Title 39. Public Finance

Subtitle II. Local Finance

Chapter 7. Local Depositories

Part II. Special Provisions for Cities over One Hundred Fifty Thousand Population

39:1242      Security for deposits

A. The commissioner of public finance, or the finance officer of cities having a population exceeding one hundred fifty thousand, or any department, board, commission, or institution thereof, shall require as security for deposits belonging to and held in their custody: 

(1) Bonds or other interest-bearing securities of the United States, or any agency thereof, including but not limited to the Federal National Mortgage Association, or bonds or other interest-bearing obligations guaranteed fully or partially as to principal and interest by the United States, or by any agency thereof, bonds of any possession of the United States, bonds of this state, including bonds or other interest-bearing obligations, whether supported by revenue or by the avails of taxes, of the State of Louisiana or of any agency, board, commission, department or division thereof or of any agency, public corporation or authority created by or recognized by the State of Louisiana; bonds of the municipality in which the fiscal agent banks are located, bonds of the levee board or school board in which the fiscal agent banks are located, or bonds of the board of commissioners of the port of New Orleans; or bonds of any parish, municipality, industrial district or industrial board which are secured by a lease executed in accordance with the provisions of Article XIV, Section 14, Paragraphs b.2 or b.3 of the Constitution of the State of Louisiana for the year 1921¹ or R.S. 39:1001 et seq. or R.S. 51:1151 et seq., as amended, and partially or fully guaranteed by the Louisiana Board of Commerce and Industry in accordance with the provisions of the Bond Lease Guarantee Act of the regular session of the Louisiana Legislature of 1968² 

(2) Promissory notes, warrants or certificates of indebtedness, either of the depositing authority letting the deposits or any other depositing authority referred to in R.S. 39:1241. The notes, warrants, or certificates of indebtedness must be either unmatured or payable on demand. 

(3) Notes representing loans to students which are guaranteed by the Louisiana Higher Education Assistance Commission in accordance with a contract agreement between the lender and the Commission under the provisions of R.S. 17:3021 et seq. 

(4) Notwithstanding any other law to the contrary, any obligation, security, or investment that a municipality may invest in directly as provided in R.S. 33:2955, except as provided in Subsection E of this Section. 

(5) Letters of credit issued by the Federal Home Loan Bank as authorized by R.S. 6:318 or 748.1.

(6) Any recognized system or program providing Federal Deposit Insurance Corporation insurance coverage as authorized by R.S. 6:319. 

B. Bonds or other securities in default, either in principal or interest, shall not be accepted or held by any of the depositing authorities named in this Part. 

C. The market value, excluding accrued interest, of the securities held by any depositing authority shall at all times be equal to one hundred percent of the amount on deposit to the credit of the depositing authority except that portion of the deposits insured or guaranteed by any government agency insuring bank deposits that is organized under the laws of the United States; provided that in the case of bonds or other interest-bearing obligations guaranteed as to principal and interest by the United States, or an agency thereof, or bonds of any parish, municipality, industrial district or industrial board which are secured by a lease executed in accordance with the provisions of Article XIV, Sections 14(b.2) and 14(b.3) of the Constitution of 1921 or R.S. 39:1011 et seq. or R.S. 51:1151 et seq., as amended, and partially or fully guaranteed by the Louisiana Board of Commerce and Industry in accordance with the provisions of the Bond Lease Guarantee Act* of the 1968 Regular Session of the Louisiana Legislature,¹ the market value of said bonds or obligations, excluding accrued interest, shall not be deemed to exceed an amount in excess of the principal so guaranteed. The market value of the securities used to secure deposits as provided herein may be calculated on the basis of the quarterly reports of financial conditions submitted by the fiscal agent bank to the office of financial institutions, Federal Deposit Insurance Corporation, or Office of the Comptroller of the Currency using the valuations derived from any national securities index, register, or publication, or in any other reasonable manner acceptable to the depositing authority. 

D. No funds in excess of the capital stock and declared surplus of any bank shall be deposited in any depository by any depositing authority named in this Part; provided that any depositing authority named in this Part may grant any designated depository a period not exceeding ten days from date of any deposit in which to post the security required under Subsection C of this Section. 

E. Notwithstanding any other law to the contrary, there shall be no limitation or restriction on the duration of the bonds, debentures, notes, or other indebtedness used as security for deposits under this Section. 

Amended by Acts 1968, No. 218, § 3; Acts 1968, No. 287, § 1; Acts 1986, No. 373, § 2; Acts 2010, No. 957, § 1; Acts 2019, No. 99, § 1; Acts 2020, No. 289, § 1.

Footnotes

¹See, now, R.S. 39:471, 39:551.1, 39:551.2, 39:570.1, 39:991, and 39:992.

²See Acts 1968, No. 697 which contained a proposed amendment to the 1921 Louisiana Constitution, an addition to Art. 14, § 14 of a par. (b.4) authorizing the Board of Commerce and Industry to insure portions of lease payments under terms of lease agreement securing and related to certain bonds issued by political subdivisions. Pursuant to the provisions of Act 697, the proposed amendment was submitted to the voters at a general election held in 1968. It failed to pass.