S.B. No. 1271
AN ACT
1-1 relating to the establishment of an intercept program to increase
1-2 the credit rating of certain local government debt and authorizing
1-3 the comptroller of public accounts to withhold local government
1-4 funds to pay such obligations under certain circumstances.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 271, Local Government Code, is amended by
1-7 adding Subchapter E to read as follows:
1-8 SUBCHAPTER E. STATE INTERCEPT TO INCREASE CREDIT RATING
1-9 Sec. 271.091. DEFINITIONS. In this subchapter:
1-10 (1) "Local government" means a municipality, county,
1-11 or hospital district of the State of Texas.
1-12 (2) "Payment" means the local sales and use tax
1-13 authorized by the Municipal Sales and Use Tax Act (Chapter 321, Tax
1-14 Code), the County Sales and Use Tax Act (Chapter 323, Tax Code),
1-15 and Subchapter E, Chapter 285, Health and Safety Code.
1-16 (3) "Paying agent" means the financial institution
1-17 that is designated by a local government as its agent for the
1-18 payment of the principal of and interest on the obligation.
1-19 (4) "Obligation" means bonds, notes, certificates of
1-20 obligation, and other obligations authorized to be issued by the
1-21 local government.
1-22 (5) "Agreement" means the document referred to in
1-23 Section 271.092 and Section 271.093.
2-1 (6) "Board" means the bond review board created by
2-2 Chapter 1078, Acts of the 70th Legislature, Regular Session, 1987
2-3 (Article 717k-7, Vernon's Texas Civil Statutes).
2-4 (7) "Comptroller" means the comptroller of public
2-5 accounts.
2-6 Sec. 271.092. AGREEMENT WITH TEXAS BOND REVIEW BOARD AND
2-7 COMPTROLLER. Prior to the issuance of any obligation, the
2-8 governing body of any local government may notify the board of the
2-9 proposed issuance of an obligation and enter into an agreement with
2-10 the board to authorize and direct the comptroller to withhold from
2-11 such local government sufficient money from any payment to which
2-12 such local government may be entitled and apply so much as shall be
2-13 necessary to pay the principal of and interest on such obligation
2-14 then due and to continue withholding additional payments until an
2-15 amount sufficient to satisfy the amount then due has been met.
2-16 Sec. 271.093. FORM OF AGREEMENT; CONDITIONS. (a) The
2-17 agreement shall set forth the following:
2-18 (1) the proposed date of issuance of the obligation
2-19 and the name and series of the proposed obligation;
2-20 (2) each payment date with respect to the obligation
2-21 and the principal of and interest on the obligation coming due on
2-22 each such date; and
2-23 (3) the name and address of the financial institution
2-24 serving as paying agent for the obligation to whom any payment by
2-25 the comptroller should be made.
3-1 (b) This subchapter does not require or permit the state to
3-2 make an appropriation to any local government and shall not be
3-3 construed as creating an indebtedness of the state. Any agreement
3-4 made pursuant to this subchapter shall contain a statement to that
3-5 effect.
3-6 (c) The agreement terminates at the time the final payment
3-7 of the principal of and interest on the obligation is made or the
3-8 obligation is refunded.
3-9 Sec. 271.094. NOTICE, DEPOSIT OF DEBT SERVICE,
3-10 AUTHORIZATION, AND TRANSMITTAL. (a) If a local government enters
3-11 into an agreement with the board under Section 271.092, the board
3-12 on notification from the local government, the custodian bank, or
3-13 the paying agent for the local government that the local government
3-14 is unable or has failed to pay amounts as required by the agreement
3-15 or to pay principal of or interest on the obligation when due,
3-16 shall notify the comptroller, who shall withhold sufficient money
3-17 from any payment to which such local government may be entitled and
3-18 apply so much thereof as shall be necessary to pay the amounts then
3-19 due as provided in this section.
3-20 (b) The local government may in the agreement agree to make
3-21 monthly deposits of one-sixth of the semiannual debt service
3-22 requirement, or such other amount at such other times as specified
3-23 in the agreement, into an interest and sinking fund in a custodian
3-24 bank. If a bank agrees to serve as custodian for the interest and
3-25 sinking fund, it shall be the duty of the bank to notify the board
4-1 if the agreed upon amount of funds is not deposited each month or
4-2 other specified time on a timely basis as specified in the
4-3 agreement.
4-4 (c) On receiving notification and direction from the board,
4-5 the comptroller is authorized to withhold from any payment an
4-6 amount equal to the amount to have been deposited by the local
4-7 government pursuant to the agreement. The comptroller shall
4-8 continue to withhold payments until the required amounts have been
4-9 deposited in the interest and sinking fund with the custodian bank
4-10 or with the paying agent. If the required amounts have not been
4-11 deposited at the time interest on or principal of the obligation of
4-12 the local government is required to be deposited pursuant to the
4-13 agreement, the comptroller shall transmit, from payments withheld,
4-14 the appropriate amount to the custodian bank or to the paying
4-15 agent, as directed by the board.
4-16 (d) The board shall cause a copy of any notice given
4-17 pursuant to this section to be promptly given to the local
4-18 government.
4-19 Sec. 271.095. RIGHT TO PLEDGE PAYMENTS. (a) The local
4-20 government may pledge payments to secure any obligation only if the
4-21 amount of payments received by the local government in the fiscal
4-22 year of the state preceding the proposed issuance equals or exceeds
4-23 the amount required in each year to pay the sum of an amount equal
4-24 to two times (i) the maximum annual principal and interest
4-25 requirements for the obligation, and (ii) the maximum annual
5-1 principal and interest requirements on any additional obligation
5-2 for which payments have been pledged. The local government shall
5-3 provide evidence that these requirements are met.
5-4 (b) A pledge of payments pursuant to this subchapter is a
5-5 first priority for application of payments and the comptroller
5-6 shall apply such payments as provided by this subchapter prior to
5-7 applying such payments pursuant to any other authorization to
5-8 withhold or intercept such payments.
5-9 (c) While obligations which are the subject of an agreement
5-10 remain outstanding, the local government may not repeal the sales
5-11 tax or reduce the rate of the sales tax below the rate that would
5-12 provide the amount required by Subsection (a), except as provided
5-13 by this subsection. If at an election duly held in accordance with
5-14 law a majority of the qualified voters approve the repeal of the
5-15 sales tax, the local government shall, at the earliest practicable
5-16 time, refund or defease the obligations, and after such defeasance
5-17 or refunding the repeal shall become effective in accordance with
5-18 law. If the qualified voters vote to reduce the rate of the sales
5-19 tax, if such is provided for by law, below that which is required
5-20 to provide the amount required by Subsection (a), the local
5-21 government shall, at the earliest practicable time, refund or
5-22 defease the obligations, and after such defeasance or refunding the
5-23 reduction in rate shall become effective in accordance with law.
5-24 Sec. 271.096. ADMINISTRATION, RULES, FEES. The board shall
5-25 administer the implementation of this subchapter and may adopt
6-1 rules and set fees necessary for its administration.
6-2 SECTION 2. The importance of this legislation and the
6-3 crowded condition of the calendars in both houses create an
6-4 emergency and an imperative public necessity that the
6-5 constitutional rule requiring bills to be read on three several
6-6 days in each house be suspended, and this rule is hereby suspended,
6-7 and that this Act take effect and be in force from and after its
6-8 passage, and it is so enacted.