84R8180 PAM-F
By: Keffer H.B. No. 3363
A BILL TO BE ENTITLED
AN ACT
relating to authorizing local government programs to provide
assessments for residential water and energy improvements in
designated regions, including authorizing the issuance of
obligations to provide financing for the programs; authorizing a
fee.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1232.002, Government Code, is amended to
read as follows:
Sec. 1232.002. PURPOSE. The purpose of this chapter is to
provide a method of financing for:
(1) the acquisition or construction of buildings;
[and]
(2) the purchase or lease of equipment by executive or
judicial branch state agencies; and
(3) local government water and energy improvement
contractual assessment programs for the benefit of residential real
property under Chapter 400, Local Government Code.
SECTION 2. Section 1232.066(a), Government Code, is amended
to read as follows:
(a) The board's authority under this chapter is limited to
the financing of:
(1) the acquisition or construction of a building;
(2) the purchase or lease of equipment; [or]
(3) stranded costs of a municipal power agency; or
(4) local government water and energy improvement
contractual assessment programs for the benefit of residential real
property under Chapter 400, Local Government Code.
SECTION 3. Subchapter C, Chapter 1232, Government Code, is
amended by adding Section 1232.1075 to read as follows:
Sec. 1232.1075. ISSUANCE OF OBLIGATIONS FOR FINANCING LOCAL
GOVERNMENT WATER AND ENERGY IMPROVEMENT CONTRACTUAL ASSESSMENT
PROGRAMS. (a) The legislature finds that:
(1) promoting the conservation, protection,
management, development, and beneficial use of the state's energy
and water resources is an essential public purpose and it is
appropriate for the state to assist local governments in the
development and financing of local government water and energy
improvement contractual assessment programs for the benefit of
residential real property under Chapter 400, Local Government Code;
and
(2) it is appropriate for the authority, on the
request of a local government, to assist in the financing of local
government water and energy improvement contractual assessment
programs for the benefit of residential real property under Chapter
400, Local Government Code.
(b) In this section "bond," "credit agreement," "local
government," and "program administrator" have the meanings
assigned by Section 400.002, Local Government Code.
(c) At the request of the program administrator under
Section 400.016, Local Government Code, the authority shall issue
bonds for the financing of a local government water and energy
improvement contractual assessment program for the benefit of
residential real property established under Chapter 400, Local
Government Code.
(d) The authority shall determine the method of sale, type
of bond, bond form, maximum interest rates, and other terms of the
bonds that, in the authority's judgment, best achieve the economic
goals of the local government and provide funds at the lowest
practicable cost.
(e) The authority may enter into a credit agreement in
connection with the bonds. The bonds and the related credit
agreement must be payable from and secured by a pledge of revenues
to be received from contractual assessments imposed under the
program established under Chapter 400, Local Government Code.
(f) The proceeds of bonds issued by the authority under this
section shall be deposited with a trustee selected by the authority
and the program administrator.
(g) Bond proceeds, including investment income, shall be
held in trust for the exclusive use and benefit of the local
government. The local government may use the proceeds to pay:
(1) the costs of materials and labor necessary for the
installation or modification of qualified improvements;
(2) underwriting, processing, and administrative
fees;
(3) the costs associated with issuing the bonds,
including fees paid to a bond issuer, bond counsel, bond placement
agent, or bond trustee;
(4) assessment, administrative, and county recording
fees; and
(5) any other lawfully permitted costs related to a
program established under Chapter 400, Local Government Code.
(h) A bond issued by the authority under this section and
any related credit agreement is not a debt of the state, a state
agency, or a local government and is not a pledge of the faith and
credit of the state, a state agency, or a local government. A bond
issued by the authority under this section and any related credit
agreement is payable solely from and secured by a pledge of revenues
from contractual assessments imposed under the program established
under Chapter 400, Local Government Code.
(i) A bond issued by the authority under this section and
any related credit agreement must contain on its face a statement to
the effect that:
(1) the state, a state agency, or a local government is
not obligated to pay the principal of or interest on the bond except
as provided by this section; and
(2) the faith and credit or the taxing power of the
state, a state agency, or a local government may not be pledged to
pay the principal of or interest on the bond.
(j) The state may not with respect to any outstanding bonds
under this section:
(1) take action to limit or restrict the rights of the
local government to fulfill its responsibility to pay bond
obligations; or
(2) in any way impair the rights or remedies of the
bond owners until the bonds are fully discharged.
