By: Alvarado S.B. No. 1918

(In the Senate - Filed March 7, 2019; March 19, 2019, read first time and referred to Committee on Intergovernmental Relations; April 15, 2019, reported adversely, with favorable Committee Substitute by the following vote: Yeas 7, Nays 0; April 15, 2019, sent to printer.) Click here to see the committee vote

COMMITTEE SUBSTITUTE FOR S.B. No. 1918 By: Alvarado

A BILL TO BE ENTITLED

AN ACT

relating to the creation of an urban land bank by certain municipalities; granting authority to issue bonds.

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

SECTION 1. Subtitle A, Title 12, Local Government Code, is amended by adding Chapter 379H to read as follows:

CHAPTER 379H. URBAN LAND BANK PROGRAM IN MUNICIPALITY WITH

POPULATION OF TWO MILLION OR MORE

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 379H.001. SHORT TITLE. This chapter may be cited as the Urban Land Bank Program for a Municipality with a Population of Two Million or More.

Sec. 379H.002. APPLICABILITY OF CHAPTER. This chapter applies only to a municipality with a population of two million or more.

Sec. 379H.003. DEFINITIONS. In this chapter:

(1) "Board" means the board of directors of a land bank.

(2) "Land bank" means an entity established or approved by the governing body of a municipality under this chapter.

(3) "Non-qualifying municipality" means a municipality to which this chapter does not apply and that is located in the same county in which a municipality to which this chapter does apply is predominantly located.

(4) "Real property" means land, land under water, and any structure, easement, air rights, franchise, or incorporeal hereditament, every estate, interest, and right therein, legal and equitable, including terms for years and liens by way of judgment, mortgage, or otherwise, and any fixture or improvement located thereon.

Sec. 379H.004. APPLICABILITY OF OTHER LAW. A land bank created under this chapter:

(1) is:

(A) a governmental unit, as defined by Section 101.001, Civil Practice and Remedies Code;

(B) a local government corporation, as defined by Section 431.003, Transportation Code; and

(C) a public nonprofit corporation that has and may exercise all of the rights, powers, privileges, authority, and functions given by the general laws of this state to nonprofit corporations in this state;

(2) is not:

(A) a program created or operating under Chapter 373 or 374; or

(B) a housing finance corporation created under Chapter 394; and

(3) must comply with the requirements of Chapters 551 and 552, Government Code.

Sec. 379H.005. PURPOSE. A land bank created under this chapter exists for the purpose of acquiring, managing, and disposing of vacant, abandoned, and deteriorated properties and returning those properties to productive uses, including affordable housing, workforce housing, public service housing, community-based economic development, food desert solutions, beautification and public art, parks and recreation, flood reduction and storm resiliency, and other uses necessary and appropriate to stabilize communities, improve living conditions, and protect against the displacement of residents of the municipality served by the land bank.

Sec. 379H.006. CONSTRUCTION. This chapter shall be construed liberally to carry out the intended purposes as a complete and independent authorization for the performance of each and every act and thing authorized by this chapter, and all powers granted shall be broadly interpreted to carry out the intended purposes and not as a limitation of powers. Except as otherwise provided by this chapter, a land bank, in the exercise of its powers and duties under this chapter and with respect to real property held by the land bank, has the same amount of control as if the land bank represented a private property owner, and the land bank is not subject to restrictions imposed by the charter, ordinances, or resolutions of a local unit of government.

SUBCHAPTER B. BOARD OF DIRECTORS

Sec. 379H.051. COMPOSITION OF BOARD. The size, membership, composition, and officers of the board of directors of a land bank, and methods of appointment to the board, must be established by the certificate of formation and the bylaws of the land bank.

Sec. 379H.052. ELIGIBILITY FOR MEMBERSHIP. (a) In this section, "public officer" means an individual who is elected to a municipal office.

(b) A municipal employee is eligible to serve as a member of the board, and notwithstanding any law to the contrary, a public officer is eligible to serve as a member of the board and acceptance of the appointment will neither terminate nor impair service in the public office.

