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H.B. No. 2217
AN ACT
relating to the management of public school land and the permanent
school fund.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 51.001(11), Natural Resources Code, is
amended to read as follows:
(11) "Market value" has the meaning assigned by
Section 1.04, Tax Code [means the value of real property determined
by an appraisal performed by an appraiser].
SECTION 2. The heading to Subchapter B, Chapter 51, Natural
Resources Code, is amended to read as follows:
SUBCHAPTER B. PROVISIONS GENERALLY APPLICABLE
TO THE MANAGEMENT [SALE AND LEASE]
OF PUBLIC SCHOOL AND ASYLUM LAND
SECTION 3. The heading to Section 51.011, Natural Resources
Code, is amended to read as follows:
Sec. 51.011. MANAGEMENT [SALE AND LEASE] OF PUBLIC SCHOOL
LAND.
SECTION 4. Section 51.011, Natural Resources Code, is
amended by amending Subsection (a) and adding Subsections (a-1) and
(a-2) to read as follows:
(a) Any land that is set apart to the permanent school fund
under the constitution and laws of this state together with the
mineral estate in riverbeds, channels, and the tidelands, including
islands, shall be subject to the sole and exclusive management and
control of [controlled, sold, and leased by] the school land board
and the commissioner under the provisions of this chapter and other
applicable law.
(a-1) The board may acquire, sell, lease, trade, improve, or
otherwise manage, control, or use land that is set apart to the
permanent school fund in any manner, at such prices, and under such
terms and conditions as the board finds to be in the best interest
of the fund.
(a-2) Not later than October 15 of each year, the board
shall report to the Legislative Budget Board the sale of any land
that is set apart to the permanent school fund for less than
appraised value or the purchase of any land that is set apart to the
permanent school fund for more than appraised value during the
preceding state fiscal year.
SECTION 5. Section 51.051, Natural Resources Code, is
amended to read as follows:
Sec. 51.051. SALE OF LAND. All [Subject to the provisions
of Section 32.109 of this code, all] sales of land described in
Section 51.011 [of this code] shall be made by or under the
direction of the school land board [to the applicant who submits the
highest bid for the land at a price that is not less than the price
set by the board for purchase of the land].
SECTION 6. Section 51.052, Natural Resources Code, is
amended by amending Subsections (d), (e), and (i) and adding
Subsection (l) to read as follows:
(d) Before the land under this chapter is sold, the
appraiser must appraise the land at its market value and file a copy
of the appraisal with the commissioner. [No land covered by this
chapter may be sold for less than the market value that appears in
the appraisal made under this subsection.]
(e) The owner of land that surrounds land in a tract shall
have a preference right to purchase the tract before the land is
made available for sale to any other person, provided the person
having the preference right pays not less than the market value for
the land as determined by the board and the board finds use of the
preference to be in the best interest of the state. The board shall
adopt rules to implement this preference right.
(i) If no bid meeting minimum requirements is received for a
tract of land offered at a sealed bid sale under Subchapter D of
Chapter 32 [of this code], or if the transaction involves
commercial real estate and the board determines that it is in the
best interest of the permanent school fund, the asset management
division of the land office may solicit proposals or negotiate a
sale, exchange, or lease of the land to any person. The asset
management division may [also] contract for the services of a real
estate broker or of a private brokerage or real estate firm to
assist in a [the real estate] transaction under this subsection.
[The sale price may not be less than the market value.] The board
must approve any negotiated sale, exchange, or lease of any land
under this section.
(l) If the board leases land under this subchapter and the
lease includes the right to produce groundwater from the land, the
lessee shall comply with the statutory provisions governing and the
rules adopted by the groundwater conservation district, if any, in
which the land is located, including the statutory provisions and
rules governing the production and use of groundwater and the
transfer of groundwater out of the district.
SECTION 7. Sections 51.401(a) and (c), Natural Resources
Code, are amended to read as follows:
(a) The board may designate funds received from the sale of
permanent school fund land under this chapter and the proceeds of
future mineral leases and royalties generated from existing and
future [active] leases of permanent school fund mineral interests
received under Chapters 52 and 53 [of this code] for deposit in a
special fund account of the permanent school fund in the State
Treasury to be used by the board [to acquire fee or lesser interests
in real property, including mineral and royalty interests, for the
use and benefit of the permanent school fund,] as provided by
[Section 51.402 of] this subchapter.
(c) Money received from the sale of a particular piece of
land [and designated for the acquisition of interests in real
property] under this subchapter must be used by the board as
provided by this subchapter not later than two years after the date
of the sale of land from which the money is derived. Money received
from the lease of minerals and royalties derived from [active]
leases and designated for use by the board as provided by [the
acquisition of interests in real property under] this subchapter
must be used by the board not later than two years after the date the
money is deposited in the special fund account.
