§ 10 — Deposits of public money; security

New York § 10

• Jurisdiction: New York
• Law GMU: General Municipal
• Art. 2: General Municipal Finances

Text

§ 10. Deposits of public money; security. 1. For purposes of this\nsection:\n a. "Local government" shall mean any municipal corporation, school\ndistrict, board of cooperative educational services, district\ncorporation, special improvement district governed by a separate board\nof commissioners, industrial development agency or authority or a public\nlibrary.\n b. "Public funds" shall mean funds of a local government.\n c. "Public deposits" shall mean deposits of public funds in a bank or\ntrust company which are available for all uses generally permitted by\nthe bank or trust company to the depositing local government for\nactually and finally collected funds under the bank's or trust company's\naccount agreement or policies.\n d. "Bank" shall mean a bank as defined by the banking law or a\nnational banking association located and authorized to do business in\nNew York.\n e. "Trust company" shall mean a trust company as defined by the\nbanking law and located and authorized to do business in New York.\n f. "Eligible securities" shall mean any of the following:\n (i) Obligations issued by the United States of America, an agency\nthereof or a United States government sponsored corporation or\nobligations fully insured or guaranteed as to the payment of principal\nand interest by the United States of America, an agency thereof or a\nUnited States government sponsored corporation.\n (ii) Obligations issued or fully guaranteed by the International Bank\nfor Reconstruction and Development, the Inter-American Development Bank,\nthe Asian Development Bank, and the African Development Bank.\n (iii) Obligations partially insured or guaranteed by any agency of the\nUnited States of America, at a proportion of the market value of the\nobligation that represents the amount of the insurance or guaranty.\n (iv) Obligations issued or fully insured or guaranteed by this state,\nobligations issued by a municipal corporation, school district or\ndistrict corporation of this state or obligations of any public benefit\ncorporation which under a specific state statute may be accepted as\nsecurity for deposit of public moneys.\n (v) Obligations issued by states (other than this state) of the United\nStates rated in one of the three highest rating categories by at least\none nationally recognized statistical rating organization.\n (vi) Obligations of Puerto Rico rated in one of the three highest\nrating categories by at least one nationally recognized statistical\nrating organization.\n (vii) Obligations of counties, cities and other governmental entities\nof another state having the power to levy taxes that are backed by the\nfull faith and credit of such governmental entity and rated in one of\nthe three highest rating categories by at least one nationally\nrecognized statistical rating organization.\n (viii) Obligations of domestic corporations rated in one of the four\nhighest rating categories by at least one nationally recognized\nstatistical rating organization.\n (ix) Any mortgage related securities, as defined in the Securities\nExchange Act of 1934, as amended, which may be purchased by banks under\nthe limitations established by federal bank regulatory agencies.\n (x) Commercial paper and bankers' acceptances issued by a bank (other\nthan the bank with which the money is being deposited or invested) rated\nin the highest short-term category by at least one nationally recognized\nstatistical rating organization and having maturities of not longer than\nsixty days from the date they are pledged.\n (xi) Zero-coupon obligations of the United States government marketed\nas "Treasury STRIPS".\n g. "Eligible surety bond" shall mean a bond executed by an insurance\ncompany authorized to do business in this state, the claims-paying\nability of which is rated in the highest rating category by at least two\nnationally recognized statistical rating organizations.\n h. "Eligible letter of credit" shall mean an irrevocable letter of\ncredit issued in favor of the local government for a term not to exceed\nninety days by a bank (other than the bank with which the money is being\ndeposited or invested) whose commercial paper and other unsecured\nshort-term debt obligations (or, in the case of a bank which is the\nprincipal subsidiary of a holding company, whose holding company's\ncommercial paper and other unsecured short-term debt obligations) are\nrated in one of the three highest rating categories (based on the credit\nof such bank or holding company) by at least one nationally recognized\nstatistical rating organization or by a bank (other than the bank with\nwhich the money is being deposited or invested) that is incompliance\nwith applicable federal minimum risk-based capital requirements.\n 2. a. (i) The governing board of every local government shall\ndesignate one or more banks or trust companies for the deposit of public\nfunds, the disposition of which is not otherwise provided for by law,\nreceived by the chief fiscal officer or any other officer authorized by\nlaw to make deposits. Such designation shall be by resolution of the\ngoverning board or, in the case of a city, such other body as may be\nauthorized or required by law to designate depositaries. Such resolution\nshall specify the maximum amount which may be kept on deposit at any\ntime in each such bank or trust company. Such designations and amounts\nmay be changed at any time by further resolution.