BILL ANALYSIS C.S.H.B. 2388 By: Brimer 03-23-95 Committee Report (Substituted) BACKGROUND Cities collect impact fees for utility system improvements, but because state law does not recognize the collection of those fees as specifically related to utility systems, as governed by Articles 1111 through 1118, Vernon's Texas Civil Statutes, cities are unable to include those fees as part of revenues under the city's bond ordinances. The result of this is to cause total available revenues to be reported at a level lower than actually available to the city for utility system improvements. This fact causes artificial pressure on regularly-assessed water and sewer system rates, in effect causing the rates to be subject to increases at a higher level than that which otherwise would be the result if the impact fees could be counted as a utility system review, the result could be to strengthen revenues, and thereby help to sustain or possibly lead to an increase in credit ratings on the city's utility system revenue bonds. PURPOSE The purpose of this legislation is to amend Section 395.012, Local Government Code, to allow a city to pledge as security and include impact fees as part of revenues used or to be used for the payment of principal and interest on bonds, notes, or other obligations relating to capital improvements other than roadway facilities. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 395.102, Local Government Code, by adding a new subsection (d) that allows cities to pledge impact fees as security against bonds, notes, and other obligations and to use impact fees as payment of principal and interest bonds, notes, or other obligations issued by a municipality to provide capital improvements other than roadway facilities. The impact fees can only be pledged to be expended on capital improvements identified in a capital improvement plan. SECTION 2. Effective Date. SECTION 3. Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute removes the first sentence of section 1 to clarify which other laws are being referred to in the bill and to clarify the use of impact fees. There are no other differences between the two versions. SUMMARY OF COMMITTEE ACTION The committee convened in a public hearing on March 27, 1995 to consider HB 2388. The committee considered a complete committee substitute for the bill which was adopted without objection. The following people testified in favor of the bill: Rep. Brimer; and Joe Paniagua. The motion to report the HB 2388 favorably as substituted, with the recommendation that it do pass and be printed, prevailed by a record vote of: 5 Ayes, 0 Nays, 0 PNV, 4 Absent.