Second Regular Session Sixty-seventh General Assembly STATE OF COLORADO INTRODUCED LLS NO. 10-0124.01 Troy Bratton HOUSE BILL 10-1075 HOUSE SPONSORSHIP Kagan and Sonnenberg, Soper SENATE SPONSORSHIP Williams and Harvey, House Committees Senate Committees Business Affairs and Labor A BILL FOR AN ACT Concerning the authority for public entities to use credit unions as financial institutions, and, in connection therewith, allowing credit unions to make loans to public entities and allowing for the deposit of public moneys in credit unions. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) Currently, state law allows public moneys to be deposited in or invested with banks and savings and loan associations that are protected by the federal deposit insurance corporation. The bill permits the deposit or investment of public moneys into a credit union so long as the credit union is protected by the national credit union administration. The bill also authorizes credit unions to make loans to public entities. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. 11-30-104 (1) (p), Colorado Revised Statutes, is amended to read: 11-30-104. Powers. (1) A credit union has the following powers to: (p) Act as fiscal agent for, and receive payments on shares and deposits from, and make loans to nonmember units of the federal government or the state of Colorado or any agency or political subdivision thereof; SECTION 2. 11-40-106 (1) (c), Colorado Revised Statutes, is amended to read: 11-40-106. Annual fees and assessments - fund. (1) Every domestic savings and loan association operating in this state shall pay to the division of financial services such fees for administration, supervision, and examination as the commissioner may determine sufficient to meet the budget of the division of financial services as appropriated by the general assembly for the fiscal year commencing July 1. The fees shall be determined as follows: (c) At least semiannually, the commissioner shall assess each state and federal savings and loan association that has been designated as an eligible public depository, as defined in section 11-47-103 (6), based on its total public deposits held, to meet its share of the division's supervisory costs of monitoring compliance with the provisions of the "Credit Union and Savings and Loan Association Public Deposit Protection Act", article 47 of this title, for that fiscal year. Such assessments shall be calculated in terms of cents per thousand dollars of total public deposits held. The assessment calculation, or ratio of the assessment charged to total public deposits held, shall be alike in all cases. On or before the dates specified by the commissioner, each association shall pay its assessment. SECTION 3. 11-47-101, Colorado Revised Statutes, is amended to read: 11-47-101. Short title. This article shall be known and may be cited as the "Credit Union and Savings and Loan Association Public Deposit Protection Act". SECTION 4. 11-47-102 (1), Colorado Revised Statutes, is amended to read: 11-47-102. Legislative declaration. (1) The general assembly declares that the purpose of this article is to provide protection of public moneys on deposit in state-chartered and federally chartered credit unions and savings and loan associations in this state above and beyond the protection provided by the federal deposit insurance corporation or its successor or the national credit union administration or its successor, as applicable, and to ensure prompt payment of deposit liabilities to governmental units in the event of default or insolvency of any such association. SECTION 5. 11-47-103 (2), (6), and (10), Colorado Revised Statutes, are amended, and the said 11-47-103 is further amended BY THE ADDITION OF THE FOLLOWING NEW SUBSECTIONS, to read: 11-47-103. Definitions. As used in this article, unless the context otherwise requires: (2) "Capital funds" means: (a) With respect to any eligible public depository savings and loan association, the aggregate sum of its capital stock, surplus, and undivided profits and of all reserves required by any law or regulation, together with the amount of any debt subordinated to deposit liabilities when such debt has been allowed to be included in its stated capital position by the applicable regulatory authority; (b) With respect to any credit union, its net worth as defined in 12 CFR 702.2, as amended, plus current earnings. (3.5) "Credit union" means a state- or federally chartered credit union. (6) "Eligible public depository" means any state-chartered savings and loan association or any federally chartered credit union or savings and loan association having an office in this state which that is authorized by the laws of this state or the United States to accept deposit or share accounts, which deposits or shares are insured by the federal deposit insurance corporation or its successor or as specified in section 11-30-117.5, and which depository has been designated as an eligible public depository by the commissioner. (10) "Net deposit liability" means, with respect to a defaulting depository savings and loan association, the amount of its deposit liability to a governmental unit after deduction of any applicable federal deposit insurance corporation or its successor insurance with respect thereto or, with respect to a credit union, the amount of its deposit liability to a governmental unit after deduction of any applicable national credit union administration or its successor or other authorized insurance. (12.5) "Savings and loan association" means a state- or federally chartered savings and loan association. SECTION 6. 11-47-105 (1), Colorado Revised Statutes, is amended to read: 11-47-105. Acceptance of provisions - designation as eligible public depository. (1) Every state-chartered savings and loan association and every federally chartered A credit union or savings and loan association having an office in this state that is otherwise eligible to be an eligible public depository and that desires to accept and hold public deposits in an amount in excess of the amount insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable, shall file with the commissioner, on a form provided by him or her for such purpose, a statement signed and sworn to by an executive officer of such credit union or savings and loan association electing to accept and become subject to the provisions of this article and setting forth the amount of its capital funds and the aggregate amount and nature of all public deposits held by it. Upon the filing of such statement and acceptance, the commissioner shall forthwith designate such credit union or savings and loan association as an eligible public depository and shall issue an appropriate certificate evidencing such designation. SECTION 7. 