(k) Bonds issued by the authority under this section, any
transaction relating to the bonds, and any profits made from the
sale of the bonds are exempt from taxation by the state or a local
government.
(l) The board of directors of the authority and the
employees of the authority are not personally liable as a result of
exercising any rights or responsibilities under this section.
SECTION 4. Subtitle C, Title 12, Local Government Code, is
amended by adding Chapter 400 to read as follows:
CHAPTER 400. MUNICIPAL AND COUNTY WATER AND ENERGY IMPROVEMENT
REGIONS FOR RESIDENTIAL IMPROVEMENTS
Sec. 400.001. SHORT TITLE. This chapter may be cited as the
Residential Property Assessed Clean Energy Act ("R-PACE").
Sec. 400.002. DEFINITIONS. In this chapter:
(1) "Bond" means any type of revenue obligation,
including a bond, note, certificate, or other instrument, payable
from and secured by a pledge of revenues received from contractual
assessments as provided in the resolution authorizing the
obligation. A bond obligation includes the principal of a bond and
any premium and interest on the bond, together with any amount owed
under a related credit agreement.
(2) "Credit agreement" means a loan agreement, a
revolving credit agreement, an agreement establishing a line of
credit, a letter of credit, an interest rate swap agreement, an
interest rate lock agreement, a currency swap agreement, a forward
payment conversion agreement, an agreement to provide payments
based on levels of or changes in interest rates or currency exchange
rates, an agreement to exchange cash flows or a series of payments,
an option, put, or call to hedge payment, currency, interest rate,
or other exposure, or another agreement that enhances the
marketability, security, or creditworthiness of a bond issued under
this chapter.
(3) "Local government" means a municipality or county.
(4) "Program" means a program established under this
chapter.
(5) "Program administrator" means the administrator
designated under Section 400.006(b) or the local government
official responsible for discharging the administrative duties of
the program.
(6) "Property owner" means the record owner of real
property.
(7) "Qualified improvement" means a permanent
improvement fixed to real property and intended to decrease water
or energy consumption or demand, including a product, device, or
interacting group of products or devices on the property owner's
side of the meter that uses energy technology to generate
electricity, provide thermal energy, regulate temperature, or
regulate water consumption.
(8) "Qualified project" means the installation or
modification of a qualified improvement.
(9) "Real property" means residential real property on
which a dwelling designed for occupancy for one to four families is
located.
(10) "Region" means a region designated under this
chapter.
Sec. 400.003. EXERCISE OF POWERS. In addition to the
authority provided by Chapter 376 for municipalities, the governing
body of a local government that establishes a program in accordance
with the requirements provided by Section 400.008 may exercise
powers granted under this chapter.
Sec. 400.004. AUTHORIZED ASSESSMENTS. (a) An assessment
under this chapter may be imposed to repay the financing of
qualified projects on real property located in a region designated
under this chapter.
(b) An assessment under this chapter may not be imposed to
repay the financing of:
(1) facilities for undeveloped lots or lots undergoing
development at the time of the assessment; or
(2) the purchase or installation of products or
devices not permanently fixed to real property.
Sec. 400.005. WRITTEN CONTRACT FOR ASSESSMENT REQUIRED. A
local government may impose an assessment under this chapter only
under a written contract with the property owner of real property to
be assessed.
Sec. 400.006. ESTABLISHMENT OF PROGRAM. (a) The governing
body of a local government may determine that it is convenient and
advantageous to establish a program under this chapter.
(b) A local government may enter into an agreement with a
designated administrator for the purposes of administering,
qualifying, and otherwise discharging the local government's
administrative responsibilities over the program in its
jurisdiction, except that the local government retains the
responsibility to impose assessments as provided by this chapter.
The designated administrator may be a for profit or nonprofit
organization with experience in managing programs similar to
programs established under this chapter or an organization whose
executive leadership includes persons who have managed programs
similar to those established under this chapter.
(c) A local government may contract with a designated
administrator that has established and is administering a program
for one or more other local governments.
(d) The program administrator may enter into a written
contract with a property owner in a region designated under this
chapter to impose an assessment to repay the property owner's
financing of a qualified project. The contract must expressly
state the terms of the assessment, including the assessment term,
the payment amounts, and the remedies for default and foreclosure.
(e) The financing to be repaid through assessments under a
program established under this chapter may be provided by:
(1) a third party;
(2) the local government, if authorized by the
program; or
(3) the Texas Public Finance Authority as authorized
by Section 1232.1075, Government Code.
