Request By:
Mr. Harry K. Lowe
President
First National Bank & Trust Company
Sixth and Madison
P.O. Box 307
Covington, Kentucky 41012
Opinion
Opinion By: Robert F. Stephens, Attorney General; By Elizabeth E. Blackford, Assistant Attorney General
In your letter of June 20 you point out that KRS 41.240 and KRS 66.480 establish different standards for the type of collateral which must be pledged by a bank to secure deposits of state funds and deposits from municipalities or other governmental units. You stated that the Greater Cincinnati Airport Authority has a temporary surplus of funds which it wants to deposit with local banks. As we understand it, the problem arises because the local banks do not have enough of the types of collateral required by KRS 66.480(d) to be pledged as security to cover the amounts the Airport Authority wishes to deposit. You want to know whether the banks could pledge, as security, types of collateral which would qualify under KRS 41.240 but which do not quality under KRS 66.480(d).
It is the opinion of this office that the Greater Cincinnati Airport Authority, as a governmental unit, must abide by the mandates of KRS 66.480, and cannot accept as security for its deposits types of collateral which do not qualify under KRS 66.480, even though such collateral would be sufficient to secure state funds under KRS 41.240. As a statutorially created governmental unit, the Greater Cincinnati Airport Authority has only those powers prescribed by the
Legislature. Louisville and Jefferson County Air Board v. American Airlines, Inc., (CA Ky.) 269 P.2d 811 (1959). KRS 66.480 establishes clear, unambiguous requirements regarding the investment of the funds of governmental units. As a governmental unit the Airport Authority has the power to invest only in the manner prescribed by KRS 66.480, and thus cannot accept as security for its deposits types of collateral which are not recognized under KRS 66.480, even though such collateral is sufficient security for state funds pursuant to KRS 41.420.
If any given local bank does not have sufficient amounts of the collateral required by KRS 66.480(d) to secure the total amount the Airport Authority wants to deposit, and if the Airport Authority is desirous of investing its funds in the local economy, it may do so by distributing its funds to several banks such that the amount deposited with each bank is fully secured by proper collateral pursuant to KRS 66.480. By depositing its funds with several different local banks the Airport Authority could avoid investing its funds in Treasury or U.S. obligations.