By: Birdwell S.B. No. 1281
A BILL TO BE ENTITLED
AN ACT
relating to assessments for water and energy improvements in
certain municipalities and counties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Chapter 399, Local Government
Code, is amended to read as follows:
CHAPTER 399. MUNICIPAL AND COUNTY WATER AND ENERGY IMPROVEMENT
PROPERTY ASSESSMENTS [REGIONS]
SECTION 2. Section 399.002, Local Government Code, is
amended by adding Subdivisions (1-a) and (2-a) and amending
Subdivision (2) to read as follows:
(1-a) "Office" means the state energy conservation
office.
(2) "Program" means the [a] program established under
this chapter.
(2-a) "Program administrator" means the third party
selected by the office to administer the program.
SECTION 3. Chapter 399, Local Government Code, is amended
by adding Sections 399.0023, 399.0025, 399.0027, and 399.0029 to
read as follows:
Sec. 399.0023. RULES. The office shall adopt rules to
administer the program.
Sec. 399.0025. PROGRAM ADMINISTRATOR. (a) The office
shall administer the program through a third-party administrator
selected under this section.
(b) In selecting the program administrator, the office
shall select the candidate that demonstrates:
(1) best practices in program design;
(2) compliance with applicable ethics requirements;
and
(3) appropriate underwriting and technical standards.
(c) The program administrator shall oversee program
elements, including implementing:
(1) guidelines;
(2) documentation, underwriting, and technical
standards; and
(3) administrative protocols as described by Section
399.0027.
Sec. 399.0027. ADMINISTRATION. (a) The office shall
review and either approve or request revision of administrative
protocols developed under this section.
(b) The program administrator shall develop:
(1) a form contract between the local government and
the property owner specifying the terms of:
(A) assessment under the program; and
(B) financing provided by a third party or the
local government, as appropriate;
(2) if the proposed program provides for third-party
financing, a form contract between the local government and the
third party regarding the servicing of the debt through
assessments;
(3) a description of types of qualified projects that
may be subject to contractual assessments;
(4) a method for ranking requests from property owners
for financing through contractual assessments in priority order if
requests appear likely to exceed the amount authorized for funding
by a local government;
(5) a method for determining:
(A) the interest rate and period during which
contracting owners would pay an assessment; and
(B) the maximum amount of an assessment;
(6) 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;
(7) a description of the application process and
eligibility requirements for financing qualified projects to be
repaid through contractual assessments under the program;
(8) a method 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;
(9) the manner in which property will be assessed and
assessments will be collected;
(10) the lender notice required by Section 399.010;
(11) the review required by Section 399.011;
(12) marketing and participant education services to
be provided for the program;
(13) quality assurance and antifraud measures;
(14) procedures for collecting the proposed
contractual assessments; and
(15) any other item necessary for the administration
of the program or as directed by the office.
Sec. 399.0029. DEMONSTRATION OF FINANCIAL ABILITY. The
method for ensuring a demonstration of financial ability under
Section 399.0027(b)(8) must be based on 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.
SECTION 4. Section 399.003, Local Government Code, is
amended to read as follows:
Sec. 399.003. EXERCISE OF POWERS BY LOCAL GOVERNMENT.
(a) In addition to the authority provided by Chapter 376 for
municipalities, the governing body of a local government that
participates in the [establishes a] program [in accordance with the
requirements provided by Section 399.008] may exercise powers
granted under the program [this chapter].
(b) Participation in the program [The establishment and
operation of a program under this chapter] by a local government is
a governmental function for all purposes.
SECTION 5. Section 399.004(a), Local Government Code, is
amended to read as follows:
(a) An assessment under this chapter may be imposed to repay
the financing of qualified projects on real property located in the
territory of a local government participating in the program
[region designated under this chapter]. Property located in a
municipality's extraterritorial jurisdiction may be included in
the municipality's territory for the purposes of participation in
the program.
SECTION 6. Chapter 399, Local Government Code, is amended
by adding Section 399.0045 to read as follows:
Sec. 399.0045. AUTHORIZED USER FEE. (a) The program
administrator may collect a user fee imposed on each contract
entered into under the program.
(b) Fees collected under this section may be used only to
pay the costs of administering the program.
