2006 New York Code - Deposits Of Public Money; Security.

 
    §  10.  Deposits  of  public  money; security. 1. For purposes of this
  section:
    a. "Local government" shall mean  any  municipal  corporation,  school
  district,   board   of   cooperative   educational   services,  district
  corporation, special improvement district governed by a  separate  board
  of commissioners, industrial development agency or authority or a public
  library.
    b. "Public funds" shall mean funds of a local government.
    c.  "Public deposits" shall mean deposits of public funds in a bank or
  trust company which are available for all uses  generally  permitted  by
  the  bank  or  trust  company  to  the  depositing  local government for
  actually and finally collected funds under the bank's or trust company's
  account agreement or policies.
    d. "Bank" shall mean a bank  as  defined  by  the  banking  law  or  a
  national  banking  association  located and authorized to do business in
  New York.
    e. "Trust company" shall mean  a  trust  company  as  defined  by  the
  banking law and located and authorized to do business in New York.
    f. "Eligible securities" shall mean any of the following:
    (i)  Obligations  issued  by  the  United States of America, an agency
  thereof  or  a  United  States  government  sponsored   corporation   or
  obligations  fully  insured or guaranteed as to the payment of principal
  and interest by the United States of America, an  agency  thereof  or  a
  United States government sponsored corporation.
    (ii)  Obligations issued or fully guaranteed by the International Bank
  for Reconstruction and Development, the Inter-American Development Bank,
  the Asian Development Bank, and the African Development Bank.
    (iii) Obligations partially insured or guaranteed by any agency of the
  United States of America, at a proportion of the  market  value  of  the
  obligation that represents the amount of the insurance or guaranty.
    (iv)  Obligations issued or fully insured or guaranteed by this state,
  obligations issued  by  a  municipal  corporation,  school  district  or
  district  corporation of this state or obligations of any public benefit
  corporation which under a specific state  statute  may  be  accepted  as
  security for deposit of public moneys.
    (v) Obligations issued by states (other than this state) of the United
  States  rated  in one of the three highest rating categories by at least
  one nationally recognized statistical rating organization.
    (vi) Obligations of Puerto Rico rated in  one  of  the  three  highest
  rating  categories  by  at  least  one nationally recognized statistical
  rating organization.
    (vii) Obligations of counties, cities and other governmental  entities
  of  another  state having the power to levy taxes that are backed by the
  full faith and credit of such governmental entity and rated  in  one  of
  the   three  highest  rating  categories  by  at  least  one  nationally
  recognized statistical rating organization.
    (viii) Obligations of domestic corporations rated in one  of  the  two
  highest   rating  categories  by  at  least  one  nationally  recognized
  statistical rating organization.
    (ix) Any mortgage related securities, as  defined  in  the  Securities
  Exchange  Act of 1934, as amended, which may be purchased by banks under
  the limitations established by federal bank regulatory agencies.
    (x) Commercial paper and bankers' acceptances issued by a bank  (other
  than the bank with which the money is being deposited or invested) rated
  in the highest short-term category by at least one nationally recognized
  statistical rating organization and having maturities of not longer than
  sixty days from the date they are pledged.
    (xi)  Zero-coupon obligations of the United States government marketed
  as "Treasury STRIPS".
    g.  "Eligible  surety bond" shall mean a bond executed by an insurance
  company authorized to do  business  in  this  state,  the  claims-paying
  ability of which is rated in the highest rating category by at least two
  nationally recognized statistical rating organizations.
    h.  "Eligible  letter  of  credit" shall mean an irrevocable letter of
  credit issued in favor of the local government for a term not to  exceed
  ninety days by a bank (other than the bank with which the money is being
  deposited  or  invested)  whose  commercial  paper  and  other unsecured
  short-term debt obligations (or, in the case of  a  bank  which  is  the
  principal  subsidiary  of  a  holding  company,  whose holding company's
  commercial paper and other unsecured short-term  debt  obligations)  are
  rated in one of the three highest rating categories (based on the credit
  of  such  bank or holding company) by at least one nationally recognized
  statistical rating organization or by a bank (other than the  bank  with
  which  the  money  is  being deposited or invested) that is incompliance
  with applicable federal minimum risk-based capital requirements.
