By Capelo                                             H.B. No. 1385
         77R4135 ESH-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to security for public securities issued by governmental
 1-3     entities.
 1-5           SECTION 1. Subtitle A, Title 9, Government Code, is amended
 1-6     by adding Chapter 1208 to read as follows:
 1-8           Sec. 1208.001.  DEFINITIONS. In this chapter:
 1-9                 (1)  "Credit agreement" means any agreement authorized
1-10     by a governing body of an issuer in connection with or related to
1-11     the authorization, issuance, sale, resale, security, exchange,
1-12     payment, purchase, remarketing, or redemption of a public security,
1-13     interest on a public security, or both. The term includes any
1-14     agreement relating to public securities that is defined or
1-15     described in state law as a "credit agreement" or a "bond
1-16     enhancement agreement."
1-17                 (2)  "Issuer" and "public security" have the meanings
1-18     assigned by Section 1202.001.
1-19                 (3)  "Security agreement" means a resolution, order,
1-20     ordinance, or agreement that creates a security interest with
1-21     respect to a public security or a credit agreement.
1-22                 (4)  "Security interest" means a pledge of, lien on, or
1-23     other interest in taxes, revenue, receipts, funds, or other
1-24     personal property or fixtures that secures payment or performance
 2-1     of public securities or a credit agreement.
 2-2           Sec. 1208.002.  PLEDGE OF SECURITY. (a)  A security interest
 2-3     created by an issuer by means of a security agreement:
 2-4                 (1)  is valid and effective according to the terms of
 2-5     the security agreement as to all property of the governmental unit
 2-6     stated to be covered by the security agreement, whether:
 2-7                       (A)  held at the time the security agreement is
 2-8     entered into or adopted; or
 2-9                       (B)  later acquired or received;
2-10                 (2)  except as provided by Subsection (c), is perfected
2-11     from the time the security agreement is entered into or adopted
2-12     continuously through the termination of the security interest, in
2-13     accordance with its terms, without physical delivery or transfer of
2-14     control of the property, filing of a document, or another act;
2-15                 (3)  ranks as to priority in order of the time of
2-16     perfection, except as otherwise provided by the security agreement;
2-17     and
2-18                 (4)  may be enforced as provided by the security
2-19     agreement or the law that authorizes the security agreement.
2-20           (b)  The rights of a lien creditor as defined by Section
2-21     9.102(a), Business & Commerce Code, are subordinate to a perfected
2-22     security interest described by Subsection (a).
2-23           (c)  A security interest in real property is perfected when
2-24     the security agreement, a memorandum of the security agreement, or
2-25     other instrument creating the security interest is duly recorded in
2-26     the real property records of the county in which the property is
2-27     located.
 3-1           (d)  This section does not:
 3-2                 (1)  create or exempt an issuer from a duty to submit
 3-3     public securities to the attorney general for approval and
 3-4     registration by the comptroller; or
 3-5                 (2)  authorize an issuer to enter into or adopt a
 3-6     security agreement.
 3-7           Sec. 1208.003.  PREEMPTION. This chapter is a statute
 3-8     described by Section 9.109(c)(2), Business & Commerce Code, and an
 3-9     issuer is considered to be a governmental unit for purposes of that
3-10     section.
3-11           SECTION 2.  Chapter 1208, Government Code, as added by this
3-12     Act, applies to any security interest as defined by Section
3-13     1208.001, Government Code, as added by this Act, regardless of the
3-14     date on which the security interest was created.
3-15           SECTION 3.  This Act takes effect July 1, 2001, if it
3-16     receives a vote of two-thirds of all the members elected to each
3-17     house, as provided by Section 39, Article III, Texas Constitution.
3-18     If this Act does not receive the vote necessary for immediate
3-19     effect, this Act takes effect September 1, 2001.