Resolution No. 6102
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RESOLUTION NO. 6102
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A RESOLUTION OF THE CITY COUNCIL OF THE
OF VERNON APPROVING AND AUTHORIZING THE
TREASURER TO TRANSFER UNRESTRICTED
INTEREST EARNINGS INTO THE GENERAL FUND
CITY
CITY
FUND
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WHEREAS, Government Code S53647 directs that all money
deposited belongs to, and shall be paid into, the genera 1 fund of
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the local agency, represented by the officer making the deposit,
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unless otherwise directed by law; and
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WHEREAS, the City of Vernon is a local agency, as that
term is defined in Government Code S53600; and
WHEREAS, the City Council has determined it is prudent
fiscal management for the city to implement the provisions of
Government Code S53647(a) with respect to the special funds of the
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City not otherwise restricted by law, including the enterprise.
funds for the Light and Power Department and the Water Department.
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NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
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SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are
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true and correct.
SECTION 2: The City Council of the City of Vernon hereby
authori.zes the ci.ty Treasurer to transfer quarterly to the General
Fund of the City, all interest earned on the principal amounts of
money in all other funds of the city except for funds associated
with the Redevelopment Agency of the City of vernon, provided the
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use of the money in said funds is not otherwise restricted by law.
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SECTION 3: The City Council of the City of Vernon hereby
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directs the City Treasurer to review the status of each special
I fund of the City and determine if the moneys in such fund are
2 restricted in order to carry out the policy of this resolution.
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SECTION 4: The city Clerk of the City of Vernon shall
4 certify to the passage of this resolution, and thereupon and
5 thereafter the same shall be in full force and effect.
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APPROVED AND ADOPTED this 2nd day of June, 1992.
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T o'Mi\s A. YB ., Mayor Pro Tem
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II BRUCE V. MALKENHORST,
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I STATE OF CALIFORNIA )
)ss
2 COUNTY OF LOS ANGELES )
3 I, BRUCE V. MALKENHORST, City Clerk of the City of
4 Vernon, do hereby certify that the foregoing Resolution, being
5 Resolution No. 6102, was duly adopted by the city council of the
6 City of Vernon at a regular meeting of the City council duly held
7 on Tuesday, June 2, 1992, and thereafter was duly signed by the
8 Mayor of the City of Vernon.
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BRUCE V. MALKENHORST, City Clerk
(SEAL)
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LAW OFFICES OF
Q/
ERIC T. FRESCH
CITICORP CENTER, ONE SANSOME STREET
TWENTY-FIRST FLOOR
SAN FRANCISCO, CALIFORNIA 94104
TELEPHONE (415) 951-1035
FAX (415) 951-4660
May 26, 1992
Mr. Bruce V, Malkenhorst
City Administrator
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Re: Crediting interest earned from the City's various special funds to the City's General
Fund,
Dear Mr. Malkenhorst:
I have been asked to research whether the City of Vernon may transfer all the interest
earned on all the City's special funds to the City's General Fund, It is my conclusion that
the City may transfer the interest earnings of the various special funds to the City's General
Fund, provided the use of the money in those various special funds is NOT otherwise
restricted by law or contract. The answer to the question must be approached on a case by
case basis.
California Government Code Section 53647(a) provides that interest on all money deposited
belongs to, and shall be paid quarterly into the general fund of the local agency, represented
by the officer making the deposit, unless otherwise directed by law. Section 53647(a)
provides for the placing of interest in the general fund, That section had its origin in the
Public Deposit Act of 1933, which permitted local agencies to deposit their funds in state
and national banks for safekeeping.
The common law rule in this area is that interest follows the principal and becomes a part
of it unless separated from it by statute, Therefore, in order for the City of Vernon to avail
itself of the provisions of Section 53647 and thus abrogate the common law rule, the City
must not be otherwise directed by law in regard to the special fund in question.
In other words, whether interest should be credited to the City's General Fund or a special
fund of the City depends upon the source of the funds and the restrictions which have been
placed on the use of those funds. Government Code Section 53647(a) only operates to
direct the payment of interest into the general fund when the officer making the deposit is
NOT otherwise directed by law.
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Mr, Bruce Malkenhorst
Page 2
May 26, 1992
In 1978, Subdivision (b) of Section 53647 was enacted to permit the treasurer of a local
agency to bypass subdivision (a)'s directive to place interest in the general fund and obtain
direction from the city council to deposit interest directly into the fund which contains the
principal. The concern of the legislature at that time was whether a treasurer of a local
agency lacked the authority to credit interest earned from special funds directly to those
accounts, but instead had to credit the interest to the general fund, Thus, if the City is not
otherwise directed by law, the City Council can direct the City Treasurer to credit interest
earned to the account where the principal is deposited,
To summarize, first an analysis must be made of the particular fund involved before the City
directs its Treasurer to transfer the interest earned thereon into the City's General Fund.
When the use of that particular fund is specifically restricted by law or an agreement which
the City may have entered into, interest earned on such money must be credited to the fund
from which the interest is earned. Some examples of funds which might be restricted include
bond funds, deferred compensation plan funds or special tax funds.
If I can be of further assistance in this matter, or if you have any questions, please call me.
Sincerely,
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Eric Fresch
Special Counsel