C.S.H.B. 2313 78(R)    BILL ANALYSIS


C.S.H.B. 2313
By: Krusee
County Affairs
Committee Report (Substituted)



BACKGROUND AND PURPOSE 
Chapter 1371, Government Code, was enacted in 1999 as a codification of
former Article 717q, Vernon's Texas Civil Statutes, as amended.  Chapter
1371 gives certain entities ("issuers") the authority to issue debt
obligations described by Chapter 1371.  Under the current provisions of
the chapter, the only counties permitted to issue obligations under
Chapter 1371 are counties with populations of 3.3 million or more or
counties operating under Chapter 334, Local Government Code (the "Brimer
Bill") relating to venue projects.  Harris County uses that law as the
statutory authority for its issuance of voter-approved debt in the form of
commercial paper notes. 
As proposed, the Bill would amend Chapter 1371 to widen the number of
counties permitted to issue obligations under Chapter 1371.  Specifically,
the Bill would permit counties with outstanding ad valorem tax backed debt
of at least $100 million to be issuers under Chapter 1371, as long as the
long-term debt of such counties is rated in one of the four highest rating
categories by a nationally recognized rating agency ("affected counties"). 
The practical effect of the Bill would be to increase the number of
counties that are issuers under Chapter 1371 to approximately twelve to
fourteen.  One of them, Williamson County, is interested in possible use
of the authority conferred by the Bill to establish a commercial paper
program similar to that of Harris County. 
As amended by the committee substitute, the Bill would also amend the
definition of "eligible project" under Chapter 1371 to include not only
projects financed by voter approved ad valorem tax obligations, but also
projects that may be financed by ad valorem tax obligations for which
state law does not otherwise require voter approval.  The primary example
of that type of obligation is certificates of obligation that under
current law may be issued by cities and counties pursuant to Subchapter C,
Chapter 271, Local Government Code.  Thus, as amended, the Bill would
permit certain cities and counties to finance a project under Chapter 1371
with non-voted ad valorem taxsupported obligations, including commercial
paper notes. 
In addition,  the Bill substitute would permit affected counties to use
commercial paper notes to finance not only voter-approved projects, but
also projects that may be financed without voter approval under current
law.  The amended Bill does not remove the requirement of voter approval
where voter approval is required under current law; rather, it simply
permits issuers to use commercial paper notes as a means of financing
projects that are already exempt from voter approval under current law.
The primary law under which counties may finance projects using ad valorem
taxes without voter approval is the Certificate of Obligation Act of 1971,
Subchapter C, Local Government Code.  Thus, the primary effect of the
amendment is to permit counties to finance projects permitted by the
Certificate of Obligation Act of 1971 using commercial paper notes. 

RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS
Section 1.Amends Sec. 1371.001(2) and (4) to change the definition
"eligible project" to include projects for which no voter approval is
required and to change the definition of "issuer" to include affected
counties. 
Section 2. Governs the effective date of the Bill.


EFFECTIVE DATE
This Act takes effect immediately if it receives two-thirds vote in each
house, or it takes effect September 1, 2003. 
 COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute addresses the "eligible project" and "issuer" language and
affected sections as well as clarifies indebtedness in relationship to the
issuance of obligations and so affected sections in order to make all
conforming changes.