SECTION 8. Section 51.402, Natural Resources Code, is
amended to read as follows:
Sec. 51.402. USE OF DESIGNATED FUNDS [ACQUISITION OF
INTEREST IN REAL PROPERTY]. (a) The board may use the money
designated under Section 51.401 [of this subchapter to acquire real
property and to pay the expenses of acquisitions and sales] for any
of the following purposes:
(1) to add to a tract of public school land to form a
tract of sufficient size to be manageable;
(2) to add contiguous land to public school land;
(3) to acquire, as public school land, interests in
real property for [of unique] biological, commercial, geological,
cultural, or recreational purposes [value]; [or]
(4) to acquire mineral and royalty interests for the
use and benefit of the permanent school fund;
(5) to protect, maintain, or enhance the value of
public school land;
(6) to acquire interests in real estate; or
(7) to pay reasonable fees for professional services
related to a permanent school fund investment.
(b) Before using funds [acquiring real property] under
Subsection (a) [of this section], the board must determine, using
the prudent investor standard, that the use of the funds for the
intended purpose [acquisition] is in the best interest of the
permanent school fund.
(c) Notwithstanding Subsection (a), the market value of the
investments in real estate under this section on January 1 of each
even-numbered year may not exceed an amount that is equal to 15
percent of the market value of the permanent school fund on that
date.
SECTION 9. Subchapter I, Chapter 51, Natural Resources
Code, is amended by adding Sections 51.4021 and 51.408-51.412 to
read as follows:
Sec. 51.4021. APPOINTMENT OF SPECIAL FUND MANAGERS. (a)
The board may appoint investment managers to invest the money
designated under Section 51.401 by contracting for professional
investment management services with one or more organizations that
are in the business of managing real estate investments.
(b) To be eligible for appointment under this section, an
investment manager must be:
(1) registered under the Investment Advisers Act of
1940 (15 U.S.C. Section 80b-1 et seq.);
(2) a bank as defined by that Act; or
(3) an insurance company qualified to perform real
estate investment services under the laws of more than one state.
(c) In a contract under this section, the board shall
specify any policies, requirements, or restrictions, including
ethical standards and disclosure policies and criteria for
determining the quality of investments and for the use of standard
rating services, that the board adopts for real estate investments
of the permanent school fund. Money designated under Section
51.401 may not be invested in a real estate investment trust, as
defined by Section 200.001, Business Organizations Code.
(d) Compensation paid to an investment manager by the board
must be consistent with the compensation standards of the
investment industry and compensation paid by similarly situated
institutional investors.
(e) Chapter 2263, Government Code, applies to investment
managers appointed under this section. The board by rule shall
adopt standards of conduct for investment managers appointed under
this section as required by Section 2263.004, Government Code, and
shall implement the disclosure requirements of Section 2263.005 of
that code.
Sec. 51.408. ETHICS POLICY AND TRAINING. (a) In addition
to any other requirements provided by law, the board shall adopt and
enforce an ethics policy that provides standards of conduct
relating to the management and investment of the funds designated
under Section 51.401. The ethics policy must include provisions
that address the following issues as they apply to the management
and investment of the funds and to persons responsible for managing
and investing the funds:
(1) general ethical standards;
(2) conflicts of interest;
(3) prohibited transactions and interests;
(4) the acceptance of gifts and entertainment;
(5) compliance with applicable professional
standards;
(6) ethics training; and
(7) compliance with and enforcement of the ethics
policy.
(b) The ethics policy must include provisions applicable
to:
(1) members of the board;
(2) the commissioner;
(3) employees of the board; and
(4) any person who provides services to the board
relating to the management or investment of the funds designated
under Section 51.401.
(c) Not later than the 45th day before the date on which the
board intends to adopt a proposed ethics policy or an amendment to
or revision of an adopted ethics policy, the board shall submit a
copy of the proposed policy, amendment, or revision to the Texas
Ethics Commission and the state auditor for review and comments.
The board shall consider any comments from the commission or state
auditor before adopting the proposed policy.
(d) The provisions of the ethics policy that apply to a
person who provides services to the board relating to the
management or investment of the funds designated under Section
51.401 must be based on the Code of Ethics and the Standards of
Professional Conduct prescribed by the Association for Investment
Management and Research or other ethics standards adopted by
another appropriate professionally recognized entity.
(e) The board shall ensure that applicable provisions of the
ethics policy are included in any contract under which a person
provides services to the board relating to the management and
investment of the funds designated under Section 51.401.
