10 TAC §§183.1 - 183.10
The Office of the Governor, Economic Development and Tourism
Division (Office), formerly the Texas Department of Economic Development (Department),
proposes new Chapter 183, §§183.1 - 183.10, setting forth rules
of the Office of the Governor, Economic Development and Tourism Division Investment
Policy.
The new rules are proposed because Senate Bill 275 of the 78th Legislature
abolished the Department and transferred its functions to the Office of the
Governor. The new rules will replace previous rules proposed for repeal in
this issue of the
Texas Register
. New rules
are needed because the administration of the Texas Small Business Industrial
Development Corporation (TSBIDC) and the Texas Public Facilities Capital Access
Program (TEXCAP) (collectively the "Program") transferred from the Department
to the Office and bond proceeds can be invested under the Program.
Proposed §183.1 sets forth the statutory authority for the rules.
Proposed §183.2 sets forth the policy and priorities for investments
under the Program.
Proposed §183.3 sets forth the scope of the rules.
Proposed §183.4 sets forth the prudent person standard for investments.
Proposed §183.5 sets forth limitations and objectives for investments
and a strategy for ensuring that there will be adequate funds for a self-supporting
program.
Proposed §183.6 delegates the authority to invest Program funds to
the Economic Development Bank and to the investment officer.
Proposed §183.7 sets forth training requirements for board members
and the investment officer.
Proposed §183.8 provides for investment of funds through authorized
dealers.
Proposed §183.9 provides that the investments authorized by statute
and by the trust indenture governing the bond issue are eligible investments
under the Program.
Proposed §183.10 provides that the Economic Development Bank and the
investment officer will establish investment procedures.
Tracye McDaniel, Executive Director of the Office, has determined that
for the first five-year period that the proposed rules are in effect there
will be no fiscal implications for state or local government as a result of
enforcing or administering the new rules.
Ms. McDaniel has also determined that each year of the first five years
that the rules are in effect, the public will benefit from a better understanding
of the management of the Office and the Program. There will be no effect on
small business. There is no anticipated economic cost to persons other than
an application fee for entities that choose to participate in the Program
and no private property rights are affected by the new rules.
Comments on the proposed rules may be submitted within 30 days of the publication
of this notice to Robin Abbott, Assistant General Counsel, 1100 San Jacinto,
4th Floor, or P.O. Box 12428, Austin, Texas 78711-2428. Comments may be faxed
to Ms. Abbott at (512) 463-1932 or e-mailed to rabbott@governor.state.tx.us
within 30 days.
The new rules are proposed under the Texas Government Code, §481.005(d),
which authorizes the executive director of the Office to adopt rules for programs
administered by the Office, and the Texas Government Code, Chapter 2001, Subchapter
B, which prescribes the process for rulemaking by state agencies. Texas Government
Code, Chapter 481, creating the Office, Texas Government Code, Chapter 489,
creating the Economic Development Bank within the Office, and Vernon's Texas
Civil Statutes, Article 5190.6 are affected by the proposed rules.
§183.1.Authority.
The Office of the Governor, Economic Development and Tourism Division
(Office), on behalf of the Boards of Directors of the Texas Small Business
Industrial Development Corporation and TEXCAP (Board), as the investing entities,
hereby adopts its written investment policy in compliance with the Public
Funds Investment Act, Texas Government Code, Chapter 2256, Subchapter A, as
amended (Act) and pursuant to the authority granted by Texas Government Code,
Chapter 481, and the Development Corporation Act of 1979, V.T.C.S. Article
5190.6.
§183.2.Policy.
It is the policy of the Board to invest the financial assets of the
Corporation pursuant to the following principles in order of priority and
in conformance with all applicable federal and state statutes, rules or regulations
as well as all bond indenture requirements of these financial assets:
(1)
Preservation and safety of principal;
(2)
Maintaining liquidity in order to meet cash flow needs
and to maintain a self-supporting program;
(3)
Providing the highest investment return within the applicable
federal and state statutes and bond indenture requirements.
§183.3.Scope.
This investment policy applies to the Texas Small Business Industrial
Development Corporation and TEXCAP Corporation bond issuance and all proceeds
of the issuance. The Board or anyone acting on its behalf shall comply with
the provisions of this section.
§183.4.Prudence.
(a)
Prudent person standard. Investments shall be made with
judgment and care, under circumstances then prevailing, which a person of
prudence, discretion, and intelligence would exercise in the management of
the person's own affairs, not for speculation, but for investment considering
the probable safety of capital and the probable income to be derived.
(b)
Considerations. In determining whether an investment officer/staff
has exercised prudence with respect to an investment decision, the determination
shall be made taking into consideration the investment of all funds or proceeds
under the Board's control rather than a consideration as to the prudence of
a single investment; and whether the investment decision was consistent with
the written investment policy of the Board.
§183.5.Limitations, Objectives and Strategy.
(a)
Limitations.
(1)
Investments shall comply with bond indenture covenants,
applicable Internal Revenue Service regulations, credit/liquidity facility
agreements, and the Act.
(2)
Investments shall not have maturities longer than the maturities
of the bonds that financed the funds to be invested.
(b)
Investment objectives. Investment objectives have been
formulated on the following considerations:
(1)
Preservation and safety of principal. To assure the re-payment
of the principal amounts to bondholders; investments will be made in securities
that minimize risk of loss.
(2)
Return on Investment. Investments shall be made to maintain
a self-supporting program and the payment of interest.
