HOUSE OF REPRESENTATIVES

                      Olympia, Washington

Bill Analysis      Bill No.  HB 1183

Negotiating state-wide custody contracts

Brief Title                              Hearing Date: 1/29/99

Reps. H. Sommers and Huff                 Staff:  Steve Lundin

Sponsor(s)                          State Government Committee

                                              Phone:  786-7127

BACKGROUND:

Local governments are authorized to invest their moneys in a variety of investments.

All local governments may deposit their money into savings accounts, time accounts, or money market deposit accounts of designated public depositories.  A public depository is a financial institution designated by the Washington public depository commission, or state finance committee, (composed of the state treasurer, lieutenant governor, and governor) that accepts public deposits of moneys and is required to segregate a certain amount of securities apart from its other assets as security for the public moneys on deposit.  The state finance committee is authorized to take control of these securities if the public depository has a loss and use proceeds from the sale of these securities to reimburse the local governments that deposited moneys in the failing financial institution for their loses.

In addition, local governments are allowed to invest their moneys in a variety of securities, including federal securities or other obligations of federal agencies, bankers acceptances purchased on the secondary market, federal home loan bank securities, and federal land bank securities.  Cities and towns may also invest in other types of securities, including Washington state bonds, general obligation bonds and utility revenue bonds of any city or town in the state, and their own local improvement district bonds.

The state treasurer acts as the treasurer for public moneys provided to institutions of higher education.  However, each four-year institution of higher education has direct control over other moneys provided to the institution, such as grants and bequests, as well as tuition fees, and may invest these moneys.

SUMMARY:

Commencing on September 1, 1999, the state treasurer may negotiate a statewide custody contract to provide custodial banking services on investments made by local governments and institutions of higher education.  Custodial banking services are services for the settlement, safekeeping, valuation, and market-value reporting of negotiable instruments owned by a local government or institution of higher education.  The contract must last for a period of at least four years.  If a new statewide custodian is designated, the state treasurer is authorized to adopt rules to ensure the orderly transition from the prior custodian to the new custodian.

Any local government or institution of higher education may, at its option, become a signatory to the statewide contract for custody services, which is a contract between the participating local governments or institution of higher education and the statewide custodian, and utilize the custodial banking services of the statewide custodian.

FISCAL NOTE:  Not requested.

EFFECTIVE DATE:  This act takes effect September 1, 1999.