Chapter 311 Oregon Laws 1999

Session Law

AN ACT

SB 196

Relating to depositories of public funds; creating new provisions; amending ORS 292.042, 295.005, 295.105, 348.010, 711.520 and 716.592; repealing ORS 295.095; and declaring an emergency.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 295.005 is amended to read:

295.005. As used in this section, ORS 295.015 and 295.025 to 295.165, unless the context requires otherwise:

(1) "Certificate of participation" or "certificate" means a nonnegotiable document issued by a pool manager to a public official.

(2) "Custodian bank" or "custodian" means the following institutions designated by the depository bank for its own account:

(a) The Federal Reserve Bank designated to serve this state, or any branch of that bank;

(b) The Federal Home Loan Bank designated to serve this state, or any branch of that bank;

(c) Any insured institution or trust company, as those terms are defined in ORS 706.008, that is authorized to accept deposits or transact trust business in this state, provided, however, that no insured institution or trust company may be a custodian bank unless it certifies in writing to the State Treasurer that it will furnish the reports required under ORS 714.075 to the Director of the Department of Consumer and Business Services. With the approval of the State Treasurer, a depository bank may be a custodian bank with respect to its own securities; and

(d) The fiscal agency of the State of Oregon, duly appointed and acting as such agency pursuant to ORS 288.010 to 288.110.

(3) "Custodian's receipt" or "receipt" means a document issued by a custodian bank to a pool manager describing the securities deposited with it by a depository bank to secure public fund deposits.

(4) "Depository bank" or "depository" means any insured institution or trust company, as those terms are defined in ORS 706.008, that maintains a head office or a branch in this state in the capacity of an insured institution or trust company[, provided, however, that no]. However, an insured institution or trust company [may be] is not a depository bank unless it has:

(a) [certifies] Certified in writing to the State Treasurer that it will furnish the reports required under ORS 714.075 to the Director of the Department of Consumer and Business Services; and

(b) Entered into a written agreement with the State Treasurer and a custodian that pledges the securities deposited by the insured institution or trust company with the custodian as collateral for deposits of public funds held by the insured institution or trust company. The agreement shall be approved by the board of directors or loan committee of the insured institution or trust company and shall be continuously maintained as a written record of the institution or company.

(5) "Pool manager" means:

(a) The State Treasurer;

(b) Any insured institution or trust company, as those terms are defined in ORS 706.008, that is authorized to accept deposits or transact trust business in this state; but a depository bank shall not be a pool manager with respect to securities that it deposits with its custodians as collateral for the security of public fund deposits and no insured institution or trust company may be a pool manager unless it certifies in writing to the State Treasurer that it will furnish the reports required under ORS 714.075 to the Director of the Department of Consumer and Business Services;

(d) The Federal Home Loan Bank designated to serve this state, or any branch of that bank.

(6) "Public funds" or "funds" means the funds under the control or in the custody of a public official by virtue of office, other than those [which, pursuant to] that, under law other than this section, ORS 295.015 and 295.025 to 295.165, [are invested in authorized investments or] are:

(a) Deposited for the purpose of meeting the payment of principal or interest on bonds or like obligations; or

(b) Invested in authorized investments. Funds invested under ORS 293.701 to 293.820 are invested in authorized investments for purposes of this paragraph when the funds are transferred by the State Treasurer to a third party under the terms of a contract for investment of funds that requires such a transfer.

