Bill Text: TX HB114 | 2015-2016 | 84th Legislature | Enrolled

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Bill Title: Relating to the issuance of certain capital appreciation bonds by political subdivisions.

Sponsorship: Strong Partisan Bill (Republican 19-1)

Status: (Passed) 2015-06-19 - Effective on 9/1/15 [HB114 Detail]

Download: Texas-2015-HB114-Enrolled.html

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H.B. No. 114

AN ACT
relating to the issuance of certain capital appreciation bonds by
political subdivisions.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 1201, Government Code, is
amended by adding Section 1201.0245 to read as follows:
Sec. 1201.0245. CAPITAL APPRECIATION BONDS BY POLITICAL
SUBDIVISIONS. (a) In this section, "capital appreciation bond"
means a bond that accrues and compounds interest from its date of
delivery, the interest on which by its terms is payable only upon
maturity or prior redemption.
(b) A county, municipality, special district, school
district, junior college district, or other political subdivision
may not issue capital appreciation bonds that are secured by ad
valorem taxes unless:
(1) the bonds have a scheduled maturity date that is
not later than 20 years after the date of issuance;
(2) the governing body of the political subdivision
has received a written estimate of the cost of the issuance,
including:
(A) the amount of principal and interest to be
paid until maturity;
(B) the amount of fees to be paid to outside
vendors, including vendors who sell products to be financed by the
bond issuance;
(C) the amount of fees to be paid to each
financing team member; and
(D) the projected tax impact of the bonds and the
assumptions on which the calculation of the projected tax impact is
based;
(3) the governing body of the political subdivision
has determined in writing whether any personal or financial
relationship exists between the members of the governing body and
any financial advisor, bond counsel, bond underwriter, or other
professional associated with the bond issuance; and
(4) the governing body of the political subdivision
posts prominently on the political subdivision's Internet website
and enters in the minutes of the governing body:
(A) the total amount of the proposed bonds;
(B) the length of maturity of the proposed bonds;
(C) the projects to be financed with bond
proceeds;
(D) the intended use of bond proceeds not spent
after completion of the projects identified in Paragraph (C);
(E) the total amount of the political
subdivision's outstanding bonded indebtedness at the time of the
election on the bonds, including the amount of principal and
interest to be paid on existing bond indebtedness until maturity;
(F) the total amount of the political
subdivision's outstanding bonded indebtedness, including the
amount of principal and interest to be paid until maturity; and
(G) the information received under Subdivision
(2) and determined under Subdivision (3).
(c) The governing body of a political subdivision that makes
a determination that a personal or financial relationship described
by Subsection (b)(3) exists shall submit the determination to the
Texas Ethics Commission.
(d) The governing body of a political subdivision shall
regularly update the debt information posted on the political
subdivision's Internet website under Subsection (b)(4)(F) to
ensure that the information is current and accurate.
(e) Capital appreciation bond proceeds may not be used to
purchase the following items, unless an item has an expected useful
life, determined based on the depreciable life of the asset under
the Internal Revenue Code of 1986, that exceeds the bond's maturity
date:
(1) items more regularly considered maintenance
items, including replacement HVAC units, upgraded plumbing, or
similar items; or
(2) transportation-related items, including buses.
(f) Capital appreciation bond proceeds unspent after
completion of the project identified as the proceeds' intended use
may be used only for a use identified on the political subdivision's
website under Subsection (b)(4)(D), unless another use is approved
by the voters of the political subdivision at an election held for
that purpose.
(g) The total amount of capital appreciation bonds may not
exceed 25 percent of the political subdivision's total outstanding
bonded indebtedness at the time of the issuance, including the
amount of principal and interest to be paid on the outstanding bonds
until maturity.
(h) Except as provided by Subsection (i), a county,
municipality, special district, school district, junior college
district, or other political subdivision may not extend the
maturity date of an issued capital appreciation bond, including
through the issuance of refunding bonds that extend the maturity
date.
(i) A political subdivision may extend the maturity date of
an issued capital appreciation bond only if:
(1) the extension of the maturity date will decrease
the total amount of projected principal and interest to maturity;
or
(2) the political subdivision is a school district
and:
(A) the maximum legally allowable tax rate for
indebtedness has been adopted; and
(B) the Texas Education Agency certifies in
writing that the solvency of the permanent school fund's bond
guarantee program would be threatened without the extension.
(j) Subsection (b) does not apply to the issuance of:
(1) refunding bonds under Chapter 1207; or
(2) capital appreciation bonds for the purpose of
financing transportation projects.
SECTION 2. The change in law made by this Act does not
affect the validity of capital appreciation bonds issued before the
effective date of this Act.
SECTION 3. This Act takes effect September 1, 2015.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 114 was passed by the House on May 13,
2015, by the following vote: Yeas 143, Nays 0, 2 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 114 on May 28, 2015, by the following vote: Yeas 138, Nays 2, 3
present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 114 was passed by the Senate, with
amendments, on May 26, 2015, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor