MUNICIPAL CORPORATIONS ‑- CITIES AND TOWNS ‑- COUNTIES ‑- FINANCES ‑- INVESTMENT OF FUNDS, DEPOSITARIES FOR FUNDS.
A municipal corporation may not deposit or invest any of its funds in a savings account in any bank or mutual savings bank, or deposit or invest any of its funds in any other manner except pursuant to specific statutory authority.
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August 21, 1958
Honorable W. A. Gissberg
State Senator, 39th District
Marysville, Washington Cite as: AGO 57-58 No. 216
By letter previously acknowledged, you requested our opinion on a matter we paraphrase as follows:
May a city invest its funds in a savings account of a bank?
We answer your inquiry in the negative.
Before discussing the legal question involved herein, it will be helpful to define certain words or phrases.
RCW 30.04.010. Definitions (in part).
" 'Bank,' unless a different meaning appears from the context, means any corporation organized under the laws of this state engaged in banking, other than a trust company or a mutual savings bank.
". . .
[[Orig. Op. Page 2]]
"A 'savings account' is an account of a bank in respect of which, by its regulations accepted by the depositor at the time the account is opened, (1) a passbook, certificate or other similar form of receipt must be presented to the bank whenever a deposit or withdrawal is made and (2) the depositor at any time may be required by the bank to give notice of an intended withdrawal before the withdrawal is made.
"'Savings bank' shall include (1) any bank whose deposits shall be limited exclusively to savings accounts, and (2) the department of any bank or trust company that accepts, or offers to accept, deposits for savings accounts in accordance with the provisions of this title relative to segregated savings."
Municipal funds may only be deposited or invested pursuant to express statutory authority. See Aberdeen v. National Surety Co., 151 Wash. 55, and our opinions to the State Finance Committee [[1943-44 OAG 4]]and to the prosecuting attorney of Clark County [[Yakima County, 1929-30 OAG 251]], dated January 14, 1943, and May 29, 1929 (Opinion No. 2449) respectively.
Therefore, before depositing or investing municipal funds, those entrusted with the care of such funds must find specific statutory authority to do so.
Also, we have a further limitation on the power of municipalities to deposit or invest, in that they are prohibited by our constitution from loaning money. Article VIII, § 7, of our state constitution provides:
"No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm, or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation."
In Aberdeen v. National Surety Co., supra, the court clarified this provision by holding that the city of Aberdeen could not buy interest-bearing time certificates of deposit, not subject to check, and not subject to withdrawal, without violating Article VIII, § 7 of the constitution.
In an opinion to the state auditor, division of municipal corporations, dated September 13, 1957 (AGO 57-58 No. 119), a copy of which is enclosed, we stated that [[Orig. Op. Page 3]] the case of Aberdeen v. National Surety Co., supra, was authority for the proposition that if the deposit is not subject to withdrawal by check, the deposit does not meet the requirement of the statute. We were of the opinion therein that savings accounts in mutual savings banks are not permissible since the funds are not subject to withdrawal by check. See definition of savings account quoted above in RCW 30.04.010.
This opinion was limited as follows:
"It is, therefore, our conclusion that county treasurers may not deposit public funds in mutual savings banks."
We are of the opinion that this reasoning is equally applicable to savings accounts in a bank, as defined in RCW 30.04.010, quoted in part above.
In summary, we are of the opinion that no municipal corporation may deposit or invest any of its funds in a savings account in any bank or mutual savings bank, or deposit or invest any of its funds in any other manner except pursuant to specific statutory authority.
We trust that the above discussion will prove helpful to you.
Very truly yours,
JOHN J. O'CONNELL
CHARLES I. McCLURE
Assistant Attorney General