(7) "Security" or "securities" means:

(a) Obligations of the United States, including those of its agencies and instrumentalities;

(b) Obligations of the International Bank for Reconstruction and Development;

(c) Bonds of any state of the United States (A) that are rated in one of the four highest grades by a recognized investment service organization that has been engaged regularly and continuously for a period of not less than 10 years in rating state and municipal bonds or, (B) having once been so rated are ruled[, pursuant to ORS 295.095,] to be eligible securities for the purposes of this section, ORS 295.015 and 295.025 to 295.165, notwithstanding the loss of such rating;

(d) Bonds of any county, city, school district, port district or other public body in the United States payable from ad valorem taxes levied generally on substantially all property within the issuing body and that meet the rating requirement or are ruled to be eligible securities as provided in paragraph (c) of this subsection;

(e) Bonds of any county, city, school district, port district or other public body issued pursuant to the Constitution or statutes of the State of Oregon or the charter or ordinances of any county or city within the State of Oregon, if the issuing body has not been in default with respect to the payment of principal or interest on any of its bonds within the preceding 10 years or during the period of its existence if that is less than 10 years;

(f) [Notes issued by a municipality under ORS 287.526 and] Bond anticipation notes issued, sold or assumed by an authority under ORS 441.560;

(g) One-family to four-family housing mortgage loan notes related to property situated in the State of Oregon, which are owned by a depository bank, no payment on which is more than 90 days past due, and which are eligible collateral for loans from the Federal Reserve Bank of San Francisco under section 10(b) of the Federal Reserve Act and regulations thereunder;

(h) Bonds, notes, letters of credit or other securities or evidence of indebtedness constituting the direct and general obligation of a federal home loan bank or Federal Reserve bank;

(i) Debt obligations of domestic corporations that are rated in one of the three highest grades by a recognized investment service organization that has been engaged regularly and continuously for a period of not less than 10 years in rating corporate debt obligations;

(j) Collateralized mortgage obligations and real estate mortgage investment conduits that are rated in one of the two highest grades by a recognized investment service organization that has been engaged regularly and continuously for a period of not less than 10 years in rating corporate debt obligations; and

(k) One-family to four-family housing mortgages that have been secured by means of a guarantee as to full repayment of principal and interest by an agency of the United States Government, including the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

(8) "Public official" means each officer or employee of this state or any agency, political subdivision or public or municipal corporation thereof who by law is made the custodian of or has control of any public funds.

(9) "Value" means the current market value of securities [at the most recent valuation date, as provided in ORS 295.095, or, if issued thereafter, market value at the date of issue].

SECTION 2. ORS 295.105 is amended to read:

295.105. (1) The deposit of securities by a depository bank with its custodian pursuant to ORS 295.005, 295.015 and 295.025 to 295.165 constitutes consent by the depository to the disposition of the securities in accordance with this section.

(2) When a depository is closed by order of the Director of the Department of Consumer and Business Services or the Comptroller of the Currency, the State Treasurer shall:

(a) Demand and receive from the pool manager the custodian's receipts; and

(b) Demand and receive from the custodian the securities pledged to secure deposits of public funds and[, with the advice and counsel of the valuation committee,] liquidate in an orderly manner the securities or such thereof as the State Treasurer may determine advisable at public or private sale and distribute the proceeds as provided in this section.

(3) Each public official shall advise the State Treasurer of the amount of the public official's deposits in the defaulted depository bank, and the State Treasurer shall proceed to determine the total amount of the claims payable out of the collateral of the depository. The claim of a public official for purposes of this section shall be the lesser of:

(a) The amount of the public official's deposits plus interest to the date the funds are distributed to the public official at the rate the depository agreed to pay on the funds reduced by the portion thereof that is insured by the Federal Deposit Insurance Corporation; or

(b) The amount of the public official's certificates of participation plus interest on the public official's deposits to the date the funds are distributed to the public official at the rate the depository agreed to pay on the funds.

(4) The State Treasurer shall distribute the net proceeds of the collateral, to the extent that they do not exceed the total claims, among the public officials entitled thereto in proportion to their respective claims. The State Treasurer shall remit to the depository bank any of its collateral or the proceeds thereof in excess of the amount so distributable to public officials.

(5) If the net proceeds of the collateral are inadequate, after all other available sources are applied, to meet the total claims of the public officials entitled thereto, the public officials may make claims against the depository bank as general creditors.

