H.B. No. 696
    1-1                                AN ACT
    1-2  relating to depositories and investment securities for local
    1-3  governments.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Chapter 105, Local Government Code, is amended to
    1-6  read as follows:
    1-7            CHAPTER 105.  DEPOSITORIES FOR MUNICIPAL FUNDS
    1-8                   SUBCHAPTER A.  GENERAL PROVISIONS
    1-9        Sec. 105.001.  Definitions.  In this chapter:
   1-10              (1)  "Bank" means a state bank or a national bank
   1-11  domiciled in this state <banking corporation or association or an
   1-12  individual banker>.
   1-13              (2)  "Credit union" means a state credit union or
   1-14  federal credit union domiciled in this state.
   1-15              (3) <(2)>  "Demand deposit" means a deposit of funds
   1-16  that may be withdrawn on the demand of the depositor.
   1-17              (4) <(3)>  "Depository" means the bank, credit union,
   1-18  or savings association selected by the municipality to provide
   1-19  depository services.
   1-20              (5)  "Time deposit" means a deposit of funds subject to
   1-21  a contract between the depositor and the depository under which the
   1-22  depositor may not withdraw any of the funds by check or by another
   1-23  manner until the expiration of a certain period following written
    2-1  notice of the depositor's intent to withdraw the funds.
    2-2              (6) <(4)>  "Depository services" means the receipt and
    2-3  disbursement of funds by a depository in accordance with the terms
    2-4  of a depository services contract <"Secretary of a municipality"
    2-5  includes the clerk of a municipality>.
    2-6              (7)  "Depository services contract" means a contract
    2-7  executed by a municipality and a depository containing terms and
    2-8  conditions relating to the depository services to be provided by
    2-9  the depository.
   2-10              (8)  "Designated officer" means the treasurer of a
   2-11  municipality or other officer of the municipality so designated by
   2-12  the governing body of a municipality.
   2-13              (9)  "Federal credit union" means a credit union
   2-14  organized  under the Federal Credit Union Act (12 U.S.C. Section
   2-15  1751 et seq.).
   2-16              (10)  "Federal savings association" means a savings and
   2-17  loan association or a savings bank organized under federal law.
   2-18              (11)  "National bank" means a banking corporation
   2-19  organized under the provisions of 12 U.S.C. Section 21.
   2-20              (12)  "Savings association" means a state savings
   2-21  association or a federal savings association domiciled in this
   2-22  state.
   2-23              (13)  "State bank" has the meaning assigned by The
   2-24  Texas Banking Code (Article 342-101 et seq., Vernon's Texas Civil
   2-25  Statutes).
    3-1              (14)  "State credit union" means a credit union
    3-2  organized under the Texas Credit Union Act (Article 2461-1.01 et
    3-3  seq., Vernon's Texas Civil Statutes).
    3-4              (15)  "State savings association" means any savings and
    3-5  loan association or savings bank organized under the laws of this
    3-6  state.
    3-7        Sec. 105.002.  Funds Affected.  This chapter applies to the
    3-8  funds, including school funds, of any municipality or any
    3-9  department or agency of the municipality<, including any school
   3-10  funds of the municipality>.
   3-11           (Sections 105.003-105.010 reserved for expansion)
   3-12              SUBCHAPTER B.  ESTABLISHMENT OF DEPOSITORY
   3-13        Sec. 105.011.  Depository Authorized.  (a)  Before awarding a
   3-14  depository services contract to a depository, the governing body of
   3-15  a municipality shall receive applications for the performance of
   3-16  depository services from one or more banks, credit unions, or
   3-17  savings associations <At a meeting held at any time, the governing
   3-18  body of a municipality may receive applications from one or more
   3-19  banks for the deposit of the municipality's funds>.
   3-20        (b)  The governing body may consider the application of a
   3-21  bank, credit union, or savings association that is not doing
   3-22  business within the municipality if:
   3-23              (1)  the bank, credit union, or savings association
   3-24  maintains a place of business within the state and offers within
   3-25  the state the services required by the depository services
    4-1  contract; and
    4-2              (2)  the governing body, prior to giving the notice
    4-3  required by Section 105.012, has adopted a written policy expressly
    4-4  permitting the consideration of applications received by the
    4-5  municipality from a bank, credit union, or savings association that
    4-6  is not doing business within the municipality, after taking into
    4-7  consideration what is in the best interest of the municipality in
    4-8  establishing a depository.
