| 1 | 1 | | By: Lucio III H.B. No. 3308 |
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| 2 | 2 | | |
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| 3 | 3 | | |
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| 4 | 4 | | A BILL TO BE ENTITLED |
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| 5 | 5 | | AN ACT |
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| 6 | 6 | | relating to the formation of special districts for the purpose of |
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| 7 | 7 | | storm mitigation and resiliency, energy, water, and indoor air |
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| 8 | 8 | | utilizing private funding sources; providing thereto the ability of |
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| 9 | 9 | | specific entities to use conduit financing; and establishing |
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| 10 | 10 | | specific consumer protection provisions for residential property |
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| 11 | 11 | | owners related to the program. |
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| 12 | 12 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 13 | 13 | | SECTION 1. Chapter 400, Title 12, Subchapter C is added to |
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| 14 | 14 | | read as follows: |
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| 15 | 15 | | Sec. 400.001 SHORT TITLE. This Chapter may be cited as the |
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| 16 | 16 | | Storm Mitigation and Resiliency Financing Act. |
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| 17 | 17 | | Sec. 400.002 EXERCISE OF POWERS. In addition to the |
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| 18 | 18 | | authority provided by Chapter 376 for municipalities, the governing |
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| 19 | 19 | | body of a local government that establishes a program in accordance |
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| 20 | 20 | | with the requirements provided by this act may exercise powers |
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| 21 | 21 | | granted under this chapter. The establishment and operation of a |
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| 22 | 22 | | program under this chapter by a local government is a governmental |
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| 23 | 23 | | function for all purposes. |
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| 24 | 24 | | Sec. 400.003 LOCAL GOVERNMENT AUTHORIZATION. The |
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| 25 | 25 | | governing body of a local government may determine that it is |
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| 26 | 26 | | convenient and advantageous to establish a program under this |
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| 27 | 27 | | chapter to create districts to facilitate the use of conduit |
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| 28 | 28 | | financing for improvements to harden structures and mitigate the |
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| 29 | 29 | | impacts of weather-related events, flooding and fires; or provide |
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| 30 | 30 | | improvements which increase the energy and water efficiency, by |
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| 31 | 31 | | owners of certain residential real property; to provide for the |
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| 32 | 32 | | financing of such programs through voluntary property assessments, |
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| 33 | 33 | | commercial lending, and other means. |
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| 34 | 34 | | Sec. 400.004 ISSUANCE OF BONDS. A local government shall be |
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| 35 | 35 | | authorized to issue bonds, notes, and other evidences of |
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| 36 | 36 | | indebtedness and to pay the cost of authorized financing from the |
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| 37 | 37 | | proceeds thereof; to provide for the repayment of bonds, notes, and |
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| 38 | 38 | | other evidences of indebtedness; to authorize certain fees; to |
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| 39 | 39 | | prescribe the powers and duties of certain governmental officers |
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| 40 | 40 | | and entities; and to provide for remedies. |
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| 41 | 41 | | (a) Bonds or notes issued under this section may not be |
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| 42 | 42 | | general obligations of the local government. The bonds or notes |
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| 43 | 43 | | must be secured by one or more of the following as provided by the |
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| 44 | 44 | | governing body of the local government in the resolution or |
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| 45 | 45 | | ordinance approving the bonds or notes: |
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| 46 | 46 | | (1) payments of contractual assessments on benefited |
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| 47 | 47 | | property in one or more specified regions designated under this |
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| 48 | 48 | | chapter; |
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| 49 | 49 | | (2) reserves established by the local government from |
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| 50 | 50 | | grants, bonds, or net proceeds or other lawfully available funds; |
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| 51 | 51 | | (3) municipal bond insurance, lines of credit, public |
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| 52 | 52 | | or private guaranties, standby bond purchase agreements, |
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| 53 | 53 | | collateral assignments, mortgages, or any other available means of |
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| 54 | 54 | | providing credit support or liquidity; and any other funds lawfully |
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| 55 | 55 | | available for purposes consistent with this chapter. |
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| 56 | 56 | | (b) Bonds or notes issued under this chapter further an |
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| 57 | 57 | | essential public and governmental purpose, including, but not |
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| 58 | 58 | | limited to: |
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| 59 | 59 | | (1) Preservation of private property against natural |
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| 60 | 60 | | disasters and wildfires |
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| 61 | 61 | | (2) conservation of state water resources consistent |
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| 62 | 62 | | with the state water plan; |
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| 63 | 63 | | (3) reduction of energy costs; |
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| 64 | 64 | | (4) economic stimulation and development; |
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| 65 | 65 | | (5) enhancement of property values; or |
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| 66 | 66 | | (6) enhancement of employment opportunities. |
