81R29439 BEF-F
By: Paxton, Pitts, McCall, Oliveira, Raymond H.B. No. 4076
Substitute the following for H.B. No. 4076:
By: Otto C.S.H.B. No. 4076
A BILL TO BE ENTITLED
AN ACT
relating to the establishment of the Texas Power Source.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle F, Title 4, Government Code, is amended
by adding Chapter 490D to read as follows:
CHAPTER 490D. TEXAS POWER SOURCE
Sec. 490D.001. DEFINITIONS. In this chapter:
(1) "Investment team" means the nonprofit corporation
contracted by the oversight committee to manage the investments of
the Texas Power Source.
(2) "Oversight committee" means the committee
appointed by the governor with management and control of the Texas
Power Source.
(3) "Selection committee" means the committee
appointed by the governor to nominate members of the board of
directors of the investment team.
(4) "Texas Power Source" means the account created
under this chapter.
Sec. 490D.002. PURPOSE. (a) The Texas Power Source is
established to invest in Texas businesses and assets and to attract
capital to invest in Texas businesses and assets.
(b) The establishment, management, and investment of the
Texas Power Source is a program under Section 52-a, Article III,
Texas Constitution.
Sec. 490D.003. TEXAS POWER SOURCE. (a) The Texas Power
Source is an account outside the state treasury.
(b) The comptroller shall deposit funds in the Texas Power
Source as provided by the General Appropriations Act.
Sec. 490D.004. OVERSIGHT COMMITTEE. (a) The governor shall
appoint a nine-member oversight committee.
(b) The oversight committee has control and management of
the Texas Power Source.
(c) The oversight committee shall consider and approve or
reject nominees to the board of directors of the investment team.
The oversight committee shall approve nominees to the board of
directors of the investment team who have demonstrated and
substantial investment expertise.
(d) The governor may remove and replace members of the
oversight committee.
Sec. 490D.005. SELECTION COMMITTEE. (a) The governor, in
consultation with the lieutenant governor and the speaker of the
house of representatives, shall appoint a five-member selection
committee.
(b) The selection committee shall identify and select
nominees to the board of directors of the investment team. The
selection committee shall engage an executive search firm to ensure
each selection is conducted with due diligence. The selection
committee shall submit the names of nominees to the oversight
committee for approval.
(c) The governor may remove and replace members of the
selection committee.
Sec. 490D.006. INVESTMENT TEAM. (a) The investment team
must be organized as a nonprofit corporation under the Business
Organizations Code. The investment team is not a state agency and
the board of directors of the investment team are not state
employees.
(b) The oversight committee shall enter into a contract with
the investment team for the investment team to invest the Texas
Power Source. The investment team may not engage in any business
other than investing funds designated by the oversight committee
under the contract.
(c) The oversight committee must approve the:
(1) certificate of formation and bylaws of the
investment team and any amendment to the certificate of formation
or bylaws;
(2) investment policies of the investment team,
including changes to those policies;
(3) audit and ethics committee of the investment team;
and
(4) code of ethics of the investment team.
(d) The contract between the oversight committee and the
investment team must provide for industry-standard compensation
for the team's services. The contract may provide for an
asset-based fee and a performance-based fee. The contract must
contain representations by the investment team that it has all
required licenses and registrations to act as investment manager of
the Texas Power Source. The investment team compensation is an
expense of the Texas Power Source. The contract must allow the
investment team to purchase, as an expense of the Texas Power
Source, liability insurance for the coverage of the board of
directors, employees, and agents of the investment team.
(e) Under the contract between the oversight committee and
the investment team, the oversight committee may delegate to the
investment team the discretion and authority to:
(1) employ and retain staff within budgetary
constraints;
(2) acquire and dispose of the fund's assets for
investment purposes;
(3) determine all matters relating to the manner,
method, terms, conditions, and timing of investments and engage
consultants and analysts in connection with those matters;
(4) select brokers, dealers, and other intermediaries
by or through whom investments are executed;
(5) take any action necessary for the administration
and protection of the Texas Power Source;
(6) exercise all voting and other powers and
privileges attributable to an investment under contract by the
Texas Power Source;
(7) make and execute all documents and take all other
actions as necessary or appropriate to carry out the investment
team's duties under this chapter; and
(8) pay expenses of the Texas Power Source.
Sec. 490D.007. INVESTMENT STRATEGY; AUTHORIZED
INVESTMENTS. (a) The oversight committee shall ensure that the
Texas Power Source is invested in accordance with the investment
strategy under this section.
(b) The contract between the oversight committee and the
investment team must require the investment team to comply with the
investment strategy under this section.
(c) The Texas Power Source shall be invested according to an
investment strategy that maximizes the total investment return, as
described by this section, to this state. The total return may be
measured by the sum of:
(1) the direct taxpayer return, represented by the
creation of jobs in this state and the stimulation of the economy of
this state resulting from the aggregate invested capital; and
(2) the capital return, represented by the return to
this state of invested and appreciated capital.