Sec. 379H.053. MEETINGS; ATTENDANCE. (a) The board shall meet in regular session according to a schedule adopted by the board.

(b) The board may meet in a special session:

(1) convened by the president of the board in accordance with the bylaws of the board; or

(2) on written notice signed by a majority of the board members.

(c) The presence of a majority of the board's total membership constitutes a quorum for any regular or special session.

(d) The board shall establish rules related to the attendance and participation of members in regular or special meetings of the board. Rules adopted under this subsection may provide for the removal from office of a member for failure to comply with the rules if a majority of the remaining members of the board vote for the removal. Removal under this subsection takes effect the first day of the calendar month following the date of the vote. A person removed under this subsection is ineligible for reappointment to the board unless reappointment is confirmed unanimously by the board.

Sec. 379H.054. BOARD ACTIONS. (a) Subject to Subsection (b), actions of the board must be approved by the affirmative vote of a quorum of the board.

(b) Action on the following matters requires approval by a majority of the total membership of the board:

(1) adoption of bylaws or rules for conduct of the business of the land bank for which the board serves;

(2) hiring or firing of any employee or contractor of the land bank for which the board serves;

(3) incurring debt;

(4) adoption or amendment of the annual budget; and

(5) sale, lease, encumbrance, or alienation of or improvements to real or personal property with a value of more than $50,000.

(c) By majority vote, the board may delegate the hiring and firing of employees and contractors to a specific officer or committee of the land bank for which the board serves, under terms and to the extent specified by the board.

(d) A board member may not vote by proxy.

(e) A board member may request a recorded vote on any resolution or action of the land bank.

Sec. 379H.055. CONFLICT OF INTEREST. (a) A board member or employee of a land bank may not:

(1) acquire any direct or indirect interest in real property of the land bank, in any real property to be acquired by the land bank, or in any real property to be acquired from the land bank; or

(2) have any direct or indirect interest in any contract or proposed contract for materials or services to be furnished or used by the land bank.

(b) The provisions of the former Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) related to powers, standards of conduct, and interests in contracts apply to the directors and officers of the land bank.

(c) The board may adopt supplemental rules addressing potential conflicts of interest and ethical guidelines for board members and land bank employees.

Sec. 379H.056. COMPENSATION; REIMBURSEMENT. (a) Board members serve without compensation.

(b) The board may reimburse a member for expenses actually incurred in the performance of duties on behalf of the land bank.

SUBCHAPTER C. CREATION, OPERATION, AND DISSOLUTION OF LAND BANK

Sec. 379H.101. CREATION OF LAND BANK. (a) The governing body of a municipality may create a land bank by the adoption of an ordinance approving the land bank's certificate of formation and bylaws.

(b) Approval by the governing body of a municipality of the certificate of formation and bylaws of a corporation created under Chapter 431, Transportation Code, that will serve as a land bank under this chapter is sufficient to create a land bank under this section.

(c) A land bank's certificate of formation and bylaws approved under this section may not be changed or amended unless the governing body of the municipality for which the land bank was created approves the change or amendment by the adoption of an ordinance.

Sec. 379H.102. GENERAL POWERS OF LAND BANK. (a) A land bank has all powers necessary to carry out the purposes of this chapter, including the power to:

(1) adopt, amend, and repeal bylaws for the regulation of the land bank's affairs and the conduct of the land bank's business;

(2) sue and be sued in the land bank's own name and plead and be interpleaded in all civil actions, including actions to clear title to real property of the land bank;

(3) adopt and alter a seal;

(4) borrow funds necessary for the operation of the land bank from private lenders, municipalities, this state, and the federal government;

(5) adopt any policy for procurement that is recognized under state law and permitted for governmental entities, including a policy recognized under Chapters 252 and 271 of this code, Chapter 431, Transportation Code, and Chapters 2254 and 2269, Government Code;

(6) issue negotiable revenue bonds and notes under this chapter;

(7) procure insurance or guarantees from this state or the federal government of the payments of any debts or parts of debts incurred by the land bank and pay premiums in connection with those debts;