(f) If the program provides for third-party financing, the
program administrator that enters into the written contract with a
property owner must also enter into a written contract with the
third party that provides financing for a qualified project under
the program to service the debt through assessments.
(g) If the program provides for bond financing, the written
contract described by Subsection (d) must be a contract to finance
the qualified project through assessments.
(h) The financing for which assessments are imposed may
include:
(1) the costs of materials and labor necessary for
installation or modification of a qualified improvement;
(2) permit fees;
(3) inspection fees;
(4) fees associated with issuing bonds, including bond
placement agent and bond trustee fees;
(5) underwriting, processing, and administrative
fees;
(6) origination fees;
(7) program application and administrative fees;
(8) project development and engineering fees;
(9) county recording fees; and
(10) any other fees or costs that may be incurred by
the property owner incident to the installation, modification, or
improvement on a specific or pro rata basis, as determined by the
local government.
Sec. 400.007. DESIGNATION OF REGION. (a) The governing
body of a local government may determine that it is convenient and
advantageous to designate an area of the local government as a
region within which the program administrator and property owners
may enter into written contracts to impose assessments to repay the
financing by owners of qualified projects and, if authorized by the
local government program, finance the qualified project.
(b) An area designated as a region by the governing body of a
local government under this section:
(1) may include the entire local government; and
(2) must be located wholly within the local
government's jurisdiction.
(c) For purposes of determining a municipality's
jurisdiction under Subsection (b)(2), the municipality's
extraterritorial jurisdiction may be included.
(d) A local government may designate more than one region.
If multiple regions are designated, the regions may be separate,
overlapping, or coterminous.
Sec. 400.008. PROCEDURE FOR ESTABLISHMENT OF PROGRAM.
(a) To establish a program under this chapter, the governing body
of a local government must take the following actions in the
following order:
(1) adopt a resolution of intent that includes:
(A) a finding that, if appropriate, financing
qualified projects through contractual assessments is a valid
public purpose;
(B) a statement that the local government intends
to make contractual assessments to repay financing for qualified
projects available to property owners;
(C) if appropriate, a statement that the local
government intends to delegate the administration of the program to
a designated administrator;
(D) a description of the types of qualified
projects that may be subject to contractual assessments;
(E) a description of the boundaries of the
region;
(F) a description of any proposed arrangements
for third-party financing to be available or any authorized state
or local government financing to be provided for qualified
projects;
(G) a description of proposed debt servicing
procedures if third-party financing will be provided and
assessments will be collected to service a third-party debt;
(H) a reference to the report on the proposed
program prepared as provided by Section 400.009 and a statement
identifying the location where the report is available for public
inspection;
(I) a statement of the time and place for a public
hearing on the proposed program; and
(J) a statement identifying the appropriate
local official and the appropriate assessor-collector for purposes
of consulting regarding collecting the proposed contractual
assessments with property taxes imposed on the assessed property;
(2) hold a public hearing at which the public may
comment on the proposed program, including the report required by
Section 400.009; and
(3) adopt a resolution establishing the program and
the terms of the program, including:
(A) each item included in the report under
Section 400.009;
(B) a description of each aspect of the program
that may be amended only after another public hearing is held; and
(C) the name and business address of the program
administrator.
(b) For purposes of Subsection (a)(3)(A), the resolution
may incorporate the report or the amended version of the report, as
appropriate, by reference.
(c) Subject to the terms of the resolution establishing the
program as referenced by Subsection (a)(3)(B), the governing body
of a local government may amend a program by resolution.
(d) If a local government does not use a designated
administrator, a local government may:
(1) hire and set the compensation of an administrator
and staff for the program; or
(2) contract for professional services necessary to
administer a program.
(e) A local government may impose fees to offset the costs
of administering a program. The fees authorized by this subsection
may be assessed as:
(1) a program application fee paid by the property
owner requesting to participate in the program;
(2) a component of the interest rate on the assessment
in the written contract between the local government and the
property owner; or
(3) a combination of Subdivisions (1) and (2).