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| 67 | 67 | | Sec. 400.005 ESTABLISHMENT OF A DISTRICT. As provided |
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| 68 | 68 | | in this Chapter the local government may enter into a contract with |
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| 69 | 69 | | the record owner of property within a district to finance one or |
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| 70 | 70 | | more qualified projects on the property. The contract may provide |
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| 71 | 71 | | for the repayment of the cost of a project through assessments on |
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| 72 | 72 | | the property benefited. The financing or refinancing may include |
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| 73 | 73 | | the cost of materials and labor necessary for installation and of |
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| 74 | 74 | | permit fees, inspection fees, application and administrative fees, |
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| 75 | 75 | | bank fees, application, administration, and other program fees, and |
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| 76 | 76 | | all other fees that may be incurred by the record owner pursuant to |
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| 77 | 77 | | the installation on a specific or pro rata basis, as determined by |
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| 78 | 78 | | the local unit of government. |
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| 79 | 79 | | (a) Any combination of local governments may agree to |
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| 80 | 80 | | jointly implement or administer a program under this chapter, |
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| 81 | 81 | | including entering into an interlocal contract under Chapter 791, |
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| 82 | 82 | | Government Code, to jointly implement or administer a program. |
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| 83 | 83 | | (b) If two or more local governments implement a program |
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| 84 | 84 | | jointly, a single public hearing held jointly by the cooperating |
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| 85 | 85 | | local governments is sufficient to satisfy the establishment |
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| 86 | 86 | | requirements. |
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| 87 | 87 | | (c) One or more local governments may contract with a third |
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| 88 | 88 | | party, including another local government, to administer a program. |
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| 89 | 89 | | Local governments that are parties to an interlocal contract |
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| 90 | 90 | | described by Subsection (a) may contract with an entity listed in |
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| 91 | 91 | | Section 791.013, Government Code, for program administration. |
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| 92 | 92 | | (d) A local government that establishes a region under this |
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| 93 | 93 | | chapter may not: |
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| 94 | 94 | | (1) make the issuance of a permit, license, or other |
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| 95 | 95 | | authorization from the local government to a person who owns |
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| 96 | 96 | | property in the region contingent on the person entering into a |
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| 97 | 97 | | written contract to repay the financing of a qualified project |
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| 98 | 98 | | through contractual assessments under this chapter; or, |
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| 99 | 99 | | (2) otherwise compel a person who owns property in the |
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| 100 | 100 | | region to enter into a written contract to repay the financing of a |
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| 101 | 101 | | qualified project through contractual assessments under this |
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| 102 | 102 | | chapter. |
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| 103 | 103 | | (e) The members of the governing body of a local government, |
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| 104 | 104 | | other elected officials of a local government, employees of a local |
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| 105 | 105 | | government, and board members, executives, employees, and |
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| 106 | 106 | | contractors of a third party who enter into a contract with a local |
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| 107 | 107 | | government to provide administrative services for a program under |
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| 108 | 108 | | this chapter are not personally liable as a result of exercising any |
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| 109 | 109 | | rights or responsibilities granted under this chapter. |
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| 110 | 110 | | Sec. 400.006 ESTABLISHMENT OF A REGION. (a) The governing |
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| 111 | 111 | | body of a local government may determine that it is convenient and |
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| 112 | 112 | | advantageous to designate an area of the local government as a |
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| 113 | 113 | | region within which the authorized representative of the local |
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| 114 | 114 | | government and record owners of real property may enter into |
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| 115 | 115 | | written contracts to impose assessments to repay the financing by |
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| 116 | 116 | | owners of qualified projects on the owners' property and, if |
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| 117 | 117 | | authorized by the local government program, finance the qualified |
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| 118 | 118 | | project. |
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| 119 | 119 | | (b) An area designated as a region by the governing body of a |
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| 120 | 120 | | local government under this section: |
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| 121 | 121 | | (1) may include the entire local government; and |
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| 122 | 122 | | (2) must be located wholly within the local |
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| 123 | 123 | | government's jurisdiction. |
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| 124 | 124 | | (c) For purposes of determining a municipality's |
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| 125 | 125 | | jurisdiction under Subsection (b)(2), the municipality's |
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| 126 | 126 | | extraterritorial jurisdiction may be included. |
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| 127 | 127 | | (d) A local government may designate more than one region. |