(8) enter into contracts and other agreements necessary, incidental, or convenient to the performance of the land bank's duties and the exercise of the land bank's powers, including governmental agreements under Subchapter D, Chapter 431, Transportation Code, or interlocal contracts under Section 791.011, Government Code, for the joint exercise of powers under this chapter;

(9) enter into contracts and other agreements with the municipality that created the land bank for the performance of services in accordance with Chapter 311, Tax Code;

(10) make and execute contracts and other instruments necessary or convenient to the exercise of the land bank's powers;

(11) procure insurance against losses in connection with the real property, assets, or activities of the land bank;

(12) invest money of the land bank, at the discretion of the board, in instruments, obligations, securities, or property determined proper by the board and name and use depositories for the land bank's money;

(13) enter into contracts for the management of, collection of rent from, or sale of real property of the land bank;

(14) design, develop, construct, demolish, reconstruct, rehabilitate, renovate, relocate, or otherwise improve real property of the land bank;

(15) set, charge, and collect rents, fees, and charges for the use of real property of the land bank and for services provided by the land bank;

(16) finance by loan, grant, lease, or otherwise refinance, construct, erect, assemble, purchase, acquire, own, repair, remodel, rehabilitate, modify, maintain, extend, improve, install, sell, equip, expand, add to, operate, or manage real property of the land bank and pay the costs of those activities from the proceeds of loans by persons, corporations, limited or general partnerships, and other entities;

(17) grant or acquire a license, easement, lease, as lessor or lessee, or option with respect to real property of the land bank;

(18) enter into partnerships, joint ventures, and other collaborative relationships with the municipality that created the land bank and other public and private entities for the ownership, management, development, and disposition of real property of the land bank;

(19) make application directly or indirectly to any federal, state, county, or municipal government or agency or to any other public or private source for loans, grants, guarantees, or other financial assistance in furtherance of the land bank's public purpose and accept and use the loans, grants, guarantees, or financial assistance on terms prescribed by that federal, state, county, or municipal government or agency or other source;

(20) as security for the repayment of any notes or other obligations of the land bank, pledge, mortgage, convey, assign, hypothecate, or otherwise encumber any property of the land bank, including real property, fixtures, personal property, revenue, and other funds, and execute any lease, trust indenture, trust agreement, agreement for the sale of the land bank's notes of other obligation, loan agreement, mortgage, security agreement, or other agreement necessary or desirable as determined by the land bank; and

(21) hold title to real property for purposes of establishing contracts with public and private nonprofit community land trusts, including long-term lease contracts.

(b) A land bank may not:

(1) exercise the power of eminent domain; or

(2) acquire real property outside the geographical boundaries of the municipality that created the land bank.

Sec. 379H.103. RESOLUTION OF COMPLEX TITLE QUESTIONS. A land bank may provide assistance and guidance to owners of real property for which there are complex, highly divided fractional interests in the real property because of multigenerational intestate distributions, unknown heirs, and other interested parties for whom accurate information cannot be ascertained.

Sec. 379H.104. INTERLOCAL CONTRACTS. (a) A land bank may enter into an interlocal contract under Section 791.011, Government Code, with:

(1) a municipality for a program created by the municipality under Chapter 373 or 374; or

(2) a non-qualifying municipality for the purpose of the land bank conducting land bank activities on behalf of and within the geographical boundaries of the non-qualifying municipality.

(b) Notwithstanding Section 379H.102(b)(2), a land bank may acquire real property within the geographical boundaries of a non-qualifying municipality with which it has entered into an agreement under Subsection (a).

Sec. 379H.105. RECORDS AND REPORTS. (a) A land bank shall keep accurate minutes of the land bank's meetings and shall keep accurate records and books of account that conform with generally accepted principles of accounting and that clearly reflect the income and expenses of the land bank and all transactions in relation to the land bank's real property.

(b) A land bank shall maintain and make available for public review and inspection:

(1) an inventory of all real property held by the land bank;

(2) a copy of the sale settlement statement for each real property sold or transferred to a third party; and

(3) a copy of the performance report filed under Subsection (e).