SECTION 7. The heading to Section 399.006, Local Government
Code, is amended to read as follows:
Sec. 399.006. LOCAL GOVERNMENT PARTICIPATION IN
[ESTABLISHMENT OF] PROGRAM.
SECTION 8. Sections 399.006(a), (b), and (e), Local
Government Code, are amended to read as follows:
(a) The governing body of a local government may determine
that it is convenient and advantageous to participate in
[establish] a program under this chapter.
(b) An authorized representative of the local government
that participates in the [establishes a] program may enter into a
written contract with a record owner of real property in the
territory of the local government [a region designated under this
chapter] to impose an assessment to repay the owner's financing of a
qualified project on the owner's property. The financing to be
repaid through assessments may be provided by a third party or, if
authorized by the program, by the local government.
(e) The financing for which assessments are imposed may
include:
(1) the cost of materials and labor necessary for
installation or modification of a qualified improvement;
(2) permit fees;
(3) inspection fees;
(4) lender's fees;
(5) program application and administrative fees;
(6) project development and engineering fees;
(7) third-party review fees, including verification
review fees, under Section 399.011; [and]
(8) a user fee authorized under Section 399.0045; and
(9) 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
office [local government].
SECTION 9. The heading to Section 399.008, Local Government
Code, is amended to read as follows:
Sec. 399.008. PROCEDURE FOR PARTICIPATION IN
[ESTABLISHMENT OF] PROGRAM.
SECTION 10. Section 399.008, Local Government Code, is
amended by amending Subsections (a), (b), and (d) and adding
Subsection (f) to read as follows:
(a) Except as provided by Subsection (f), to participate in
the [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:
(1) [(A)] a finding that[, if appropriate,] financing
qualified projects through contractual assessments is a valid
public purpose;
(2) [(B)] a statement that the local government
intends to make contractual assessments to repay financing for
qualified projects available to property owners;
(3) [(C)] a description of the types of qualified
projects that may be subject to contractual assessments;
(4) [(D) a description of the boundaries of the
region;
[(E)] a description of any proposed arrangements
for third-party financing to be available or any local government
financing to be provided for qualified projects;
(5) [(F)] a description of local government debt
servicing procedures if third-party financing will be provided and
assessments will be collected to service a third-party debt;
(6) [(G)] a reference to the report on the proposed
program prepared as provided by Section 399.009 and a statement
identifying the location where the report is available for public
inspection;
[(H) a statement of the time and place for a public
hearing on the proposed program;] and
(7) [(I)] a statement identifying the appropriate
representative of the local government and the appropriate
assessor-collector for purposes of consulting regarding collecting
the proposed contractual assessments 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 399.009; and
[(3) adopt a resolution establishing the program and
the terms of the program, including:
[(A) each item included in the report under
Section 399.009; and
[(B) a description of each aspect of the program
that may be amended only after another public hearing is held].
(b) For purposes of Subsection (a)(1) [(a)(3)(A)], the
resolution may incorporate the report required by Section 399.009
[or the amended version of the report], as appropriate, by
reference.
(d) A local government may:
(1) hire and set the compensation of staff necessary
to participate in the program [a program administrator and program
staff]; or
(2) contract for professional services necessary to
participate in the [administer a] program.
(f) A local government that established a program under this
chapter before September 1, 2019, may participate in the program by
passing a resolution stating that the local government is
participating. The resolution is not required to meet the
requirements of Subsection (a) or to include the report described
by Section 399.009.
SECTION 11. The heading to Section 399.009, Local
Government Code, is amended to read as follows:
Sec. 399.009. REPORT REGARDING PROGRAM [ASSESSMENT].