    2. a. The governing board of every local  government  shall  designate
  one  or  more  banks or trust companies for the deposit of public funds,
  the disposition of which is not otherwise provided for by law,  received
  by  the  chief  fiscal officer or any other officer authorized by law to
  make deposits.  Such designation shall be by resolution of the governing
  board or, in the case of a city, such other body as may be authorized or
  required by law  to  designate  depositaries.    Such  resolution  shall
  specify  the  maximum amount which may be kept on deposit at any time in
  each such bank or trust company.  Such designations and amounts  may  be
  changed at any time by further resolution.
    b.  Except as otherwise provided by law, all deposits shall be made to
  the credit of the  local  government.    The  deposit  of  public  funds
  pursuant  to  this  subdivision  shall  release  the  officer making the
  deposit and his or her surety from any liability for loss of such public
  funds by reason of the default or insolvency of any such bank  or  trust
  company.
    c.    The  governing  board  of a local government, in which a banking
  development district has been designated by the superintendent of  banks
  pursuant  to  section  ninety-six-d  of the banking law, may designate a
  bank, trust company or national bank located in such  district  for  the
  deposit  of  public  funds,  the  disposition  of which is not otherwise
  provided for by law, received by  the  chief  fiscal  officer  or  other
  officer  authorized by law to make such deposits. Such designation shall
  be by resolution of the governing board or, in the case of a city,  such
  other  body  as  may  be  authorized  or  required  by  law to designate
  depositories.  Such resolution shall specify the  maximum  amount  which
  may  be  kept  on  deposit  at any time with such bank, trust company or
  national bank located in such district.  Subject to an agreement between
  such  governing  board  and  such  banking  institution,  public   funds
  deposited  in  such  banking  institution may earn a fixed interest rate
  which is  at  or  below  such  banking  institution's  posted  two  year
  certificate  of deposit rate.  In those instances where there is such an
  agreement, its terms and conditions  shall  also  be  specified  in  the
  resolution.    Any such designation, amount, or agreement provisions may
  be changed at any time by further resolution.
    3. All public deposits in excess  of  the  amount  insured  under  the
  provisions  of  the  Federal  Deposit  Insurance Act as now or hereafter
  amended shall be secured in accordance with this subdivision:
    a. The officers making a deposit  may  accept  a  pledge  of  eligible
  securities  having in the aggregate a market value at least equal to the
  aggregate amount of public deposits from such officers, or a pledge of a
  pro rata portion  of  a  pool  of  eligible  securities  having  in  the
  aggregate  a  market  value  at  least  equal to the aggregate amount of
  public  deposits from all such officers within the state at such bank or
  trust company, together with a security agreement from the bank or trust
  company. The security agreement  and  custodial  agreement  referred  to
  below may be the same agreement including when the bank or trust company
  holding  the  public  deposits holds the collateral for the public body.
  The security agreement shall provide that such  eligible  securities  or
  pro  rata  portion of a pool of eligible securities are being pledged by
  the bank or trust company as security for the public deposits,  together
  with agreed upon interest, if any, and any costs or expenses arising out
  of  the collection of such deposit upon a default. It shall also provide
  for the conditions under which the securities or pro rata portion  of  a
  pool  of  eligible  securities  held may be sold, presented for payment,
  substituted or released and the events of default which will enable  the
  local  government to exercise its rights against the pledged securities.
  Such  agreement  shall  include  all  provisions  deemed  necessary  and
  sufficient  to  secure  in  a satisfactory manner the local government's
  interest in the collateral. The custodial agreement shall  provide  that
  the  pledged  securities  or  pro  rata  portion  of  a pool of eligible
  securities will be held by the custodial bank or trust company as  agent
  of,  and  custodian for, the local government, and will be kept separate
  and apart from the general assets of the custodial bank or trust company
  and it shall also provide for the manner in which the custodial bank  or
  trust  company shall confirm the receipt, substitution or release of the
  collateral.  Such  agreement  shall  provide  for   the   frequency   of
  revaluation of collateral by the custodial bank or trust company and the
  substitution  of  collateral  when  a change in the rating of a security
  causes ineligibility pursuant to paragraph f of subdivision one of  this
  section.  Such  agreement  shall include all provisions deemed necessary
  and sufficient to secure in a satisfactory manner the local government's
  interest in the collateral. Such agreement may also contain  such  other
  provisions as the governing board may deem necessary.