(c) Not later than the 90th day after the end of the fiscal year of the municipality that created the land bank, the land bank shall file with the municipality an annual audited financial statement prepared by a certified public accountant.

(d) Financial transactions of a land bank are subject to audit by the municipality that created the land bank.

(e) For purposes of evaluating the effectiveness of a land bank created under this chapter, a land bank shall submit an annual performance report to the municipality that created the land bank not later than November 1 of each year in which the land bank acquires or sells real property in accordance with this chapter.

Sec. 379H.106. STAFF. (a) A land bank may employ an executive director, counsel and legal staff, technical experts, and other agents and employees, permanent or temporary, that the land bank may require and may determine the qualifications and set the compensation and benefits of each of those persons.

(b) A land bank may enter into contracts and agreements with municipalities for staffing services to be provided to the land bank by those municipalities or for the land bank to provide such staffing services to those municipalities.

Sec. 379H.107. ADVISORY COMMITTEE AND NEIGHBORHOOD CONSULTATION. (a) A land bank shall create one or more advisory committees to consult with and advise the land bank on:

(1) properties within the municipality served by the land bank that are imposing the greatest harm on neighborhoods and communities in the municipality;

(2) neighborhood priorities for new uses of those properties; and

(3) the range of potential transferees of those properties.

(b) As appropriate to the location of the real property of the land bank, advisory committee membership and neighborhood consultations shall include formal and informal neighborhood-specific community associations, residents' associations, faith communities, community development corporations, and anchor institutions.

Sec. 379H.108. DISSOLUTION OF LAND BANK. (a) A land bank may be dissolved not earlier than the 60th day after the date an affirmative resolution to dissolve the land bank is approved by two-thirds of the membership of the board and confirmed by resolution of the municipality that created the land bank.

(b) Not less than 60 days before the consideration of a resolution of dissolution by the board, the board shall:

(1) provide to the governing body of the municipality that created the land bank written notice of the board's intent to vote on a resolution for dissolution of the land bank;

(2) publish the notice in a local newspaper of general circulation; and

(3) send the notice by certified mail to the trustee of any outstanding bonds of the land bank.

(c) On dissolution of the land bank, all real property, personal property, and other assets and obligations of the land bank become the assets and obligations of the municipality that created the land bank.

SUBCHAPTER D. ACQUISITION AND DISPOSITION OF PROPERTY

Sec. 379H.151. TAX EXEMPT STATUS OF LAND BANK PROPERTY. The real property of a land bank, including real property held by a land bank under a long-term lease contract with a community land trust, and the land bank's income and operations are exempt as public property used for public purposes from all license fees, recording fees, and all other taxes imposed by this state or by political subdivisions of this state.

Sec. 379H.152. TITLE HELD BY LAND BANK. All real property acquired by a land bank must be held in the name of the land bank.

Sec. 379H.153. QUIET TITLE ACTIONS. (a) A land bank may file an action to quiet title as to any real property in which the land bank has an interest. For purposes of a quiet title action, the land bank is considered to be the holder of sufficient legal and equitable interests and possessory rights to qualify the land bank as an adequate complainant in the action.

(b) Before filing an action to quiet title, the land bank shall conduct an examination of title to determine the identity of all persons and entities possessing a claim or interest in or to the real property. Service of the complaint to quiet title shall be provided to the interested parties by the following methods:

(1) by first class mail to an identity and address as reasonably ascertainable by an inspection of public records;

(2) in the case of occupied real property, by registered or certified mail addressed to "occupant";

(3) by posting a copy of the notice on the real property;

(4) by publication in a newspaper of general circulation in the municipality in which the property is located; and

(5) by another method the court may order.

(c) As part of the complaint to quiet title, a land bank shall file an affidavit identifying all parties potentially having an interest in the real property and the form of notice provided.

(d) A court hearing an action under this section shall:

(1) schedule a hearing on the complaint not later than the 90th day after the date of the filing of the affidavit under Subsection (c); and

(2) issue a final judgment not later than the 120th day after the date of the filing of the complaint for all matters on which an answer was not filed by an interested party.

