By: Hinojosa S.B. No. 1632

(In the Senate - Filed March 8, 2013; March 20, 2013, read first time and referred to Committee on Transportation; May 10, 2013, reported adversely, with favorable Committee Substitute by the following vote: Yeas 5, Nays 3; May 10, 2013, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 1632 By: Campbell

A BILL TO BE ENTITLED

AN ACT

relating to the financing of transportation projects; authorizing fees.

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

SECTION 1. Section 222.071, Transportation Code, is amended to read as follows:

Sec. 222.071. DEFINITIONS. In this subchapter:

(1) "Bank" means the state infrastructure bank account.

(2) "Credit agreement" has the meaning assigned by Section 1371.001, Government Code ["Construction" has the meaning assigned by 23 U.S.C. Section 101].

(3) "Federal act" means Section 350 of the National Highway System Designation Act of 1995 (Pub. L. No. 104-59), relating to the state infrastructure bank pilot program or the state infrastructure bank program (23 U.S.C. Section 610), as applicable.

(4) "Financial assistance" means a direct loan or other assistance described by Section 222.074(a) ["Federal-aid highway" has the meaning assigned by 23 U.S.C. Section 101].

(5) "Qualified project" includes:

(A) a public roadway project [the construction of a federal-aid highway];

(B) a transportation project of a port authority or navigation district created or operating under Section 52, Article III, or Section 59, Article XVI, Texas Constitution;

(C) a freight rail project;

(D) an infrastructure project relating to an intracoastal waterway;

(E) [a transit project under 49 U.S.C. Sections 5307, 5309, and 5311; or

[(C)] for the expenditure of secondary funds from an account subject to Section 350 of the National Highway System Designation Act of 1995 (Pub. L. No. 104-59), a project eligible for assistance under Title 23 or Title 49, United States Code; or

(F) for the expenditure of money subject to the federal act, a public roadway or public transit project.

(6) "Secondary funds" includes:

(A) the payment or repayment of a loan or other assistance that is provided with money deposited to the credit of the bank; and

(B) investment income generated by secondary funds deposited to the credit of the bank.

SECTION 2. Section 222.072, Transportation Code, is amended by amending Subsection (b) and adding Subsection (c) to read as follows:

(b) The commission may deposit in the bank:

(1) federal [Federal] funds received by the state under the federal act;

(2) [,] matching state funds in an amount required by the federal [that] act;

(3) funds appropriated by the legislature for that purpose;

(4) a payment or repayment of principal and interest on a loan made under Section 222.074;

(5) proceeds from the sale of loans under Section 222.078;

(6) [,] proceeds from bonds issued under Section 222.075;

(7) [,] secondary funds;

(8) a gift or grant;

(9) fees paid to the bank; and

(10) investment earnings on the money on[, other state funds deposited into the bank by order of the commission, and other money received by the state that is eligible for] deposit in the bank [may be deposited into the bank and used only for the purposes described in this subchapter].

(c) Not later than January 31 of each year, the department shall prepare and file with the governor, the lieutenant governor, the Legislative Budget Board, and each standing committee of the legislature with primary responsibility over transportation and state finance a report that provides information on the operation of the bank, including:

(1) investments and returns on investments of money in the bank during the previous fiscal year;

(2) loans made from the bank during the previous fiscal year;

(3) other financial assistance provided from the bank during the previous fiscal year;

(4) the status of any defaults on repayment of loans or on repayment of debt service paid from the bank; and

(5) the status of any uncompleted qualified project for which a guarantee was provided from the bank during the previous fiscal year.

SECTION 3. Section 222.073, Transportation Code, is amended to read as follows:

Sec. 222.073. PURPOSES OF INFRASTRUCTURE BANK. The [Notwithstanding Section 222.001, the] commission shall use money deposited in the bank to:

(1) encourage public and private investment in transportation facilities both within and outside of the state highway system, including facilities that contribute to the multimodal and intermodal transportation capabilities of the state; [and]

(2) develop or expand transportation in the state; and

(3) develop financing techniques designed to:

(A) expand the availability of funding for transportation projects and to reduce direct state costs;

(B) maximize private and local participation in financing projects; and

(C) improve the efficiency of the state transportation system.

SECTION 4. Section 222.074, Transportation Code, is amended by amending Subsection (a) and adding Subsections (d), (e), and (f) to read as follows:

(a) To further a purpose described by Section 222.073, the commission may use money deposited to the credit of the bank to provide financial assistance to a public [or private] entity, including the department, for a qualified project to:

(1) extend credit by direct loan, including by purchasing a bond or other obligation of a public entity;

(2) provide credit enhancements;

(3) serve as a capital reserve for bond or debt instrument financing;

(4) subsidize interest rates;

(5) insure the issuance of a letter of credit or credit instrument;

(6) finance a purchase or lease agreement in connection with a transit project;

(7) provide security for bonds and other debt instruments; [or]

(8) provide capitalized interest for debt financing by a public entity;

(9) pay the cost of issuing a bond or other debt instrument; or

(10) for money subject to the federal act, provide methods of leveraging money that have been approved by the United States secretary of transportation and relate to the project for which the assistance is provided.

