SRC-BWC S.B. 988 77(R)   BILL ANALYSIS


Senate Research Center   S.B. 988
2001/S0178/2 By: Duncan
State Affairs
3/19/2001
As Filed


DIGEST AND PURPOSE 

All issuers of voter-authorized debt benefit from having a valid choice
between the negotiated and competitive methods of sale.  This choice is
important because, under certain market conditions, utilizing the
negotiated method of sale can provide significant economic advantages.
Furthermore, during the 76th Legislature, Chapter 536 (S.B. 1091) amended
the Education Code permitting school districts to sell "new money"
voter-authorized debt via either public (competitive) or private
(negotiated) methods.  Currently, however, the Office of the Attorney
General (OAG) is not interpreting state law to treat underwriter's
compensation the same for both a negotiated and competitive sale.  In a
competitive sale, underwriter's compensation is not counted against
voterauthorized debt; however, in a negotiated sale the underwriter's
compensation is counted against voter authorized dept.  OAG treatment of
underwriter's compensation creates an economic inequity between the two
methods of sale effectively negating an issuer's choice.  As proposed, S.B.
988 pertains to the treatment of underwriter's compensation (production)
related to the sale of voter authorized debt via the negotiated method of
sale.  This bill makes it clear that underwriter's production does not
count against voter authorization in a negotiated sale just as it currently
is not counted against voter authorization for a competitive sale. 

RULEMAKING AUTHORITY

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

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 1201B, Government Code, by adding Section
1201.028, as follows:   

Sec. 1201.028.  COMMISSIONS NOT TO BE PAID FROM PRINCIPAL.  Provides that
in a public or private sale of public securities, the principal amount of
which is limited by law, by voted authorization, or otherwise, for purposes
of determining whether the principal amount of public securities that are
issued exceed the limit, amounts produced by the initial purchaser through
market pricing of the public securities when the public securities are
resold by the initial purchaser are not to be regarded as proceeds of the
issuer if such amounts constitute all or part of the compensation of the
initial purchaser.   

SECTION 2.  Effective date: September 1, 2001.
                       Makes application of this Act prospective.