11-47-108 (1), Colorado Revised Statutes, is amended to read: 11-47-108. Method of securing public deposits. (1) Except as provided in section 11-47-112 (6) (a), any eligible public depository shall secure public deposits accepted and held by it by pledging eligible collateral having a market value, at all times, equal to at least one hundred percent of the aggregate of said deposits not insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable. SECTION 8. 11-47-109 (1), Colorado Revised Statutes, is amended to read: 11-47-109. Where collateral held - right of substitution - income derived. (1) The eligible collateral required to be pledged as provided in section 11-47-108 shall be held in escrow by another credit union or savings and loan association in Colorado, by a state or national bank in Colorado, or by any federal home loan bank or branch thereof or any federal reserve bank or branch thereof approved by the commissioner, and held in such manner as the financial services board shall prescribe by rule. All collateral so held shall be clearly identified as being security maintained or pledged for the aggregate amount of public deposits accepted and held on deposit by said eligible public depository. SECTION 9. 11-47-112 (1) and (6) (a), Colorado Revised Statutes, are amended to read: 11-47-112. Power and authority of financial services board - rules. (1) The commissioner shall have specific power and authority to require any eligible public depository to furnish, at any time, such information as the commissioner may request or demand concerning the amount of public deposits held by it, the portion thereof that is insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable, the amount of its capital funds, and the nature, amount, market value, and location of the eligible collateral maintained or pledged by it to secure said deposits. (6) (a) The financial services board may promulgate rules to require an eligible public depository to reduce or eliminate its uninsured public deposit liability if said depository's regulatory capital does not comply with the minimum requirement of the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable. Notwithstanding any other provision in this article to the contrary, the financial services board also may promulgate rules to require a depository to pledge eligible collateral having a market value in excess of one hundred percent of the aggregate amount of public deposits not insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable, if said depository's regulatory capital does not comply with the minimum requirement of the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable. Notwithstanding any other provision in this article to the contrary, the financial services board may promulgate rules to require an eligible public depository to pledge a minimum amount of eligible collateral. SECTION 10. 11-47-113 (1) (b) and (1) (e), Colorado Revised Statutes, are amended to read: 11-47-113. Procedure when event of default occurs. (1) When the commissioner has determined that an event of default has occurred with respect to any eligible public depository and has determined and fixed the date of such occurrence, he or she shall proceed in the following manner: (b) Within twenty days after seizing and taking possession of all eligible collateral pursuant to paragraph (a) of this subsection (1), the commissioner shall ascertain the aggregate amount of public deposits held by the defaulting depository, as disclosed by the records of such depository, and the portion thereof that is insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable, and shall notify each affected governmental unit of the amount of its deposit, as so disclosed, and the portion thereof that is so insured, and shall require each affected governmental unit to provide him or her with a verified statement showing the amount of its deposit, as disclosed by its own records, within thirty days after receipt of such notification. (e) In the event the federal deposit insurance corporation or its successor or the national credit union administration or its successor, or other authorized insurer, as applicable, is appointed and acts as liquidator or receiver of any eligible public depository under state or federal law, those duties specified in this section to be performed by the commissioner may, where the commissioner deems appropriate, be delegated by the commissioner to and performed by the federal deposit insurance corporation or its successor or the national credit union administration or its successor, or other authorized insurer, as applicable. SECTION 11. 11-47-118 (1) and (3), Colorado Revised Statutes, are amended to read: 11-47-118. Public moneys to be deposited only in eligible public depositories - penalty for violation - rules. (1) It shall be unlawful for any public moneys to be deposited in any state-chartered savings and loan association, or in any federally chartered a credit union or savings and loan association having its principal office in this state, other than one that has been designated by the commissioner as an eligible public depository, unless the entire amount of such deposit is insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable. (3) Notwithstanding any other provision of this section to the contrary, nothing shall be construed to prevent a credit union or savings and loan association which that is an eligible public depository operating pursuant to the provisions of this article from being or acting as an agent in behalf of any public entity for the purposes of making investments as authorized by part 6 of article 75 of title 24, C.R.S. Any such credit union or savings and loan association shall maintain such accounting records as are necessary to readily distinguish between the activities authorized by said part 6 of article 75 of title 24, C.R.S., and the purposes of the public deposit protection requirements imposed upon it as a condition of being an eligible public depository. The financial services board may promulgate such rules and regulations as it deems desirable to ensure that the activities authorized under part 6 of article 75 of title 24, C.R.S., and the protection of public funds pursuant to this article are not commingled. SECTION 12. 