OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS 

JOHN CORNYN 

March 27,200l 

The Honorable Ben W. “Bud” Childers 

Fort Bend County Attorney 

301 Jackson, Suite 621 

Richmond, Texas 77469-3 108 

Opinion No. JC-0359 

Re: Whether, under section 2256.016 of the 

Government Code, the Texas Local Government 

Investment Pool may calculate the “maximum 

average dollar-weighted maturity” of the pool using 

the reset date of floating rate securities as opposed 

to their stated maturity date (RQ-0305JC) 

Dear Mr. Childers: 

Section 2256.016 of the Government Code requires a public funds investment pool to 

disclose “the maximum average dollar-weighted maturity allowed, based on the stated maturity date, 

of the pool,” TEX. GOV’T CODE ANN. 8 2256.016(b)(2) (V emon 2000) and “the current average 

dollar-weighted maturity, based on the stated maturity date, of the pool,” id. 5 2256.016(c)(2)(B). 

On behalf of your county treasurer, you ask whether, under section 2256.016, the Texas Local 

Government Investment Pool (“TexPool”) may calculate the “maximum average dollar-weighted 

maturity” of the pool using the reset date of floating rate securities as opposed to their stated 

maturity date.’ We conclude that section 2256.016 requires TexPool to calculate the “maximum 

average dollar-weighted maturity” of the pool’s portfolio using these securities’ stated maturity 

dates. TexPool’s practice of disclosing information using both the reset date and the stated maturity 

date of these securities is consistent with section 2256.016. 

TexPool is a public funds investment pool organized under chapter 791 of the Governrnent 

Code, the Interlocal Cooperation Act, and chapter 2256 of the Government Code, the Public Funds 

Investment Act, which generally governs the investments of state agencies, local governments, and 

public funds investment pools, such as TexPool. See id. 8 2256.003. Under the Public Funds 

Investment Act, an “investment pool” is “an entity created under this code to invest public funds 

jointly on behalf of the entities that participate in the pool.” Id. 9 2256.002(6). The Public Funds 

Investment Act refers to a governmental unit subject to its provisions as an “investing entity” or 

“entity.” See id. $5 2256.002(5), .003. 

‘See Letter from Honorable Ben W. “Bud” Childers, Fort Bend County Attorney, to Honorable John Cornyn, 

Texas Attorney General at 2 (Nov. 3,200O) (on file with Opinion Committee) [hereinafter Request Letter]. 
The Honorable Ben W. “Bud” Childers - Page 2 (JC-0359) 

Section 2256.016(a) authorizes an entity to invest its funds in an investment pool. 

Subsections (b) and (c) of that provision establish certain requirements an investment pool must 

satisfy in order to be eligible to receive and invest funds. Those requirements include disclosing in 

an offering circular, or similar disclosure instrument, information including “the maximum average 

dollar-weighted maturity allowed, based on the stated maturity date, of the pool,” id. 

8 2256.016(b)(2), and providing its investors with a monthly report that contains, among other 

things, “the current average dollar-weighted maturity, based on the stated maturity date, of the pool,” 

id. 8 2256,016(c)(2)(B). Y ou inquire about the first disclosure requirement. 

We note that two other provisions in the Public Funds Investment Act contain similar 

language. Section 2256.005 requires investing entities to adopt investment policies. Pooled fund 

groups’ policies must include “the maximum dollar-weighted average maturity allowed based on the 

stated maturity date for the portfolio.” Id. $ 2256.005(b)(4)(C). In addition, section 2256.019 

requires a public funds investment pool to be “continuously rated no lower than AAA or AAA-m 

or at an equivalent rating by at least one nationally recognized rating service or no lower than 

investment grade by at least one nationally recognized rating service with a weighted average 

maturity no greater than 90 days.” Id. 9 2256.019 (emphasis added); see also id. 9 2256.016(h) (“To 

maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, 

an investment pool must be continuously rated no lower than AAA or AAA-m or at an equivalent 

rating by at least one nationally recognized rating service.“). You have not asked us to construe 

these provisions and we do not address them. 

