By: Hancock S.B. No. 1384

A BILL TO BE ENTITLED

AN ACT

relating to the authority of an independent school district to invest in local water projects.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2256.0204, Government Code, is amended by amending Subsections (a), (d), (e), (f), and (g) and adding Subsection (c-1) to read as follows:

(a) In this section:

(1) "Corporate[, "corporate] bond" means a senior secured debt obligation issued by a domestic business entity and rated not lower than "AA-" or the equivalent by a nationally recognized investment rating firm. The term does not include a debt obligation that:

(A) [(1)] on conversion, would result in the holder becoming a stockholder or shareholder in the entity, or any affiliate or subsidiary of the entity, that issued the debt obligation; or

(B) [(2)] is an unsecured debt obligation.

(2) "Governing body" means the commissioners court of a county or the governing body of a municipality.

(3) "Local water bond" means a secured debt obligation issued by a municipality or county in which the investing school district is located and that is:

(A) rated not lower than "AA-" or the equivalent by a nationally recognized investment rating firm; and

(B) issued to finance a local water project.

(4) "Local water project" means the acquisition, design, construction, improvement, repair, or maintenance of land, buildings, equipment, facilities, or improvements found by the governing body to be required or suitable for the promotion of water development, including water supply facilities, wastewater treatment facilities, water distribution and wastewater conveyance facilities, and storm drainage, flood control, watershed protection, and water conservation projects, regardless of whether the land, buildings, equipment, facilities, or improvements are in existence or are to be acquired or constructed after the finding is made.

(c-1) In addition to authorized investments permitted by this subchapter, an independent school district subject to this section may purchase, sell, and invest its funds and funds under its control in local water bonds that, at the time of purchase, are rated by a nationally recognized investment rating firm "AA-" or the equivalent and have a stated final maturity date that is not later than the 10th anniversary of the date the local water bonds were purchased.

(d) An independent school district subject to this section is not authorized by this section to:

(1) invest in the aggregate more than 15 percent of its monthly average fund balance, excluding bond proceeds, reserves, and other funds held for the payment of debt service, in corporate bonds or local water bonds; or

(2) invest more than 25 percent of the funds invested in corporate bonds in any one domestic business entity, including subsidiaries and affiliates of the entity.

(e) An independent school district subject to this section may purchase, sell, and invest its funds and funds under its control in corporate bonds or local water bonds if the governing body of the district:

(1) amends its investment policy to authorize corporate bonds or local water bonds as an eligible investment;

(2) adopts procedures to provide for:

(A) monitoring rating changes in corporate bonds or local water bonds acquired with public funds; and

(B) liquidating the investment in corporate bonds or local water bonds; and

(3) identifies the funds eligible to be invested in corporate bonds or local water bonds.

(f) The investment officer of an independent school district, acting on behalf of the district, shall sell corporate bonds or local water bonds in which the district has invested its funds not later than the seventh day after the date a nationally recognized investment rating firm:

(1) issues a release that places the corporate bonds or the domestic business entity that issued the corporate bonds, or the local water bonds or the municipality or county that issued the local water bonds, on negative credit watch or the equivalent, if the corporate bonds or local water bonds are rated "AA-" or the equivalent at the time the release is issued; or

(2) changes the rating on the corporate bonds or local water bonds to a rating lower than "AA-" or the equivalent.

(g) Corporate bonds or local water bonds are not an eligible investment for a public funds investment pool.

SECTION 2. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2013.