11-47-120, Colorado Revised Statutes, is amended to read: 11-47-120. Authority to accept deposits - acceptance of insured deposits. Any state-chartered savings and loan association, or any federally chartered A credit union or savings and loan association having its principal office in this state that is authorized by the laws of this state or of the United States to accept deposit accounts, share accounts, or savings deposits is authorized to accept and hold, and any governmental unit is authorized to make and maintain in such credit union or association, deposits of public moneys as provided in this article. Any such credit union or association is authorized to accept and hold, and any governmental unit is authorized to make and maintain therein, deposits of public moneys to the extent that the full amount thereof is insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable, even though such credit union or association has not elected to be designated as an eligible public depository under the provisions of this article. SECTION 13. 24-36-112, Colorado Revised Statutes, is amended to read: 24-36-112. Deposits in credit unions and savings and loan associations. (1) Subject to the requirements of subsection (4) of this section, the state treasurer is authorized to deposit state moneys with any state-chartered savings and loan association, or federally chartered credit union or savings and loan association having its principal office in this state, for fixed periods of time not exceeding three years, at such rate of interest as may be negotiated from time to time, but in no event shall any such deposit be in excess of the amount insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable, unless such credit union or savings and loan association has been designated as an eligible public depository by the state commissioner of financial services, pursuant to the provisions of article 47 of title 11, C.R.S. (2) Any such credit union or savings and loan association is authorized to accept deposits of state moneys to the extent permitted in this section. (3) For the purpose of making such deposits, the state treasurer may, in his or her discretion, appoint in writing one or more persons to act as custodians of the moneys. Such persons shall give surety bonds in such amounts and form and for such purposes as the state treasurer requires. (4) (a) The state treasurer shall deposit state moneys for fixed periods in state-chartered or federally chartered credit unions or savings and loan associations that have applied and are eligible as depositories for state moneys pursuant to subsection (1) of this section and pursuant to the time deposit rules established by the department of the treasury that are in effect at that time in accordance with the procedure established in paragraph (b) of this subsection (4) or in paragraph (c) of this subsection (4). Such procedure utilized shall be at the discretion of the treasurer. (b) (I) Except as provided in paragraph (c) of this subsection (4), when state moneys become available for time deposits pursuant to subsection (1) of this section, the state treasurer shall announce the interest rate at which state moneys may be deposited for a fixed period in eligible state-chartered or federally chartered credit unions or savings and loan associations but shall not disclose the amount of state moneys available for deposit. (II) An eligible state-chartered or federally chartered credit union or savings and loan association may request the state treasurer to deposit a specified amount of state moneys in that credit union or savings and loan association at the interest rate announced by the treasurer. Except as otherwise provided by subparagraph (III) of this paragraph (b), the treasurer shall deposit all or a portion of the state moneys available for deposit with any eligible state-chartered or federally chartered credit union or unions or savings and loan association or associations making such a request in an amount equal to the amount requested by that credit union or savings and loan association. (III) In the event that the total amount of state moneys requested for deposit by all eligible state-chartered or federally chartered credit unions or savings and loan associations pursuant to subparagraph (II) of this paragraph (b) exceeds the amount of state moneys available for deposit, the state treasurer shall determine the total amount of state moneys that all such credit unions or savings and loan associations requested for deposit and calculate the percentage of such total that each eligible state-chartered or federally chartered credit union or savings and loan association requested. The state treasurer shall deposit with each eligible state-chartered or federally chartered credit union or savings and loan association an amount equal to the product of such percentage multiplied by the total amount of state moneys available for deposit. (c) (I) In the alternative to paragraph (b) of this subsection (4), when state moneys become available for time deposits pursuant to subsection (1) of this section, the state treasurer shall announce the amount of state moneys available for deposit for a fixed period in any eligible state-chartered or federally chartered credit unions or savings and loan associations but shall not announce the interest rate at which such moneys shall be deposited. (II) Except as provided by subparagraph (III) of this paragraph (c), any eligible state-chartered or federally chartered credit union or savings and loan association may submit a bid to the state treasurer specifying the interest rate that the eligible credit union or savings and loan association will pay if state moneys are deposited in such