    4-9        (c)  The designated officer shall request, receive, and
   4-10  review applications for the performance of depository services.
   4-11  The designated officer shall present the specifications of each
   4-12  application to the governing body who will then select a depository
   4-13  <If two or more banks are doing business within a municipality, the
   4-14  governing body may consider the applications of only those banks.
   4-15  However, a general-law municipality with a population of more than
   4-16  20,000 may consider applications from any bank located in the
   4-17  county in which the municipality is located or in an adjacent
   4-18  county>.
   4-19        Sec. 105.012.  Notice.  (a)  The designated officer shall
   4-20  give notice to banks, credit unions, and savings associations
   4-21  requesting the submission of applications for the performance of
   4-22  depository services.
   4-23        (b)  The notice must contain:
   4-24              (1)  the name and address of the designated officer
   4-25  receiving the applications;
    5-1              (2)  the date and time the applications are to be
    5-2  received by the designated officer; and
    5-3              (3)  the date, time, and place the governing body of
    5-4  the municipality will consider the selection of one or more
    5-5  depositories.
    5-6        (c)  Notice of the request shall be published at least once
    5-7  no later than 21 days prior to the deadline for receipt of
    5-8  applications for depository services contracts  (i)  in a newspaper
    5-9  of general circulation in the municipality and (ii)  in a financial
   5-10  publication of general circulation published within this state;
   5-11  provided, that the notice required by clause (ii) shall not be
   5-12  required if the governing body has not adopted the written policy
   5-13  described in Section 105.011 <Not earlier than four weeks or later
   5-14  than one week before the date of the meeting, the secretary of the
   5-15  municipality shall publish at least once in a newspaper published
   5-16  in the municipality a notice of the meeting at which applications
   5-17  are to be received>.
   5-18        Sec. 105.013.  Application.  The designated officer may not
   5-19  consider an application if it is received after the date specified
   5-20  in the notice for receiving applications by the designated
   5-21  officer <A bank desiring to be selected as a municipal depository
   5-22  must deliver its application to the secretary of the municipality
   5-23  on or before the date of the meeting at which applications are to
   5-24  be received>.
   5-25        Sec. 105.014.  REVIEW OF APPLICATIONS.  In reviewing the
    6-1  applications, the designated officer shall consider the terms and
    6-2  conditions for the performance of depository services, including
    6-3  the type and cost of services to be provided to the municipality,
    6-4  consistent with any policy guidelines adopted by the governing body
    6-5  regarding the selection of one or more depositories.
    6-6        Sec. 105.015.  Selection of Depository.  (a)  The governing
    6-7  body of a municipality may authorize the designated officer to
    6-8  execute on the municipality's behalf one or more depository
    6-9  services contracts <After considering the applications, the
   6-10  governing body of the municipality shall select as municipal
   6-11  depositories one or more banks that offer the most favorable terms
   6-12  and conditions for the handling of the municipal funds>.
   6-13        (b)  The governing body may reject any of the applications
   6-14  and readvertise if all <for> applications are rejected.
   6-15        (c)  The conflict of interests provisions of <Chapter 179,
   6-16  Acts of the 60th Legislature, Regular Session, 1967 (>Article
   6-17  2529c, Vernon's Texas Civil Statutes<),> apply to the selection of
   6-18  the depositories.
   6-19        Sec. 105.016 <105.015>.  Designation of Depository.  (a)  The
   6-20  <When security is provided in accordance with Subchapter C and is
   6-21  approved by the governing body of the municipality, the> governing
   6-22  body shall designate, by an order recorded in its minutes, the
   6-23  bank, credit union, or savings association to serve as a depository
   6-24  for the municipality's funds.
