By: Birdwell S.B. No. 1281
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to assessments for water and energy improvements in
  certain municipalities and counties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  The heading to Chapter 399, Local Government
  Code, is amended to read as follows:
  CHAPTER 399.  MUNICIPAL AND COUNTY WATER AND ENERGY IMPROVEMENT
  PROPERTY ASSESSMENTS [REGIONS]
         SECTION 2.  Section 399.002, Local Government Code, is
  amended by adding Subdivisions (1-a) and (2-a) and amending
  Subdivision (2) to read as follows:
               (1-a)  "Office" means the state energy conservation
  office.
               (2)  "Program" means the [a] program established under
  this chapter.
               (2-a)  "Program administrator" means the third party
  selected by the office to administer the program.
         SECTION 3.  Chapter 399, Local Government Code, is amended
  by adding Sections 399.0023, 399.0025, 399.0027, and 399.0029 to
  read as follows:
         Sec. 399.0023.  RULES. The office shall adopt rules to
  administer the program.
         Sec. 399.0025.  PROGRAM ADMINISTRATOR. (a)  The office
  shall administer the program through a third-party administrator
  selected under this section.
         (b)  In selecting the program administrator, the office
  shall select the candidate that demonstrates:
               (1)  best practices in program design;
               (2)  compliance with applicable ethics requirements;
  and
               (3)  appropriate underwriting and technical standards.
         (c)  The program administrator shall oversee program
  elements, including implementing:
               (1)  guidelines;
               (2)  documentation, underwriting, and technical
  standards; and
               (3)  administrative protocols as described by Section
  399.0027.
         Sec. 399.0027.  ADMINISTRATION. (a)  The office shall
  review and either approve or request revision of administrative
  protocols developed under this section.
         (b)  The program administrator shall develop:
               (1)  a form contract between the local government and
  the property owner specifying the terms of:
                     (A)  assessment under the program; and
                     (B)  financing provided by a third party or the
  local government, as appropriate;
               (2)  if the proposed program provides for third-party
  financing, a form contract between the local government and the
  third party regarding the servicing of the debt through
  assessments; 
               (3)  a description of types of qualified projects that
  may be subject to contractual assessments;
               (4)  a method for ranking requests from property owners
  for financing through contractual assessments in priority order if
  requests appear likely to exceed the amount authorized for funding
  by a local government;
               (5)  a method for determining:
                     (A)  the interest rate and period during which
  contracting owners would pay an assessment; and
                     (B)  the maximum amount of an assessment;
               (6)  a method for ensuring that the period of the
  contractual assessment does not exceed the useful life of the
  qualified project that is the basis for the assessment;
               (7)  a description of the application process and
  eligibility requirements for financing qualified projects to be
  repaid through contractual assessments under the program;
               (8)  a method for ensuring that property owners
  requesting to participate in the program demonstrate the financial
  ability to fulfill financial obligations to be repaid through
  contractual assessments;
               (9)  the manner in which property will be assessed and
  assessments will be collected;
               (10)  the lender notice required by Section 399.010;
               (11)  the review required by Section 399.011;
               (12)  marketing and participant education services to
  be provided for the program;
               (13)  quality assurance and antifraud measures;
               (14)  procedures for collecting the proposed
  contractual assessments; and
               (15)  any other item necessary for the administration
  of the program or as directed by the office.
         Sec. 399.0029.  DEMONSTRATION OF FINANCIAL ABILITY. The
  method for ensuring a demonstration of financial ability under
  Section 399.0027(b)(8) must be based on appropriate underwriting
  factors, including:
               (1)  providing for verification that:
                     (A)  the property owner requesting to participate
  under the program:
                           (i)  is the legal owner of the benefited
  property;
                           (ii)  is current on mortgage and property
  tax payments; and
                           (iii)  is not insolvent or in bankruptcy
  proceedings; and
                     (B)  the title of the benefited property is not in
  dispute; and
               (2)  requiring an appropriate ratio of the amount of
  the assessment to the assessed value of the property.
         SECTION 4.  Section 399.003, Local Government Code, is
  amended to read as follows:
         Sec. 399.003.  EXERCISE OF POWERS BY LOCAL GOVERNMENT.
