BILL REQ. #:  S-0173.1 

Read first time 01/27/09.   Referred to Committee on Ways & Means.

     AN ACT Relating to the deposit of public funds; and amending RCW 39.58.010, 35.38.060, 35.58.510, 36.48.060, and 43.08.280.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 39.58.010 and 1996 c 256 s 1 are each amended to read as follows:
     In this chapter, unless the context otherwise requires:
     (1) "Public funds" means moneys under the control of a treasurer or custodian belonging to, or held for the benefit of, the state or any of its political subdivisions, public corporations, municipal corporations, agencies, courts, boards, commissions, or committees, including moneys held as trustee, agent, or bailee;
     (2) "Public depositary" means a financial institution ((which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state,)) which has been approved by the commission to hold public deposits, and which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability. Addition of the word "bank" denotes a bank, trust company, or national banking association and the word "thrift" denotes a savings association or savings bank;
     (3) "Loss" means the issuance of an order by a regulatory or supervisory authority or a court of competent jurisdiction (a) restraining a public depositary from making payments of deposit liabilities or (b) appointing a receiver for a public depositary;
     (4) "Commission" means the Washington public deposit protection commission created under RCW 39.58.030;
     (5) "Eligible collateral" means securities which are enumerated in RCW 39.58.050 (5) and (6) as eligible collateral for public deposits;
     (6) The "maximum liability" of a public depositary on any given date means a sum equal to ten percent of (a) all public deposits held by the ((qualified)) public depositary on the then most recent commission report date, or (b) the average of the balances of said public deposits on the last four immediately preceding reports required pursuant to RCW 39.58.100, whichever amount is greater, less any assessments paid to the commission pursuant to this chapter since the then most recent commission report date;
     (7) "Public funds available for investment" means such public funds as are in excess of the anticipated cash needs throughout the duration of the contemplated investment period;
     (8) "Investment deposits" means time deposits, money market deposit accounts, and savings deposits of public funds available for investment;
     (9) "Treasurer" shall mean the state treasurer, a county treasurer, a city treasurer, a treasurer of any other municipal corporation, and any other custodian of public funds;
     (10) "Financial institution" means ((any)) a national or state-chartered commercial bank or trust company, savings bank, ((or)) savings association, or federal or state-chartered credit union, or branch or branches thereof, located in this state and lawfully engaged in business;
     (11) "Commission report" means a formal accounting rendered by all public depositaries to the commission in response to a demand for specific information made by the commission detailing pertinent affairs of each public depositary as of the close of business on a specified date, which is the "commission report date." "Commission report due date" is the last day for the timely filing of a commission report;
     (12) "Director of financial institutions" means the Washington state director of the department of financial institutions;
     (13) "Net worth" of a public depositary means (a) the equity capital as reported to its primary regulatory authority on the quarterly report of condition or statement of condition and may include capital notes and debentures which are subordinate to the interests of depositors, or (b) equity capital adjusted by rule of the commission;
     (14) "Depositary pledge agreement" means a tripartite agreement executed by the commission with a financial institution and its designated trustee. Such agreement shall be approved by the directors or the loan committee of the financial institution and shall continuously be a record of the financial institution. New securities may be pledged under this agreement in substitution of or in addition to securities originally pledged without executing a new agreement;
     (15) "Trustee" means a third-party safekeeping agent which has completed a depositary pledge agreement with a public depositary and the commission. Such third-party safekeeping agent may be the federal reserve bank of San Francisco, the federal home loan bank of Seattle, the trust department of the public depositary, or such other third-party safekeeping agent approved by the commission.

Sec. 2   RCW 35.38.060 and 1984 c 177 s 4 are each amended to read as follows:
     "Financial institution," as used in the foregoing provisions of this chapter, means a branch of a bank engaged in banking in this state in accordance with RCW 30.04.300, and any state bank or trust company, national banking association, stock savings bank, mutual savings bank, ((or)) savings and loan association, or credit union, which institution is located in this state and lawfully engaged in business.