\n (ii) The governing board of a local government that has designated one\nor more banks or trust companies for the deposit of public funds\npursuant to subparagraph (i) of this paragraph may, in its discretion,\nauthorize the designated bank or trust company to arrange for the\nredeposit of the local government's funds in one or more banking\ninstitutions, as defined in section nine-r of the banking law, for the\naccount of the local government, through a deposit placement program\nthat meets all of the following conditions:\n (A) On or after the date that the local government's funds are\nreceived, the designated bank or trust company (I) arranges for the\nredeposit of such funds into deposit accounts in one or more banking\ninstitutions and (II) serves as custodian for the local government with\nrespect to the funds redeposited into such accounts.\n (B) Local government funds deposited in a designated bank or trust\ncompany in accordance with this subparagraph and held in the designated\nbank or trust company in excess of the amount insured by the federal\ndeposit insurance corporation pending redeposit of the funds pursuant to\nthis subparagraph shall be secured in accordance with subdivision three\nof this section.\n (C) The full amount of local government funds redeposited by the\ndesignated bank or trust company into deposit accounts in banking\ninstitutions pursuant to this subparagraph (plus accrued interest, if\nany) shall be insured by the federal deposit insurance corporation.\n (D) At the same time that the money of the local government is\nredeposited pursuant to this subparagraph, the selected depository\nreceives an amount of deposits from customers of other financial\ninstitutions pursuant to the deposit placement program that are at least\nequal to the amount of the local government's funds redeposited by the\ndesignated bank or trust company.\n b. Except as otherwise provided by law, all deposits shall be made to\nthe credit of the local government. The deposit of public funds pursuant\nto this subdivision shall release the officer making the deposit and his\nor her surety from any liability for loss of such public funds by reason\nof the default or insolvency of any such bank or trust company.\n c. The governing board of a local government, in which a banking\ndevelopment district has been designated by the superintendent of\nfinancial services pursuant to section ninety-six-d of the banking law,\nmay designate a bank, trust company or national bank located in such\ndistrict for the deposit of public funds, the disposition of which is\nnot otherwise provided for by law, received by the chief fiscal officer\nor other officer authorized by law to make such deposits. Such\ndesignation shall be by resolution of the governing board or, in the\ncase of a city, such other body as may be authorized or required by law\nto designate depositories. Such resolution shall specify the maximum\namount which may be kept on deposit at any time with such bank, trust\ncompany or national bank located in such district. Subject to an\nagreement between such governing board and such banking institution,\npublic funds deposited in such banking institution may earn a fixed\ninterest rate which is at or below such banking institution's posted two\nyear certificate of deposit rate. In those instances where there is such\nan agreement, its terms and conditions shall also be specified in the\nresolution. Any such designation, amount, or agreement provisions may be\nchanged at any time by further resolution.\n 3. All public deposits in excess of the amount insured under the\nprovisions of the Federal Deposit Insurance Act as now or hereafter\namended shall be secured in accordance with this subdivision:\n a. The officers making a deposit may accept a pledge of eligible\nsecurities having in the aggregate a market value at least equal to the\naggregate amount of public deposits from such officers, or a pledge of a\npro rata portion of a pool of eligible securities having in the\naggregate a market value at least equal to the aggregate amount of\npublic deposits from all such officers within the state at such bank or\ntrust company, together with a security agreement from the bank or trust\ncompany. The security agreement and custodial agreement referred to\nbelow may be the same agreement including when the bank or trust company\nholding the public deposits holds the collateral for the public body.\nThe security agreement shall provide that such eligible securities or\npro rata portion of a pool of eligible securities are being pledged by\nthe bank or trust company as security for the public deposits, together\nwith agreed upon interest, if any, and any costs or expenses arising out\nof the collection of such deposit upon a default. It shall also provide\nfor the conditions under which the securities or pro rata portion of a\npool of eligible securities held may be sold, presented for payment,\nsubstituted or released and the events of default which will enable the\nlocal government to exercise its rights against the pledged securities.\nSuch agreement shall include all provisions deemed necessary and\nsufficient to secure in a satisfactory manner the local government's\ninterest in the collateral. The custodial agreement shall provide that\nthe pledged securities or pro rata portion of a pool of eligible\nsecurities will be held by the custodial bank or trust company as agent\nof, and custodian for, the local government, and will be kept separate\nand apart from the general assets of the custodial bank or trust company\nand it shall also provide for the manner in which the custodial bank or\ntrust company shall confirm the receipt, substitution or release of the\ncollateral. Such agreement shall provide for the frequency of\nrevaluation of collateral by the custodial bank or trust company and the\nsubstitution of collateral when a change in the rating of a security\ncauses ineligibility pursuant to paragraph f of subdivision one of this\nsection. Such agreement shall include all provisions deemed necessary\nand sufficient to secure in a satisfactory manner the local government's\ninterest in the collateral. Such agreement may also contain such other\nprovisions as the governing board may deem necessary.