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§ 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.

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