S.B. 1696 78(R)    BILL ANALYSIS


S.B. 1696
By: Wentworth
Local Government Ways and Means
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

Texas municipalities are facing sizable shortfalls in their sponsored
pension plan systems. Some 
believe that granting legislative authority for Texas cities to issue
pension obligation bonds 
would provide public employees and their member systems more security
knowing that their 
system has all its financial needs met to guarantee promised pension into
the future. S.B.1696 issues obligations by certain municipalities to pay
unfunded liabilities to public pension 
funds.

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 Title 4A, Local Government Code, by adding Chapter 107,
as follows: 

CHAPTER 107. OBLIGATIONS FOR CERTAIN LIABILITIES TO PUBLIC PENSION
FUNDS OF CERTAIN MUNICIPALITIES

Sec. 107.001. APPLICABILITY. Provides that this chapter applies only to a
municipality that has a population of 100,000 or more.

Sec. 107.002. DEFINITIONS. Defines "obligation" and "unfunded liability."

Sec. 107.003. DEFINITION OF "PUBLIC PENSION FUND." Defines "public pension
fund."

Sec. 107.004. PENSION FUND OBLIGATIONS AUTHORIZED. (a) Authorizes a
municipality to issue obligations to fund all or any part of an unfunded
liability. 

 (b) Requires the governing body of the municipality, before authorizing
issuance 
 and delivery of an obligation under this section, to enter into certain
written 
 agreements with the governing body of the public retirement system.

 (c) Requires the written agreement to state the amount of the unfunded
liability 
 and the date or dates on which the public pension fund will accept the net
 proceeds of the obligations to be issued in payment of all or a portion
of the 
 unfunded liability.

Sec. 107.005. PROCEEDS OF OBLIGATIONS ISSUED. Requires the municipality to
deposit the net proceeds of obligations issued under Section 107.004 to
the credit of the 
public pension fund. Provides that the amount deposited under this section
becomes part 
of the public pension fund's assets.

Sec. 107.006. PAYMENT OF OBLIGATIONS. Authorizes an obligation issued under
Section 107.004 to be made payable by the municipality from certain funds.

 Sec. 107.007. OBLIGATION AS REFINANCING. Provides that an obligation
issued 
under Section 107.004 is a complete or partial refinancing of a commitment
of the 
municipality to fund its unfunded liability.

Sec. 107.008. SALE OF OBLIGATIONS; MATURITY. Authorizes obligations issued
under Section 107.004 to be sold at private or public sale and to mature
not later than the 
30th anniversary of the date of issuance.

Sec. 107.009. ADDITIONAL AUTHORITY; CREDIT AGREEMENTS. (a) Defines
"credit agreement" and "obligation."

 (b) Authorizes the governing body of a municipality that issues
obligations under 
 Section 107.004 to exercise any of the rights or powers of the governing
body of 
 an issuer under Chapter 1371, Government Code, and to enter into a credit
 agreement under that chapter. Provides that an obligation issued under
Section 
 107.004 is an obligation under Chapter 1371, Government Code, but is not
 required to be rated as required by that chapter.

Sec. 107.010. CHAPTER CONTROLLING. Provides that this chapter prevails over
any conflict between this chapter and another law respecting the issuance
of obligations 
of a municipality or a municipal home-rule charter.

SECTION 2. Effective date: upon passage or September 1, 2003.

EFFECTIVE DATE

Upon passage or September 1, 2003.