    b. Whenever eligible securities delivered to a custodial bank or trust
  company  pursuant  to  this  paragraph are transferred by entries on the
  books of a federal reserve bank or other book-entry system operated by a
  federally regulated entity without physical delivery of the evidence  of
  such  obligations,  the  records  of the custodial bank or trust company
  shall show, at all times, the interest of the local government  in  such
  securities  or  pro rata portion of a pool of eligible securities as set
  forth in the security agreement.
    c. (i)  In  lieu  of  or  in  addition  to  the  deposit  of  eligible
  securities,  the officers making a deposit may accept an eligible surety
  bond payable to such local government as security for the payment of one
  hundred percent, or an eligible letter of credit payable to  such  local
  government  as security for the payment of one hundred forty percent, of
  the aggregate amount of public  deposits  from  such  officers  and  the
  agreed  upon  interest, if any. The terms and conditions of any eligible
  surety bond shall be approved by the governing board.
    (ii) In lieu of or in addition to the deposit of eligible  securities,
  the  officers making a deposit may, in the case of an irrevocable letter
  of credit issued in favor of the local government by a federal home loan
  bank  whose  commercial  paper  and  other  unsecured  short-term   debt
  obligations  are  rated  in  the highest rating category by at least one
  nationally  recognized  statistical  rating  organization,  accept  such
  letter  of  credit  payable to such local government as security for the
  payment of one  hundred  percent  of  the  aggregate  amount  of  public
  deposits from such officers and the agreed upon interest, if any.
    d.  For  purposes  of  determining  the  market value of securities as
  required by this subdivision:
    (i) The eligible securities described in subparagraphs (viii), (x) and
  (xi) of paragraph f of subdivision one of this section shall  be  valued
  at eighty percent of their market value.
    (ii)  The  eligible  securities  described  in  subparagraph  (ix)  of
  paragraph f of subdivision one  of  this  section  shall  be  valued  at
  seventy percent of their market value.
    (iii)  Of the eligible securities described in subparagraphs (v), (vi)
  and (vii) of paragraph f of  subdivision  one  of  this  section,  those
  securities  rated in the highest category shall be valued at one hundred
  percent of their market value;   those securities rated  in  the  second
  highest  rating  category  shall  be  valued  at ninety percent of their
  market value;  and those securities rated in the  third  highest  rating
  category  shall be valued at eighty percent of their market value.  When
  two  nationally  recognized  statistical  rating  organizations  rate  a
  security  in  two different categories, the security shall be considered
  to be rated in the higher of the two categories.
    4. (a) Notwithstanding any other provision of law to the contrary, the
  chief fiscal officer,  or  other  officer  authorized  by  law  to  make
  deposits,  may, subject to the approval of the governing body of a local
  government, by resolution, enter into a contract with a courier  service
  for  the  purpose  of causing the deposit of public funds with a bank or
  trust company as provided in this section.
    (b) The entrusting of public funds for deposit pursuant  to  paragraph
  (a)  of this subdivision shall release the officer entrusting the public
  funds to the courier service and his or her surety  from  any  liability
  for  loss  of such public funds by the courier service in the process of
  delivering such public funds to the designated bank or trust company.
    (c) The local government authorizing the deposit of public funds by  a
  courier  service  pursuant  to  paragraph  (a) of this subdivision shall
  require the courier service to obtain a surety bond for the full  amount
  entrusted  to  the courier, payable to the local government and executed
  by an insurance company authorized to do business  in  this  state,  the
  claims  paying  ability of which is rated in the highest rating category
  by at least two nationally recognized statistical rating  organizations,
  to  insure  against  any  loss  of public funds entrusted to the courier
  service for deposit or failure to deposit the full amount  entrusted  to
  the courier.
    (d)  A deposit made by a courier on behalf of a local government shall
  be deemed to be a deposit made by the  chief  fiscal  officer  or  other
  officer entrusting such funds for purposes of the requirements contained
  in this section for securing public deposits.
    (e)  A bank or trust company may, from time to time and as agreed upon
  with a local government, reimburse all or part of, but  not  more  than,
  the  actual  cost incurred by the local government in transporting cash,
  negotiable instruments or other items  for  deposit  through  a  courier
  service.    Any  such  reimbursement  agreement  shall  apply  only to a
  specified deposit  transaction,  and  may  be  subject  to  such  terms,
  conditions  and limitations as the bank or trust company deems necessary
  to ensure sound banking practices, including, but not  limited  to,  any
  terms,  conditions  or  limitations  that may be required by the banking
  department or other federal or state authority.