Work is officially underway on the nation’s first state-administered gold bullion depository, which will be located in Austin.
State officials on Wednesday announced that the Texas Bullion Depository, where people may store gold and other precious metals, will be built and run in Austin by Lone Star Tangible Assets, the parent company of the United States Gold Bureau and WholesaleCoinsDirect.com.
Texans may be able to store their gold at an existing Class 3 vault the company owns in Austin by January 2018 — and in a new “purpose built vault facility” at a yet-to-be-determined facility in the Austin area by December 2018, Texas Comptroller Glenn Hegar said.
“We’ve worked for two years to make the depository a reality,” Hegar said during a press conference at the Capitol. “This has been a monumental undertaking. ... This is a very complex project.”
This caps a two-year review of depositories in general, as well as a search for a private company to run and operate the facility in Texas.
The state signed a five-year contract with Lone Star Tangible Assets, whose proposal was chosen from six plans submitted to the state. The company will have two one-year extension options.
The company “brings the right combination of experience, financial stability and infrastructure necessary to make this depository a success,” said Tom Smelker, who earlier this week was named administrator of the depository. “LSTA had a comprehensive vision for a safe and secure vaulting facility located right here in the Austin area, and they addressed a lot of concerns we had relating to everything from transportation and security to customer service and IT infrastructure.”
Matt Ferris, chairman of LSTA, said he’s glad his company was chosen for this project.
“This is a monumental moment in the state of Texas,” he said, noting there has never been a state-administered bullion depository before. “The process of establishing the Texas Bullion Depository is underway.”
He noted there are “complexities involved,” and that is “not something our company takes lightly.”
As the company begins refitting the current vault, and searching for a new location for a second facility, it also will begin creating IT systems and developing marketing materials. The comptroller’s Criminal Investigation Division has already inspected the current facility and existing security.
Security is a key issue for the depository. Last year, officials laid out criteria for a facility, noting that any company wanting to manage a depository for the state must shoulder all the upfront costs and be reimbursed down the road once storage fees and other payments begin.
While the facility will be in Austin, officials said they hope a network of depository agents, who will be licensed to deposit metal on behalf of their clients, will evolve across the state to work with Texans in protecting their valuable metals.
“The Texas Bullion Depository will offer Texas safe, fully-insured storage of precious metals providing an alternative to the depositories largely located in and around New York City,” Hegar said.
Plans for the depository have been underway since lawmakers approved the measure — shepherded through the Texas House by state Rep. Giovanni Capriglione, R-Southlake — during the 2015 legislative session.
While it’s geared to give Texans a place to store precious metals, it’s not just for residents.
Financial institutions, cities, school districts, businesses, individuals — even other countries — could do business there as well. And storage fees will be charged to generate revenue for the state.
Those fees could add up, particularly in storing larger amounts, such as the estimated $650 million owned by the University of Texas Investment Management Company now stored at the HSBC Bank in New York. The company pays about $650,000 a year to store the gold there. Some Texas officials have long indicated they would like for the gold to come home.
“The depository is the first rung on the ladder to Texas serving as a hub for commodity trading,” said Brandon Rottinghaus, a political science professor at the University of Houston. “This could diversify and broaden the state’s economy in the long run.”
At the depository, Texans will be able to open accounts similar to checking or savings accounts at traditional banks — and monitor them online. People will be able to deposit gold or silver and pay people through checks or electronic means. Many have likened the depository to a bank that doesn’t do any lending.