf of a municipal depository or investigate the value of

securities pledged by a depository to secure municipal funds.

Added by Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1,

1987. Renumbered from Sec. 105.056 and amended by Acts 1993, 73rd

Leg., ch. 234, Sec. 1, eff. Sept. 1, 1993.

Sec. 105.054. SURRENDER OF INTEREST ON SECURITIES. Except as

provided for in the collateral policies of the municipality

adopted in accordance with Chapter 2257, Government Code, on

request of a municipal depository, the municipality shall

surrender, when due, interest coupons or other evidence of

interest on securities deposited by the depository with the

governing body if the securities remaining pledged by the

depository are adequate to meet the requirements of this chapter

and of the governing body.

Added by Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1,

1987. Renumbered from Sec. 105.057 and amended by Acts 1993, 73rd

Leg., ch. 234, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1995,

74th Leg., ch. 76, Sec. 5.95(12), eff. Sept. 1, 1995.

SUBCHAPTER E. DEPOSITORY ACCOUNTS

Sec. 105.071. CHARACTER AND AMOUNT OF DEPOSITS. (a) The

governing body of the municipality may determine and designate in

the depository services contract the character and amount of

municipal funds that will be demand deposits. However, the

municipality has the right to maintain other investments of

municipal funds in accordance with the investment policy adopted

by the municipality.

(b) The designated officer may contract with a depository for

interest on time deposits, including, without limitation,

certificates of deposit, at any legal rate under federal or state

law, rule, or regulation.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.072. INVESTMENTS. The provisions of Chapter 810, Acts

of the 66th Legislature, Regular Session, 1979 (Article

4413(34c), Vernon's Texas Civil Statutes), and Subchapter A,

Chapter 2256, Government Code shall govern the investment of

municipal funds.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993; Acts 1995, 74th Leg., ch. 76, Sec. 5.95(11), eff. Sept. 1,

1995.

Sec. 105.073. DEPOSIT OF FUNDS. Not later than 60 days from the

date the governing body of the municipality designates a

depository in accordance with the provisions of Section 105.016,

the designated officer of the municipality shall transfer to the

depository all the municipal funds covered by the depository

services contract under the control of the designated officer.

The designated officer of the municipality shall as soon as

practicable also deposit in the depository to the credit of the

municipality any money covered by the depository services

contract received after the depository is designated.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.074. PAYMENT OF FUNDS. (a) The funds of the

municipality may be paid out of a depository only at the

direction of a designated officer.

(b) Except as provided in Subsection (g), a designated officer

may draw a check on a depository only on a warrant signed by the

mayor and attested by the secretary of the municipality.

(c) If there is sufficient money in a fund in a depository

against which the proper authority has drawn a warrant, the

designated officer on presentation of the warrant shall draw a

check on the depository in favor of the legal holder of the

warrant, retain the warrant, and charge the warrant against the

fund on which it is drawn. The designated officer may not draw a

warrant on a fund in a depository unless the fund has sufficient

money to pay the warrant.

(d) A designated officer may not draw a check on any funds

designated in the depository services contract as time deposits

until notice has been given and the notice period has expired

under the terms of the contract with the depository.

(e) The mayor and secretary of the municipality may not draw a

warrant on a special fund in a depository or under the control of

the designated officer that was created to pay the bonded

indebtedness of the municipality other than to pay the principal

of or interest on the indebtedness or to invest the fund as

provided by law.

(f) The designated officer may not pay or draw a check to pay

money out of a special fund that was created to pay the bonded

indebtedness of the municipality other than to pay the principal

of or interest on the indebtedness or to invest the fund as

provided by law.

(g) Notwithstanding the provisions of Subsections (b) through

(f), the governing body of a municipality may adopt procedures:

(1) governing the method by which the designated officer is

authorized to direct payments from the funds of the municipality

on deposit with a depository;

(2) governing the method of payment of obligations of the

municipality, including payment by check, draft, wire transfer,

or other method of payment mutually acceptable to the

municipality and the depository; and

(3) the governing body determines are necessary to ensure the

safety and integrity of the payment process.

(h) If a municipality adopts procedures in accordance with

Subsection (g), a copy of the adopted procedures shall be filed

with the depository. The designated officer and the depository

shall agree upon record-keeping safeguards and other measures

necessary to ensure the safety and integrity of the payment

process. The safeguards must be approved by the governing body of

the municipality if the governing body finds that the safeguards

are consistent with and do not contravene the procedures adopted

under Subsection (g).

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.075. CHECKS PAYABLE AT DEPOSITORY. Checks drawn by the

treasurer of the municipality against municipal funds on deposit

are payable by the depository at its place of business in the

municipality.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

Sec. 105.076. DEBTS PAYABLE OTHER THAN AT MUNICIPAL TREASURY.

The governing body of the municipality may direct the designated

officer to withdraw from a depository and deposit money

sufficient to pay a bond, coupon, or other indebtedness of the

municipality at a place other than at the municipal treasury if

by its terms the indebtedness is payable on maturity or upon

redemption prior to maturity at the other location.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.

SUBCHAPTER F. LIABILITY AND REPORT OF DESIGNATED OFFICER

Sec. 105.091. LIABILITY OF DESIGNATED OFFICER. (a) The

designated officer is not responsible for any loss of municipal

funds through the negligence, failure, or wrongful act of a

depository. This subsection does not release the designated

officer from responsibility for a loss resulting from the

official misconduct of the designated officer, including a

misappropriation of the funds, or from responsibility for the

funds until a depository is selected and the funds are deposited.

(b) A designated officer who diverts money from an interest and

sinking fund or who applies money in that fund for a purpose

other than as permitted by Section 105.074(f) is:

(1) subject to a penalty of not less than $500 or more than

$1,000; and

(2) liable for the amount of money that is diverted.

(c) The state is entitled to recover a penalty imposed under

Subsection (b)(1). The amount of diverted money that is recovered

under Subsection (b)(2) shall be paid into the municipal treasury

to the credit of the fund from which it was diverted.

(d) The attorney general or the district attorney of the

district in which the designated officer resides, or the county

attorney in a county that is not served by a district attorney,

may institute suit against the designated officer and the

sureties on the designated officer's official bond to recover the

amounts described by Subsection (b).

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993; Acts 1999, 76th Leg., ch. 227, Sec. 6, eff. Sept. 1, 1999.

Sec. 105.092. REPORT BY DESIGNATED OFFICER. In conjunction with

the publication of the annual financial statement of the

municipality, the designated officer shall prepare a report which

shall describe in summary form:

(1) the amount of receipts and expenditures of the municipal

treasury;

(2) the amount of money on hand in each fund;

(3) the amount of bonds becoming due for redemption that require

action;

(4) the amount of interest to be paid during the next fiscal

year; and

(5) any other information required by law to be reported by the

designated officer.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1993, 73rd Leg., ch. 234, Sec. 1, eff. Sept. 1,

1993.