Sec. 51.409. DISCLOSURE OF CONFLICTS OF INTEREST AND
FINANCES. (a) A member of the board, the commissioner, an employee
of the board, or a person who provides services to the board that
relate to the management or investment of the funds designated
under Section 51.401 who has a business, commercial, or other
relationship that could reasonably be expected to diminish the
person's independence of judgment in the performance of the
person's responsibilities relating to the management or investment
of the funds shall disclose the relationship in writing to the
board.
(b) The board or the board's designee shall, in the ethics
policy adopted under Section 51.408, define the kinds of
relationships that may create a possible conflict of interest.
(c) A person who is required to file a disclosure statement
under Subsection (a) shall refrain from giving advice or making
decisions about matters affected by the conflict of interest unless
the board, after consultation with the general counsel of the
board, expressly waives this prohibition. The board shall maintain
a written record of each waiver and the reasons for it. The board
may delegate the authority to waive prohibitions under this
subsection to one or more designated employees of the land office on
a vote of a majority of the members of the board at an open meeting
called and held in compliance with Chapter 551, Government Code.
The board shall have any order delegating authority to waive
prohibitions under this section entered into the minutes of the
meeting. The board may adopt criteria for designated employees to
use to determine the kinds of relationships that do not constitute a
material conflict of interest for purposes of this subsection.
(d) Each employee of the board who exercises significant
decision-making or fiduciary authority, as determined by the board,
shall file financial disclosure statements with a person designated
by the board. The content of a financial disclosure statement must
comply substantially with the requirements of Subchapter B, Chapter
572, Government Code. A statement must be filed not later than the
30th day after the date a person is employed in a significant
decision-making or fiduciary position and annually after
employment not later than April 30. The filing deadline may be
postponed by the board for not more than 60 days on written request
or for an additional period for good cause, as determined by the
chairman of the board. The board shall maintain a financial
disclosure statement for at least five years after the date of its
filing.
Sec. 51.410. REPORTS OF EXPENDITURES. A consultant,
advisor, broker, or other person providing services to the board
relating to the management and investment of the funds designated
under Section 51.401 shall file with the board regularly, as
determined by the board, a report that describes in detail any
expenditure of more than $50 made by the person on behalf of:
(1) a member of the board;
(2) the commissioner; or
(3) an employee of the board.
Sec. 51.411. FORMS; PUBLIC INFORMATION. (a) The board
shall prescribe forms for:
(1) statements of possible conflicts of interest and
waivers of possible conflicts of interest under Section 51.409; and
(2) reports of expenditures under Section 51.410.
(b) A statement, waiver, or report described by Subsection
(a) is public information.
(c) The board shall designate an employee of the board to
act as custodian of statements, waivers, and reports described by
Subsection (a) for purposes of public disclosure.
Sec. 51.412. REPORTS TO LEGISLATURE. (a) Not later than
September 1 of each even-numbered year, the board shall submit to
the legislature a report that, specifically and in detail, assesses
the direct and indirect economic impact, as anticipated by the
board, of the investment of funds designated under Section 51.401
for deposit in the special fund account of the permanent school
fund. The board may not disclose information under this section
that is confidential under applicable state or federal law. The
report must include the following information:
(1) the total amount of money designated by Section
51.401 for deposit in the special fund account of the permanent
school fund that the board intends to invest;
(2) the rate of return the board expects to attain on
the investment;
(3) the amount of money the board expects to
distribute to the permanent school fund after making the
investments;
(4) the distribution of the board's investments by
county;
(5) the effect of the board's investments on the level
of employment, personal income, and capital investment in the
state; and
(6) any other information the board considers
necessary to include in the report.
(b) Not later than January 1 of each odd-numbered year, the
board shall submit to the legislature a report that assesses the
return and economic impact of the investments reported to the
legislature before the preceding regular legislative session.
SECTION 10. Sections 32.254 and 51.403, Natural Resources
Code, are repealed.
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, 2005.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2217 was passed by the House on April
21, 2005, by the following vote: Yeas 145, Nays 0, 1 present, not
voting; that the House refused to concur in Senate amendments to
H.B. No. 2217 on May 27, 2005, and requested the appointment of a
conference committee to consider the differences between the two
houses; and that the House adopted the conference committee report
on H.B. No. 2217 on May 29, 2005, by the following vote: Yeas 140,
Nays 0, 2 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2217 was passed by the Senate, with
amendments, on May 24, 2005, by the following vote: Yeas 31, Nays
0; at the request of the House, the Senate appointed a conference
committee to consider the differences between the two houses; and
that the Senate adopted the conference committee report on H.B. No.
2217 on May 29, 2005, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor