HBA-JLV S.B. 1759 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1759 By: Armbrister Financial Institutions 5/5/2001 Engrossed BACKGROUND AND PURPOSE Current law regulating the issuance of public securities may be unclear as to whether public securities can be sold at public or private sales. Additionally, current law generally prohibits a municipality from pledging its sales and use tax to indebtedness. For larger municipalities, sales tax growth often has exceeded property tax valuation growth, and the ability to pledge sales and use taxes as a source of security for certificates of obligation could possibly afford municipalities a financing option that would be an economic alternative to indebtedness. Senate Bill 1759 authorizes public securities to be sold at public or private sales, authorizes certain municipalities to issue certificates of obligation paid from sales and use taxes, and makes other modifications regarding public securities. 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 Senate Bill 1759 amends the Government, Local Government, Tax, and Education codes and the Development Corporation Act of 1979 relating to the issuance, sale of, security, and payment for public securities. The bill provides that a public security may be issued to be sold at a public or private sale and under the terms determined by the governing body of the issuer (Sec. 1201.022, Government Code). The bill provides that certain actions taken at a meeting of the governing body of an issuer are effective immediately and a subsequent meeting is not required regarding a resolution, order, or ordinance calling an election to authorize the issuance and sale of public securities, or approve resources, revenue, or income of the issuer to be pledged as security for a public security; a resolution, order, or ordinance canvassing the results of an election; or a public security authorization (Sec. 1201.028, Government Code). The bill provides that a trust company or commercial bank that is required to maintain registration records of public securities, now does this at the discretion of the issuer (Sec. 1203.023, Government Code). The bill does not require an issuer of public securities to refund bonds in a situation in which the maximum amount by which the aggregate amount of payments to be made under the refunding bonds exceeds the aggregate amount of payments that would have been made under the terms of the obligations being refunded, provided that the governing body of the issuer determines that it is not practical (Sec. 1207.008, Government Code). The bill authorizes an issuer, in lieu of making a deposit with the comptroller, to deposit money in a sufficient amount to pay or redeem obligations directly with a trust company or commercial bank, provided it does not act as a depository for the issuer and is named in the proceedings of the issuer authorizing execution of the agreement (Sec. 1207.061, Government Code). The bill authorizes the governing body of an issuer to issue, sell, and deliver on certain obligations, to finance all or part of a payment owed or to be owed on the establishment of an interest rate lock, interest rate hedging agreement, another credit agreement, or the settlement or termination, at maturity or otherwise, of an interest rate lock, interest rate hedging agreement, or other credit agreement, whether the settlement of termination occurs at the option of the issuer or the other party to the credit agreement or by operation of the terms of the credit agreement (Sec. 1371.051, Government Code). The bill provides that a municipality with a population of more than 100,000, rather than 1.2 million, is not required to hold an election in order to sell an unencumbered natural gas system (Sec. 1502.055, Government Code). The bill amends the Education Code to set forth provisions that limit the purpose for which funds may be spent by the governing board (board) of an institution of higher education and that do not impair a board's ability to pledge and use all revenue funds under the board's control to secure and pay obligations of the board. The bill requires the board to fix each rental, rate, charge, or fee that the board has authority to fix in an amount determined to be necessary to pay or provide, for each activity or service, all associated capital costs, including debt service, operation and maintenance costs, including associated overhead costs of a system or institution, and prudent reserves. This provision does not authorize a board to impose a rental, rate, charge, or fee at an amount exceeding a limit imposed by another provision. For billing and reporting purposes, the bill requires the board to accumulate all mandatory fees or charges as a separate facilities and services charge (Sec. 55.16, Education Code). The bill provides that all acts and proceedings of each board, relating to the establishment and collection of rates, rentals, charges, and fees are validated as of the dates they occurred. This provision does not apply to an act of proceeding that on September 1, 2001 is involved in litigation, if the litigation ultimately results in the act or proceeding being held invalid by a final judgement of a court, or has been held invalid by a final judgement of a court (SECTION 14). EFFECTIVE DATE September 1, 2001.