HBA-KDB H.B. 3357 77(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 3357
By: Kuempel
Financial Institutions
7/18/2001
Enrolled



BACKGROUND AND PURPOSE 

Under current law, the board of directors of a river authority engaged in
the distribution and sale of electric energy is authorized to create a
nonprofit corporation to act on behalf of the river authority as its
authority and instrumentality.  Such a nonprofit corporation has most of
the same powers as the creating river authority, including the issuance of
the bonds and public securities.  However, prior to the 77th Legislature,
it might have taken time for a newly formed nonprofit corporation to
develop credit ratings suitable for the issuance of bonds and other
securities.  If a creating river authority was authorized to guarantee the
obligations of the nonprofit corporation, the potential lower interest
rates and improved marketability might reduce costs to the public.  House
Bill 3357 authorizes a river authority to guarantee with its own assets
public securities and other obligations of a nonprofit corporation
established by the authority. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 3357 amends the Water Code to authorize a creating river
authority of a nonprofit corporation engaged in the distribution and sale
of electric energy to guarantee or otherwise provide credit support for any
public security or other obligation or contract of that corporation if the
board of directors of the river authority determines that the guarantee or
other credit agreement is beneficial to a public purpose of the river
authority and is for the public purpose of the development and
diversification of the economy of the state, the elimination of
unemployment or underemployment in the state, or the development or
expansion of commerce in the state.  The bill provides that a determination
by the board of directors of a river authority is conclusive.     

The bill authorizes a guarantee or other credit agreement to provide for
the guarantee of or other credit support for public securities or other
obligations or contracts of the corporation, all or a portion of which may
be authorized, executed, and delivered in the future.   Existing law
governing the examination and registration of public securities applies to
a guarantee or other credit agreement as if the guarantee or other credit
agreement were a public security.   

EFFECTIVE DATE

September 1, 2001.