You explain that TexPool purchases “floating rate securities.” The rates of these securities 

are not fixed but change at set intervals. See Request Letter, supra note 1, at 1. “As a result, the 

floater security has two (2) dates important to the investor: the reset date and the maturity date. At 

the reset date, the security can change the coupon. At the floater’s stated (final) maturity date it will 

mature.” Id. at l-2. You state that TexPool “is currently using the reset date (the date of the rate 

increases) of the floating rate security to calculate the weighted average maturity.” Id. at 2. The 

Comptroller’s office, which administers TexPool, confirms that “TexPool currently calculates the 

pool’s WAM through use of the final maturity date for fixed rate securities and ‘reset date’ for 

floating rate securities.“* Later in the same letter, however, the Comptroller’s office informs us that 

TexPool is calculating and disclosing weighted average maturity using both “the reset date standard 

and the final maturity standard.” Comptroller Letter, note 2, at 4. 

It appears that your county treasurer believes that section 2256.016 of the Government Code 

requires TexPool to calculate “maximum average dollar-weighted maturity” according to the final 

maturity date of floating rate securities. Accordingly, you ask the following questions: 

1. May a public funds investment pool use the “reset date” to 

calculate their portfolio’s weighted average maturity (“WAM”), as 

2Letter from Lita Gonzalez, Associate Deputy General Counsel, Agency Affairs, Office of the Comptroller of 

Public Accounts, to Honorable John Comyn, Texas Attorney General at 2 (Dec. 28, 2000) (on file with Opinion 

Committee) [hereinafter Comptroller Letter]. 
The Honorable Ben W. “Bud” Childers - Page 3 (JC-0359) 

opposed to the stated maturity date as dictated by 0 2256.016(b)(2) 

of the Government Code? 

2. If it is determined that a public funds investment pool may use 

the “reset date” to calculate their portfolio’s weighted average 

maturity, should the pool additionally disclose the weighted average 

maturity (“WAM”) based on the stated maturity? 

3. What recourse, if any, does a public entity in Texas have 

against a public funds investment pool who inaccurately calculates its 

weighted average maturity (“WAM”)? 

Request Letter, supra note 1, at 2-3. 

First, we address whether calculation of “maximum average dollar-weighted maturity” using 

floating rate securities’ reset dates satisfies the section 2256.016(b)(2) disclosure requirement. 

Again, that provision requires a public funds investment pool to disclose in an offering circular, or 

similar disclosure instrument, “the maximum average dollar-weighted maturity allowed, based on 

the stated maturity date, of the pool.” TEX. GOV'T CODE ANN. 9 2256.016(b)(2) (Vernon 2000). 

The answer to this question turns on the meaning of the phrase “stated maturity date” as it is used 

in section 2256.016. The Code Construction Act provides that “[wlords and phrases that have 

acquired a technical or particular meaning, whether by legislative definition or otherwise, shall be 

construed accordingly.” Id. 8 3 11 .Ol 1 (b) (Vernon 1998). Absent such a meaning, words and 

phrases are “read in context and construed according to the rules of grammar and common usage.” 

Id. fj 311.01 l(a). 

No Texas statute or case defines “stated maturity date” (or “maximum average dollarweighted maturity”) for purposes of the Public Funds Investment Act disclosure requirement. We 

believe, however, that “stated maturity date” is commonly understood to mean the date a security 

finally matures, and is not commonly understood to refer to other relevant dates such as the date the 

rate on the security may be adjusted. See BLACK'S LAW DICTIONARY 400 (7th ed. 1999) (defining 

“date of maturity” as “[tlhe date when a debt falls due, such as a debt on a promissory note or 

bond”). Given that each floating rate security has a stated maturity date and it is possible to calculate 

“maximum average dollar-weighted maturity” using such a security’s stated maturity date, this 

construction of the statute is not absurd. See TEX. GOV'T CODE ANN. 0 3 11.02 l(4) (Vernon 1998) 

(presumption that in enacting statute “a result feasible of execution is intended”). Because this 

construction is not absurd or contrary to any clear expression of legislative intent, we are not at 

liberty to substitute the words “reset date” for the words “stated maturity date” employed by the 

legislature in section 2256.016(b)(2), or to insert those words into the statute. See Laidlaw Waste 

Sys. v. City of Wilmer, 904 S.W.2d 656,659 (Tex. 1995) (courts should not insert words in a statute 

except to give effect to clear legislative intent); Hunter v. Fort Worth Capital Corp., 620 S. W.2d 