(6) The State Treasurer, in accordance with ORS 183.310 to 183.550, shall adopt rules to carry out this section.

SECTION 3. ORS 292.042 is amended to read:

292.042. (1) Notwithstanding the provisions of ORS 292.039 or any other law, any state official authorized to disburse funds in payment of salaries or wages of state officers or employees is authorized, upon written request of state officers or employees to whom salaries and wages are to be paid, and may pay the same to any financial institution designated by the officers or employees for credit to their accounts. A single check may be drawn in favor of such financial institution, for the total amount due the officers or employees involved, and written directions provided to such financial institution of the amount to be credited to the account of each officer or employee. Financial institutions permitted to participate in the payroll program shall be those only which are qualified state depositories as provided by ORS 295.005, 295.015 and 295.025 to [295.175] 295.165.

(2) The issuance and delivery by the disbursing officer of a check in accordance with the procedure set forth in subsection (1) of this section and proper indorsement thereof by the financial institution shall constitute full acquittance for the amount due to the officer or employee.

SECTION 4. ORS 348.010 is amended to read:

348.010. (1) The Department of Higher Education shall maintain with the State Treasurer a fund separate and distinct from the General Fund known as the Higher Education Student Loan Fund which shall consist of:

(a) All moneys made available to the State Board of Higher Education for student loan purposes by state appropriations and by the federal government under terms of the National Defense Education Act of 1958 and amendments thereto, and under terms of the Health Professions Educational Assistance Act of 1963 and the Nurses Training Act of 1964 and amendments thereto;

(b) Repayments of loans identified in paragraph (a) of this subsection;

(d) Earnings from investments of the Higher Education Student Loan Fund.

(2) All moneys in the Higher Education Student Loan Fund are continuously appropriated for the purpose of granting student loans under the terms established by the National Defense Education Act of 1958 and amendments thereto, under terms of the Health Professions Educational Assistance Act of 1963 and the Nurses Training Act of 1964 and amendments thereto.

(3) The repayment in whole or part of any student loan made under terms of the National Defense Education Act of 1958 and amendments thereto, under terms of the Health Professions Educational Assistance Act of 1963 and the Nurses Training Act of 1964 and amendments thereto, shall be made pursuant to the provisions of the applicable federal statutes and repayment to the Higher Education Student Loan Fund shall be made in accordance with applicable federal statutes.

(4) Funds in the Higher Education Student Loan Fund not needed for student loans may be invested by the State Treasurer [in securities which constitute legal investments as defined in ORS 295.005 (7)] as other public funds are invested under ORS 293.701 to 293.820. The State Treasurer shall credit to the Higher Education Student Loan Fund any interest or other income derived from such investment.

SECTION 5. ORS 711.520 is amended to read:

711.520. If an Oregon stock bank becomes insolvent or goes into voluntary or involuntary liquidation, the assets of the Oregon stock bank shall be applied in the following order of priority:

(1) First, if [the assets have] collateral has been pledged under ORS 295.015 and assets have been pledged under ORS 709.030, to the benefit of those for whom the collateral and assets have been pledged;

(2) Second, to pay the expenses of liquidation;

(3) Third, to satisfy the amount due the depositors; and

(4) Fourth, to satisfy the amount due sellers of federal funds.

SECTION 6. ORS 716.592 is amended to read:

716.592. A savings bank may pledge its assets to secure public funds as provided under ORS chapter 295. For the purposes of this section, "public funds" has the meaning ascribed to it by ORS 295.005 [(6)].

SECTION 7. ORS 295.005, 295.015, 295.018 and 295.022 are added to and made a part of ORS 295.025 to 295.165.

SECTION 8. ORS 295.095 is repealed.

SECTION 9. This 1999 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 1999 Act takes effect October 1, 1999.

Approved by the Governor June 23, 1999

Filed in the office of Secretary of State June 24, 1999

Effective date October 1, 1999

__________