(d) In implementing the investment strategy, the investment
team may consider the current economic conditions and give
significant weight to the direct taxpayer return, as described by
Subsection (c)(1), as appropriate. In implementing the investment
strategy, the investment team shall consider both the current
return and future potential returns.
(e) Eighty percent of the Texas Power Source assets shall be
invested according to a co-investment strategy in a manner that
leverages the resources and investing experience of private-sector
investors in order to ensure an efficient allocation of Texas Power
Source assets. Under the co-investment strategy, the investment
team shall make investment decisions identical to those made by
substantial and experienced private-sector investors, such as
seasoned venture capital investors. The amount of Texas Power
Source assets invested in a co-investment may not be greater than
the amount of assets invested by the private-sector investor. The
investment team shall make co-investments on terms and conditions
that are necessary and reasonably calculated to attract significant
investment by private-sector investors, from both inside and
outside this state, and in such a way as to maximize the aggregate
capital deployed into the economy of this state in accordance with
the objectives of the investment strategy. To the extent allowed by
law, the co-investment terms may include the deployment of debt,
equity, or subsidies as necessary to facilitate an appropriate
investment.
(f) Twenty percent of the Texas Power Source assets shall be
invested in small businesses. The total amount of investments made
in small businesses under the control of any individual may not
exceed $2 million. Investments under this subsection may be made
with or without coinvestor participation.
(g) The assets of the Texas Power Source may be invested
only in businesses, public or private, with operations and assets
substantially located in this state and only in investments with
the potential for job and economic growth in this state in
accordance with the investment strategy.
(h) All income and returns realized on investments shall be
retained in the Texas Power Source and made available for
additional investments until the Texas Power Source is dissolved.
Sec. 490D.008. OVERSIGHT. (a) The oversight committee
shall review the activities of the investment team to ensure
compliance with the investment strategy and operating guidelines
provided by this chapter.
(b) On a determination by at least two-thirds of the members
of the oversight committee that the activities of the investment
team are in material noncompliance with the provisions of this
chapter or the terms of the investment team's contract, the state
oversight committee may remove any or all of the members of the
board of directors of the investment team. The selection committee
shall nominate members to fill vacancies created by the removal of
members of the board of directors.
(c) The investment team shall make quarterly reports to the
oversight committee and annual reports to the state oversight
committee and the legislature regarding the finances and operation
of the Texas Power Source.
Sec. 490D.009. DISSOLUTION. (a) The investment team shall
begin dissolution of the Texas Power Source not later than
September 1, 2019, or the 10th anniversary of the date of extension
of the Texas Power Source, as applicable. The investment team shall
use reasonable efforts to plan the orderly liquidation of
investments so that all investments will be liquidated before
September 1, 2020, or the 11th anniversary of the date of extension
of the Texas Power Source, as applicable.
(b) Except under unusual circumstances in which it may be
necessary to protect investments previously made, further
investments may not be made in or by the Texas Power Source after
September 1, 2019, or the 10th anniversary of the date of extension,
as applicable.
(c) Upon dissolution, the Texas Power Source's assets shall
be returned to the comptroller.
(d) At the regular legislative session next preceding
September 1, 2019, or the 10th anniversary of the date of the
previous extension of the Texas Power Source, as applicable, the
legislature, by a two-thirds vote of the members present in each
house, may extend the duration of the Texas Power Source for 10
years.
Sec. 490D.010. RESTRICTIONS ON LOBBYING EXPENDITURES. (a) A
political subdivision or private entity that receives Texas Power
Source funds may not use those funds to pay:
(1) lobbying expenses;
(2) a person or entity that is required to register
with the Texas Ethics Commission under Chapter 305;
(3) a partner, employee, employer, relative,
contractor, consultant, or related entity of a person described by
Subdivision (2); or
(4) a person that has been hired to represent
associations or other entities for the purpose of affecting the
outcome of legislation, agency rules, ordinances, or other
government policies.
(b) A person serving on the selection committee, oversight
committee, or board of directors of the investment team or as an
employee of the investment team may not receive or give a gift in
exchange for taking an action in connection with the person's
duties under this chapter.
Sec. 490D.011. PROHIBITED ACTS. The Texas Power Source and
persons on the oversight committee, selection committee, or board
of directors of the investment team may not use Texas Power Source
money under the person's control, including appropriated money,
capital appreciation, or money invested in a co-investment, to
finance or otherwise support the candidacy of a person for an office
of a local or county government, of the legislative, executive, or
judicial branch of state government, or of the government of the
United States.
SECTION 2. Not later than the 30th day after the effective
date of this Act, the governor shall appoint the members of the
selection committee and the oversight committee under Chapter 490D,
Government Code, as added by this Act.
SECTION 3. 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, 2009.