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| 128 | 128 | | If multiple regions are designated, the regions may be separate, |
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| 129 | 129 | | overlapping, or coterminous. |
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| 130 | 130 | | Sec. 400.007 ESTABLISHMENT OF A PROGRAM. |
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| 131 | 131 | | (a) To establish a program under this chapter, the governing |
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| 132 | 132 | | body of a local government must take the following actions in the |
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| 133 | 133 | | following order: |
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| 134 | 134 | | (1) adopt a resolution of intent that includes: |
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| 135 | 135 | | (A) a finding that, if appropriate, financing |
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| 136 | 136 | | qualified projects through contractual assessments is a valid |
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| 137 | 137 | | public purpose; |
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| 138 | 138 | | (B) a statement that the local government intends to |
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| 139 | 139 | | make contractual assessments to repay financing for qualified |
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| 140 | 140 | | projects available to property owners; |
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| 141 | 141 | | (C) a description of the types of qualified projects |
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| 142 | 142 | | that may be subject to contractual assessments; |
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| 143 | 143 | | (D) a description of the boundaries of the region; |
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| 144 | 144 | | (E) a description of any proposed arrangements for |
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| 145 | 145 | | third-party financing to be available or any local government |
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| 146 | 146 | | financing to be provided for qualified projects; |
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| 147 | 147 | | (F) a description of local government debt servicing |
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| 148 | 148 | | procedures if third-party financing will be provided and |
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| 149 | 149 | | assessments will be collected to service a third-party debt; |
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| 150 | 150 | | (G) a reference to the required report on the proposed |
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| 151 | 151 | | program and a statement identifying the location where the report |
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| 152 | 152 | | is available for public inspection; |
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| 153 | 153 | | (H) a statement of the time and place for a public |
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| 154 | 154 | | hearing on the proposed program; and |
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| 155 | 155 | | (I) a statement identifying the appropriate |
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| 156 | 156 | | representative of the local government and the appropriate |
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| 157 | 157 | | assessor-collector for purposes of consulting regarding collecting |
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| 158 | 158 | | the proposed contractual assessments imposed on the assessed |
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| 159 | 159 | | property; |
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| 160 | 160 | | (2) hold a public hearing at which the public may comment on |
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| 161 | 161 | | the proposed program; and |
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| 162 | 162 | | (3) adopt a resolution establishing the program and the |
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| 163 | 163 | | terms of the program, including: |
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| 164 | 164 | | (A) a description of each aspect of the program that may be |
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| 165 | 165 | | amended only after another public hearing is held. |
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| 166 | 166 | | (b) For purposes of Subsection (a)(3)(A), the resolution |
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| 167 | 167 | | may incorporate the report or the amended version of the report, as |
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| 168 | 168 | | appropriate, by reference. |
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| 169 | 169 | | (c) Subject to the terms of the resolution establishing the |
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| 170 | 170 | | program as referenced by Subsection (a)(3)(B), the governing body |
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| 171 | 171 | | of a local government may amend a program by resolution. |
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| 172 | 172 | | (d) A local government may: |
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| 173 | 173 | | (1) hire and set the compensation of a program |
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| 174 | 174 | | administrator and program staff; or |
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| 175 | 175 | | (2) contract for professional services necessary to |
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| 176 | 176 | | administer a program. |
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| 177 | 177 | | (e) A local government may impose fees to offset the costs |
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| 178 | 178 | | of administering a program. The fees authorized by this subsection |
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| 179 | 179 | | may be assessed as: |
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| 180 | 180 | | (1) a program application fee paid by the property |
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| 181 | 181 | | owner requesting to participate in the program expressed as a set |
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| 182 | 182 | | amount, a percentage of the amount of the assessment, or in any |
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| 183 | 183 | | other manner; |
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| 184 | 184 | | (2) a component of the interest rate on the assessment |
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| 185 | 185 | | in the written contract between the local government and the |
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| 186 | 186 | | property owner; or |
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| 187 | 187 | | (3) a combination of Subdivisions (1) and (2). |
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| 188 | 188 | | (f) A report for a proposed program shall be prepared by the |
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| 189 | 189 | | local government and include the following: |
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| 190 | 190 | | (1) a map showing the boundaries of the proposed |
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| 191 | 191 | | region; |
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| 192 | 192 | | (2) a form contract between the local government and |
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| 193 | 193 | | the property owner specifying the terms of: |