(e) A land bank may join in a single complaint to quiet title for one or more parcels of real property.

Sec. 379H.154. ACQUISITION OF PROPERTY GENERALLY. (a) A land bank may acquire real property by gift, devise, transfer, exchange, foreclosure, purchase, purchase contracts, lease purchase agreements, installment sales contracts, land contracts, or transfers from a municipality on terms as agreed by the land bank and the municipality, or through any other means on terms and in a manner the land bank considers appropriate.

(b) Notwithstanding any other law to the contrary, a municipality served by a land bank or a non-qualifying municipality that has entered into an interlocal contract with a land bank under Section 379H.104 may transfer to the land bank real property of the municipality or non-qualifying municipality on terms and according to procedures determined by the municipality or non-qualifying municipality.

(c) A land bank may acquire real property from this state, the municipality served by the land bank, the county in which that municipality is located, a governmental entity within the county, the federal government, or an agency or department of the federal government.

(d) A land bank shall maintain all of its real property in accordance with the laws and ordinances of the jurisdiction in which the real property is located.

Sec. 379H.155. ACQUISITION OF FORECLOSED OR SEIZED PROPERTY. (a) In this section, "taxing unit" has the meaning assigned by Section 1.04, Tax Code.

(b) A land bank may submit a written bid to acquire real property at a tax sale conducted in accordance with Section 34.01, Tax Code. The bid:

(1) must be in an amount not less than the amount calculated under Section 34.01(b), Tax Code; and

(2) may be submitted in writing in advance of the auction or tendered in person at the auction.

(c) If the bid submitted under Subsection (b) is the highest bid received at the sale, the land bank:

(1) shall:

(A) pay in cash the amount of the costs and expenses as described by Section 33.48, Tax Code, and any penalties described by Section 33.07 or 33.08, Tax Code; or

(B) remit payment of the amounts described by Paragraph (A) to the selling officer by check or electronic funds transfer not later than the seventh calendar day after the date of the auction; and

(2) is entitled to credit bid that portion of the bid amount consisting of the amount of the taxes, penalties, other than penalties described by Sections 33.07 and 33.08, Tax Code, and interest set forth in the judgment.

(d) A taxing unit that is a party to a judgment of foreclosure for property sold at auction may request that the selling officer bid off the property to the taxing unit in the manner provided by Section 34.01(j), Tax Code, and, if the request is granted, the transfer to the taxing unit prevails over a bid by the land bank if the land bank's bid is the only bid sufficient to satisfy the minimum bid described by Section 34.01(j), Tax Code.

(e) The aggregate amount of all credit bids in a calendar year shall be considered satisfied by the aggregate expenditure in that calendar year of an amount equal to or greater than the credit bid amount, which expenditures are attributable directly and indirectly to maintenance, rehabilitation, construction, demolition, and remediation activities. As to any specific tract of property acquired by the credit bid and transferred by a land bank to a public entity described by Section 379H.158(a), the credit bid shall be considered satisfied by that transfer.

(f) A land bank may submit a written request to a taxing unit at any time for the commencement of tax foreclosure proceedings for delinquent taxes on real property, other than property legally owned and occupied. A land bank may not submit a written request to a taxing unit under this subsection for legally occupied residential real property unless the property is five or more years delinquent.

(g) A request submitted under Subsection (f) must include a commitment to tender a bid in the amount specified under Subsection (b). On receipt of the written request, the taxing unit, or the governmental office acting on behalf of the taxing unit, shall commence enforcement proceedings in accordance with Section 33.41, Tax Code.

(h) If there is no private third party bid in an amount more than the bid of the land bank, the real property must be sold to the land bank.

(i) A sale to a land bank under this section is not a sale to a taxing unit under Section 34.01(j) or (p) or 34.21, Tax Code.

(j) A land bank may bid an amount higher than the amount calculated under Section 34.01(b), Tax Code, and if that higher bid amount is the highest successful bid, the land bank shall pay the full amount of the bid in cash.

