Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB19 by Meyer (Relating to the issuance and repayment of debt by local governments, including the adoption of an ad valorem tax rate and the use of ad valorem tax revenue for the repayment of debt.), As Introduced
No significant fiscal implication to the State is anticipated.
The bill would provide that a school district's notice of public meeting to discuss budget and proposed tax rate must contain the minimum dollar amount required to be paid to service the district's debt.
The bill would require an election to authorize the issuance of general obligation bonds or to approve an increase in a property tax rate must be held on the November uniform election date.
The bill would limit a political subdivision from authorizing additional debt if the resulting annual debt service exceeds the maximum annual debt service in any fiscal year. The maximum annual debt service on debt payable from property taxes may not exceed 20 percent of an amount equal to the average of the amount of property tax collections for the three preceding fiscal years.
The bill would require a political subdivision to allocate the proceeds from the issuance of general obligation bonds authorized by the voters in the manner stated in the ballot proposition to authorize the issuance.
The bill would remove hospital districts from the definition of “eligible countywide district” for the purpose of authority to issue anticipation notes under Chapter 1431 of the Government Code. The bill would provide that under certain circumstances the governing body of an issuer could not authorize an anticipation note 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 and failed to be approved during the preceding five years.
The bill would remove hospital district from the definition of “issuer” and redefine “public work” for the purpose of Chapter 271 of the Local Government Code. The bill would limit the authorization of certificates of obligation to certain reasons, limit the maturity term and the reauthorization waiting period, reduce the number of signatures required to petition for an election to approve issuance of the certificates of obligation from five percent of qualified voters to two percent of registered voters, and expands the use of certain debt vehicles from construction to include renovation, repair, or improvement.
The bill would redefine “current debt” as “current debt service” to mean the minimum dollar amount required to be expended for debt service for the current year for the purposes of Chapter 26 of the Tax Code. The bill would require the schedule of the taxing unit's debt obligations to show the minimum dollar amount of principal and interest required to be paid to service the taxing unit's debts in the next year from property tax revenue. The bill would allow the governing body of a taxing unit to approve a rate that exceeds the debt rate for the taxing unit under certain circumstances and requires the recalculation of the voter-approval tax rate to include the new current debt rate. The bill prohibits the use of an increase in a taxing unit's maintenance and operations tax revenue derived from an election to adopt a tax rate above the voter-approval tax rate to be used or transferred to repay debt.
The bill would make conforming changes to the Government Code and Local Government Code.
The bill would repeal Section 271.046 of the Local Government Code (Additional Purposes for Certificates), and Sections 26.012(7)(A)(ii)(d), (g), and (h), and 26.012(9) of the Tax Code (Definitions).
Local Government Impact
The bill would revise the rules related to the issuance of certificates of obligation (CO) and general obligation bonds (GO) by political subdivisions and limit certain debt a taxing unit can issue that is backed by property tax. As COs in most cases don't need voter-approval, they are a frequently used tool by local governments. They have been used in the past to refinance and reduce interest rates on existing debt but also for financing non-emergency items such as park and recreation facilities without voter input. This bill would further refine the applicability of some of the finance options.
The number of projects as might be affected by the limitations provided by the bill, their timing and respective financing, and any related election outcomes are not known; consequently the impact on units of local government cannot be estimated.