\n b. Whenever eligible securities delivered to a custodial bank or trust\ncompany pursuant to this paragraph are transferred by entries on the\nbooks of a federal reserve bank or other book-entry system operated by a\nfederally regulated entity without physical delivery of the evidence of\nsuch obligations, the records of the custodial bank or trust company\nshall show, at all times, the interest of the local government in such\nsecurities or pro rata portion of a pool of eligible securities as set\nforth in the security agreement.\n c. (i) In lieu of or in addition to the deposit of eligible\nsecurities, the officers making a deposit may accept an eligible surety\nbond payable to such local government as security for the payment of one\nhundred percent, or an eligible letter of credit payable to such local\ngovernment as security for the payment of one hundred forty percent, of\nthe aggregate amount of public deposits from such officers and the\nagreed upon interest, if any. The terms and conditions of any eligible\nsurety bond shall be approved by the governing board.\n (ii) In lieu of or in addition to the deposit of eligible securities,\nthe officers making a deposit may, in the case of an irrevocable letter\nof credit issued in favor of the local government by a federal home loan\nbank whose commercial paper and other unsecured short-term debt\nobligations are rated in the highest rating category by at least one\nnationally recognized statistical rating organization, accept such\nletter of credit payable to such local government as security for the\npayment of one hundred percent of the aggregate amount of public\ndeposits from such officers and the agreed upon interest, if any.\n d. For purposes of determining the market value of securities as\nrequired by this subdivision:\n (i) The eligible securities described in subparagraphs (viii), (x) and\n(xi) of paragraph f of subdivision one of this section shall be valued\nat eighty percent of their market value.\n (ii) The eligible securities described in subparagraph (ix) of\nparagraph f of subdivision one of this section shall be valued at\nseventy percent of their market value.\n (iii) Of the eligible securities described in subparagraphs (v), (vi)\nand (vii) of paragraph f of subdivision one of this section, those\nsecurities rated in the highest category shall be valued at one hundred\npercent of their market value; those securities rated in the second\nhighest rating category shall be valued at ninety percent of their\nmarket value; and those securities rated in the third highest rating\ncategory shall be valued at eighty percent of their market value. When\ntwo nationally recognized statistical rating organizations rate a\nsecurity in two different categories, the security shall be considered\nto be rated in the higher of the two categories.\n 4. (a) Notwithstanding any other provision of law to the contrary, the\nchief fiscal officer, or other officer authorized by law to make\ndeposits, may, subject to the approval of the governing body of a local\ngovernment, by resolution, enter into a contract with a courier service\nfor the purpose of causing the deposit of public funds with a bank or\ntrust company as provided in this section.\n (b) The entrusting of public funds for deposit pursuant to paragraph\n(a) of this subdivision shall release the officer entrusting the public\nfunds to the courier service and his or her surety from any liability\nfor loss of such public funds by the courier service in the process of\ndelivering such public funds to the designated bank or trust company.\n (c) The local government authorizing the deposit of public funds by a\ncourier service pursuant to paragraph (a) of this subdivision shall\nrequire the courier service to obtain a surety bond for the full amount\nentrusted to the courier, payable to the local government and executed\nby an insurance company authorized to do business in this state, the\nclaims paying ability of which is rated in the highest rating category\nby at least two nationally recognized statistical rating organizations,\nto insure against any loss of public funds entrusted to the courier\nservice for deposit or failure to deposit the full amount entrusted to\nthe courier.\n (d) A deposit made by a courier on behalf of a local government shall\nbe deemed to be a deposit made by the chief fiscal officer or other\nofficer entrusting such funds for purposes of the requirements contained\nin this section for securing public deposits.\n (e) A bank or trust company may, from time to time and as agreed upon\nwith a local government, reimburse all or part of, but not more than,\nthe actual cost incurred by the local government in transporting cash,\nnegotiable instruments or other items for deposit through a courier\nservice. Any such reimbursement agreement shall apply only to a\nspecified deposit transaction, and may be subject to such terms,\nconditions and limitations as the bank or trust company deems necessary\nto ensure sound banking practices, including, but not limited to, any\nterms, conditions or limitations that may be required by the department\nof financial services or other federal or state authority.\n