83R24769 JTS-F

By: Hinojosa S.B. No. 449

(Flynn, Hilderbran)

Substitute the following for S.B. No. 449: No.

A BILL TO BE ENTITLED

AN ACT

relating to the issuance of certain capital appreciation bonds by political subdivisions.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter B, Chapter 1201, Government Code, is amended by adding Section 1201.0245 to read as follows:

Sec. 1201.0245. CAPITAL APPRECIATION BONDS BY POLITICAL SUBDIVISIONS. (a) In this section, "capital appreciation bond" means a bond that accrues and compounds interest from its date of delivery, the interest on which by its terms is payable only upon maturity or prior redemption.

(b) A county, municipality, special district, school district, junior college district, or other political subdivision may not issue capital appreciation bonds that are secured by ad valorem taxes unless:

(1) the bonds have a scheduled maturity date that is not later than 20 years after the date of issuance;

(2) the governing body of the political subdivision has received a written estimate of the cost of the issuance, including:

(A) the amount of principal and interest to be paid until maturity;

(B) the amount of fees to be paid to outside vendors, including vendors who sell products to be financed by the bond issuance;

(C) the amount of fees to be paid to each financing team member; and

(D) the projected tax impact of the bonds and the assumptions on which the calculation of that impact is based;

(3) the governing body of the political subdivision has determined in writing whether any personal or financial relationship exists between the members of the governing body and any financial advisor, bond counsel, bond underwriter, or other professional associated with the bond issuance; and

(4) the governing body of the political subdivision posts prominently on the political subdivision's Internet website and enters in the minutes of the governing body:

(A) the total amount of the bonds to be voted on;

(B) the length of maturity of the bonds;

(C) the projects proposed to be financed with bond proceeds;

(D) the amount of the political subdivision's total bonded indebtedness at the time of the election, including the amount of principal and interest to be paid until maturity;

(E) the information received under Subdivision (2) and determined under Subdivision (3); and

(F) the political subdivision's total amount of outstanding bonded indebtedness, updated quarterly, including the amount of principal and interest to be paid until maturity.

(c) The total amount of capital appreciation bonds may not exceed 25 percent of the political subdivision's total outstanding bonded indebtedness at the time of the issuance, including the amount of principal and interest to be paid on the outstanding bonds until maturity.

(d) Except as provided by Subsection (e), a county, municipality, special district, school district, junior college district, or other political subdivision may not extend the maturity date of an issued capital appreciation bond, including through the issuance of refunding bonds that extend the maturity date.

(e) A school district may extend the maturity date of an issued capital appreciation bond only if:

(1) the maximum legally allowable tax rate for indebtedness has been adopted; and

(2) the attorney general certifies in writing that the solvency of the permanent school fund's bond guarantee program would be threatened without the extension.

(f) Subsection (b) does not apply to the issuance of refunding bonds under Chapter 1207.

(g) Subsection (b) does not apply to the issuance of capital appreciation bonds for the purpose of financing transportation projects.

SECTION 2. The change in law made by this Act does not affect the validity of capital appreciation bonds issued before the effective date of this Act.

SECTION 3. This Act takes effect September 1, 2013.