August 23, 2012
The new “public funds” program authorized by the 2009 Oregon Legislature allows local governments to invest more money in local credit unions. Previously, Oregon state law had only allowed credit unions to take a maximum of $250,000 in public deposits from a single public entity.
To get the program going, a minimum of five credit unions are required by statute (ORS 295) to provide letters from municipal governments stating their intent to deposit more than $250,000 in a credit union. Those five credit unions must then provide a signed pledge agreement and proof of board buy-in.
The Northwest Credit Union Association (NWCUA) will then assemble a single packet for the Oregon State Treasury, along with a check for $199,065 to cover one year of expenses related to administering the pool. Once the packet has been delivered, the treasurer’s office has six months to get the program up and running.
According to NWCUA Senior Vice President and General Counsel Stacy Augustine, figuring out the cost of the program was a significant challenge, because the Association needed to know how many credit unions wanted to participate in the program before the Treasury could accurately estimate the cost of initiating a Credit Union Public Funds Collateral Pool (PFCP).
Ultimately, 10 credit unions agreed to participate and to split the majority of the cost. The Association, along with a number of other credit unions, agreed to pitch in to cover the remaining costs. According to Andrea Belz, the Treasury’s public funds manager, the Treasury was able to reduce potential costs by reallocating existing staff and operational resources rather than hire a new staff member and purchase dedicated resources. Still, the Treasury built in a small reserve to cover potential cost overruns in the event participation exceeds resources.
The Treasury is currently updating the pledge agreement, which should be provided by the end of the week. The majority of credit unions have paid their share, and additional checks are coming in on a regular basis. NWCUA Director of Regulatory Advocacy John Trull said that a couple of municipal governments have provided letters of intent to deposit, and he expects to see more by the end of the month.
“The final piece of the puzzle needed to submit the complete packet is board approval,” Trull said, “and the Treasury informed us that minutes will suffice. As the Treasury puts the program in place, the participating credit unions will need to familiarize themselves with the collateralization process and requirements.”
Trull expects to have the packet turned into the treasurer’s office by the end of September, barring unforeseen circumstances. He said that he hopes the Treasury will have the program up and running as early as Jan. 1, 2013, and no later than March 31, 2013.
“Credit unions reinvest in the community,” Trull said, “making loans to members that keep the economy moving. They invest in things that people understand.”
The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions on these or any regulatory issues, please contact Director of Regulatory Advocacy John Trull at firstname.lastname@example.org, or at 503.350.2209.