By: Capriglione H.B. No. 4209

A BILL TO BE ENTITLED

AN ACT

relating to the investment of public funds.

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

SECTION 1. Subsection (a) of Section 2256.010, Government Code, is amended by deleting "and" at the end of clause (5), changing the period at the end of clause (6) to "; and", and adding a new clause (7), to read as follows:

"(7) interest-bearing banking deposits that are guaranteed or insured by the Federal Deposit Insurance Corporation or its successor or the National Credit Union Share Insurance Fund or its successor."

SECTION 2. Section 2256.010, Government Code, is amended by adding a new subsection (c), to read as follows:

"(c) In addition to the authority to invest funds in certificates of deposit under Subsections (a) and (b), an investment in certificates of deposit made in accordance with Section 2256.020(2) is an authorized investment under this section."

SECTION 3. Subsection (a), Clause (4), Section 2256.014, Government Code, is amended to read as follows:

(3) complies with Rule 2a-7, promulgated by the United States Securities and Exchange Commission has a dollar weighted average stated maturity of 90 days or fewer; and

(4) includes in its investment objectives the maintenance of stable net asset value of $1 for each shares determined in accordance with Rule 2a-7, promulgated by the United States Securities and Exchange Commission.

SECTION 4. Subsection (c), Clause (2), Section 2256.015, Government Code, is amended to read as follows:

"(2) the entity must receive bids from at least two [three]separate providers with no material financial interest in the bonds from which proceeds were received;".

SECTION 5. Section 2256.011, Government Code, is amended by adding a new subsection (e), to read as follows:

"(e) The repurchase agreement may provide that the investing entity may agree to waive sovereign immunity from suit or liability for the purpose of adjudicating a claim to enforce the repurchase agreement or for damages for breach of the repurchase agreement."

SECTION 6. Section 2256.015, Government Code, is amended by adding a new subsection (d), to read as follows:

"(d) The guaranteed investment contract may provide that the investing entity may agree to waive sovereign immunity from suit or liability for the purpose of adjudicating a claim to enforce the guaranteed investment contract or for damages for breach of the guaranteed investment contract."

SECTION 7. Subsection (b), Section 2256.016, Government Code, is amended to renumber current subsections (6) through (12) as subsections (7) through (13), and to add a new clause (6), to read as follows:

"(6) its policy as to holding deposits in cash;"

SECTION 8. Subsections(f)and (h), Section 2256.016, Government Code, are amended to read as follows:

"(f) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, a public funds investment pool created to function as a money market mutual fund must mark its portfolio to market daily, and, to the extent reasonably possible, stabilize at a $1 net asset value. 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 such action as it may determine is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants, including the sale of portfolio holdings [shall be sold as necessary] to attempt to maintain the ratio between 0.995 and 1.005."

"(h) To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must be continuously rated no lower than the highest liquidity rating given to United States Treasury obligations [AAA or AAA m or at an equivalent rating] by at least one nationally recognized rating service."

SECTION 9. Section 2256.019, Government Code, is amended to read as follows:

"A public funds investment pool must be continuously rated no lower than the highest liquidity rating given to United States Treasury obligations [AAA or AAA m or at an equivalent rating] by at least one nationally recognized rating service."

SECTION 10. Chapter 2256, Government Code, is amended by adding a new section 2256.02015, to read as follows:

"Sec. 2256.02015. Authorized Investments: Eligible Entities.

(a) An eligible entity may enter into hedging contracts, and related security and insurance agreements, to protect against economic loss related to price fluctuations of commodities used in the general operations of the eligible entity or used in connection with the acquisition or construction of capital projects by the eligible entity. A hedging transaction must comply with the regulations of the Commodity Futures Trading Commission and the Securities and Exchange Commission. If there is a conflict between the municipal charter of the eligible entity and this chapter, this chapter prevails.

(b) A payment by an eligible entity under a hedging contract may be considered: (i) an operation and maintenance expense of the eligible entity; (ii) an acquisition expense of the eligible entity; or (iii) a construction expense of the eligible entity. The eligible entity may credit any amount it receives under the contract or agreement against expenses associated with commodity purchases.

(c) The governing body of the eligible entity may set policy regarding hedging transactions.

(d) As used in this section:

(1) "Eligible entity" means those state agencies and political subdivisions described in Section 1371.001(4), Government Code; and

(2) "Hedging" means entering into an offsetting position in a related security or using a financial agreement as a protection against loss due to price fluctuation."

SECTION 11. 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, 2015.