TO: | Honorable Eddie Lucio Jr., Chair, Senate Committee on Intergovernmental Relations |
FROM: | Ursula Parks, Director, Legislative Budget Board |
IN RE: | SB103 by Hinojosa (Relating to a prohibition on the issuance of certain capital appreciation bonds by local governments.), As Introduced |
Based on the Texas Bond Review Board's (BRB) 2014 Local Government Annual Report, capital appreciation bonds (CABs) amounts issued by local governments in fiscal year 2014 totaled $476.7 million. School Districts utilize CABs more frequently than other issuers of local debt, issuing 99% of total CABs issued in 2014.
The Texas Municipal League indicated that based on the BRB's report, cities did not issue CABs very often in fiscal year 2014.
The Texas Association of Counties indicated the bill would have limited fiscal impact to counties.
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 using CABs.
Source Agencies: | 592 Soil and Water Conservation Board, 701 Central Education Agency
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LBB Staff: | UP, KVe, SD, EK, ED, KKR, JBi
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