Sec. 400.009. REPORT REGARDING ASSESSMENT. (a) The report
for a proposed program required by Section 400.008 must include:
(1) a map showing the boundaries of the proposed
region;
(2) a form contract between the program administrator
and the property owner specifying the terms of:
(A) assessment under the program;
(B) fees associated with the administration of
the program; and
(C) financing and any costs associated with the
financing provided by, as appropriate:
(i) a third party;
(ii) the local government; or
(iii) the Texas Public Finance Authority as
authorized by Section 1232.1075, Government Code;
(3) if the proposed program provides for third-party
financing, a form contract between the program administrator and
the third party regarding the servicing of the debt through
assessments;
(4) a description of types of qualified projects that
may be subject to contractual assessments;
(5) a statement identifying the program administrator
authorized to enter into written contracts on behalf of the local
government;
(6) a plan for ensuring sufficient capital for
third-party financing and, if appropriate, raising capital for
local government financing for qualified projects;
(7) if bonds will be issued to provide capital to
finance qualified projects as part of the program as provided by
Section 400.015:
(A) the maximum principal amount for financing
through bonds;
(B) a method for determining:
(i) the interest rate and period during
which contracting owners would pay an assessment; and
(ii) the maximum amount of an assessment;
and
(C) a description of the use of the proceeds,
which may include the payment of:
(i) the costs for qualified improvements;
(ii) the costs of issuing the bonds;
(iii) the costs of a bond reserve fund; and
(iv) any other lawfully permitted program
costs;
(8) a method for ensuring that the period of the
contractual assessment does not exceed the useful life of the
qualified project that is the basis for the assessment;
(9) a description of the application process and
eligibility requirements for financing qualified projects to be
repaid through contractual assessments under the program;
(10) a method as prescribed by Subsection (b) for
ensuring that property owners requesting to participate in the
program demonstrate the financial ability to fulfill financial
obligations to be repaid through contractual assessments;
(11) a statement explaining the manner in which
property will be assessed and assessments will be collected;
(12) a statement explaining mortgage insurance
requirements provided by Section 400.010;
(13) a description of marketing and participant
education services to be provided for the program;
(14) a description of quality assurance and antifraud
measures to be instituted for the program; and
(15) the procedures for collecting the proposed
contractual assessments.
(b) The method for determining financial ability under
Subsection (a)(10) must use appropriate underwriting factors,
including:
(1) providing for verification that:
(A) the property owner requesting to participate
under the program:
(i) is the legal owner of the benefited
property;
(ii) is current on mortgage and property
tax payments; and
(iii) is not insolvent or in bankruptcy
proceedings; and
(B) the title of the benefited property is not in
dispute; and
(2) requiring an appropriate ratio of the amount of
the assessment to the assessed value of the property.
(c) The local government shall make the report available for
public inspection:
(1) on the local government's Internet website; and
(2) at the office of the program administrator.
Sec. 400.010. MORTGAGE INSURANCE CERTIFICATION REQUIRED
FOR PARTICIPATION. Before a local government may enter into a
written contract with a property owner to impose an assessment to
repay the financing of a qualified project under this chapter, the
program administrator must certify that mortgage guaranty
insurance offered by an insurer that holds a certificate of
authority to write mortgage guaranty insurance in this state is in
place to protect the holder of the first lien mortgage on the
property to be assessed from and against losses that may be caused
by an assessment recorded under this chapter.
Sec. 400.011. DIRECT ACQUISITION BY OWNER. The proposed
arrangements for financing a qualified project may authorize the
property owner to:
(1) purchase directly the related equipment and
materials for the installation or modification of a qualified
improvement; and
(2) contract directly, including through a lease,
power purchase agreement, or other service contract, for the
installation or modification of a qualified improvement.
Sec. 400.012. RECORDING OF NOTICE OF CONTRACTUAL ASSESSMENT
REQUIRED. (a) A local government that authorizes financing
through contractual assessments under this chapter shall file
notice of each contractual assessment in the real property records
of the county in which the property is located.
(b) The notice under Subsection (a) must contain:
(1) the amount of the assessment;
(2) the legal description of the property;
(3) the name of each property owner; and
(4) a reference to the statutory assessment lien
provided under this chapter.
Sec. 400.013. LIEN. (a) A contractual assessment under
this chapter and any interest or penalties on the assessment:
(1) is a first and prior lien against the real property
on which the assessment is imposed from the date on which the notice
of contractual assessment is recorded as provided by Section
400.012 and until the assessment, interest, or penalty is paid; and
(2) has the same priority status as a lien for any
other ad valorem tax.
(b) The lien runs with the land, and that portion of the
assessment under the assessment contract that has not yet become
due may not be accelerated and is not eliminated by foreclosure of a
property tax lien.