   6-25        (b)  If a bank, credit union, or savings association selected
    7-1  as a municipal depository does not provide security by the deadline
    7-2  prescribed by Section 105.031, the selection of the bank, credit
    7-3  union, or savings association <of the bank> as a depository is
    7-4  void, and the governing body  may consider the application it deems
    7-5  to be the next most advantageous depository services application
    7-6  <shall publish notice, receive applications, and select another
    7-7  depository in the regular manner>.
    7-8        Sec. 105.017.  Term of Depository Contract.  A municipality
    7-9  may approve, execute, and deliver any depository services contract
   7-10  whose term does not exceed five years.  The depository services
   7-11  contract may only contain terms and conditions approved by the
   7-12  governing body of the municipality.
   7-13        Sec. 105.018.  Additional Services.  In addition to
   7-14  depository services, a municipality may contract with financial
   7-15  institutions, including banks, credit unions, and savings
   7-16  associations, for additional financial services under a separate
   7-17  contract if the governing body of the municipality determines that
   7-18  additional financial services are necessary in the administration,
   7-19  collection, investment, and transfer of municipal funds.
   7-20      (Sections 105.019 <105.016>-105.030 reserved for expansion)
   7-21         SUBCHAPTER C.  SECURITY FOR FUNDS HELD BY DEPOSITORY
   7-22        Sec. 105.031.  Qualification as Depository.  (a)  The bank or
   7-23  savings association, to qualify as a municipal depository, must,
   7-24  not later than five days before the commencement of the term of the
   7-25  depository services contract, provide security for the municipal
    8-1  funds to be deposited in accordance with the terms of the
    8-2  depository services contract <Within five days after the date a
    8-3  bank is selected as a municipal depository, the bank must qualify
    8-4  as a depository by providing security for the municipal funds to be
    8-5  deposited with the bank>.
    8-6        (b)  The Public Funds Collateral Act (Article 2529d, Vernon's
    8-7  Texas Civil Statutes) governs the type, level, substitution,
    8-8  possession, release, and method of valuation of the security
    8-9  necessary to secure the deposit of municipal funds.
   8-10        (c)  The bank, credit union, or savings association may use
   8-11  personal bonds, surety bonds, or any combination to secure
   8-12  municipal funds only if each personal bond and surety bond is
   8-13  specifically approved by the governing body of the municipality or
   8-14  its designated officer <The bank may secure the municipal funds, at
   8-15  the option of the governing body of the municipality, by:>
   8-16              <(1)  personal bond; surety bond; bonds, notes, or
   8-17  other securities; or a combination of these methods, as provided by
   8-18  this subchapter; or>
   8-19              <(2)  investment securities or interests in them as
   8-20  provided by Chapter 726, Acts of the 67th Legislature, Regular
   8-21  Session, 1981 (Article 2529b-1, Vernon's Texas Civil Statutes)>.
   8-22        Sec. 105.032.  Personal Bond.  (a)  One or more personal
   8-23  bonds executed and filed with the governing body of the
   8-24  municipality or its designated officer, payable to the
   8-25  municipality, qualify as security under this subchapter if:
    9-1              (1)  the bonds are signed by at least five solvent
    9-2  sureties who:
    9-3                    (A)  own unencumbered real property in the state
    9-4  that has a value at least equal to the amount of the bonds and that
    9-5  is not exempt from execution under the constitution and other laws
    9-6  of this state; or
    9-7                    (B)  have an aggregate net worth at least equal
    9-8  to the amount of the bonds; and
    9-9              (2)  the bonds are approved by the governing body or
   9-10  its designated officer.
   9-11        (b)  When a bond is filed for approval under Subsection
   9-12  (a)(1)(A), the sureties shall also file with the governing body a
   9-13  statement containing:
   9-14              (1)  a description of the unencumbered and nonexempt
   9-15  real property sufficient to identify the secured property <it on
   9-16  the ground>; and
   9-17              (2)  a fair estimate of the value of each tract of real
   9-18  property listed, including the value of any improvements on the
   9-19  property.
   9-20        (c)  When a bond is filed for approval under Subsection
   9-21  (a)(1)(B), the sureties shall also file with the governing body or
   9-22  designated officer of the municipality an itemized and verified
   9-23  financial statement showing that the aggregate net worth of the
   9-24  sureties is at least equal to the amount of the bonds.