(k) The deed to a land bank vests good and perfect title in the land bank to the right, title, and interest owned by the defendants included in the foreclosure judgment, including the defendants' right to the use and possession of the property, subject only to the defendants' right of redemption, the terms of a recorded restrictive covenant running with the land that was recorded before January 1 of the year in which the tax lien on the property arose, a recorded lien that arose under that restrictive covenant that was not extinguished by the judgment foreclosing the tax lien, and each easement of record as of the date of the sale that was recorded before January 1 of the year the tax lien arose.

(l) A sale of real property to a land bank under this section:

(1) extinguishes each lien securing payment of the delinquent taxes, penalties, and interest against the property and included in the judgment; and

(2) does not affect the personal liability of any person for those taxes, penalties, and interest included in the judgment that are not satisfied from the proceeds of the sale.

(m) A municipality, and any taxing unit levying property taxes within the geographical jurisdiction of the municipality, may convey tax foreclosed real property owned by the municipality or the taxing unit to the land bank on terms and for an amount of consideration determined by the transferor and the land bank.

(n) A bid submitted by a land bank in accordance with this section is considered a bid for the amount calculated under Section 34.01(b), Tax Code, and must be received in accordance with Section 34.01(j), Tax Code.

Sec. 379H.156. REDEMPTION BY OWNER OF FORECLOSED PROPERTY. (a) The owner of real property sold to a land bank under Section 379H.155 may redeem the property in the manner prescribed for owners of real property sold at a tax sale to a purchaser other than a taxing unit under Section 34.21, Tax Code.

(b) The price to be paid by the owner of real property sold to a land bank under this section to redeem the property shall be in the amounts set forth in Sections 34.21(a) and (e), Tax Code. For the purposes of calculating the price, the bid paid by the land bank shall be the aggregate amount of the land bank's bid as described by Section 379H.155(b).

(c) If the owner of real property sold to a land bank under Section 379H.155 redeems the property by paying to the land bank the full amount required to redeem as set forth in Sections 34.21(a) and (e), Tax Code, the land bank shall:

(1) retain an amount equal to the amount paid in cash by the land bank in accordance with Section 379H.155;

(2) retain any redemption premium and any reasonable costs the land bank may have expended on maintenance or environmental remediation of the property being redeemed; and

(3) remit to the county assessor-collector any remaining amounts to be distributed among the taxing units that were parties to the judgment of foreclosure in an amount equal to the proportion of each taxing unit's taxes, penalties, and interest due in accordance with the judgment of foreclosure.

Sec. 379H.157. DISPOSITION OF PROPERTY GENERALLY. (a) A land bank may convey, exchange, sell, transfer, lease as lessor, grant, release and demise, pledge, or hypothecate any interest in, on, or to real property of the land bank.

(b) A municipality may, in the ordinance creating a land bank, require that a particular form of disposition of real property of the land bank, or any disposition of real property located within a specified jurisdiction of the municipality, be subject to specified voting and approval requirements of the board. Unless restricted under this subsection, the board may delegate to officers and employees the authority to enter into and execute agreements, instruments of conveyance, and all other related documents pertaining to the conveyance of real property by the land bank.

(c) A land bank shall determine the terms, conditions, form, and substance of consideration necessary and appropriate to convey, exchange, sell, transfer, lease as lessor, grant, or mortgage as mortgagor any interest in, on, or to real property of the land bank. Consideration may take the form of monetary payments and secured financial obligations, covenants, and conditions related to the present and future use of the property, deed covenants and limitations, contractual commitments of the transferee, mortgage financing, defeasible fees, and other forms of consideration as determined by the board to be in the best interests of the land bank. The board shall determine and state in the land bank's policies and procedures the general terms for consideration to be received by the land bank for the transfer of real property of the land bank.

(d) The board may authorize in the board's policies governing the disposition of land bank property a program for the disposition of land bank property to owners of contiguous properties.

