BILL ANALYSIS


                                                    C.S.S.B. 1026
                                                        By: Madla
                                             Economic Development
                                                         04-27-95
                                   Committee Report (Substituted)
BACKGROUND

Current law permits any corporate surety authorized to do business
in Texas to execute public contracting bonds.  In recent years,
some sureties that issued bonds guaranteeing performance by the
original contractor to the owner, or payment by the original
contractor to the subcontractors, have failed or are in
receivership.  As a result, public entities are not receiving their
buildings, and many subcontractors have not been paid for their
work and have lost thousands of dollars.

In the past 25 years, there has not been a treasury listed (T-listed) surety company that has failed while it was a T-listed
company.  Some companies were dropped from the T-list two or three
years prior to failure.

PURPOSE

As proposed, C.S.S.B. 1026 authorizes certain bonds to be executed
only by a state-licensed surety company that holds a certificate of
authority from the U.S. secretary of the treasury to qualify as a
surety on obligations permitted or required under federal law.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 1, Article 7.19-1, V.T.I.C., by amending
Subsection (a) and by adding Subsections (c) and (d), as follows:

     (a) Makes a conforming change.
     
     (c) Authorizes a bond for an amount that exceeds $100,000 that
     is made, given, tendered, or filed under Chapter 53H, I, or J,
     Property Code, or Chapter 2253, Government Code, to be
     executed only by a surety company that is authorized and
     admitted to write surety bonds in this state and holds a
     certificate of authority from the U.S. secretary of the
     treasury to qualify as a surety on obligations permitted or
     required under federal law.  Requires a bond for an amount
     that exceeds $100,000 that is made, given, tendered, or filed
     under Chapter 53H or I, Property Code, to state that the
     surety is a current holder of a certificate of authority from
     the U.S. secretary of the treasury.  Authorizes a third party
     afforded protection under Section 53.174 or 53.204, Property
     Code, to conclusively rely on the statement and the record of
     the bond as provided in those sections.
     
     (d) Provides that Subsection (c) does not apply if the amount
     of the bond in excess of $100,000 is reinsured by an entity
     that is authorized and admitted in this state as a surety or
     reinsurer and holds a certificate of authority from the U.S.
     secretary of the treasury to qualify on obligations permitted
     or required under federal law.  Requires a bond for an amount
     that exceeds $100,000 that is made, given, tendered, or filed
     under Chapter 53H or I, Property Code, and that is reinsured
     to state that the reinsurer of the surety is a current holder
     of a certificate of authority from the U.S. secretary of the
     treasury.  Makes a conforming change.
     
     SECTION 2.     Amends Sections 53.172, 53.202, and 53.237, Property
Code, as follows:

     Sec.  53.172.  BOND REQUIREMENTS.  Requires the bond, among
     other requirements, to be executed by a corporate surety
     authorized to do business under state law and licensed by this
     state to execute the bond as surety, subject to Section 1(c),
     Article 7.19-1, V.T.I.C.
     
     Sec.  53.202.  BOND REQUIREMENTS.  Makes a conforming change.
     
     Sec.  53.237.  BOND REQUIREMENTS.  Makes a conforming change.
     
     SECTION 3.     Amends Section 2253.001(4), Government Code, to redefine
"public work contract."

SECTION 4. Amends Chapter 7, Insurance Code, by adding Article
7.03, as follows:

     Sec.  7.03.  DISCRIMINATION IN RATES OR ISSUANCE.  Prohibits
     a surety company authorized to do business in this state from
     discriminating on the basis of race, color, religion, national
     origin, or sex in the setting of rates or the issuance of a
     bond, undertaking, obligation, recognizance, or guarantee.
     
SECTION 5. Effective date: September 1, 1995.
           Makes application of this Act prospective.

SECTION 6. Emergency clause.