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A BILL TO BE ENTITLED
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AN ACT
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relating to investment of public funds. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 2256.009(a), Government Code, is amended |
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to read as follows: |
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(a) Except as provided by Subsection (b), the following are |
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authorized investments under this subchapter: |
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(1) obligations, including letters of credit, of the |
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United States or its agencies and instrumentalities; |
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(2) direct obligations of this state or its agencies |
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and instrumentalities; |
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(3) collateralized mortgage obligations directly |
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issued by a federal agency or instrumentality of the United States, |
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the underlying security for which is guaranteed by an agency or |
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instrumentality of the United States; |
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(4) other obligations, the principal and interest of |
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which are unconditionally guaranteed or insured by, or backed by |
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the full faith and credit of, this state or the United States or |
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their respective agencies and instrumentalities, including |
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obligations that are fully guaranteed or insured by the Federal |
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Deposit Insurance Corporation or by the explicit full faith and |
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credit of the United States; |
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(5) obligations of states, agencies, counties, |
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cities, and other political subdivisions of any state rated as to |
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investment quality by a nationally recognized investment rating |
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firm not less than A or its equivalent; [and] |
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(6) bonds issued, assumed, or guaranteed by the State |
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of Israel; and |
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(7) interest-bearing banking deposits that are |
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guaranteed or insured by: |
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(A) the Federal Deposit Insurance Corporation or |
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its successor; or |
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(B) the National Credit Union Share Insurance |
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Fund or its successor. |
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SECTION 2. Section 2256.011, Government Code, is amended by |
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adding Subsection (e) to read as follows: |
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(e) Section 1371.059(c) applies to the execution of a |
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repurchase agreement by an investing entity. |
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SECTION 3. Sections 2256.014(a) and (b), Government Code, |
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are amended to read as follows: |
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(a) A no-load money market mutual fund is an authorized |
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investment under this subchapter if the mutual fund: |
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(1) is registered with and regulated by the Securities |
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and Exchange Commission; |
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(2) provides the investing entity with a prospectus |
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and other information required by the Securities Exchange Act of |
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1934 (15 U.S.C. Section 78a et seq.) or the Investment Company Act |
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of 1940 (15 U.S.C. Section 80a-1 et seq.); and |
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(3) complies with federal Securities and Exchange |
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Commission Rule 2a-7 (17 C.F.R. Section 270.2a-7), promulgated |
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under the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et |
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seq.) [has a dollar-weighted average stated maturity of 90 days or
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fewer; and
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[(4)
includes in its investment objectives the
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maintenance of a stable net asset value of $1 for each share]. |
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(b) In addition to a no-load money market mutual fund |
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permitted as an authorized investment in Subsection (a), a no-load |
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mutual fund is an authorized investment under this subchapter if |
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the mutual fund: |
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(1) is registered with the Securities and Exchange |
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Commission; |
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(2) has an average weighted maturity of less than two |
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years; and |
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(3) either: |
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(A) has a duration of one year or more and is |
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invested exclusively in obligations approved by this subchapter; or |
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(B) has a duration of less than one year and the |
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investment portfolio is limited to investment grade securities, |
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excluding asset-backed securities |
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[(4)
is continuously rated as to investment quality by
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at least one nationally recognized investment rating firm of not
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less than AAA or its equivalent; and
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[(5)
conforms to the requirements set forth in
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Sections 2256.016(b) and (c) relating to the eligibility of
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investment pools to receive and invest funds of investing
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entities]. |
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SECTION 4. Section 2256.015, Government Code, is amended by |
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adding Subsection (d) to read as follows: |
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(d) Section 1371.059(c) applies to the execution of a |
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guaranteed investment contract by an investing entity. |
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SECTION 5. Sections 2256.016(b), (f), and (h), Government |
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Code, are amended to read as follows: |
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(b) To be eligible to receive funds from and invest funds on |
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behalf of an entity under this chapter, an investment pool must |
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furnish to the investment officer or other authorized |
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representative of the entity an offering circular or other similar |
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disclosure instrument that contains, at a minimum, the following |
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information: |
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(1) the types of investments in which money is allowed |
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to be invested; |
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(2) the maximum average dollar-weighted maturity |
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allowed, based on the stated maturity date, of the pool; |
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(3) the maximum stated maturity date any investment |
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security within the portfolio has; |
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(4) the objectives of the pool; |
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(5) the size of the pool; |
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(6) the names of the members of the advisory board of |
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the pool and the dates their terms expire; |
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(7) the custodian bank that will safekeep the pool's |
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assets; |
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(8) whether the intent of the pool is to maintain a net |
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asset value of one dollar and the risk of market price fluctuation; |
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(9) whether the only source of payment is the assets of |
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the pool at market value or whether there is a secondary source of |
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payment, such as insurance or guarantees, and a description of the |