SECTION 12. Sections 399.009(a) and (c), Local Government
Code, are amended to read as follows:
(a) Before adopting a resolution under Section 399.008 to
join the program, a local government must prepare a [The] report,
consistent with guidelines adopted by the program administrator,
that includes [for a proposed program required by Section 399.008
must include]:
(1) the items described by Section 399.0027(b) [a map
showing the boundaries of the proposed region];
(2) [a form contract between the local government and
the property owner specifying the terms of:
[(A) assessment under the program; and
[(B) financing provided by a third party or the
local government, as appropriate;
[(3) if the proposed program provides for third-party
financing, a form contract between the local government 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 a local government
representative authorized to enter into written contracts on behalf
of the local government;
(3) [(6)] a plan for ensuring sufficient capital for
third-party financing and, if appropriate, raising capital for
local government financing for qualified projects; and
(4) [(7)] if bonds will be issued to provide capital
to finance qualified projects as part of the program as provided by
Section 399.016,[:
[(A)] a maximum aggregate annual dollar amount
for financing through contractual assessments to be provided by the
local government under the program[;
[(B) a method for ranking requests from property
owners for financing through contractual assessments in priority
order if requests appear likely to exceed the authorization amount;
and
[(C) 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;
[(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 the lender notice
requirement provided by Section 399.010;
[(13) a statement explaining the review requirement
provided by Section 399.011;
[(14) a description of marketing and participant
education services to be provided for the program;
[(15) a description of quality assurance and antifraud
measures to be instituted for the program; and
[(16) the procedures for collecting the proposed
contractual assessments].
(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 representative designated to
enter into written contracts on behalf of the local government
under the program].
SECTION 13. Section 399.010, Local Government Code, is
amended to read as follows:
Sec. 399.010. NOTICE TO MORTGAGE HOLDER REQUIRED FOR
PARTICIPATION. Before a local government may enter into a written
contract with a record owner of real property to impose an
assessment to repay the financing of a qualified project under this
chapter:
(1) the holder of any mortgage lien on the property
must be given written notice of the owner's intention to
participate in the [a] program [under this chapter] on or before the
30th day before the date the written contract for assessment
between the owner and the local government is executed; and
(2) a written consent from the holder of the mortgage
lien on the property must be obtained.
SECTION 14. Section 399.011(a), Local Government Code, is
amended to read as follows:
(a) The [A] program [established under this chapter] must
require for each proposed qualified project:
(1) a review of water or energy baseline conditions
and the projected water or energy savings to establish the
projected water or energy savings; and
(2) a verification that a proposed qualified
improvement meets the requirements of a qualified project.
SECTION 15. Section 399.013(a), Local Government Code, is
amended to read as follows:
(a) The program administrator shall file on behalf of a [A]
local government that authorizes financing through contractual
assessments under this chapter [shall file] written notice of each
contractual assessment in the real property records of the county
in which the property is located.
SECTION 16. Section 399.016(b), Local Government Code, is
amended to read as follows:
(b) Bonds or notes issued under this section may not be
general obligations of the local government. The bonds or notes
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 or notes:
(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.
SECTION 17. Section 399.018, Local Government Code, is
amended to read as follows:
Sec. 399.018. PROHIBITED ACTS. A local government that
participates in the program [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 territory of the local government [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
territory of the local government [region] to enter into a written
contract to repay the financing of a qualified project through
contractual assessments under this chapter.
SECTION 18. Section 399.019, Local Government Code, is
amended to read as follows:
Sec. 399.019. NO PERSONAL LIABILITY. The members of the
governing body of a local government, other elected officials of a
local government, employees of a local government, [and] board
members, executives, employees, and employees of the office or the
program administrator [and contractors of a third party who enter
into a contract with a local government to provide administrative
services for a program under this chapter] are not personally
liable as a result of exercising any rights or responsibilities
granted under this chapter.
SECTION 19. The following provisions of Chapter 399, Local
Government Code, are repealed:
(1) Section 399.002(6);
(2) Section 399.007;
(3) Sections 399.008(c) and (e);
(4) Section 399.009(b); and
(5) Section 399.017.
SECTION 20. (a) A local government that has established a
program for assessments for water and energy improvements under
Chapter 399, Local Government Code, as it existed before the
effective date of this Act, may continue the program only as
necessary for the fulfillment of contractual obligations. A local
government may not extend a contractual obligation in lieu of
satisfying the requirements for participation in the program for
assessments for water and energy improvements under Section
399.006, Local Government Code, as amended by this Act.
(b) A contract entered into under Chapter 399, Local
Government Code, as it existed before the effective date of this
Act, continues in effect until the term specified in the contract is
complete and is governed by the law in effect on the date the
contract was executed, and the former law is continued for that
purpose.
(c) The changes in law made by this Act do not invalidate or
otherwise affect bonds issued under Chapter 399, Local Government
Code, as it existed before the effective date of this Act, for the
purpose of financing a contract made under that chapter.
SECTION 21. This Act takes effect September 1, 2019.