(3)
Liquidity of Funds. To meet program cash flow and debt
service needs, investment maturities will be managed to provide appropriate
funding to meet bond and program obligations.
(4)
Marketability. To provide long term confidence and stability
of the bonds in the marketplace and to provide the lowest interest cost possible
for purchased program obligations through the use of credit enhancement, investments
will be made to preserve an adequate investment rating for the bonds.
(c)
Strategy. This will be accomplished by purchasing low risk,
varied liquid instruments with flexible terms and diversifying the portfolio
by maturity period, as appropriate. Investments will be purchased to ensure
that funds in the portfolio are sufficiently available to meet all required
and/or optional bond redemptions and purchases, acquisition of program obligations,
and maintain adequate earnings to cover bond and program expenses in order
to provide a self-supporting program.
§183.6.Delegation of Authority.
The responsibility for investing the financial assets is delegated
to the Economic Development Bank (Bank) and the Investment Officer, who shall
be responsible for all transactions undertaken and shall have procedures established
consistent with this chapter. Quarterly reports shall be presented to the
Board and Office. All investment transactions shall be conducted pursuant
to this chapter and such procedures.
§183.7.Training.
Each member of the board and its investment officer shall attend training
that conforms to the requirements of the Act.
§183.8.Authorized Dealers.
The Bank will invest funds through the use of banks and broker/dealers
which are approved by the Board according to procedures.
§183.9.Authorized Investments.
(a)
Purpose of bond issue. The purpose of the bond issue is
to provide a centralized source of low cost funds financing eligible projects,
as defined under the Act, through the purchase of a certificate of obligation,
bond, note or other obligation hereafter referred to as "Program Obligation,"
of:
(1)
an eligible city, county, district or other political corporation
or subdivision of the State of Texas (the "Public Entities");
(2)
other eligible entities providing financing for the Public
Entities; or
(3)
an eligible individual, partnership, corporation, or any
other private entity whether organized for profit or not for profit;
(4)
funding a debt service reserve fund; and
(5)
paying all of the necessary costs and expenses incidental
to the issuance and management of the bonds to achieve a self-supporting program
status.
(b)
Authorized Investments. The following investments are authorized
investments for bond funds, subject to any approval required by a credit/liquidity
facility provider:
(1)
Governmental Obligations;
(2)
bonds; debentures, notes or other evidences of indebtedness
issued or guaranteed by any of the following federal full faith and credit
agencies; Export Import Bank; Farmers Home Administration, Federal Financing
Bank, Federal Housing Administration and the Government National Mortgage
Association;
(3)
certificates of deposit or interest bearing time deposits,
including those of the Trustee, secured at all times by collateral security
described in this subsection and subsection (a) of this section. Such certificates
are only acceptable with federally or state-chartered commercial banks, including
the Trustee, savings and loan associations and mutual savings banks that are
insured by the Federal Deposit Insurance Corporation or Federal Savings and
Loan Insurance Corporation, as applicable. Unsecured obligations of a savings
and loan association must be rated Aa or better by Moody's and AA or better
by S&P Commercial banks must have a minimum capital surplus and undivided
profits of at least $50,000,000 and the unsecured obligations of said commercial
banks, or of a bank holding company of which it is the lead bank, must be
rated Aa or better by Moody's and AA or better by S&P.
(4)
the following investments, fully insured by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporations:
certificates of deposit, savings accounts, deposit accounts or depository
receipts of banks, including the Trustee, savings and loan associations and
mutual savings banks;
(5)
bankers' acceptances or certificates of deposit of commercial
banks or savings and loan associations which mature not more than one year
after the date of purchase. The banks or savings and loan associations (as
opposed to their holding companies) must be rated for unsecured debt at the
time of purchase of the investments in one of the two highest classifications
established by not less than two standard rating services or must be approved
by the letter of credit/liquidity facility provider;
(6)
bonds, debentures, notes or other evidences of indebtedness
issued or guaranteed by any of the following United State government non-full
faith and credit agencies: Banks for Cooperatives, Federal Intermediate Credit
Bank, Federal Home Loan Bank and Federal Land Bank;
(7)
commercial paper rated at the time of purchase in the single
highest classification by not less than two standard rating services and which
matures not more than 270 days after the date of purchase;
(8)
any debt obligation, the interest on which is exempt from
federal income taxation pursuant to Section 103 of the Code, and in which
an insurance company organized under the laws of the State may legally invest
its money at the time of such investment, and which is approved by the Banks;
and
(9)
the Investment Agreement or Investment Agreements as approved
by the letter of credit/liquidity facility provider (or, prior to the first
Tender Date, the Issuer); and
(10)
Program Obligations rated A or better by Moody's or S&P
or a Program Obligation supported by credit enhancement that is rated A or
better by Moody's or S&P with a maturity not to exceed 20 years, unless
approved by the Governing Board and any credit/liquidity facility provider
for a longer maturity not to exceed 30 years, provided that no Program Obligation
shall have a maturity that exceeds the maturity of the Bonds;
(11)
any other investments authorized under the indenture and
the Act.
§183.10.Internal Controls and Responsible Parties.
The Bank, in consultation with the Investment Officer, shall establish
investment procedures to ensure that the statutory requirements of the Act
and any bond indenture covenants are met.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 14, 2006.
TRD-200601634
Robin Abbott
Assistant General Counsel
Office of the Governor, Economic Development and Tourism Division
Earliest possible date of adoption: April 30, 2006
For further information, please call: (512) 936-0501