(c) The assessment lien may be enforced by the local
government in the same manner that a property tax lien against real
property may be enforced by the local government subject to the
terms of the program and to the extent the enforcement is consistent
with Section 50, Article XVI, Texas Constitution.
(d) Delinquent installments of the assessments incur
interest and penalties in the same manner as delinquent property
taxes.
(e) A local government may recover costs and expenses,
including attorney's fees, in a suit to collect a delinquent
installment of an assessment in the same manner as in a suit to
collect a delinquent property tax.
Sec. 400.014. COLLECTION OF ASSESSMENTS. The governing
body of a local government may contract with the governing body of
another taxing unit, as defined by Section 1.04, Tax Code, or
another entity, including a county assessor-collector, to perform
the duties of the local government relating to collection of
assessments imposed by the local government under this chapter.
Sec. 400.015. BONDS ISSUED BY LOCAL GOVERNMENT. (a) A
local government may issue bonds to finance qualified projects
through contractual assessments under this chapter.
(b) Bonds issued under this section and any related credit
agreement may not be general obligations of the local government.
The bonds and any related credit agreement must be secured by one or
more of the following as provided by the governing body of the local
government in the resolution or ordinance approving the bonds:
(1) payments of contractual assessments on benefited
property in one or more specified regions designated under this
chapter;
(2) reserves established by the local government from
grants, bonds, or net proceeds or other lawfully available funds;
(3) municipal bond insurance, lines of credit, public
or private guaranties, standby bond purchase agreements,
collateral assignments, mortgages, or any other available means of
providing credit support or liquidity; and
(4) any other funds lawfully available for purposes
consistent with this chapter.
(c) A local government pledge of assessments, funds, or
contractual rights in connection with the issuance of bonds by the
local government under this chapter is a first lien on the
assessments, funds, or contractual rights pledged in favor of the
person to whom the pledge is given, without further action by the
local government. The lien is valid and binding against any other
person, with or without notice.
(d) Bonds issued under this chapter further an essential
public and governmental purpose, including:
(1) improvement of the reliability of the state
electrical system;
(2) conservation of state water resources consistent
with the state water plan;
(3) reduction of energy costs;
(4) economic stimulation and development;
(5) enhancement of property values;
(6) enhancement of employment opportunities; and
(7) reduction in greenhouse gas emissions.
Sec. 400.016. REQUEST TO TEXAS PUBLIC FINANCE AUTHORITY FOR
BOND ISSUANCE. (a) If a local government determines it is in the
best interest of the local government to seek assistance in
financing the program through the issuance of bonds, the local
government may request the Texas Public Finance Authority to issue
bonds under Section 1232.1075, Government Code, on its behalf.
(b) The governing body of the local government must pass a
resolution authorizing the program administrator to submit a
request to the Texas Public Finance Authority to issue bonds. The
request must state the principal amount of the bonds and the maximum
term, not to exceed 25 years.
(c) The principal amount requested under Subsection (b) may
be increased to include an amount sufficient to:
(1) pay the costs of issuance by the Texas Public
Finance Authority;
(2) provide for a bond reserve fund; and
(3) capitalize interest for the period determined
necessary by the local government, not to exceed two years.
Sec. 400.017. JOINT IMPLEMENTATION. (a) Any combination
of local governments may agree to jointly establish, implement, or
administer a program under this chapter.
(b) If two or more local governments implement a program
jointly, a single public hearing held jointly by the cooperating
local governments is sufficient to satisfy the requirement of
Section 400.008(a)(2).
(c) Local governments acting as a jointly operated program
are authorized to request the issuance of bonds under Section
400.016 and to exercise the same powers under Section 400.003,
including the authority to contract with a designated
administrator.
Sec. 400.018. PROHIBITED ACTS. A local government that
establishes a region under this chapter may not:
(1) make the issuance of a permit, license, or other
authorization from the local government to a person who owns
property in the region contingent on the person entering into a
written contract to repay the financing of a qualified project
through contractual assessments under this chapter; or
(2) otherwise compel a person who owns property in the
region to enter into a written contract to repay the financing of a
qualified project through contractual assessments under this
chapter.
Sec. 400.019. NO PERSONAL LIABILITY. The governing body of
a local government or local government employees are not personally
liable as a result of exercising any rights or responsibilities
granted under this chapter.
SECTION 5. 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, 2015.