                         THE     ATTORNEY       GEXEIRAL
                                    OF   ?FEXAS

                                      December 30, 1986
x,TQRXRY   QEXRRAL




              @mrabIe   F. A. Cerda              Opinion No. ~~-604
              District Attorney
              P. 0. Box 340                      Re: Whether a political subdivision
              Eebbronville, Texas   78361        may designate a credit union as a
                                                 depository of public funds

              Dear Mr. Cerda:

                   You ask whether a general law city may designate a credit union
              as a depository for municipal funds. We conclude that it may not.

                   Your question arises because of a conflict between article
              2+61-4.01(a)(S), V.T.C.S.. setting forth the powers of a credit union
              and articles 2559 et seq..,V.T.C.S., governing a city’s selection of a
              depository.   Article 2559, V.T.C.S., p.rovides the following in
              pertinent part:

                       The governing body of every city, town and village
                        in the State of Texas. incorporated under either
                        the General or Special Laws, including those
                        operating under special charter or amendments of
                        charter adopted pursuant to the ‘Eome Rule’
                       provisions of the Constitution, is authorized to
                        receive applications for the custody of city funds
                       .from any banking corporation, association or
                        Individual banker that may desire to be selected
                        as a depository of the city, town or village.
                        (Emphasis added).

              Article 2560. V.T.C.S., sets forth the following in pertinent part:

                       Upon considering the applications submitted, the
                       novernina bodv shall select as the deuositorv or
                                                                     -
                       depositoiies bf such funds the banking corpora-
                       tions, association or individual banker or bankers
                       offering the most favorable terms and conditions
                       for the handling of such funds. (Emphasis added).

              Article 2461-4.01, V.T.C.S., sets forth the general powers of a credit
              union. Subsection (a) specifically provides that




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Honorable F. A. Carda - Page 2   (~~-604)




          [a] credit'union may exercise all powers nacessary
          or appropriate to accomplish the purposes for
          which it is organized and all powers granted
          corporations authorized to do business in this
          state. These powers include, but are not limited
          to, the power to:

             . . . .

             (8)  act as agent or depository of the United
          States, any agent or instrumentality of the United
          States, this or any other state, ot any city,
          town. village, county, school district. municipal
          corporation, political subdivision, or taxing
          authority of this or any other state, accept for
          deposit the funds of such an entity or both. . . .
          (Emphasis added).

V.T.C.S. art. 2461-4.01(a)(8). It is clear that a credit union is
 authorized to act as a depository of a city's public funds. At issue
 is whether a city may choose a credit union as a depository and
 specifically whether a credit union is a "banking corporation,
 sssociation or.individual banker" for purposes of article 2559 c
s,     V.T.C.S. On the basis of .prior authority, we conclude that it
 is not. Article 2461-4.01. V.T.C.S., authorizes credit unions to
.receive deposits from political subdivisions; it does not authorize
political subdivisions to make such deposits in. credit unions.
-See Attorney General Opinion H-723 (1975).
      Ii Attorney General Opinion MW-534 (1982). this office concluded
 that neither a credit union nor a' ssvings and loan could serve as a
depository for a hospital district. Citing prior opinions of this
office which hold that savings and loan associations were not embraced
.by the phrase "banking corporation, association or individual banker"
 for purposes of articles 2544 through 2558a. V.T.C.S., governing a
 county's selection of a depository (made applicable to hospital
 districts by article 4494n. 110, V.T.C.S.), the opinion extended the
 same rationale to credit unions as well.       See Attorney General
Opinions MW-272 (1980) (reaches credit unions aGel      as savings and
 loan associations); E-1013 (1977) (soil and water conservation
 district not authorized to deposit funds in savings and loan
 associations); E-723 (1975) (same with regard to political sub-
 divisions); M-22 (1967) (concluding that "banking corporations,
 associations or individual banker" does not include savings and loan
 associations for purposes of the depository statutes). Cf. Attorney
 General Opinion JM-42 (1983) (PTA funds may be depositedin     credit
union where statutes do not govern disposition of funds). The opinion
 relied in part upon the policy considerations set forth In an earlier
 opinion of this office, Attorney General Opinion WW-838-A (1961).
which held inapplicable to credit unions an article of the banking




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Honorable F. A. Cerda - Page 3     (J-M-604)




code which prohibits "branch banking."    In that earlier opinion this
office declared:

          [Although] credit unions exercise two of the most
          important functions of banking, the receiving of
          deposits and the lending of money, it must be
          recognized that credit unions or associations are
          not 'banks' as that term is defined in the Texas
          Banking Code of 1943 . . . [citation omitted1 or
          as that term is commonly used or understood.
          Furthermore, the operations of a credit union In
          receiving   deposits   or    lending   money   are
          substantially different from the corresponding
          operations of a commercial bank, snd in fact, the
          functions and underlying concept of a credit union
          are basically different from those of a commercial
          bank.

The opinion then detailed other basic functions of banking that
distinguish both banks from credit unions and banks from savings and
loan associations. Cf. Attorney General Opinion NW-1498 (1962))
withdrawn and replaced by Attorney General Opinion NW-1498-A (1963)
(also indexed as -Attorney-General bpinion C-87 (1963)). Accordingly,
we conclude that a city may not designate a credit union        as  a
depository.

                              SUMMARY

             Article 2559, V.T.C.S., does not authorize s
          city to designate a credit union as a depository
          for city funds.




                                        JIM     MATTOX
                                        Attorney General of Teras

JACK HIGHTONER
First Assistant Attorney General

MARY KFLLER
Executive Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General




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