   9-25        (d)  After the governing body approves a personal bond, it
   10-1  shall be filed with the secretary and the designated officer of the
   10-2  municipality.  The statement required by Subsection (c) shall be
   10-3  attached to the bond.
   10-4        Sec. 105.033.  Surety Bond.  (a)  One or more bonds issued
   10-5  and executed by one or more solvent surety companies authorized to
   10-6  do business in this state, payable to the municipality and filed
   10-7  with the secretary and the designated officer <governing body> of
   10-8  the municipality, qualify as security under this subchapter if the
   10-9  bonds are approved by the governing body.
  10-10        (b)  After the governing body approves a surety bond, it
  10-11  shall be filed with the secretary and the designated officer of the
  10-12  municipality.
  10-13        Sec. 105.034.  Conditions to Acting as Depository <BONDS,
  10-14  NOTES, AND OTHER SECURITIES>.  (a)  The depository shall:
  10-15              (1)  keep the municipal funds covered by the depository
  10-16  services contract;
  10-17              (2)  perform all duties and obligations imposed on the
  10-18  depository by law and under the depository services contract;
  10-19              (3)  pay on presentation all checks drawn and properly
  10-20  payable on a demand deposit account with the depository;
  10-21              (4)  pay all transfers properly payable as directed by
  10-22  a designated officer;
  10-23              (5)  provide and maintain security at the level
  10-24  required by the provisions of the Public Funds Collateral Act
  10-25  (Article 2529d, Vernon's Texas Civil Statutes); and
   11-1              (6)  account for the municipal funds as required by
   11-2  law.
   11-3        (b)  Any suit brought in connection with a depository
   11-4  services contract must be tried in the county in which the city
   11-5  hall of the municipality is located.  <If approved by the governing
   11-6  body as to kind and value, a municipal depository may pledge with
   11-7  the governing body of the municipality as security under this
   11-8  subchapter:>
   11-9              <(1)  a bond, certificate of indebtedness, or treasury
  11-10  note of the United States, or other evidence of indebtedness of the
  11-11  United States that is guaranteed as to principal and interest by
  11-12  the United States;>
  11-13              <(2)  a bond of this state or of a county,
  11-14  municipality, independent school district, common school district,
  11-15  or other school district in this state;>
  11-16              <(3)  a bond issued under the federal farm loan acts;>
  11-17              <(4)  a road district bond;>
  11-18              <(5)  a bond, pledge, or other evidence of indebtedness
  11-19  issued by the board of regents of The University of Texas System;>
  11-20              <(6)  a note or bond secured by mortgages insured and
  11-21  debentures issued by the Federal Housing Administration;>
  11-22              <(7)  shares or share accounts of a savings and loan
  11-23  association organized under the laws of this state or of a federal
  11-24  savings and loan association domiciled in this state if the payment
  11-25  of the share or share accounts is insured by the Federal Savings
   12-1  and Loan Insurance Corporation;>
   12-2              <(8)  bank acceptances of banks that have a capital
   12-3  stock of at least $500,000; or>
   12-4              <(9)  a bond issued by a municipal corporation in this
   12-5  state.>
   12-6        <Sec. 105.035.  ><CONDITION OF PERSONAL BOND OR CONTRACT FOR
   12-7  SECURITIES><.  (a)  A personal bond or surety bond provided, or a
   12-8  contract for the pledge of securities under this subchapter, must
   12-9  be conditioned that the depository will:>
  12-10              <(1)  faithfully keep the municipal funds and
  12-11  faithfully perform the duties and obligations imposed by law on the
  12-12  depository;>
  12-13              <(2)  pay on presentation all checks drawn on a demand
  12-14  deposit account with the depository;>
  12-15              <(3)  pay all checks drawn on a time deposit account on
  12-16  presentation by the treasurer of the municipality after the
  12-17  required period of notice; and>
  12-18              <(4)  account for the municipal funds as required by
  12-19  law.>
  12-20        <(b)  A suit on a personal bond, surety bond, or contract for
  12-21  securities provided or pledged under this subchapter must be tried
