By: Tepper H.B. No. 1489
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the issuance of certificates of obligation by local
  governments.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  This Act shall be known as the Certificate of
  Obligation Reform Act of 2023.
         SECTION 2.  Sections 271.043, 271.045, and 271.0461, Local
  Government Code, are amended to read as follows:
         Sec. 271.043.  DEFINITIONS. In this subchapter:
               (10)  "Public work" means:
                     (i)  streets, roads, highways, bridges,
  sidewalks, parks, landfills, parking structures, or airports;
                     (ii)  telecommunications, wireless
  communications, information technology systems, applications,
  hardware, or software;
                     (iii)  cybersecurity; or
                     (iv)  as part of any utility system, water supply
  project, water plant, wastewater plant, water and wastewater
  distribution or conveyance facility, wharf, dock, or flood control
  and drainage project.
         Sec. 271.045.  PURPOSES FOR WHICH CERTIFICATES MAY BE
  AUTHORIZED. (a)  The governing body of an issuer may authorize only
  the necessary certificates to pay a contractual obligation to be
  incurred for the construction, renovation, repair, or improvement
  of a public work:
               (1)  to comply with a state or federal law, rule, or
  regulation if the political subdivision has been officially
  notified of noncompliance with the law, rule, or regulation;
               (2)  if the governing body believes the construction,
  renovation, repair, or improvement of a public work is necessary to
  mitigate the impact of:
                     (i)  a public health emergency that poses an
  imminent danger to a resident's physical health or safety in the
  governing body's jurisdiction; or
                     (ii)  a natural disaster in the governing body's
  jurisdiction and:
                           (A)  the governor declares or renews a
  declaration of a state of disaster under Section 418.014,
  Government Code, in that fiscal year, and the governor's
  designation of the area threatened includes all or part of the
  geographic territory of the local government; or
                           (B)  the presiding officer of the governing
  body of a political subdivision declares or renews a declaration of
  a local state of disaster under Section 418.108, Government Code,
  in that fiscal year, and the presiding officer's designation of the
  area threatened includes all or part of the geographic territory of
  the local government; or
               (3)  if a court renders a decision that requires the
  local government to construct, renovate, repair, or improve a
  public work.
         [(1)  construction of any public work;
         (2)  purchase of materials, supplies, equipment, machinery,
  buildings, land, and rights-of-way for authorized needs and
  purposes; or
         (3)  payment of contractual obligations for professional
  services, including services provided by tax appraisers,
  engineers, architects, attorneys, map makers, auditors, financial
  advisors, and fiscal agents.]
         (b)  If necessary because of change orders, the governing
  body of an issuer may authorize certificates [may be authorized] in
  an amount not to exceed 15 [25] percent of a contractual obligation
  incurred for the construction of public works, but certificates may
  be delivered only in the amount necessary to discharge contractual
  obligations.
         (c)  The governing body of a municipality may issue
  certificates of obligation to pay all or part of a municipality's
  obligations incurred by contract for interests in and rights to
  water or sewer treatment capacity in connection with a water supply
  and transmission project or sewer treatment or collection project
  to be constructed in whole or in part on behalf of the municipality
  by another governmental entity or political subdivision pursuant to
  a written agreement expressly authorized under Section 552.014 of
  this code or Section 791.026, Government Code.
         (d)  In exercising its authority to issue certificates of
  obligation for the purposes specified in Subsection (c), the
  municipality must limit the principal amount of certificates to be
  issued for the purpose of funding its contractual obligations to an
  amount equal to (i) the aggregate of the contractual payments or the
  total costs allocated or attributed, under generally accepted
  accounting principles, to the capital costs of the project, as
  opposed to any maintenance or operating costs to be paid under the
  written agreement or (ii) the total cost of the project multiplied
  by the percentage of the nameplate capacity of the project acquired
  or conveyed by the written agreement to the municipality, whichever
  limitation is applicable to the contractual interests or rights
  being conveyed or identified in the written agreement.
         (e)  Work that is directly attributable under generally
  accepted accounting principles to the costs of the project and that
  is performed by employees of the issuer may be allocated or
  attributed to the capital costs of the project.
         (f)  If the governing body of an issuer authorizes
  certificates to pay a contractual obligation under this section,
  the governing body must enter into a contract or written agreement
  for the construction, renovation, repair, or improvement of a
  public work not later than 90 days after the governing body
  authorizes the certificates.
         (g)  If the governing body of an issuer authorizes
  certificates to pay a contractual obligation under this Subsection
  (a)(2)(i), the governing body shall adopt a resolution stating the
  conditions and circumstances of the public health emergency.
         (h)  The provisions of this subchapter relating to
  advertisement for competitive bids apply to contractual
  obligations to be incurred for a purpose for which certificates are
  to be issued under this section.
         Sec. 271.0461.  ADDITIONAL PURPOSE FOR CERTIFICATES:
  DEMOLITION OF DANGEROUS STRUCTURES [OR RESTORATION OF HISTORIC
  STRUCTURES]. Certificates may be issued by any municipality for the
  payment of contractual obligations to be incurred in demolishing
  dangerous structures [or restoring historic structures] and may be
  sold for cash, subject to the restrictions and other conditions of
  Section 271.050.
         SECTION 3.  Sections 271.047(c) and (d), Local Government
  Code, are amended to read as follows:
         (c)  A certificate may not mature over a period greater than
  30 [40] years from the date of the certificate and may not bear
  interest at a rate greater than that allowed by Chapter 1204,
  Government Code.
         (d)  Except as provided by this subsection, the governing
  body of an issuer may not authorize a certificate to pay a
  contractual obligation to be incurred if a bond proposition to
  authorize the issuance of bonds for the same purpose was submitted
  to the voters during the preceding five [three] years and failed to
  be approved. A governing body may authorize a certificate that the
  governing body is otherwise prohibited from authorizing under this
  subsection:
               (1)  in a case described by Sections 271.056(1)-(3);
  and
               (2)  to comply with a state or federal law, rule, or
  regulation if the political subdivision has been officially
  notified of noncompliance with the law, rule, or regulation.
         SECTION 4.  Section 271.049(c), Local Government Code, is
  amended to read as follows:
         (c)  If before the date tentatively set for the authorization
  of the issuance of the certificates or if before the authorization,
  the municipal secretary or clerk if the issuer is a municipality, or
  the county clerk if the issuer is a county, receives a petition
  signed by at least two [five] percent of the qualified voters of the
  issuer protesting the issuance of the certificates, the issuer may
  not authorize the issuance of the certificates unless the issuance
  is approved at an election ordered, held, and conducted in the
  manner provided for bond elections under Chapter 1251, Government
  Code.
         SECTION 5.  Section 271.046, Local Government Code, is
  repealed.
         SECTION 6.  Chapter 271, Local Government Code, as amended
  by this Act, applies to a certificate issued on or after the
  effective date of this Act.
         SECTION 7.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution. If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2023.