(d) The commission may require a public entity that requests financial assistance from the bank to pay an application fee and other reasonable amounts in connection with the request. The department shall deposit revenue collected under this subsection:

(1) to the credit of the state highway fund to reimburse the department for administrative costs relating to the bank that were originally charged to the state highway fund; or

(2) in the subaccount in the bank from which the financial assistance is requested.

(e) The department shall monitor the use of financial assistance provided to a public entity to ensure that the assistance is used for a purpose authorized by the financial assistance agreement. The department may audit a book or record of a public entity for that purpose.

(f) Financial assistance made available under this subchapter for the delivery of a qualified project by the department may not, taking into account any differing forms of the offered assistance, be in a larger amount or on more favorable terms than the financial assistance previously requested and offered for the delivery of that project by a public entity other than the department, if such a request and offer were made. The commission shall adopt rules to implement an analysis required to comply with this subsection.

SECTION 5. Section 222.0745, Transportation Code, is amended to read as follows:

Sec. 222.0745. INCURRENCE OF DEBT BY PUBLIC ENTITY. (a) A public entity in this state, including a municipality, county, district, authority, agency, department, board, or commission, that is authorized by law to construct, maintain, [or] finance, or refinance a qualified project, or a transportation corporation or local government corporation created under Chapter 431 and acting on behalf of a public entity, may:

(1) borrow money from the bank, including by direct loan or through another form of financial assistance; and

(2) enter into an agreement that relates to receiving financial assistance from the bank[, based on the credit of the public entity].

(b) Money received by a public entity under this subchapter [borrowed under this section] must be segregated from other funds under the control of the public entity and may only be used for purposes authorized by the financial assistance agreement [related to a qualified project].

(c) To provide for the payment or repayment of a loan or another form of financial assistance provided under this subchapter, a public entity may:

(1) pledge revenue or income from any available source;

(2) pledge, impose, or collect a tax that the entity is otherwise authorized to impose; or

(3) pledge any combination of revenue, income, or taxes.

(d) This section is wholly sufficient authority for a public entity to:

(1) borrow or otherwise obtain a form of financial assistance from the bank as authorized by this subchapter; and

(2) pledge revenue, income, or taxes or any combination of revenue, income, or taxes for the payment or repayment of a loan or another form of financial assistance from the bank.

(e) If under any constitutional limitation a public entity must obtain voter approval to impose a tax to secure the payment or repayment of any financial assistance provided under this subchapter, the public entity may call an election for that purpose.

(f) The authority granted by this section does not affect the ability of a public entity to incur debt using other statutorily authorized methods.

SECTION 6. Subsections (b), (f), (i), and (j), Section 222.075, Transportation Code, are amended to read as follows:

(b) Except as provided by Subsection (c), the commission may:

(1) issue revenue bonds or revenue refunding bonds under this section without complying with any other law applicable to the issuance of bonds; and

(2) enter into a credit agreement related to the bonds.

(f) The commission may require an entity [participants] to [make charges, levy taxes, or otherwise] provide for sufficient money to pay or repay financial assistance provided from the bank, including any [pay] acquired obligations.

(i) Before the commission issues revenue bonds or enters into a credit agreement under this section, the commission shall submit a record of the [All] proceedings of the commission that authorize [relating to] the issuance, execution, and delivery of the [revenue] bonds or credit agreement and any contract that provides revenue or security to pay the bonds or credit agreement [issued under this section shall be submitted] to the attorney general for review [examination]. If the attorney general finds that the proceedings authorizing the bonds or credit agreement and any bonds authorized by the proceedings conform to the requirements prescribed by the Texas Constitution and this subchapter [On determining that the revenue bonds have been authorized in accordance with law], the attorney general shall approve the proceedings and [revenue] bonds, and shall deliver to [the revenue bonds shall be registered by] the comptroller for registration a copy of the attorney general's legal opinion relating to the approval and a record of the proceedings. After approval by the attorney general, the bonds or credit agreement may be executed and delivered, exchanged, or refinanced in accordance with the authorization proceedings. After the approval and registration, the [revenue] bonds, credit agreement, or contract providing revenue or security included in or executed and delivered according to the authorization proceedings are incontestable in any court or other forum for any reason and are valid, [and] binding, and enforceable [obligations] in accordance with their terms for all purposes.

(j) The commission may use proceeds from the sale of revenue bonds to finance other funds or accounts relating to the bonds or credit agreement, including a debt service reserve fund, and to pay the cost of issuing the bonds. Any remaining [The] proceeds received from the sale of the [revenue] bonds shall be deposited in the bank and invested and used in the manner provided for other funds deposited under this subchapter.

SECTION 7. Section 222.076, Transportation Code, is amended to read as follows:

Sec. 222.076. SEPARATE SUBACCOUNTS. (a) The bank shall consist of at least two separate subaccounts, a highway subaccount and a transit subaccount. The commission may create additional subaccounts that are capitalized with federal funds or with a combination of federal funds and state funds.