Sec. 3   RCW 35.58.510 and 1965 c 7 s 35.58.510 are each amended to read as follows:
     All banks, trust companies, bankers, savings banks, and institutions, building and loan associations, savings and loan associations, credit unions, investment companies and other persons carrying on a banking or investment business, all insurance companies, insurance associations, and other persons carrying on an insurance business, and all executors, administrators, curators, trustees and other fiduciaries, may legally invest any sinking funds, moneys, or other funds belonging to them or within their control in any bonds or other obligations issued by a metropolitan municipal corporation pursuant to this chapter. Such bonds and other obligations shall be authorized security for all public deposits. It is the purpose of this section to authorize any persons, political subdivisions and officers, public or private, to use any funds owned or controlled by them for the purchase of any such bonds or other obligations. Nothing contained in this section with regard to legal investments shall be construed as relieving any person of any duty of exercising reasonable care in selecting securities.

Sec. 4   RCW 36.48.060 and 1984 c 177 s 9 are each amended to read as follows:
     "Financial institution," whenever it occurs in RCW 36.48.010 through 36.48.050, means a branch of a bank engaged in banking in this state in accordance with RCW 30.04.300, and any state bank or trust company, national banking association, stock savings bank, mutual savings bank, ((or)) savings and loan association, or credit union, which institution is located in this state and lawfully engaged in business.

Sec. 5   RCW 43.08.280 and 1999 c 293 s 2 are each amended to read as follows:
     (1) The state treasurer is authorized to negotiate a statewide custody contract for custody services for local governments and institutions of higher education. The term of the contract shall be for a minimum of four years.
     (2) The state treasurer shall, as soon as is practical after negotiations have been successfully completed, notify local governments and institutions of higher education that a statewide custody contract has been negotiated.
     (3) Following such notification, each local government or institution of higher education may, at its option, become a signatory to the statewide contract. Each local government or institution of higher education may only become a signatory to the contract by having its authorized local government official or financial officer and the statewide custodian execute the statewide contract. The contract is between the statewide custodian and the respective local government or institution of higher education. It is the responsibility of the local government official or financial officer to fully understand the terms and conditions of the statewide custody contract prior to its execution, and to ensure those terms and conditions are observed by the statewide custodian during the term of the contract.
     (4) The state treasurer may adopt rules to implement this section, including, but not limited to, those rules deemed necessary to provide for an orderly transition in the event of a different statewide custodian in a new statewide custody contract.
     (5) Any statewide custodian who becomes a signatory to the statewide custody contract may be exempted from the requirements of chapter 39.58 RCW for the purposes of this section, based on rules adopted by the public deposit protection commission.
     (6) For the purposes of this section:
     (a) "Financial institution" means a bank, credit union, or trust company chartered and supervised under state or federal law;
     (b) "Local government" means any county, city, town, special purpose district, political subdivision, municipal corporation, or quasi-municipal corporation, including any public corporation created by such an entity, which legally possesses and exercises investment authority;
     (c) "Statewide custody contract" means a contract negotiated between the state treasurer and a financial institution that establishes terms and fees for custody services which are optional to any local government for the term of the contract;
     (d) "Statewide custodian" means the financial institution with whom the state treasurer has negotiated a statewide custody contract;
     (e) "Custody services" means services performed by a financial institution such as the settlement, safekeeping, valuation, and market-value reporting of negotiable instruments owned by the local government;
     (f) "Local government official" means any officer or employee of a local government who has been designated by statute or local charter, ordinance, or resolution as the officer having the authority to invest the funds of the local government. However, the county treasurer is the only local government official for all political subdivisions for which the county treasurer has statutory or contractual authority to invest the funds thereof;
     (g) "Financial officer" means the board-appointed treasurer of a college, university, community or technical college district, or the state board for community and technical colleges.