LOCAL GOVERNMENT CODE
SUBTITLE C. FINANCIAL PROVISIONS APPLYING TO MORE THAN ONE TYPE OF
LOCAL GOVERNMENT
CHAPTER 131. DEPOSITORY PROVISIONS AFFECTING FUNDS OF
MUNICIPALITIES, COUNTIES, AND OTHER LOCAL GOVERNMENTS
SUBCHAPTER A. SPECIAL DEPOSITORY
§ 131.001. SPECIAL DEPOSITORY AUTHORIZED. If a
financial institution that is a depository under state law for the
public funds of a county, municipality, or district suspends
business or is taken charge of by a state or federal bank regulatory
agency, the local government authority authorized to select the
original depository may select by contract a special depository for
the public funds in the suspended financial institution.
Acts 1987, 70th Leg., ch. 149, § 1, eff. Sept. 1, 1987. Amended
by Acts 1999, 76th Leg., ch. 344, § 5.010, eff. Sept. 1, 1999.
§ 131.002. DUTIES OF SPECIAL DEPOSITORY. The special
depository shall assume the payment of the amount of public funds
due by the suspended bank on the date of its suspension, including
interest to that date, and shall pay that amount to the designated
local government authority in accordance with the contract entered
into by the special depository.
Acts 1987, 70th Leg., ch. 149, § 1, eff. Sept. 1, 1987.
§ 131.003. SPECIAL DEPOSITORY CONTRACT. (a) The
contract must require the payment of the deposit in installments as
agreed to by the parties. The last installment must be paid not
later than three years from the date of the contract.
(b) The parties may contract for the installments or the
amount due to be evidenced by negotiable certificates of deposit or
cashier's checks, payable at specified dates.
(c) The contract must set the rate of interest applicable to
the funds placed in the special depository under this subchapter
unless the parties agree that the funds are not to bear interest.
Acts 1987, 70th Leg., ch. 149, § 1, eff. Sept. 1, 1987.
§ 131.004. BOND. (a) To secure the performance of a
special depository contract, the special depository shall execute a
bond, or bonds in the case of installments, with the same character
of sureties required for regular depository bonds.
(b) The local government authority authorized by law to
approve a bond of a regularly selected depository must approve a
bond of a special depository.
Acts 1987, 70th Leg., ch. 149, § 1, eff. Sept. 1, 1987.
§ 131.005. STATE FUNDS. (a) The comptroller shall
determine the amount of state funds held by a county depository that
suspends business or is taken charge of by a state or federal bank
regulatory agency. The comptroller may:
(1) contract with a special depository selected by the
county authorities as provided by this subchapter for the custody
and payment of those funds; and
(2) approve a bond for the deposit contract.
(b) State funds placed in a special depository as provided
by Subsection (a) shall bear the average rate of interest received
by the state on state funds placed with regularly selected state
depositories.
(c) The comptroller may proceed with available legal
remedies against a suspended bank that is a depository for state
funds if the comptroller considers that action to be in the best
interest of the public.
Added by Acts 1993, 73rd Leg., ch. 268, § 35, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 344, § 5.011, eff. Sept. 1,
1999.
SUBCHAPTER Z. MISCELLANEOUS PROVISIONS
§ 131.901. OUT-OF-STATE DEPOSITORY
PROHIBITED. (a) The governing body of a political subdivision,
including a county, municipality, school district, or other
district, may not designate a financial institution located outside
the state as a depository for funds under the governing body's
jurisdiction. An out-of-state financial institution is not
considered to be located outside this state to the extent the
governing body designates a branch office of such institution that
is located in this state.
(b) An institution selected as a paying agent or trustee for
specific bonds or obligations or an institution selected by the
governing body to provide safekeeping services is not considered a
depository for purposes of this section.
Acts 1987, 70th Leg., ch. 149, § 1, eff. Sept. 1, 1987. Amended
by Acts 1993, 73rd Leg., ch. 234, § 3, eff. Sept. 1, 1993; Acts
1999, 76th Leg., ch. 344, § 5.012, eff. Sept. 1, 1999.
§ 131.902. PURSUIT OF LEGAL REMEDIES AGAINST SUSPENDED
BANK. A county, municipality, or district authority may proceed
with available legal remedies against a suspended bank that is a
depository for public funds of the authority if the authority
considers that action to be in the best interest of the public.
Acts 1987, 70th Leg., ch. 149, § 1, eff. Sept. 1, 1987.
§ 131.903. CONFLICT OF INTEREST. (a) A bank is not
disqualified from serving as a depository for funds of a political
subdivision if:
(1) an officer or employee of the political
subdivision who does not have the duty to select the political
subdivision's depository is an officer, director, or shareholder of
the bank; or
(2) one or more officers or employees of the political
subdivision who have the duty to select the political subdivision's
depository are officers or directors of the bank or own or have a
beneficial interest, individually or collectively, in 10 percent or
less of the outstanding capital stock of the bank, if:
(A) a majority of the members of the board,
commission, or other body of the political subdivision vote to
select the bank as a depository; and
(B) the interested officer or employee does not
vote or take part in the proceedings.
(b) This section may not be construed as changing or
superseding a conflicting provision in the charter of a home-rule
municipality.
Added by Acts 1993, 73rd Leg., ch. 268, § 36, eff. Sept. 1, 1993.