(b) In addition to the subaccounts under Subsection (a), the commission shall [may] create one subaccount that is, and may create [or] more subaccounts that are, capitalized with state funds only. Subaccounts capitalized with state funds only are not subject to the federal act.

SECTION 8. Section 222.077, Transportation Code, is amended by amending Subsections (a) and (b) and adding Subsection (a-1) to read as follows:

(a) If a form of financial assistance [Any funds disbursed through the state infrastructure bank] must be paid or repaid, [on terms determined by] the commission shall determine the terms of the payment or repayment, including the interest rate to be charged, and enter into a financial assistance agreement with the public entity receiving the assistance specifying the terms of the payment or repayment. The terms must comply with the federal act except for terms applicable to funds deposited in a subaccount described by Section 222.076(b).

(a-1) For a tolled highway improvement project, the commission may require that revenue from the project be shared between an entity and the department.

(b) Notwithstanding any other law to the contrary:

(1) the payment or repayment of a loan or other assistance provided with money deposited to the credit of a subaccount in the bank, including all amounts received as a share of revenue from a tolled highway improvement project, shall be deposited in that subaccount; and

(2) investment income generated by money deposited to the credit of a subaccount in the bank shall be:

(A) credited to that subaccount, subject to any requirement imposed by a proceeding that authorizes bonds to be issued to provide money for deposit in the bank that is necessary to protect the tax-exempt status of interest payable on the bonds in accordance with applicable federal law;

(B) available for use in providing financial assistance under this subchapter; and

(C) invested as authorized by Chapter 2256, Government Code, but money in the bank subject to the federal act shall be invested in United States Treasury securities, [bank] deposits in financial institutions, or other financing instruments approved by the United States secretary of transportation to earn interest and enhance the financing of projects assisted by the bank, and proceeds from bonds deposited in the bank under Section 222.072 are subject to any limitations contained in a document that authorizes the issuance of the bonds.

SECTION 9. Subchapter D, Chapter 222, Transportation Code, is amended by adding Section 222.078 to read as follows:

Sec. 222.078. SALE OF LOANS. (a) In this section, "loan" means any financial assistance provided under this subchapter that must be repaid, including financial assistance repaid through revenue sharing.

(b) The commission may direct the department to sell, in accordance with this section, any loan made from money in the bank. The department by rule must establish a competitive bidding process for a sale conducted under this section.

(c) For a loan made to a public entity, the department shall provide to the public entity written notice of the department's intent to sell the loan. The notice must be provided not later than the 90th day preceding the date established under rules of the commission on which the process required for the sale under Subsection (b) begins.

(d) The department may not sell a loan made to a public entity if:

(1) prepayment of the principal of and accrued interest due on the loan is tendered under Subsection (f); or

(2) the public entity prohibits the sale under Subsection (g).

(e) The department may not sell a loan that was made to a public entity for a tolled highway improvement project before the later of:

(1) the date of the completion of the project's construction;

(2) the date the loan is completely funded; or

(3) the earlier of:

(A) the date the project's forecasted stabilization and ramp-up is achieved based on an investment grade traffic and revenue study; or

(B) the sixth anniversary of the date the project fully opened for tolled operations.

(f) The department must accept the prepayment of principal of and accrued interest due on a loan in accordance with the financial assistance agreement or, in the absence of prescribed terms in the financial assistance agreement regarding prepayment, on terms that the commission determines to be reasonable.

(g) If the terms of the financial assistance agreement prohibit a public entity from prepaying its loan at the time of a proposed sale of the loan under this section, the public entity may prohibit the sale of the loan, in which event the department and the public entity shall renegotiate the prepayment terms in the financial assistance agreement to allow for prepayment of the loan at the time of the proposed sale. The prohibition under this subsection terminates on the date an agreement on the renegotiated prepayment terms is executed.

(h) For any loan made to a public entity to be sold under this section, the commission may submit to the attorney general for review and approval the related financial assistance agreement together with the record of proceedings of the public entity relating to the agreement. For the purposes of Chapter 1202, Government Code, the financial assistance agreement is considered to be a public security. If the attorney general finds that the financial assistance agreement has been authorized to be issued in conformity with law, the attorney general shall approve the agreement and deliver to the comptroller a copy of the attorney general's legal opinion stating that approval and the record of proceedings. Following approval by the attorney general, the financial assistance agreement is incontestable in a court or other forum and is valid, binding, and enforceable according to its terms as provided by Chapter 1202, Government Code.

(i) As part of the sales agreement with the purchaser of a loan, the department may agree to perform the functions required to enforce the conditions and requirements stated in the loan, including enforcing the payment of debt service by the borrowing entity.

(j) The department shall deposit the proceeds of the sale of a loan under this section in the bank.

(k) The commission and department may exercise any powers necessary to carry out the authority granted by this section, including the authority to contract with any person to accomplish the purposes of this section.

(l) The state, the department, and the commission are not liable for the repayment of any loan sold under this section and neither may repay a loan sold under this section.

SECTION 10. 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, 2013.

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