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secondary source of payment; |
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(10) the name and address of the independent auditor |
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of the pool; |
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(11) the requirements to be satisfied for an entity to |
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deposit funds in and withdraw funds from the pool and any deadlines |
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or other operating policies required for the entity to invest funds |
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in and withdraw funds from the pool; [and] |
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(12) the performance history of the pool, including |
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yield, average dollar-weighted maturities, and expense ratios; and |
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(13) the pool's policy regarding holding deposits in |
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cash. |
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(f) To be eligible to receive funds from and invest funds on |
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behalf of an entity under this chapter, a public funds investment |
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pool created to function as a money market mutual fund must mark its |
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portfolio to market daily, and, to the extent reasonably possible, |
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stabilize at a $1 net asset value. If the ratio of the market value |
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of the portfolio divided by the book value of the portfolio is less |
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than 0.995 or greater than 1.005, the governing body of the public |
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funds investment pool shall take action as the body determines |
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necessary to eliminate or reduce to the extent reasonably |
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practicable any dilution or unfair result to existing participants, |
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including a sale of portfolio holdings to attempt [shall be sold as
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necessary] to maintain the ratio between 0.995 and 1.005. In |
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addition to the requirements of its investment policy and any other |
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forms of reporting, a public funds investment pool created to |
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function as a money market mutual fund shall report yield to its |
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investors in accordance with regulations of the federal Securities |
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and Exchange Commission applicable to reporting by money market |
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funds. |
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(h) To maintain eligibility to receive funds from and invest |
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funds on behalf of an entity under this chapter, an investment pool |
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must be continuously rated no lower than the highest liquidity |
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rating given to United States Treasury obligations [AAA or AAA-m or
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at an equivalent rating] by at least one nationally recognized |
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rating service. |
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SECTION 6. Section 2256.019, Government Code, is amended to |
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read as follows: |
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Sec. 2256.019. RATING OF CERTAIN INVESTMENT POOLS. A |
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public funds investment pool must be continuously rated no lower |
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than the highest liquidity rating given to United States Treasury |
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obligations [AAA or AAA-m or at an equivalent rating] by at least |
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one nationally recognized rating service. |
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SECTION 7. Subchapter A, Chapter 2256, Government Code, is |
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amended by adding Section 2256.0206 to read as follows: |
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Sec. 2256.0206. AUTHORIZED INVESTMENTS: HEDGING |
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TRANSACTIONS. (a) In this section: |
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(1) "Eligible entity" means a state agency or |
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political subdivision that is an issuer as defined by Section |
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1371.001. |
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(2) "Eligible project" has the meaning assigned by |
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Section 1371.001. |
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(3) "Hedging" means acting to protect against economic |
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loss due to price fluctuation of a commodity or related investment |
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by entering into an offsetting position or using a financial |
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agreement or producer price agreement in a correlated security, |
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index, or other commodity. |
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(b) This section prevails to the extent of any conflict |
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between this section and: |
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(1) another law; or |
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(2) an eligible entity's municipal charter, if |
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applicable. |
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(c) The governing body of an eligible entity shall establish |
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the entity's policy regarding hedging transactions. |
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(d) An eligible entity may enter into hedging transactions, |
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including hedging contracts, and related security, credit, and |
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insurance agreements in connection with commodities used by an |
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eligible entity in the entity's general operations, with the |
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acquisition or construction of a capital project, or with an |
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eligible project. A hedging transaction must comply with the |
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regulations of the federal Commodity Futures Trading Commission and |
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the federal Securities and Exchange Commission. |
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(e) A hedging contract and any security, credit, or |
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insurance agreement related to a hedging contract, including a |
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letter of credit reimbursement agreement, may not have a term that |
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exceeds five years. An eligible entity may pledge as security for |
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and to the payment of an agreement described by this subsection any |
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revenue the entity is authorized by law to pledge to the payment of |
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any other obligation. |
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(f) Section 1371.059(c) applies to the execution by an |
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eligible entity of a hedging contract and any related security, |
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credit, or insurance agreement. |
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(g) An eligible entity may credit any amount the entity |
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receives under a hedging contract against expenses associated with |
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a commodity purchase. |
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(h) An eligible entity's cost of or payment under a hedging |
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contract or agreement may be considered: |
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(1) an operation and maintenance expense of the |
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eligible entity; |
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(2) an acquisition expense of the eligible entity; |
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(3) a project cost of an eligible project; or |
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(4) a construction expense of the eligible entity. |
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SECTION 8. The changes in law made by this Act apply only to |
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authorized investments of public funds governed by Chapter 2256, |
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Government Code, as amended by this Act, that are made on or after |
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the effective date of this Act. An authorized investment of public |
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funds made before the effective date of this Act is governed by the |
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law in effect immediately before that date, and that law is |
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continued in effect for that purpose. |
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SECTION 9. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2017. |