  (a)  In addition to the authority provided by Chapter 376 for
  municipalities, the governing body of a local government that
  participates in the [establishes a] program [in accordance with the
  requirements provided by Section 399.008] may exercise powers
  granted under the program [this chapter].
         (b)  Participation in the program [The establishment and
  operation of a program under this chapter] by a local government is
  a governmental function for all purposes.
         SECTION 5.  Section 399.004(a), Local Government Code, is
  amended to read as follows:
         (a)  An assessment under this chapter may be imposed to repay
  the financing of qualified projects on real property located in the
  territory of a local government participating in the program
  [region designated under this chapter]. Property located in a
  municipality's extraterritorial jurisdiction may be included in
  the municipality's territory for the purposes of participation in
  the program.
         SECTION 6.  Chapter 399, Local Government Code, is amended
  by adding Section 399.0045 to read as follows:
         Sec. 399.0045.  AUTHORIZED USER FEE. (a)  The program
  administrator may collect a user fee imposed on each contract
  entered into under the program.
         (b)  Fees collected under this section may be used only to
  pay the costs of administering the program.
         SECTION 7.  The heading to Section 399.006, Local Government
  Code, is amended to read as follows:
         Sec. 399.006.  LOCAL GOVERNMENT PARTICIPATION IN 
  [ESTABLISHMENT OF] PROGRAM.
         SECTION 8.  Sections 399.006(a), (b), and (e), Local
  Government Code, are amended to read as follows:
         (a)  The governing body of a local government may determine
  that it is convenient and advantageous to participate in
  [establish] a program under this chapter.
         (b)  An authorized representative of the local government
  that participates in the [establishes a] program may enter into a
  written contract with a record owner of real property in the
  territory of the local government [a region designated under this
  chapter] to impose an assessment to repay the owner's financing of a
  qualified project on the owner's property.  The financing to be
  repaid through assessments may be provided by a third party or, if
  authorized by the program, by the local government.
         (e)  The financing for which assessments are imposed may
  include:
               (1)  the cost of materials and labor necessary for
  installation or modification of a qualified improvement;
               (2)  permit fees;
               (3)  inspection fees;
               (4)  lender's fees;
               (5)  program application and administrative fees;
               (6)  project development and engineering fees;
               (7)  third-party review fees, including verification
  review fees, under Section 399.011; [and]
               (8)  a user fee authorized under Section 399.0045; and
               (9)  any other fees or costs that may be incurred by the
  property owner incident to the installation, modification, or
  improvement on a specific or pro rata basis, as determined by the
  office [local government].
         SECTION 9.  The heading to Section 399.008, Local Government
  Code, is amended to read as follows:
         Sec. 399.008.  PROCEDURE FOR PARTICIPATION IN
  [ESTABLISHMENT OF] PROGRAM.
         SECTION 10.  Section 399.008, Local Government Code, is
  amended by amending Subsections (a), (b), and (d) and adding
  Subsection (f) to read as follows:
         (a)  Except as provided by Subsection (f), to participate in
  the [To establish a] program [under this chapter], the governing
  body of a local government must [take the following actions in the
  following order:
               [(1)]  adopt a resolution [of intent] that includes:
               (1) [(A)]  a finding that[, if appropriate,] financing
  qualified projects through contractual assessments is a valid
  public purpose;
               (2) [(B)]  a statement that the local government
  intends to make contractual assessments to repay financing for
  qualified projects available to property owners;
               (3) [(C)]  a description of the types of qualified
  projects that may be subject to contractual assessments;
               (4) [(D)     a description of the boundaries of the
  region;
                     [(E)]  a description of any proposed arrangements
  for third-party financing to be available or any local government
  financing to be provided for qualified projects;
               (5) [(F)]  a description of local government debt
  servicing procedures if third-party financing will be provided and
  assessments will be collected to service a third-party debt;
               (6) [(G)]  a reference to the report on the proposed
  program prepared as provided by Section 399.009 and a statement
  identifying the location where the report is available for public
  inspection;
                     [(H) a statement of the time and place for a public
  hearing on the proposed program;] and
               (7) [(I)]  a statement identifying the appropriate
  representative of the local government and the appropriate
  assessor-collector for purposes of consulting regarding collecting
  the proposed contractual assessments imposed on the assessed
  property[;
               [(2)     hold a public hearing at which the public may
  comment on the proposed program, including the report required by
  Section 399.009; and
               [(3)     adopt a resolution establishing the program and
  the terms of the program, including:
                     [(A)     each item included in the report under
  Section 399.009; and
                     [(B)     a description of each aspect of the program
  that may be amended only after another public hearing is held].
