Bill could benefit credit unions
Legislation does away with $250,000 limit on deposits in credit unions from cities, counties, other government entities
The Oregon Senate passed a bill last week that removes the current cap of $250,000 that government agencies can deposit in a credit union.
The bill takes effect in January 2013.
“This is a huge win for credit unions. It will open the door for public entities and offices to do financial banking at credit unions,” said Julie Zaccone, manager of Baker City branch of Old West Federal Credit Union.
House Bill 3700, which the House passed last week, now goes to Gov. Ted Kulongoski for his signature.
The Senate approved the legislation by a 24-6 vote, and the House by a 44-12 margin.
Both of Baker County’s legislators — Sen. Ted Ferrioli, R-John Day, and Rep. Cliff Bentz, R-Ontario — voted for the bill.
Zaccone said the $250,000 deposit limit has made it difficult for credit unions to attract public agencies such as school districts, cities and counties.
Banks aren’t subject to the deposit limit.“We haven’t gone out and talked to public agencies about becoming credit union members and depositing their funds with us,” Zaccone said. “Now we can. Now they have a choice.”
Zaccone said the original version of the bill called for dropping the $250,000 cap on public funds deposits in 2011, but the American Bankers Association fought the bill, finally agreeing to a compromise that keeps the $250,000 limit for credit unions in place until January 2013.
Jeanie Dexter, Baker City’s finance director, said she considered depositing less than $250,000 in city reserves in Old West last fall, but the credit union’s interest rate then was a bit lower than what the city is getting from Banner Bank.
The city has almost $5 million deposited in that bank, Dexter said. That includes all of the city’s trust funds, most of which can be spent only for certain purposes such as maintaining Mount Hope Cemetery.
Dexter said the Legislature’s decision to get rid of the deposit limit gives cities another option to consider when trying to earn the highest rate of return.
Sen. Rick Metsger, a key supporter of the legislation, said the bill gives public entities and communities more options as they rethink how to best support local, sustainable growth.
“Since credit unions by definition serve a local community, those public fund deposits will stay and be reinvested in that community through consumer and business loans as well as sustaining and creating jobs,” Metsger said.
Doug Dalton, Baker School District’s chief financial officer, said: “Any time you have more providers and more competition, consumers tend to benefit. Specifically, will the school district be able to benefit? It’s yet to be determined.
“We look at the interest rates, the security of investments and the security of the underlying institution.”
The school district typically invests in the government pool, but also has accounts with Sterling Bank and US Bank, Dalton said.
The bill gives public agencies flexibility to seek the best rate of return on “the people’s money,” said Pamela Leavitt, senior vice president of governmental affairs and public relations for the Credit Union Association of Oregon.