LEGISLATIVE BUDGET BOARD
Austin, Texas
 
FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION
 
April 1, 2013

TO:
Honorable Juan Hinojosa, Chair, Senate Committee on Intergovernmental Relations
 
FROM:
Ursula Parks, Director, Legislative Budget Board
 
IN RE:
SB449 by Hinojosa (Relating to a prohibition on the issuance of capital appreciation bonds by local governments.), Committee Report 1st House, Substituted

No fiscal implication to the State is anticipated.

The bill would amend Chapter 1201 of the Government Code to prohibit a local governmental entity from issuing capital appreciation bonds (CABs) that are secured by ad valorem taxes, but would not be applicable to refunding bonds or CABs for transportation projects.
 
According to the Texas State Soil and Water Conservation Board, no fiscal impact to the state is anticipated.
 
According to the Texas Education Agency (TEA), the bill would have no direct fiscal implications for the Foundation School Program or the operations of the TEA.

Local Government Impact

Based on the Texas Bond Review Board’s (BRB) 2011 Local Government Annual Report, capital appreciation bonds (CABs) amounts issued by local governments in fiscal year 2011 totaled $466.0 million, of which: cities, towns, and villages issued $7.8 million; other special districts and authorities issued $158.2 million; water districts and authorities issued $3.8 million; and counties and health and hospital districts issued none.
 
The Texas Municipal League indicated that based on the BRB’s report, cities did not issue CABs very often in fiscal year 2011.
 
The Texas Association of Counties indicated no significant fiscal impact is anticipated.

According to the TEA, school districts would not be able to issue CABs secured by ad valorem taxes; however, they would be able to issue refunding bonds for cost savings. Because total interest costs on CABs can be higher than interest costs on current interest bonds, school districts could experience savings on the interest paid on bonds if they were prohibited from issuing CABs.



Source Agencies:
592 Soil and Water Conservation Board, 701 Central Education Agency
LBB Staff:
UP, KKR, TP, JBi