By: Leedom S.B. No. 529
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the investment of public funds in collateralized
1-2 mortgage obligations.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsection (a), Section 2, Public Funds
1-5 Investment Act of 1987 (Article 842a-2, Vernon's Texas Civil
1-6 Statutes), as amended by Chapters 39, 628, 693, and 750, Acts of
1-7 the 71st Legislature, Regular Session, 1989, is amended to read as
1-8 follows:
1-9 (a) An incorporated city or town, a county, a public school
1-10 district, a district or authority created under Article III,
1-11 Section 52(b)(1) or (2), or Article XVI, Section 59, of the Texas
1-12 Constitution, an institution of higher education as defined by
1-13 Section 61.003 of the Education Code, a hospital district, a fresh
1-14 water supply district, or any nonprofit corporation or public funds
1-15 investment pool created under The Interlocal Cooperation Act
1-16 (Article 4413(32c), Vernon's Texas Civil Statutes) acting on behalf
1-17 of any of those entities, or a navigation district organized under
1-18 Article III, Section 52, or Article XVI, Section 59, of the Texas
1-19 Constitution may, in accordance with this Act, purchase, sell, and
1-20 invest its funds and funds under its control in the following:
1-21 (1) obligations of the United States or its agencies
1-22 and instrumentalities;
1-23 (2) direct obligations of the State of Texas or its
2-1 agencies;
2-2 (3) other obligations, the principal of and interest
2-3 on which are unconditionally guaranteed or insured by the State of
2-4 Texas or the United States or its agencies and instrumentalities;
2-5 (4) obligations of states, agencies, counties, cities,
2-6 and other political subdivisions of any state having been rated as
2-7 to investment quality by a nationally recognized investment rating
2-8 firm and having received a rating of not less than A or its
2-9 equivalent;
2-10 (5) certificates of deposit issued by state and
2-11 national banks domiciled in this state that are:
2-12 (A) guaranteed or insured by the Federal Deposit
2-13 Insurance Corporation, or its successor; or
2-14 (B) secured by obligations that are described by
2-15 Subdivisions (1)-(4) of this subsection, which are intended to
2-16 include all direct federal agency or instrumentality issued
2-17 mortgage backed securities that have a market value of not less
2-18 than the principal amount of the certificates or in any other
2-19 manner and amount provided by law for deposits of the investing
2-20 entities;
2-21 (6) certificates of deposit issued by savings and loan
2-22 associations domiciled in this state that are:
2-23 (A) guaranteed or insured by the Federal Savings
2-24 and Loan Insurance Corporation, or its successor; or
2-25 (B) secured by obligations that are described by
3-1 Subdivisions (1)-(4) of this subsection, which are intended to
3-2 include all direct federal agency or instrumentality issued
3-3 mortgage backed securities that have a market value of not less
3-4 than the principal amount of the certificates or in any other
3-5 manner and amount provided by law for deposits of the investing
3-6 entities;
3-7 (7) prime domestic bankers' acceptances;
3-8 (8) commercial paper with a stated maturity of 270
3-9 days or less from the date of its issuance that either:
3-10 (A) is rated not less than A-1, P-1, or the
3-11 equivalent by at least two nationally recognized credit rating
3-12 agencies; or
3-13 (B) is rated at least A-1, P-1, or the
3-14 equivalent by at least one nationally recognized credit rating
3-15 agency and is fully secured by an irrevocable letter of credit
3-16 issued by a bank organized and existing under the laws of the
3-17 United States or any state thereof; <and>
3-18 (9) fully collateralized repurchase agreements having
3-19 a defined termination date, secured by obligations described by
3-20 Subdivision (1) of this subsection, pledged with a third party
3-21 selected or approved by the political entity, and placed through a
3-22 primary government securities dealer, as defined by the Federal
3-23 Reserve, or a bank domiciled in this state; and
3-24 (10) collateralized mortgage obligations directly
3-25 issued by a federal agency or instrumentality of the United States,
4-1 the underlying security for which is guaranteed by an agency or
4-2 instrumentality of the United States.
4-3 SECTION 2. Section 2256.006, Government Code, as added by
4-4 Section 1, S.B. No. 248, Acts of the 73rd Legislature, Regular
4-5 Session, 1993, is amended to read as follows:
4-6 Sec. 2256.006. AUTHORIZED INVESTMENTS: OBLIGATIONS OF, OR
4-7 GUARANTEED BY, GOVERNMENTAL ENTITIES. The following are authorized
4-8 investments under this subchapter:
4-9 (1) obligations of the United States or its
4-10 instrumentalities;
4-11 (2) direct obligations of this state or its agencies;
4-12 (3) collateralized mortgage obligations directly
4-13 issued by a federal agency or instrumentality of the United States,
4-14 the underlying security for which is guaranteed by an agency or
4-15 instrumentality of the United States;
4-16 (4) other obligations, the principal and interest of
4-17 which are unconditionally guaranteed or insured by this state or
4-18 the United States or its instrumentalities; and
4-19 (5) <(4)> obligations of states, agencies, counties,
4-20 cities, and other political subdivisions of any state rated as to
4-21 investment quality by a nationally recognized investment rating
4-22 firm not less than A or its equivalent.
4-23 SECTION 3. (a) Except as provided by Subsections (b) and
4-24 (c) of this section, this Act takes effect September 1, 1993.
4-25 (b) If S.B. No. 248, Acts of the 73rd Legislature, Regular
5-1 Session, 1993, finally passes and is approved by the governor,
5-2 Section 1 of this Act has no effect.
5-3 (c) If S.B. No. 248, Acts of the 73rd Legislature, Regular
5-4 Session, 1993, does not finally pass or is not approved by the
5-5 governor, Section 2 of this Act has no effect.
5-6 SECTION 4. The importance of this legislation and the
5-7 crowded condition of the calendars in both houses create an
5-8 emergency and an imperative public necessity that the
5-9 constitutional rule requiring bills to be read on three several
5-10 days in each house be suspended, and this rule is hereby suspended.