BILL ANALYSIS

C.S.H.B. 3670

By: Plesa

Pensions, Investments & Financial Services

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Private activity bonds are a critical financing tool for infrastructure, student loans, and rental housing projects. Under current state law, a private activity bond must be fully funded at the time of closing. Partial funding of private activity bonds—a practice authorized in other states—ensures that interest only begins accruing on the amount needed immediately and not the total sum of the private activity bond, which reduces costs and allows for bond proceeds to be used for actual construction costs rather than interest payments. C.S.H.B. 3670 seeks to provide for this partial funding by revising the definition of "closing" for purposes of statutory provisions relating to the issuance of private activity bonds and certain other bonds by the state or a local government.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 3670 amends the Government Code to revise what constitutes "closing" as it pertains to the issuance of private activity bonds and certain other bonds by the state or a local government by, as follows:

·         removing the issuance of a bond by an issuer in exchange for the required payment for the bond; and

·         including, for a qualified residential rental project bond, the delivery of a bond in exchange for a partial payment for the incremental funding of the bond in accordance with the terms of the bond, provided that the partial payment is not less than 10 percent of the required payment for the bond.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2023.

COMPARISON OF INTRODUCED AND SUBSTITUTE

C.S.H.B. 3670 differs from the introduced only by including a Texas Legislative Council draft number in the footer.