| TO: | Honorable Tom Craddick, Speaker of the House, House of Representatives |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | HB1546 by McClendon (Relating to the administration and use of the Texas rail relocation and improvement fund and the issuance of obligations for financing the relocation, construction, reconstruction, acquisition, improvement, rehabilitation, and expansion of certain rail facilities.), As Passed 2nd House |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2006 | ($25,585,000) |
| 2007 | ($87,454,900) |
| 2008 | ($87,454,500) |
| 2009 | ($87,453,000) |
| 2010 | ($87,454,400) |
| Fiscal Year | Probable Revenue Gain/(Loss) from New Other from Texas Rail Relocation and Improvement Fund - Bond Proceeds |
Probable Savings/(Cost) from New Other from Texas Rail Relocation and Improvement Fund |
Probable Revenue Gain/(Loss) from New Other from Texas Rail Relocation and Improvement Fund |
Probable Savings/(Cost) from GENERAL REVENUE FUND 1 |
|---|---|---|---|---|
| 2006 | $989,000,000 | ($247,250,000) | $25,585,000 | ($25,585,000) |
| 2007 | $0 | ($247,250,000) | $87,454,900 | ($87,454,900) |
| 2008 | $0 | ($247,250,000) | $87,454,500 | ($87,454,500) |
| 2009 | $0 | ($247,250,000) | $87,453,000 | ($87,453,000) |
| 2010 | $0 | $0 | $87,454,400 | ($87,454,400) |
The provisions of the bill would amend the Transportation Code to authorize the Texas Transportation Commission (TTC) to issue and enter into credit agreements related to obligations in the name and on behalf of the state for financing the relocation, construction, reconstruction, acquisition, improvement, rehabilitation, and expansion of rail facilities. The provisions also allow funds to be used to provide a method of financing the construction of railroad underpasses and overpasses if the construction is part of the relocation of the rail facility. The provisions would pledge the full faith and credit of the state to the payment of obligations and credit agreements in the event that revenue and money for and on deposit in the fund would be insufficient to cover debt obligations. The provisions would establish authorizations, requirements, and limitations for issuing and aggregating obligations, investing, using, and administering the fund.
The provisions would not dedicate a specific amount to the Texas Rail Relocation and Improvement Fund (Fund), but would require that revenue dedicated or appropriated pursuant to the requirements of the Texas Constitution would be deposited to the fund. The bill would also require the Comptroller to hold and certify amounts within the fund. The bill would require that income received from the investment of money in the fund be deposited in the fund subject to any requirements imposed by proceedings authorizing obligations to protect the tax-exempt status of interest payable on the obligations under the Internal Revenue Code of 1986. The bill would prohibit the TTC from issuing obligations prior to the Texas Department of Transportation (TxDOT) developing a strategic plan that would outline how funds would be used and would benefit the state.
The provisions of the bill require that long-term obligations may not be issued unless the comptroller projects in the comptroller's certification that the amount of the money dedicated to the fund and required to deposit in the fund will be equal to at least 110 percent of the requirements to pay the principal of and interest on the proposed long-term obligations.
The provisions also allow TxDOT to purchase property with the revenue from the obligations issued for any transportation purposes. TxDOT may sell or lease property acquired under the provisions of the bill that is no longer needed with the revenue from a sale or lease to be deposited in the Fund.
For the purposes of this analysis, it is assumed that $1 billion in bonds would be issued in two $500 million issuances with the first occurring in February 2006 and the second in August 2006. It is also assumed that the cost of projects would occur over four years with debt service being paid by General Revenue. Any increase in the issuance of bonds would have a correlating cost of debt service to General Revenue.
It is assumed that an annual transfer would be made from the General Revenue Fund to the new Texas Rail Relocation and Improvement Fund for the purposes of making required debt payments for the bonds. It is assumed bonds totaling $1 billion would be issued for 20 years at an interest rate of 6 percent with semi-annual payment with the first occurring on August 31, 2006. Other assumptions include fees of $11 million for the cost of issuance and underwriting fees ($11 per $1,000 of bonds). It is estimated that the Texas Department of Transportation (TxDOT) would issue $500 million in bonds on February 1, 2006, and that the debt service required for the bonds would cost $25.6 million in fiscal year 2006 with the cost increasing to $87.5 million in fiscal year 2007.
It is assumed that TXDOT would develop the necessary strategic plan prior to the issuance of obligations and that the issuance of these obligations would impact the constitutional debt limit under Article III, Section 49-j of the Texas Constitution.
| Source Agencies: | 601 Department of Transportation, 302 Office of the Attorney General, 304 Comptroller of Public Accounts, 352 Bond Review Board
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| LBB Staff: | JOB, SR, MW, DE, KJG
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