BILL ANALYSIS C.S.H.B. 2839 By: Stiles 4-24-95 Committee Report (Substituted) BACKGROUND Chapter 56 of the Texas Water Code provides for the creation of drainage districts and their powers and duties. These districts are under and subject to limitations of either Article III, Section 52 of the Texas Constitution, or Article XVI, Section 59 of the Texas Constitution. Chapter 56 does not include a provision allowing drainage districts to borrow money, even for short term needs. Some drainage districts experience temporary shortfalls because they depend upon the receipt of tax revenue. PURPOSE To allow drainage districts to borrow money by issuing negotiable tax anticipation notes or bond anticipation notes if the district has an insufficient amount of money to provide for its needs. 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 the heading in Subchapter F, Chapter 56, Water Code. SECTION 2. Amends Subchapter F, Chapter 56, Water Code, by adding Section 56.213, Subsections (a)- (f). Section 56.213. (a) Provides for a drainage district to borrow money by issuing negotiable tax anticipation notes or bond anticipation notes if the district has insufficient amount of money available to meet its needs. (b) Provides that the district may issue tax anticipation notes or bond anticipation notes without providing notice or advertisement of the notice. (c) Provides for the maturity of the notes not to exceed one year from the date of issuance. (d) Provides that the district may issue tax anticipation notes for any purpose for which the district is authorized to levy taxes; provides that the notes must be secured with the proceeds of taxes to be levied by the district in the 12-month period following issuance of the note; additionally provides that the district may covenant with purchasers of the notes that the district will levy a tax sufficient to pay the principal of and interest on the notes and to pay the costs of collecting the tax. (e) Provides that the district may issue tax anticipation bonds for any purpose for which bonds of the district have been approved by the voters or to refund previously issued bond anticipation notes; provides that a district may covenant with purchasers of the notes that the district will use the proceeds of the sale of any district bonds in the process of issuance to refund the notes, and after doing so, shall use the bond proceeds to pay the principal, interest, or redemption price on the notes. (f) Provides that a district required to seek TNRCC approval of bonds must have an application for approval of a bond on file with the commission before issuing bond anticipation notes secured by the bond. SECTION 3. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The Original amends Subchapter D, Chapter 56, Water Code, and broadly provides for a drainage district to borrow money, not in excess of $250,000, to meet the temporary financial needs of the district. The district is additionally granted the ability to issue notes or other short-term obligations, other than bonds, that are not to mature more than 10 years from the date of issuance. The Substitute, amends Subchapter F, Chapter 56, Water Code, to provide for a drainage district to borrow money. The Substitute provides for a district to borrow money by issuing negotiable tax anticipation notes or bond anticipation notes if the district has an insufficient amount of money available to meet its needs; provides that the tax anticipation note or bond anticipation note must not mature beyond one year after the date of issuance; delineates other procedural requirements of and purposes for which a district may issue anticipated notes. SUMMARY OF COMMITTEE ACTION H.B.2839 was considered by the committee in a public hearing on April 24, 1995. No testimony was received. The committee considered a complete substitute for the bill. The substitute was adopted without objection. The bill was reported favorably as substituted, with the recommendation that it do pass and be printed, by a record vote of 8 ayes, 0 nays, 0 pnv, 1 absent.