The nation’s first state-administered gold depository expects to open in 2018, intent on repatriating $1 billion in bullion stored in New York, offering Texans a safe place to park their precious metals closer to home.
Texas Comptroller Glenn Hegar announced at a June 14 press conference that private Texas-based investment company Lone Star Tangible Assets (LSTA) will build and operate the Texas Bullion Depository, described online as a 60,000-square-foot secure facility housing precious metals on a 10-acre campus.
“The Texas Bullion Depository will offer Texans safe, secure, and fully insured storage for precious metals, providing an alternative to depositories largely located in and around New York City,” said Hegar.
LSTA’s existing highest-rated Class 3 vault in Austin will serve as the initial depository site, ready to receive metals as early as January 2018. Hegar noted they anticipate the permanent facility to open in December 2018.
During the press conference, LSTA Chairman Matthew Ferris stated the permanent depository could run anywhere from 35,000 to 75,000 square feet.
Hegar indicated that Texans will not have to travel to the state capital to open accounts because officials envision a network of licensed and insured depository agents around the state to help Texans sign up for these services.
In 2015, Governor Greg Abbott signed House Bill 483, allowing Texas to set up a gold depository and bring its roughly $1 billion in gold bullion back from an HSBC vault in New York City, Breitbart Texas reported. The gold is part of the University of Texas endowment fund and it costs taxpayers around $1 million per year to store the bullion in the Big Apple bank. Abbott said he signed HB 483 “to provide a secure facility for the state of Texas, state agencies, and Texas citizens to store gold bullion and other precious metals.”
Since then, the comptroller’s office initiated a lengthy process, requesting proposals and later choosing LSTA, one of six respondents because, as Hegar said, LSTA had a “solid business model” and offered them the right combination of experience, financial stability, and infrastructure. He said LSTA was the only contender to offer up creative solutions for large commercial or institutional accounts that require significant liquidity.
“They are proposing to work with a large banking partner to provide the liquidity needed to attract larger investment of our depository facility,” said Hegar.
The state signed an initial five year contract with LSTA. This includes two one-year extension options.
Hegar also announced Tom Smelker, a 30 year comptroller veteran recently named as director of Treasury Operations at the Texas Comptroller of Public Accounts, will serve as the initial depository administrator.
The comptroller emphasized all parties accomplished a “monumental undertaking” that involved unique challenges including security, IT systems, transportation, customer service, marketing materials, and other logistical hurdles without using additional appropriations, staff, or resources.
According to officials, the depository will be built at no cost to Texas taxpayers and overseen by the comptroller’s office. Hegar called this a “great moment” in Texas history, citing the Texas Bullion Depository as “yet another example why Texas is the greatest state in the nation and a leader when it comes to economic innovations.”
Ferris added, “This is a monumental moment in the history of the state of Texas and in the modern history of the precious metals industry itself. Never before has there existed a state-administered depository available for use by private citizens, institutional investors, state agencies, and, eventually non-U.S. precious metals investors.”
He depicted LSTA’s staff of “more than 100 Texans” as humbled and excited to be chosen as the depository’s first operator.
Meanwhile, the Texas Tribune reported on the University of Texas Investment Management Company’s (UTIMCO) reluctance to transfer Texas-owned gold they manage for the UT and Texas A&M systems from New York. UTIMCO has said the Texas depository must be a member of the Chicago Mercantile Exchange’s COMEX platform, the primary market for trading precious metals.
Ferris told reporters the Texas Bullion Depository was not yet a member of COMEX because of geographical limitations. He said, to compensate, they established a system with subcontractors like MTB, a leading gold coin and bullion investment firm, that will afford them COMEX level liquidity. Ferris commented, “Ultimately, our goal is to create liquidity of COMEX levels in the state of Texas and for those large institutions over time.”
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