C.S.H.B. 397 78(R)    BILL ANALYSIS

C.S.H.B. 397
Urban Affairs
         Committee Report (Substituted)


Chapter 271 of the Local Government Code is entitled Purchasing and
Contracting Authority of Municipalities, Counties, and Certain Other Local
Governments.  Among other provisions, chapter 271 contains the Public
Property Finance Act, provisions for competitive bidding on public works
contracts, cooperative purchasing, and other miscellaneous provisions.
Subchapter C of chapter 261 is entitled Certificate of Obligation Act.
This contains the legislation first enacted in 1971 for the issuance of
certificates of obligation ("COs") by cities and counties.  

Under current law, a municipality or county can issue certificates of
obligation in any amount without voter approval, although the statute has
since its enactment contained a provision requiring voter approval upon a
petition of five percent of the voters. These debt instruments were
originally intended to help local government meet short-term needs without
the cost or time needed to hold a bond election. In recent years, some
units of local government have abused their authority to issue
certificates of obligation and have taken on ever-increasing amount of

C.S.H.B. 397 lowers the petition threshold under which citizens can
require a public vote on the issuance of certificates of obligation, and
includes a requirement that the issuer publicize intent to issue. 


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


SECTION 1.Amends Section 271.049, Local Government Code, to require an
election prior to the issuance of certificates of obligation if a petition
is submitted to the municipal clerk or secretary, or the county clerk,
depending on which entity is the issuer, signed by a total number of
registered voters equal to at least two percent of the number of votes
cast for all candidates for governor in the last gubernatorial election
held in the county or municipality.  In addition, this section requires
notice by newspaper publication 30 days before issuance, rather than the
current 14 days; and requires the issuer to send press releases of intent
to issue to area television, radio, and newsprint media 30 days before

SECTION 2.Amends Section 271.0525(c), Local Government Code, to require an
election prior to the issuance of county refinancing certificates of
obligation if two percent of the qualified voters protest the issuance. 

SECTION 3.Act not retroactive.

SECTION 4. Effective date.


Upon passage, or, if the Act does not receive the necessary vote, the Act
takes effect September 1,  2003. 


C.S.H.B. 397 removes the original's $2 million ceiling that would trigger
an election regarding the issuance of certificates of obligation. In
addition, the substitute adds the requirement of press releases to area
media outlets and extends newspaper publication requirements to 30 days
before issuance. Modifies two percent petition requirement in original
from two percent of qualified voters to two percent of votes in the most
recent gubernatorial election. Changes petition requirement for a protest
of the issuance of refinancing certificates from five to two percent.