SRC-PNG H.B. 347 76(R)BILL ANALYSIS


Senate Research CenterH.B. 347
76R14345 PEP-DBy: Averitt (Ogden)
Intergovernmental Relations
5/6/1999
Committee Report (Amended)


DIGEST 

Due to overcrowded conditions in local jails, certain municipalities and
counties in Texas financed new jail facilities (facilities) commencing in
the mid-1980's.  Commonly, the municipality or county contracted with a
nonprofit corporation that acted on behalf of the governmental unit,
thereby allowing the governmental unit to lease-purchase, or lease with an
option to purchase, the facilities from the nonprofit corporation which, in
turn, issued certificates of participation (certificates) representing a
"pass-through" of the lease payments of the governmental unit.  Proceeds
from the sale of these certificates were then applied to build the
facilities.  Typically, the obligation of the municipality or county to
make lease payments has been subject to annual appropriations made by the
governing body.  Additionally, most of the financing arrangements have
included a deed of trust and security agreement entered into by the
nonprofit corporation with a trustee to secure for the benefit of the
purchasers of the certificates a mortgage on the financed facility.  Many
of the certificates were initially sold at a high interest rate, relative
to current bond market rates.  Certain municipalities and counties desire
to refinance the facilities through issuance of refunding bonds but have
been unable to do so because there is an apparent lack of statutory
authorization for the refinancing of the facilities in this manner.  This
bill would authorize municipalities, counties, and nonprofit corporations
acting on their behalf to refinance facilities originally financed through
certificates of participation. 

PURPOSE

As proposed, H.B. 347 authorizes municipalities, counties, and nonprofit
corporations acting on their behalf to refinance facilities originally
financed through certificates of participation. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Sections 361.051(4) and (5), Local Government Code, to
redefine "lease obligation" and "obligations." 

SECTION 2. Amends Section 361.052, Local Government Code, to include
obligations incurred, rather than only issued, in connection with an
eligible project as one of the obligations which the governing body of an
entity is empowered and authorized to issue.  Provides that this subsection
is applicable regardless of when the obligations are due, or when title to
the project is transferred to the entity.  Authorizes revenues derived by
an entity from the operation of an eligible project to be pledged to secure
or pay the entity's obligations, in whole or in part.  Authorizes an entity
to apply certain provisions of Article 717q, V.T.C.S., or certain sections
of this code to the issuance of obligations and the execution of credit
agreements to satisfy the purposes of this subchapter, except that an
entity's obligations may be refunded by the issuance of bonds, that are
payable from a pledge of ad valorem tax receipts only if the issuance of
the bonds is approved by a majority of votes cast at an election conducted
as provided by the Election Code. Makes nonsubstantive changes. 

SECTION 3. Amends Section 361.053(d), Local Government Code, to authorize
the bonds to be secured additionally by a deed of trust granting a security
interest in an eligible project.   

 SECTION 4. Emergency clause.
  Effective date: upon passage.


SUMMARY OF COMMITTEE CHANGES

SECTION 2. 

Amends Section 361.052, Local Government Code, to authorize an entity to
apply certain provisions of Article 717q, V.T.C.S., or certain sections of
this code to the issuance of obligations and the execution of credit
agreements to satisfy the purposes of this subchapter, except that an
entity's obligations may be refunded by the issuance of bonds, that are
payable from a pledge of ad valorem tax receipts only if the issuance of
the bonds is approved by a majority of votes cast at an election conducted
as provided by the Election Code.