LOCAL GOVERNMENT CODE
CHAPTER 105. DEPOSITORIES FOR MUNICIPAL FUNDS
SUBCHAPTER A. GENERAL PROVISIONS
§ 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be withdrawn on the demand of the depositor.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,
§ 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,
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993; Acts
1995, 74th Leg., ch. 914, § 9, eff. Sept. 1, 1995; Acts 1999,
76th Leg., ch. 62, § 7.79, eff. Sept. 1, 1999; Acts 1999, 76th
Leg., ch. 344, § 5.008, eff. Sept. 1, 1999.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
SUBCHAPTER B. ESTABLISHMENT OF DEPOSITORY
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1989, 71st Leg., ch. 1, § 14(a), eff. Aug. 28, 1989; Acts
1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987.
Renumbered from § 105.014 and amended by Acts 1993, 73rd Leg.,
ch. 234, § 1, eff. Sept. 1, 1993. Amended by Acts 1993, 73rd
Leg., ch. 268, § 25, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987.
Renumbered from § 105.015 and amended by Acts 1993, 73rd Leg.,
ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1993.
SUBCHAPTER C. SECURITY FOR FUNDS HELD BY DEPOSITORY
§ 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, § 20(a),
eff. Sept. 1, 2001.
Acts 1987, 70th Leg., ch. 149, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993; Acts
1995, 74th Leg., ch. 76, § 5.95(12), eff. Sept. 1, 1995; Acts
2001, 77th Leg., ch. 402, § 20(a), eff. Sept. 1, 2001.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993; Acts
1995, 74th Leg., ch. 76, § 5.95(12), eff. Sept. 1, 1995.
SUBCHAPTER D. MAINTENANCE AND MODIFICATION OF SECURITY
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987.
Renumbered from § 105.056 and amended by Acts 1993, 73rd Leg.,
ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987.
Renumbered from § 105.057 and amended by Acts 1993, 73rd Leg.,
ch. 234, § 1, eff. Sept. 1, 1993. Amended by Acts 1995, 74th
Leg., ch. 76, § 5.95(12), eff. Sept. 1, 1995.
SUBCHAPTER E. DEPOSITORY ACCOUNTS
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993; Acts
1995, 74th Leg., ch. 76, § 5.95(11), eff. Sept. 1, 1995.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
SUBCHAPTER F. LIABILITY AND REPORT OF DESIGNATED OFFICER
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993; Acts
1999, 76th Leg., ch. 227, § 6, eff. Sept. 1, 1999.
§ 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, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 1, eff. Sept. 1, 1993.
