HBA-RBT H.B. 1625 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1625 By: Pitts Natural Resources 3/8/1999 Introduced BACKGROUND AND PURPOSE The Texas Public Funds Investment Act (PFIA), Subchapter A, Chapter 2256, Government Code, authorizes local governments, including water districts and other political subdivisions of the state, to invest funds in certain low risk and highly liquid investment instruments. These investments must be made in accordance with a written investment strategy and policy approved by the governing body. Nonprofit rural water systems organized under Chapter 67 of the Water Code are not considered political subdivisions of the state according to the PFIA and therefore are not eligible to make investments under the PFIA. However, these utilities do provide public functions similar to a water district, including the provision of public water and wastewater services. For the purposes of financing programs, the Texas Water Development Board (TWDB) does consider Chapter 67 nonprofit water supply and sewer service corporations to be political subdivisions. These nonprofit water corporations are considered retail public utilities under the Texas Water Code. They must comply with the Texas Open Meetings and Open Records Act and they are provided a constitutional exemption from state ad valorem taxes. These utilities are governed by an elected board of directors and secure most of their infrastructure financing from the U.S. Department of Agriculture and the TWDB. Revenues from water rates received from the public are reinvested into the operations of the utility on a nonprofit basis. From time to time these utilities will have accumulated reserve funds that need to be invested. The existing Section 67.014(b) of the Water Code specifically lists the types of investments that are authorized for these utilities. There are currently nearly 900 nonprofit water supply and sewer service corporations operating in Texas. Many of these companies periodically have excess funds that they need to invest. By investing in certain investment instruments that are authorized under the PFIA, these entities stand to obtain a higher rate of return. H.B. 1625 authorizes nonprofit water supply and sewer service corporations to invest in any investment authorized by the Texas Public Funds Investment Act if the corporations also comply with a written investment policy and strategy approved by the board of directors of the corporation. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends the heading to Section 67.014, Water Code, as follows: Sec. 67.014. New title: DEPOSITORY FOR FUNDS; PERMITTED INVESTMENTS. SECTION 2. Amends Section 67.014(b), Water Code, to add an investment authorized under Subchapter A, Chapter 2256, Government Code (Public Funds Investment), and by a written investment policy approved by the board of directors of a corporation (board) and that complies with a written investment strategy approved by the board to the options in which the board is required to invest funds which are allocated to a sinking fund for replacement, amortization of debts, and the payment of interest that are not required to be spent in the year in which deposited. SECTION 3. Emergency clause. Effective date: upon passage.