  12-22  in the county in which the municipality is located.>
  12-23        <Sec. 105.036.  ><Amount of Security Required><.  (a)  Personal
  12-24  or surety bonds that secure municipal funds in a depository must be
  12-25  in an amount at least equal to the total amount of the revenue of
   13-1  the municipality for the year preceding the year for which the
   13-2  bonds are made.>
   13-3        <(b)  Securities pledged to secure municipal funds on deposit
   13-4  in a depository must be in an amount equal to the amount of those
   13-5  funds.  The value of the securities is determined by the governing
   13-6  body of the municipality, and that determination is final and is
   13-7  binding on the depository.>
   13-8        <Sec. 105.037.  ><Security Not Required For Federally Insured
   13-9  Deposits><.  A depository is not required to provide security for the
  13-10  deposit of municipal funds to the extent the deposits are insured
  13-11  under 12 U.S.C.A.  Sections 1811-1832.>
  13-12      (Sections 105.035 <105.038>-105.050 reserved for expansion)
  13-13        SUBCHAPTER D.  MAINTENANCE AND MODIFICATION OF SECURITY
  13-14        Sec. 105.051.  Maintenance of <New> Security.  (a)  A
  13-15  depository services contract shall contain terms and conditions
  13-16  relating to the possession, substitution, or release of security,
  13-17  including:
  13-18              (1)  requiring the depository to execute a new bond or
  13-19  pledge additional securities for the deposit of municipal funds;
  13-20              (2)  substituting one security for another;
  13-21              (3)  releasing securities pledged by a depository in
  13-22  excess of the amount required by this chapter;
  13-23              (4)  the time period in which such addition,
  13-24  substitution, or release of security by a depository may occur; and
  13-25              (5)  other matters relating to the possession,
   14-1  substitution, or release of security the municipality considers
   14-2  necessary for its protection <The governing body of the
   14-3  municipality may by written order require a depository to execute a
   14-4  new bond or pledge additional or other securities at any time the
   14-5  governing body considers it advisable or considers it necessary for
   14-6  the protection of the municipality>.
   14-7        (b)  If a depository fails for any reason to comply with the
   14-8  requirements governing the possession, substitution, or release of
   14-9  security <file the required new bond or pledge the required
  14-10  securities within five days after the date the depository is served
  14-11  with a copy of the order>, the governing body may select a new
  14-12  depository in the <regular> manner provided in this chapter.
  14-13        Sec. 105.052.  <Substitution of Securities><.  (a)  A
  14-14  depository is entitled to substitute one type of security for
  14-15  another if the substituting security meets the requirements of law
  14-16  and is approved by the governing body of the municipality.>
  14-17        <(b)  The governing body may direct the manner in which
  14-18  securities pledged in place of personal or surety bonds are to be
  14-19  deposited.>
  14-20        <Sec. 105.053.  ><Release of Excess Security><.  If the
  14-21  securities pledged by a depository to secure municipal funds exceed
  14-22  the amount required by this chapter, the governing body of the
  14-23  municipality shall permit the release of the excess.>
  14-24        <Sec. 105.054.  ><Inadequate Security><.  If for any reason the
  14-25  municipal funds on deposit with a depository exceed the amount of
   15-1  security pledged, the depository shall immediately pledge
   15-2  additional securities with the governing body of the municipality.>
   15-3        <Sec. 105.055.>  Solvency of Personal Surety.  (a)  At least
   15-4  twice each year while a personal bond securing municipal deposits
   15-5  is in effect, the designated officer of the municipality <governing
   15-6  body of the municipality> shall investigate the solvency of each
   15-7  surety on the bond.  The governing body of the municipality or its
   15-8  designated officer <governing body> may require a surety to make an
   15-9  itemized and verified financial statement accurately showing the
  15-10  surety's financial position and, if the bond requires the surety to
  15-11  own real property, identifying each tract of real property owned by
  15-12  the surety and stating its value.