credit union or savings and loan association and the amount of such moneys the credit union or savings and loan association will accept for deposit at that interest rate. The credit union or savings and loan association submitting a bid with the highest interest rate shall be awarded the deposit of state moneys in the full amount requested or the full amount available for deposit at that time, whichever is less. (III) In the event that two or more eligible state-chartered or federally chartered credit unions or savings and loan associations submit the highest bid for the same interest rate and the total amount requested for deposit by the eligible credit unions or savings and loan associations exceeds the amount of state moneys available for deposit at that time, the state treasurer shall determine the total amount of state moneys that all such credit unions or savings and loan associations requested for deposit and calculate the percentage of such total that each eligible state-chartered or federally chartered credit union or savings and loan association requested. The state treasurer shall deposit with each eligible state-chartered or federally chartered credit union or savings and loan association an amount equal to the product of such percentage multiplied by the total amount of state moneys available for deposit. (IV) In the event that depositing state moneys in the highest bidding eligible state-chartered or federally chartered credit union or unions or savings and loan association or associations does not exhaust the state moneys available for deposit at that time, the state treasurer shall deposit the remaining moneys in other eligible credit unions or savings and loan associations giving priority to the highest remaining bidders. (V) The state treasurer shall have the authority to establish a minimum acceptable bid for an interest rate. The rate shall be announced before the start of the bidding by any eligible state-chartered or federally chartered credit union or savings and loan association. SECTION 14. 24-75-603, Colorado Revised Statutes, is amended to read: 24-75-603. Depositories - definition. (1) It is lawful for the state of Colorado and any of its institutions and agencies, counties, municipalities, and districts, and any other political subdivision of the state, and any department, agency, or instrumentality thereof, or any political or public corporation of the state, whenever any of the foregoing have funds, and for any bank, savings and loan association, industrial bank, credit union, fraternal benefit society, trust deposit and security company, trust company, or any other financial institution operating under the laws of this state having funds in their possession or custody, respectively, to deposit, or cause to be deposited either by or through the treasurer or such other custodian of funds as may be appointed, such funds so eligible for investment in any state bank, national bank, state or federal credit union, or state or federal savings and loan association in Colorado that is, at the time the deposit is made: (a) A member of the federal deposit insurance corporation or its successor to the extent that the deposit is insured by the federal deposit insurance corporation or its successor or is secured by pledge of eligible collateral as required by statute; or (b) Insured pursuant to section 11-30-117.5, C.R.S., to the extent that the deposit is insured by the national credit union administration or its successor or other authorized insurer or is secured by a pledge of eligible collateral as required by law. (2) Notwithstanding any provisions of law of this state or any rule or requirement of any political subdivision thereof requiring security for deposits in the form of collateral, surety bond, or any other form, such security for deposits of public funds shall not be required to the extent said deposits are insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable. (3) Repealed. (4) In lieu of or in addition to other statutory authorization for the investment of public funds, any public funds that are not needed for current operating expenses may be invested in accordance with the following conditions: (a) The public funds shall initially be placed by the public entity in a bank, credit union, or savings and loan association located in this state that is an eligible public depository certified by the state banking board or the state financial services board that offers on its shares or deposits federal deposit insurance corporation insurance, on its deposits national credit union administration insurance, or other authorized insurance, or insurance by any successor entities to the federal deposit insurance corporation, the national credit union administration, or other authorized insurer; (b) The selected eligible public depository simultaneously shall arrange for the deposit of any public funds initially placed in such eligible public depository that are in excess of the amount insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable, in one or more certificates of deposit fully insured by the federal deposit insurance corporation or by the national credit union administration or other authorized insurer in one or more other banks, credit unions, or savings and loan associations wherever located in the United States, for the account of the public entity; (c) At the same time the public funds are deposited and the certificates of deposit are issued for the benefit of the public entity, the eligible public depository shall receive an amount of deposits from customers of other banks, credit unions, or savings and loan associations equal to the amount of the public funds initially placed by the public entity; (d) Each such certificate of deposit shall be insured by the federal deposit insurance corporation or its successor, the national credit union administration or its successor, or other authorized insurer, as applicable; (e) The selected eligible public depository shall act as custodian for the public entity with respect to the certificates of deposit issued for the public entity's account; (f) Public funds invested in accordance with paragraphs (a) to (e) of this subsection (4) are not subject to the collateralization, requirements, or