547,552 (Tex. 198 1) (same). Thus, we conclude that section 2256.016 requires TexPool to calculate 

the “maximum average dollar-weighted maturity” of its portfolio according to floating rate 

securities’ stated date of maturity. 
The Honorable Ben W. “Bud” Childers : Page 4 (JC-0359) 

You also ask, “[i]f it is determined that a public funds investment pool may use the ‘reset 

date’ to calculate their portfolio’s weighted average maturity, should the pool additionally disclose 

the weighted average maturity (“WAM”) based on the stated maturity?’ Request Letter, supra note 

1, at 3. We note that TexPool is currently calculating weighted average maturity based on both the 

reset date and the stated date of maturity of floating rate securities. See Comptroller Letter, supra 

note 2, at 4 (“[TJhe calculation of the WAM through use of the reset date standard and the final 

maturity standard is posted in TexPool’s Information Statement. Thus, both calculations are 

available to all participants in the pool.“). Disclosure of these two sets of data is consistent with 

section 2256.016. 

Section 2256.016 requires a public funds investment pool to disclose certain data, but it 

establishes only minimum, threshold disclosure requirements. See TEX. GOV’T CODE ANN. 

tj 2256.016(b) (V emon 2000) (offering circular must contain “at a minimum, the following 

information”); (c)(2) ( monthly report must contain “at a minimum, the following information”) 

(emphasis added). The statute does not preclude a pool from calculating and disclosing additional 

data and, by using the words “at a minimum” to describe the required disclosures, see id., appears 

to expressly contemplate that additional information may be disclosed. Thus, we believe that a 

public funds investment pool is authorized to calculate and disclose additional data, provided that 

the methods used to calculate the information are reasonable and the information is not misleading 

to investors. 

The Comptroller’s office informs us that TexPool calculates weighted average maturity using 

the reset date of floating rate securities according to Federal Securities and Exchange Cornmission 

(“SEC”) rules applicable to money market funds, 17 C.F.R. 8 270.2a-7. See Comptroller Letter, 

supra note 2, at 2. We understand that these rules, while they do not apply to government funds like 

TexPool, establish industry standards for money market funds, TexPool’s private sector equivalent. 

See id.3 These rules allow certain securities to be treated as having maturity dates that are shorter 

than their final maturity dates. For example, certain adjustable rate government securities “shall be 

deemed to have a maturity equal to the period remaining until the next readjustment of the interest 

rate. A Government Security that is a Floating Rate Security shall be deemed to have a remaining 

maturity of one day.” 17 C.F.R. 9 270.2a-7(d)( 1) (2000). We conclude that TexPool may 

reasonably rely on the SEC rules to calculate weighted average maturity using floating rate 

securities’ reset date. TexPool publications disclosing two sets of maximum average maturity data 

are explicit about the different parameters used to calculate the two sets of data. See, e.g., 

http://www.TexPool.com (rate information). 

Because we conclude that TexPool’s disclosure practices are consistent with section 

2256.016, we do not address your final question about what recourse a public entity might have 

against a public funds investment pool that inaccurately calculates its weighted average maturity. 

Finally, we note that calculation of weighted average maturity according to floating rate securities’ 

reset dates may be the industry standard for evaluating money market fund portfolios. See 

3See also Letter fi-om Carol A. Smith, Audit Manager, State Auditor’s Office, to Susan D. Gusky, Chair, 

Opinion Committee, Office of the Attorney General at 2 (Dec. 18,200O) (on file with Opinion Committee). 
The Honorable Ben W. “Bud” Childers - Page 5 (JC-0359) 

discussion supra. In construing section 2256.016, however, this office may not depart Tom the plain 

meaning of the words “stated maturity date.” 
The Honorable Ben W. “Bud” Childers - Page 6 (JC-0359) 

SUMMARY 

Section 2256.016(b)(2) of the Government Code requires 

TexPool to calculate the “maximum average dollar-weighted 

maturity” of the pool’s portfolio using floating rate securities’ stated 

maturity dates. TexPool’s practice of disclosing two sets of weighted 

average maturity data, one using floating rate securities’ reset dates 

and the other using their stated maturity dates, is consistent with 

section 2256.016. 

Attorney General of Texas 

ANDY TAYLOR 

First Assistant Attorney General 

CLARK KENT ERVIN 

Deputy Attorney General - General Counsel 

SUSAN D. GUSKY 

Chair, Opinion Committee 

Mary R. Crouter 

Assistant Attorney General - Opinion Committee