  15-13        (b)  The governing body of the municipality shall require a
  15-14  depository to provide a new bond meeting the requirements of this
  15-15  chapter if a financial statement provided under Subsection (a)
  15-16  indicates that:
  15-17              (1)  a surety is insolvent;
  15-18              (2)  a surety's net worth is less than the amount
  15-19  required by this chapter;
  15-20              (3)  the assets listed are depreciated or their value
  15-21  is in any way impaired; or
  15-22              (4)  real property required by the bond has been
  15-23  disposed of or encumbered and the value of the remaining
  15-24  unencumbered and nonexempt real property is insufficient to meet
  15-25  the requirements of this chapter.
   16-1        Sec. 105.053 <105.056>.  Solvency of Surety Company and
   16-2  Adequacy of Securities.  At any time the governing body of the
   16-3  municipality considers it necessary for the protection of the
   16-4  municipality, the governing body may direct the designated officer
   16-5  to investigate the solvency of a surety company that issues a bond
   16-6  on behalf of a municipal depository or investigate the value of
   16-7  securities pledged by a depository to secure municipal funds.
   16-8        Sec. 105.054 <105.057>.  Surrender of Interest on Securities.
   16-9  Except as provided for in the collateral policies of the
  16-10  municipality adopted in accordance with the Public Funds Collateral
  16-11  Act (Article 2529d, Vernon's Texas Civil Statutes), on <On> request
  16-12  of a municipal depository, the <governing body of the> municipality
  16-13  shall surrender, when due, interest coupons or other evidence of
  16-14  interest on securities deposited by the depository with the
  16-15  governing body if the securities remaining pledged by the
  16-16  depository are adequate to meet the requirements of this chapter
  16-17  and of the governing body.
  16-18      (Sections 105.055 <105.058>-105.070 reserved for expansion)
  16-19                  SUBCHAPTER E.  DEPOSITORY ACCOUNTS
  16-20        Sec. 105.071.  Character and Amount of Deposits.  (a)  The
  16-21  governing body of the municipality may determine and designate in
  16-22  the depository services contract the character and amount of
  16-23  municipal funds that will be demand deposits.  However, the
  16-24  municipality has the right to maintain other investments of
  16-25  municipal funds in accordance with the investment policy adopted by
   17-1  the municipality <and that will be time deposits>.
   17-2        (b)  The designated officer <governing body> may contract
   17-3  with a depository for interest on time deposits, including, without
   17-4  limitation, certificates of deposit, at any legal rate under
   17-5  federal or state law,  <or under a> rule, or regulation <adopted by
   17-6  the board of governors of the Federal Reserve System or by the
   17-7  board of directors of the Federal Deposit Insurance Corporation>.
   17-8        Sec. 105.072.  Investments <in United States Securities>.
   17-9  The provisions of Chapter 810, Acts of the 66th Legislature,
  17-10  Regular Session, 1979 (Article 4413(34c), Vernon's Texas Civil
  17-11  Statutes), and the Public Funds Investment Act of 1987 (Article
  17-12  842a-2, Vernon's Texas Civil Statutes) shall govern the investment
  17-13  of municipal funds <The governing body of the municipality may
  17-14  direct the treasurer of the municipality to withdraw any municipal
  17-15  funds deposited in a depository that are not immediately required
  17-16  to pay obligations of the municipality and invest those funds in
  17-17  direct debt securities of the United States unless such an
  17-18  investment or withdrawal is expressly prohibited by law or the
  17-19  withdrawal is contrary to the terms of the depository contract>.
  17-20        Sec. 105.073.  Deposit of Funds.  Not later than 60 days from
  17-21  the date <Immediately after> the governing body of the municipality
  17-22  designates a <municipal> depository in accordance with the
  17-23  provisions of Section 105.016, the designated officer of the
  17-24  municipality <treasurer of the municipality> shall transfer to the
  17-25  depository all the municipal funds covered by the depository
   18-1  services contract under the <treasurer's> control of the designated
   18-2  officer.  The designated officer of the municipality <treasurer>
   18-3  shall as soon as practicable also <immediately> deposit in the
   18-4  depository to the credit of the municipality any money covered by
   18-5  the depository services contract received after the depository is
   18-6  designated.
   18-7        Sec. 105.074.  Payment of Funds <Drawing of Checks and
   18-8  Warrants>.  (a)  The funds of the municipality may be paid out of a
   18-9  depository only at <on> the direction of a designated officer
  18-10  <checks of the treasurer of the municipality>.
  18-11        (b)  Except as provided in Subsection (g) <in a municipality
  18-12  that operates under a municipal charter provision that provides for
  18-13  the drawing of checks or warrants on the depository or municipal
  18-14  funds in a manner different from that prescribed by this section>,
  18-15  a designated officer <treasurer> may draw a check on a depository
  18-16  only on a warrant signed by the mayor and attested by the secretary
  18-17  of the municipality.
  18-18        (c)  If there is sufficient money in a fund in a depository
  18-19  against which the proper authority has drawn a warrant, the
  18-20  designated officer <treasurer> on presentation of the warrant shall
  18-21  draw a check on the depository in favor of the legal holder of the
  18-22  warrant, retain the warrant, and charge the warrant against the
  18-23  fund on which it is drawn.  The designated officer <treasurer> may
  18-24  not draw a warrant on a fund in a depository unless the fund has
  18-25  sufficient money to pay the warrant.
   19-1        (d)  A designated officer <treasurer> may not draw a check on
   19-2  any funds designated in the depository services contract as time
   19-3  deposits until notice has been given and the notice period has
   19-4  expired under the terms of the contract with the depository.
   19-5        (e)  The mayor and secretary of the municipality may not draw
   19-6  a warrant on a special fund in a depository or under the control of
   19-7  the designated officer <treasurer> that was created to pay the
   19-8  bonded indebtedness of the municipality other than to pay the
   19-9  principal of or interest on the indebtedness or to invest the fund
  19-10  as provided by law.
  19-11        (f)  The designated officer <treasurer> may not pay or draw a
  19-12  check to pay money out of a special fund that was created to pay
  19-13  the bonded indebtedness of the municipality other than to pay the
  19-14  principal of or interest on the indebtedness or to invest the fund
  19-15  as provided by law.
  19-16        (g)  Notwithstanding the provisions of Subsections (b)
  19-17  through (f), the governing body of a municipality may adopt
  19-18  procedures:
  19-19              (1)  governing the method by which the designated
  19-20  officer is authorized to direct payments from the funds of the
  19-21  municipality on deposit with a depository;
  19-22              (2)  governing the method of payment of obligations of
  19-23  the municipality, including payment by check, draft, wire transfer,
  19-24  or other method of payment mutually acceptable to the municipality
  19-25  and the depository; and
   20-1              (3)  the governing body determines are necessary to
   20-2  ensure the safety and integrity of the payment process.
   20-3        (h)  If a municipality adopts procedures in accordance with
   20-4  Subsection (g), a copy of the adopted procedures shall be filed
   20-5  with the depository.  The designated officer and the depository
   20-6  shall agree upon record-keeping safeguards and other measures
   20-7  necessary to ensure the safety and integrity of the payment
   20-8  process.  The safeguards must be approved by the governing body of
   20-9  the municipality if the governing body finds that the safeguards
  20-10  are consistent with and do not contravene the procedures adopted
  20-11  under Subsection (g).
  20-12        Sec. 105.075.  Checks Payable at Depository.  Checks drawn by
  20-13  the treasurer of the municipality against municipal funds on
  20-14  deposit are payable by the depository at its place of business in
  20-15  the municipality.
  20-16        Sec. 105.076.  DEBTS PAYABLE OTHER THAN AT MUNICIPAL
  20-17  TREASURY.  The governing body of the municipality may direct the
  20-18  designated officer <treasurer of the municipality> to withdraw from
  20-19  a depository and deposit money sufficient to pay a bond, coupon, or
  20-20  other indebtedness of the municipality at a place other than at the
  20-21  municipal treasury if by its terms the indebtedness is payable on
  20-22  maturity or upon redemption prior to maturity at the other
  20-23  location.
  20-24           (Sections 105.077-105.090 reserved for expansion)
  20-25       SUBCHAPTER F.  LIABILITY AND REPORT OF DESIGNATED OFFICER
   21-1                              <TREASURER>
   21-2        Sec. 105.091.  Liability of Designated Officer <Treasurer>.