restrictions of article 10.5 of title 11, C.R.S., except for certification as an eligible public depository as provided in paragraph (a) of this subsection (4); and (g) Banks, credit unions, and savings and loan associations that accept public funds for the purposes of investing them in accordance with paragraphs (a) to (e) of this subsection (4) are not subject to the additional requirements or restrictions of article 10.5 of title 11, C.R.S., except for certification as an eligible public depository as provided in paragraph (a) of this subsection (4). (5) As used in this section, "financial institution" means: (a) A bank, as defined in section 11-10.5-103 (2), C.R.S., whose deposits are insured by the federal deposit insurance corporation or its successor; (b) A credit union organized or chartered under the laws of any state or of the United States whose shares and deposits are insured by the national credit union administration or its successor or other authorized insurer; or (c) A savings and loan association organized or chartered under the laws of any state or of the United States whose deposits are insured by the federal deposit insurance corporation or its successor. SECTION 15. 30-10-708 (1), Colorado Revised Statutes, is amended to read: 30-10-708. Deposit of funds in banks, credit unions, and savings and loan associations. (1) In all counties of this state, the county treasurer shall deposit all the funds and moneys of whatever kind that come into the treasurer's possession by virtue of the office, in the treasurer's name as treasurer, in one or more state banks, national banks, or, in compliance with the provisions of article 47 of title 11, C.R.S., credit unions or savings and loan associations that have previously been approved and designated by written resolution duly adopted by a majority vote of the board of county commissioners, which shall be entered in its minutes. The board, by written resolution similarly adopted, may authorize the county treasurer to invest all or any part of the funds and moneys in securities meeting the investment requirements established in part 6 of article 75 of title 24, C.R.S. For the purposes of investment of funds of the county as set forth in said part 6, the board, by written resolution, may appoint one or more custodians of the funds, and such persons shall give surety bonds in such amounts and form and for such purposes as the board requires. SECTION 16. 31-20-303 (1) (b) and (2), Colorado Revised Statutes, are amended to read: 31-20-303. Deposits - investments - interest - no liability. (1) (b) Subject to the requirements of part 6 of article 75 of title 24, C.R.S., in all cities and towns in this state, the treasurer shall deposit all the funds and moneys that come into his the treasurer's possession by virtue of his or her office, in his or her name as treasurer or in the name of such other custodian as has been appointed by resolution, in one or more state banks, national banks having their principal office in this state, or, in compliance with the provisions of article 47 of title 11, C.R.S., credit unions or savings and loan associations having their principal offices in this state which that have been approved and designated by resolution. The governing body by resolution may authorize the investment of all or any part of such funds and moneys in any type of security or form of investment authorized by part 6 of article 75 of title 24, C.R.S., or by any other law of this state. All securities so purchased shall be duly registered in the name of the treasurer or other custodian appointed by resolution and, if issued in a form so permitting, shall be deposited and safely kept by him or her in the custody of some state or national bank located in this state. The governing body, by resolution, shall establish requirements for the sale or other disposal of securities and for the deposit or reinvestment of any proceeds, subject to the restrictions set forth in this section. For the purposes of investment of funds of the city or town, the governing body of the city or town, by resolution, may appoint one or more custodians of the funds and moneys, and such persons shall give surety bonds in such amount and form and for such purposes as the governing body may require. (2) Such funds and moneys may be deposited in said banks, credit unions, and savings and loan associations in demand accounts, in interest-bearing or dividend-bearing savings accounts, or in certificates of deposit or share certificates for fixed periods of time at such rates of interest as may be negotiated from time to time. All interest and dividends credited or received on such deposits shall become a part of the general fund of the city or town or of such other fund as the governing body designates. SECTION 17. 38-37-113 (1), Colorado Revised Statutes, is amended to read: 38-37-113. Checking account - custodial funds. (1) In the performance of his or her duties under this article and article 38 of this title, the public trustee of each county shall have the authority to establish and manage one or more of the following accounts: An automated clearing house account, checking account, escrow account, custodial account, similar banking services, or similar overnight depository account with a bank, credit union, or savings and loan association that is an eligible public depository under the "Public Deposit Protection Act", article 10.5 of title 11, C.R.S., or the "Credit Union and Savings and Loan Association Public Deposit Protection Act", article 47 of title 11, C.R.S. A public trustee may also participate in local government investment pool trust funds as described in part 7 of article 75 of title 24, C.R.S., and invest public funds in eligible money market mutual funds described in part 6 of article 75 of title 24, C.R.S. SECTION 18. Act subject to petition - effective date. This act shall take effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 11, 2010, if adjournment sine die is on May 12, 2010); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part shall not take effect unless approved by the people at the general election to be held in November 2010 and shall take effect on the date of the official declaration of the vote thereon by the governor.