THE DISTRICT AT LAST has the right to determine where to deposit and invest its public funds. This authority was given the city under the home-rule charter in 1974. But a procedure for making deposits had to be developed before any money could be transffered from the U.S. Treasury account. Now, after months of study and extensive hearings, the city council has passed and the mayor has signed legislation that will direct more thatn $1.5 billion to various financial institutions in Washington.

The importance of this legislation, officially known as the Depository act of 1977, is twofold.It will allow the city to realize high interest on short-term investments, which constitute most of the city's transactions. And it will have an effect on local economic development by encouraging financial institutions that want to have a portion of the city's account to increase their lending and investment in the District. As much as one-third of the city's deposits are to be set aside specifically for institutions that lend regularly and substantially to minority customers. A portion of the city's resources will also be made available to community credit unions, which traditionally have had a difficult time obtaining funds from financial institutions. All of the other money to be deposited will be directed to banks and savings-and-loan associations amount of interest offered for each deposit.

Careful work lies behind this thoughful legislation. The law attempts to strengthen the economic base of the city. And there may now be a way to increase local investment, minimize red-lining and serve the economic and credit needs of District residents. That is good news, indeed.