(e) A municipality may recommend that a land bank created by the municipality, and the land bank may in the land bank's own policies and procedures, establish a hierarchical ranking of priorities for the use of real property conveyed by the land bank, including use for:

(1) purely public spaces and places;

(2) flood reduction, storm water retention and drainage, and storm resiliency;

(3) affordable housing, workforce housing, or public service housing;

(4) community-based economic development, including retail, commercial, and industrial activities;

(5) food desert solutions;

(6) beautification and public art, parks, and recreation;

(7) conservation areas; and

(8) community land trusts or other public entities.

Sec. 379H.158. DISPOSITION OF PROPERTY FOR FLOOD CONTROL AND STORM WATER DRAINAGE AND PLANNING. (a) A land bank may convey to a public entity such as a flood control district or a municipal parks and recreation department real property held by the land bank:

(1) for which the highest and best use is flood control or storm water retention or drainage; and

(2) that, as a result of housing and building code restrictions, flood plain elevations, other local, state, or federal laws, or public or private agreements, conditions, and limitations, is no longer capable of being developed or redeveloped.

(b) The transfer of real property by a land bank under this section may be:

(1) by grant, deed lease, or other conveyance and may include additional limitations, restrictions, and conditions determined by the land bank; and

(2) for nominal consideration, for consideration consisting of contractual commitments, for an exchange of real properties, or for other consideration determined by the land bank.

Sec. 379H.159. AFFORDABLE HOUSING REQUIREMENT. A land bank created under this chapter shall adopt a policy requiring not less than 70 percent of real property conveyed for residential purposes to the land bank be deed restricted for housing that is affordable to households with an income of not greater than 80 percent of the area median family income, adjusted for household size, for the municipality, as determined annually by the United States Department of Housing and Urban Development, unless otherwise required by:

(1) the governing body of the municipality for which the land bank is created;

(2) a source of funding; or

(3) a transferor of an interest in the real property.

SUBCHAPTER E. FINANCING OF LAND BANK OPERATIONS

Sec. 379H.201. GENERAL FINANCING. (a) A land bank may receive funding through grants and loans from the municipality that created the land bank, other municipalities, this state, the federal government, and other public or private sources.

(b) A land bank may receive and retain payments for services rendered, for rents and leasehold payments received, for consideration for disposition of real and personal property, for proceeds of insurance coverage for losses incurred, for income from investments, and for any other asset or activity permitted under this chapter.

Sec. 379H.202. SALE OF LAND BANK PROPERTY. At the time a land bank sells or otherwise disposes of real property, the proceeds from the sale, if any, shall be allocated to operations and expenses of the land bank.

Sec. 379H.203. TAX PENALTY FINANCING. The governing authority of the municipality that created the land bank, and a taxing unit within the geographical boundaries of the municipality, may increase the amount of the penalty imposed for the nonpayment of real property taxes of the municipality levied within that jurisdiction under Section 33.01, Tax Code, by increasing the penalty amount on delinquent taxes on July 1, as described by Section 33.01(a), Tax Code, from 12 percent to 14 percent. The supplemental penalty authorized by this subsection applies only to properties not owned and occupied as a residence homestead as defined by Section 11.13(j)(1), Tax Code. If the supplemental penalty is authorized and collected, all such supplemental revenue must be transferred to the land bank.

Sec. 379H.204. COLLECTION OF TAXES ON PROPERTY CONVEYED BY LAND BANK. Not more than 75 percent of the real property taxes the municipality that created the land bank collected on real property, excluding any school district or county ad valorem tax, conveyed by a land bank under the laws of this state shall be remitted to the land bank. The real property taxes of any other taxing unit, as to real property of the land bank, may also be allocated to the land bank in a similar manner under an interlocal agreement between the other taxing unit and the land bank. The specific percentage of those taxes to be remitted shall be established by ordinance, resolution, or interlocal cooperation agreement of the land bank. The allocation of property tax revenue shall begin with the first taxable year following the date of conveyance and shall continue for a period of five years. The funds shall be remitted to the land bank in accordance with the administrative procedures established by the assessor-collector of the county in which the land bank is located. The allocation of property tax revenue may not occur if those taxes have been previously allocated to a tax increment reinvestment zone, or to secure a debt of the municipality or other taxing unit, unless the municipality or other taxing unit enters into an agreement with the land bank for the remittance of those funds to the land bank. Any property tax revenue allocated to the land bank under this subsection shall be excluded from the calculation of ad valorem tax revenue under the municipality's charter.

