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By: Wentworth S.B. No. 1696
(In the Senate - Filed March 14, 2003; March 20, 2003, read
first time and referred to Committee on Intergovernmental
Relations; April 14, 2003, reported adversely, with favorable
Committee Substitute by the following vote: Yeas 5, Nays 0;
April 14, 2003, sent to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 1696 By: Wentworth
A BILL TO BE ENTITLED
AN ACT
relating to the issuance of obligations by certain municipalities
to pay unfunded liabilities to public pension funds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 4, Local Government Code, is
amended by adding Chapter 107 to read as follows:
CHAPTER 107. OBLIGATIONS FOR CERTAIN LIABILITIES TO PUBLIC
PENSION FUNDS OF CERTAIN MUNICIPALITIES
Sec. 107.001. APPLICABILITY. This chapter applies only to
a municipality that has a population of 100,000 or more.
Sec. 107.002. DEFINITIONS. In this chapter:
(1) "Obligation" includes a bond, certificate, note,
or book entry obligation.
(2) "Unfunded liability" means an unfunded, accrued
liability of a municipality to a public pension fund as determined
by actuarial analysis.
Sec. 107.003. DEFINITION OF "PUBLIC PENSION FUND." In this
chapter, "public pension fund":
(1) means a continuing, organized program or plan of
service retirement, disability retirement, or death benefits for
officers or employees of a municipality;
(2) includes a plan qualified under Section 401(a),
Internal Revenue Code of 1986, as amended; and
(3) does not include:
(A) a program that provides only workers'
compensation benefits;
(B) a program administered by the federal
government;
(C) a plan described by Section 401(d), Internal
Revenue Code of 1986, as amended;
(D) an individual retirement account consisting
of an annuity contract described by Section 403(b), Internal
Revenue Code of 1986, as amended;
(E) an individual retirement account as defined
by Section 408(a), Internal Revenue Code of 1986, as amended;
(F) an individual retirement annuity as defined
by Section 408(b), Internal Revenue Code of 1986, as amended;
(G) an eligible deferred compensation plan as
defined by Section 457(b), Internal Revenue Code of 1986, as
amended; or
(H) a program for which benefits are administered
by a life insurance company or for which the only funding agency is
a life insurance company.
Sec. 107.004. PENSION FUND OBLIGATIONS AUTHORIZED. (a) A
municipality may issue obligations to fund all or any part of an
unfunded liability.
(b) Before authorizing issuance and delivery of an
obligation under this section, the governing body of the
municipality must enter into a written agreement with the governing
body of the public retirement system that:
(1) has fiduciary responsibility for assets of the
public pension fund or public pension funds that are to receive the
net proceeds of the obligations to be issued; and
(2) has the duty to oversee the investment and
expenditure of the assets of the public pension fund.
(c) The written agreement must 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. The
municipality shall deposit the net proceeds of obligations issued
under Section 107.004 to the credit of the public pension fund. The
amount deposited under this section becomes part of the public
pension fund's assets.
Sec. 107.006. PAYMENT OF OBLIGATIONS. An obligation issued
under Section 107.004 may be made payable by the municipality from:
(1) the fund from which compensation is paid to its
officers and employees;
(2) its general fund; or
(3) taxes, revenues, both taxes and revenues, or any
other source or combination of sources of money that the
municipality may use under state law to secure or pay any kind of
bond or obligation.
Sec. 107.007. OBLIGATION AS REFINANCING. 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. Obligations
issued under Section 107.004 may be sold at private or public sale
and must mature not later than the 30th anniversary of the date of
issuance.
Sec. 107.009. ADDITIONAL AUTHORITY; CREDIT AGREEMENTS.
(a) In this section, "credit agreement" and "obligation" have the
meanings assigned by Section 1371.001, Government Code.
(b) The governing body of a municipality that issues
obligations under Section 107.004 may exercise any of the rights or
powers of the governing body of an issuer under Chapter 1371,
Government Code, and may enter into a credit agreement under that
chapter. 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. This chapter prevails
over any conflict between this chapter and:
(1) another law respecting the issuance of obligations
of a municipality; or
(2) a municipal home-rule charter.
SECTION 2. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2003.
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