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

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