         (b)  For purposes of Subsection (a)(1) [(a)(3)(A)], the
  resolution may incorporate the report required by Section 399.009 
  [or the amended version of the report], as appropriate, by
  reference.
         (d)  A local government may:
               (1)  hire and set the compensation of staff necessary
  to participate in the program [a program administrator and program
  staff]; or
               (2)  contract for professional services necessary to
  participate in the [administer a] program.
         (f)  A local government that established a program under this
  chapter before September 1, 2019, may participate in the program by
  passing a resolution stating that the local government is
  participating.  The resolution is not required to meet the
  requirements of Subsection (a) or to include the report described
  by Section 399.009.
         SECTION 11.  The heading to Section 399.009, Local
  Government Code, is amended to read as follows:
         Sec. 399.009.  REPORT REGARDING PROGRAM [ASSESSMENT].
         SECTION 12.  Sections 399.009(a) and (c), Local Government
  Code, are amended to read as follows:
         (a)  Before adopting a resolution under Section 399.008 to
  join the program, a local government must prepare a [The] report,
  consistent with guidelines adopted by the program administrator,
  that includes [for a proposed program required by Section 399.008
  must include]:
               (1)  the items described by Section 399.0027(b) [a map
  showing the boundaries of the proposed region];
               (2)  [a form contract between the local government and
  the property owner specifying the terms of:
                     [(A)  assessment under the program; and
                     [(B)     financing provided by a third party or the
  local government, as appropriate;
               [(3)     if the proposed program provides for third-party
  financing, a form contract between the local government and the
  third party regarding the servicing of the debt through
  assessments;
               [(4)     a description of types of qualified projects that
  may be subject to contractual assessments;
               [(5)]  a statement identifying a local government
  representative authorized to enter into written contracts on behalf
  of the local government;
               (3) [(6)]  a plan for ensuring sufficient capital for
  third-party financing and, if appropriate, raising capital for
  local government financing for qualified projects; and
               (4) [(7)]  if bonds will be issued to provide capital
  to finance qualified projects as part of the program as provided by
  Section 399.016,[:
                     [(A)]  a maximum aggregate annual dollar amount
  for financing through contractual assessments to be provided by the
  local government under the program[;
                     [(B)     a method for ranking requests from property
  owners for financing through contractual assessments in priority
  order if requests appear likely to exceed the authorization amount;
  and
                     [(C)  a method for determining:
                           [(i)     the interest rate and period during
  which contracting owners would pay an assessment; and
                           [(ii)  the maximum amount of an assessment;
               [(8)     a method for ensuring that the period of the
  contractual assessment does not exceed the useful life of the
  qualified project that is the basis for the assessment;
               [(9)     a description of the application process and
  eligibility requirements for financing qualified projects to be
  repaid through contractual assessments under the program;
               [(10)     a method as prescribed by Subsection (b) for
  ensuring that property owners requesting to participate in the
  program demonstrate the financial ability to fulfill financial
  obligations to be repaid through contractual assessments;
               [(11)     a statement explaining the manner in which
  property will be assessed and assessments will be collected;
               [(12)     a statement explaining the lender notice
  requirement provided by Section 399.010;
               [(13)     a statement explaining the review requirement
  provided by Section 399.011;
               [(14)     a description of marketing and participant
  education services to be provided for the program;
               [(15)     a description of quality assurance and antifraud
  measures to be instituted for the program; and
               [(16)     the procedures for collecting the proposed
  contractual assessments].
         (c)  The local government shall make the report available for
  public inspection[:
               [(1)]  on the local government's Internet website[; and
               [(2)     at the office of the representative designated to
  enter into written contracts on behalf of the local government
  under the program].
