Is it lawful for a local public agency to requires fees for its services which it then deposits into an "investment account" in order to obtain yields on the collected fees before disbursing it to the state treasury?
The authority or prohibition to do what they do probably comes from the county or city government codes or the California government code. Check that, or call a lawyer who knows government law.
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That is not an "investment scheme." It is earning income from the float on payments the agency receives, which is a common practice. As my colleague correctly notes, the statutory authority under which this agency operates either allows or prohibits the agency from doing this.
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Probably so unfortunately; as pointed out by other counsel already! I find it difficult to believe that a public agency would engage in such conduct UNLESS authorized to do so by either statute, or other applicable authority!