Sec. 379H.205. ISSUANCE OF BONDS. (a) A land bank may issue bonds for the land bank's purposes. The principal and interest of bonds issued under this section are payable from the land bank's general revenue. Any bonds issued under this section may be secured by a pledge of any revenue, including grants or contributions from this state, the federal government, or any agency or instrumentality of this state or the federal government, or by a mortgage of any real property of the land bank.

(b) Bonds issued by a land bank are negotiable instruments under the law.

(c) Bonds of a land bank issued under this section and the income from those bonds shall at all times be free from taxation for state or local purposes under any provision of state law.

(d) Bonds issued by a land bank must be authorized by resolution of the board and shall be limited obligations of the land bank. A land bank may not issue bonds unless authorized by the municipality for which the land bank is created.

(e) The principal and interest, costs of issuance, and other costs incidental to bonds issued under this section shall be payable solely from the income and revenue derived from the sale, lease, or other disposition of the assets of the land bank.

(f) In the discretion of the land bank, the bonds may be additionally secured by mortgage or other security device covering all or part of the project from which the revenue pledged may be derived.

(g) Any refunding bonds issued shall be payable from any source described by this section or from the investment of any of the proceeds of the refunding bonds, may not constitute an indebtedness or pledge of the general credit of a municipality or any other governmental entity within the meaning of any constitutional or statutory limitation of indebtedness, and must contain a recital to that effect.

(h) Bonds of the land bank may be issued in the form, may be in the denominations, may bear interest, may mature in the manner, and may be executed by one or more members of the board as provided by the resolution authorizing the issuance of the bonds. The bonds may be subject to redemption at the option of and in the manner determined by the board in the resolution authorizing the issuance of the bonds.

(i) The municipality in which a land bank operates may guarantee, insure, or otherwise become primarily or secondarily obligated on the indebtedness of the land bank subject to all other provisions of state law applicable to municipal indebtedness.

(j) Bonds issued by a land bank shall be issued, sold, and delivered in accordance with the terms and provisions of a resolution adopted by the board. The board of a land bank may sell the bonds in a manner, either at public or at private sale, and for a price as the board determines to be in the best interests of the land bank. The resolution issuing bonds shall be published in a newspaper of general circulation within the jurisdiction of the land bank.

(k) A board member or a person executing the bonds is not liable personally on any bonds by reason of the issuance of the bonds. The bonds or other obligations of the land bank are not a debt of the municipality that created the land bank or of this state and must state so on their face. The municipality, this state, or any revenue or any property of a municipality or this state is not liable for the bond.

SECTION 2. Section 379E.002, Local Government Code, is amended to read as follows:

Sec. 379E.002. APPLICABILITY; CONSTRUCTION WITH OTHER LAW. This chapter applies only to a municipality:

(1) to which Chapter 379C or 379H [or 379D] does not apply; and

(2) that has not ever adopted a homestead land bank program under Subchapter E, Chapter 373A.

SECTION 3. Chapter 379D, Local Government Code, is repealed.

SECTION 4. The Houston Land Bank, a public nonprofit corporation evidenced by its amended and restated Certificate of Formation dated September 26, 2018, as filed with the Secretary of State under File No. 155688901, under ordinance dated HCD 18-51, approved and adopted by the city council of the City of Houston on July 25, 2018, and originally created as the Land Assemblage Redevelopment Authority under Subchapter D, Chapter 431, Transportation Code, is a land bank under Chapter 379H, Local Government Code, as added by this Act, and shall continue to possess the statutory authorization by which it was originally created under Subchapter D, Chapter 431, Transportation Code. All actions of the board of directors and employees of the Houston Land Bank, all contracts, agreements, services, and real property acquisitions and dispositions taken before the effective date of this Act shall remain unaffected by the adoption of an ordinance under Chapter 379H, Local Government Code, as added by this Act.

SECTION 5. This Act takes effect September 1, 2019.

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