         SECTION 13.  Section 399.010, Local Government Code, is
  amended to read as follows:
         Sec. 399.010.  NOTICE TO MORTGAGE HOLDER REQUIRED FOR
  PARTICIPATION.  Before a local government may enter into a written
  contract with a record owner of real property to impose an
  assessment to repay the financing of a qualified project under this
  chapter:
               (1)  the holder of any mortgage lien on the property
  must be given written notice of the owner's intention to
  participate in the [a] program [under this chapter] on or before the
  30th day before the date the written contract for assessment
  between the owner and the local government is executed; and
               (2)  a written consent from the holder of the mortgage
  lien on the property must be obtained.
         SECTION 14.  Section 399.011(a), Local Government Code, is
  amended to read as follows:
         (a)  The [A] program [established under this chapter] must
  require for each proposed qualified project:
               (1)  a review of water or energy baseline conditions
  and the projected water or energy savings to establish the
  projected water or energy savings; and
               (2)  a verification that a proposed qualified
  improvement meets the requirements of a qualified project.
         SECTION 15.  Section 399.013(a), Local Government Code, is
  amended to read as follows:
         (a)  The program administrator shall file on behalf of a [A]
  local government that authorizes financing through contractual
  assessments under this chapter [shall file] written notice of each
  contractual assessment in the real property records of the county
  in which the property is located.
         SECTION 16.  Section 399.016(b), Local Government Code, is
  amended to read as follows:
         (b)  Bonds or notes issued under this section may not be
  general obligations of the local government.  The bonds or notes
  must be secured by one or more of the following as provided by the
  governing body of the local government in the resolution or
  ordinance approving the bonds or notes:
               (1)  payments of contractual assessments on benefited
  property [in one or more specified regions designated under this
  chapter];
               (2)  reserves established by the local government from
  grants, bonds, or net proceeds or other lawfully available funds;
               (3)  municipal bond insurance, lines of credit, public
  or private guaranties, standby bond purchase agreements,
  collateral assignments, mortgages, or any other available means of
  providing credit support or liquidity; and
               (4)  any other funds lawfully available for purposes
  consistent with this chapter.
         SECTION 17.  Section 399.018, Local Government Code, is
  amended to read as follows:
         Sec. 399.018.  PROHIBITED ACTS.  A local government that
  participates in the program [establishes a region under this
  chapter] may not:
               (1)  make the issuance of a permit, license, or other
  authorization from the local government to a person who owns
  property in the territory of the local government [region]
  contingent on the person entering into a written contract to repay
  the financing of a qualified project through contractual
  assessments under this chapter; or
               (2)  otherwise compel a person who owns property in the
  territory of the local government [region] to enter into a written
  contract to repay the financing of a qualified project through
  contractual assessments under this chapter.
         SECTION 18.  Section 399.019, Local Government Code, is
  amended to read as follows:
         Sec. 399.019.  NO PERSONAL LIABILITY.  The members of the
  governing body of a local government, other elected officials of a
  local government, employees of a local government, [and] board
  members, executives, employees, and employees of the office or the
  program administrator [and contractors of a third party who enter
  into a contract with a local government to provide administrative
  services for a program under this chapter] are not personally
  liable as a result of exercising any rights or responsibilities
  granted under this chapter.
         SECTION 19.  The following provisions of Chapter 399, Local
  Government Code, are repealed:
               (1)  Section 399.002(6);
               (2)  Section 399.007;
               (3)  Sections 399.008(c) and (e);
               (4)  Section 399.009(b); and
               (5)  Section 399.017.
         SECTION 20.  (a)  A local government that has established a
  program for assessments for water and energy improvements under
  Chapter 399, Local Government Code, as it existed before the
  effective date of this Act, may continue the program only as
  necessary for the fulfillment of contractual obligations.  A local
  government may not extend a contractual obligation in lieu of
  satisfying the requirements for participation in the program for
  assessments for water and energy improvements under Section
  399.006, Local Government Code, as amended by this Act.
         (b)  A contract entered into under Chapter 399, Local
  Government Code, as it existed before the effective date of this
  Act, continues in effect until the term specified in the contract is
  complete and is governed by the law in effect on the date the
  contract was executed, and the former law is continued for that
  purpose.
         (c)  The changes in law made by this Act do not invalidate or
  otherwise affect bonds issued under Chapter 399, Local Government
  Code, as it existed before the effective date of this Act, for the
  purpose of financing a contract made under that chapter.
         SECTION 21.  This Act takes effect September 1, 2019.