Bill Text: TX HB2706 | 2019-2020 | 86th Legislature | Comm Sub

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Relating to authorized investments for governmental entities and a study of the investment and management of funds by public schools.

Spectrum: Partisan Bill (Republican 3-0)

Status: (Passed) 2019-06-14 - Effective on 9/1/19 [HB2706 Detail]

Download: Texas-2019-HB2706-Comm_Sub.html

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86R25527 SCL-F
By: Capriglione, Lambert H.B. No. 2706
Substitute the following for H.B. No. 2706:
By: Stephenson C.S.H.B. No. 2706

A BILL TO BE ENTITLED
AN ACT
relating to authorized investments for governmental entities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections 2256.011(a) and (b), Government Code,
are amended to read as follows:
(a) A fully collateralized repurchase agreement is an
authorized investment under this subchapter if the repurchase
agreement:
(1) has a defined termination date;
(2) is secured by a combination of cash and
obligations described by Section 2256.009(a)(1) or 2256.013 or, if
applicable, Section 2256.0204; [and]
(3) requires the securities being purchased by the
entity or cash held by the entity to be pledged to the entity, held
in the entity's name, and deposited at the time the investment is
made with the entity or with a third party selected and approved by
the entity; and
(4) is placed through a primary government securities
dealer, as defined by the Federal Reserve, or a financial
institution doing business in this state.
(b) In this section, "repurchase agreement" means a
simultaneous agreement to buy, hold for a specified time, and sell
back at a future date obligations described by Section
2256.009(a)(1) or 2256.013 or, if applicable, Section 2256.0204, at
a market value at the time the funds are disbursed of not less than
the principal amount of the funds disbursed. The term includes a
direct security repurchase agreement and a reverse security
repurchase agreement.
SECTION 2. Section 2256.013, Government Code, is amended to
read as follows:
Sec. 2256.013. AUTHORIZED INVESTMENTS: COMMERCIAL PAPER.
Commercial paper is an authorized investment under this subchapter
if the commercial paper:
(1) has a stated maturity of 365 [270] days or fewer
from the date of its issuance; and
(2) is rated not less than A-1 or P-1 or an equivalent
rating by at least:
(A) two nationally recognized credit rating
agencies; or
(B) one nationally recognized credit rating
agency and is fully secured by an irrevocable letter of credit
issued by a bank organized and existing under the laws of the United
States or any state.
SECTION 3. Sections 2256.016(e) and (f), Government Code,
are amended to read as follows:
(e) In this section, for purposes of an investment pool for
which a $1.00 net asset value is maintained, "yield" shall be
calculated in accordance with regulations governing the
registration of open-end management investment companies under the
Investment Company Act of 1940, as promulgated from time to time by
the federal Securities and Exchange Commission.
(f) To be eligible to receive funds from and invest funds on
behalf of an entity under this chapter:
(1) [,] a public funds investment pool that uses
amortized cost or fair value accounting must mark its portfolio to
market daily; [,] and
(2) if the investment pool uses amortized cost:
(A) the investment pool must, to the extent
reasonably possible, stabilize at a $1.00 net asset value, when
rounded and expressed to two decimal places;
(B) the governing body of the investment pool
must, if [. If] the ratio of the market value of the portfolio
divided by the book value of the portfolio is less than 0.995 or
greater than 1.005, [the governing body of the public funds
investment pool shall] take action as the body determines necessary
to eliminate or reduce to the extent reasonably practicable any
dilution or unfair result to existing participants, including a
sale of portfolio holdings to attempt to maintain the ratio between
0.995 and 1.005; and
(C) the investment pool must, in [. In] addition
to the requirements of its investment policy and any other forms of
reporting, [a public funds investment pool that uses amortized cost
shall] report yield to its investors in accordance with regulations
of the federal Securities and Exchange Commission applicable to
reporting by money market funds.
SECTION 4. Section 2256.0204(b), Government Code, is
amended to read as follows:
(b) This section applies only to an independent school
district [that qualifies as an issuer as defined by Section
1371.001].
SECTION 5. Subchapter A, Chapter 2256, Government Code, is
amended by adding Section 2256.0208 to read as follows:
Sec. 2256.0208. LOCAL GOVERNMENT INVESTMENT OF BOND
PROCEEDS AND PLEDGED REVENUE. (a) In this section, "pledged
revenue" means money pledged to the payment of or as security for:
(1) bonds or other indebtedness issued by a local
government;
(2) obligations under a lease, installment sale, or
other agreement of a local government; or
(3) certificates of participation in a debt or
obligation described by Subdivision (1) or (2).
(b) The investment officer of a local government may invest
bond proceeds or pledged revenue only to the extent permitted by
this chapter, in accordance with:
(1) statutory provisions governing the debt issuance
or the agreement, as applicable; and
(2) the local government's investment policy regarding
the debt issuance or the agreement, as applicable.
SECTION 6. Section 2256.0204(g), Government Code, is
repealed.
SECTION 7. This Act takes effect September 1, 2019.