   21-3  The designated officer <treasurer of the municipality> is not
   21-4  responsible for any loss of municipal funds through the negligence,
   21-5  failure, or wrongful act of a depository.  This section does not
   21-6  release the designated officer <treasurer> from responsibility for
   21-7  a loss resulting from the official misconduct of the designated
   21-8  officer <treasurer>, including a misappropriation of the funds, or
   21-9  from responsibility for the funds until a depository is selected
  21-10  and the funds are deposited.
  21-11        Sec. 105.092.  REPORT BY DESIGNATED OFFICER <TREASURER>.  In
  21-12  conjunction with the publication of the annual financial statement
  21-13  of the municipality <On or before the first regular meeting of the
  21-14  governing body of the municipality in July of each year>, the
  21-15  designated officer <treasurer of the municipality> shall prepare a
  21-16  report which shall describe in summary form <to the governing
  21-17  body>:
  21-18              (1)  the amount of receipts and expenditures of the
  21-19  municipal treasury;
  21-20              (2)  the amount of money on hand in each fund;
  21-21              (3)  the amount of bonds becoming due for redemption
  21-22  that require action;
  21-23              (4)  the amount of interest to be paid during the next
  21-24  fiscal year; and
  21-25              (5)  any other information required by law to be
   22-1  reported by the designated officer <treasurer>.
   22-2        SECTION 2.  Section 2(6), Public Funds Collateral Act
   22-3  (Article 2529d, Vernon's Texas Civil Statutes), is amended to read
   22-4  as follows:
   22-5              (6)  "Investment security" means:
   22-6                    (A)  a direct obligation of the United States;
   22-7                    (B)  an obligation that in the opinion of the
   22-8  Attorney General of the United States is a general obligation of
   22-9  the United States and backed by its full faith and credit;
  22-10                    (C)  an obligation, the principal of and interest
  22-11  on which are unconditionally guaranteed by the United States;
  22-12                    (D)  an obligation of an agency or
  22-13  instrumentality of the United States, including a mortgage-backed
  22-14  security of the agency or instrumentality;
  22-15                    (E)  a general or special obligation issued by a
  22-16  public agency, payable from taxes, revenues, or a combination of
  22-17  taxes and revenues <that has been rated as to investment quality by
  22-18  a nationally recognized rating agency and that has a current rating
  22-19  of not less than A or its equivalent>; and
  22-20                    (F)  any security in which a public entity may
  22-21  invest under the Public Funds Investment Act of 1987 (Article
  22-22  842a-2, Vernon's Texas Civil Statutes).
  22-23        SECTION 3.  Section 131.901(b), Local Government Code, is
  22-24  amended to read as follows:
  22-25        (b)  An institution selected as a paying agent or trustee for
   23-1  specific bonds or obligations or an institution selected by the
   23-2  governing body to provide safekeeping services is not considered a
   23-3  depository for purposes of this section.
   23-4        SECTION 4.  Section 116.001(1), Local Government Code, is
   23-5  amended to read as follows:
   23-6              (1)  "Bank" means a banking corporation, <or>
   23-7  association or an individual banker, savings and loan association
   23-8  or savings bank organized under the laws of this state, or a
   23-9  savings and loan association or savings bank organized under
  23-10  federal law.
  23-11        SECTION 5.  Section 23.73(2), Education Code, is amended to
  23-12  read as follows:
  23-13              (2)  "Bank" means a state bank authorized and regulated
  23-14  under the laws of the state pertaining to banking and in particular
  23-15  authorized and regulated by the Banking Department Self-Support and
  23-16  Administration Act, <or> a national bank, a savings and loan
  23-17  association or savings bank authorized and regulated by federal
  23-18  law, or a savings and loan association or savings bank organized
  23-19  under the laws of this state, but does not include any bank the
  23-20  deposits of which are not insured by the Federal Deposit Insurance
  23-21  Corporation.
  23-22        SECTION 6.  This Act takes effect September 1, 1993.
  23-23        SECTION 7.  The importance of this legislation and the
  23-24  crowded condition of the calendars in both houses create an
  23-25  emergency and an imperative public necessity that the
   24-1  constitutional rule requiring bills to be read on three several
   24-2  days in each house be suspended, and this rule is hereby suspended.