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| 194 | 194 | | (A) assessment under the program; and |
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| 195 | 195 | | (B) financing provided by a third party or the |
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| 196 | 196 | | local government, as appropriate; |
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| 197 | 197 | | (3) if the proposed program provides for third-party |
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| 198 | 198 | | financing, a form contract between the local government and the |
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| 199 | 199 | | third party regarding the servicing of the debt through |
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| 200 | 200 | | assessments; |
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| 201 | 201 | | (4) a description of types of qualified projects that |
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| 202 | 202 | | may be subject to contractual assessments; |
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| 203 | 203 | | (5) a statement identifying a local government |
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| 204 | 204 | | representative authorized to enter into written contracts on behalf |
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| 205 | 205 | | of the local government; |
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| 206 | 206 | | (6) a plan for ensuring sufficient capital for |
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| 207 | 207 | | third-party financing; |
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| 208 | 208 | | (7) if bonds will be issued to provide capital to |
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| 209 | 209 | | finance qualified projects as part of the program as provided by |
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| 210 | 210 | | this Chapter: |
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| 211 | 211 | | (A) a maximum aggregate annual dollar amount for |
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| 212 | 212 | | financing through contractual assessments to be provided by the |
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| 213 | 213 | | local government under the program; |
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| 214 | 214 | | (B) a method for ranking requests from property |
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| 215 | 215 | | owners for financing through contractual assessments in priority |
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| 216 | 216 | | order if requests appear likely to exceed the authorization amount; |
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| 217 | 217 | | and |
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| 218 | 218 | | (C) a method for determining: |
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| 219 | 219 | | (i) the interest rate and period during |
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| 220 | 220 | | which contracting owners would pay an assessment; and |
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| 221 | 221 | | (ii) the maximum amount of an assessment; |
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| 222 | 222 | | (8) a method for ensuring that the period of the |
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| 223 | 223 | | contractual assessment does not exceed the useful life of the |
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| 224 | 224 | | qualified project that is the basis for the assessment; |
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| 225 | 225 | | (9) a description of the application process and |
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| 226 | 226 | | eligibility requirements for financing qualified projects to be |
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| 227 | 227 | | repaid through contractual assessments under the program; |
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| 228 | 228 | | (10) a method as prescribed by Subsection (b) for |
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| 229 | 229 | | ensuring that property owners requesting to participate in the |
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| 230 | 230 | | program demonstrate the financial ability to fulfill financial |
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| 231 | 231 | | obligations to be repaid through contractual assessments; |
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| 232 | 232 | | (11) a statement explaining the manner in which |
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| 233 | 233 | | property will be assessed and assessments will be collected; |
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| 234 | 234 | | (12) a description of marketing and participant |
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| 235 | 235 | | education services to be provided for the program; |
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| 236 | 236 | | (13) a description of quality assurance and antifraud |
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| 237 | 237 | | measures to be instituted for the program; and |
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| 238 | 238 | | (14) the procedures for collecting the proposed |
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| 239 | 239 | | contractual assessments. |
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| 240 | 240 | | Sec. 400.008 DEFINITIONS. For purposes of this program: |
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| 241 | 241 | | (a) "Local government" means a municipality, county, |
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| 242 | 242 | | council of government. |
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| 243 | 243 | | (b) "Program" means a program established under this |
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| 244 | 244 | | chapter. |
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| 245 | 245 | | (c) "Program Administrator" means a joint-powers authority, |
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| 246 | 246 | | state agency with the authority to issue bonds as defined under this |
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| 247 | 247 | | chapter, or a regional council of governments acting within its |
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| 248 | 248 | | jurisdictional boundaries. |
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| 249 | 249 | | (c) "Qualified improvement" means a permanent improvement |
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| 250 | 250 | | fixed to real property and intended to assist in mitigating damage |
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| 251 | 251 | | caused by the impacts of weather-related events, flooding and |
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| 252 | 252 | | fires; decrease water or energy consumption or demand. |
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| 253 | 253 | | (d) "Qualified project" means the installation or |
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| 254 | 254 | | modification of a qualifying improvement. |
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| 255 | 255 | | (e) "Residential Real property" means any of the following: |
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| 256 | 256 | | (1) properties with 1-4 living units (may include single |
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| 257 | 257 | | family, townhome, PUD, duplex, triplex, and 4-plex) |
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| 258 | 258 | | (2) manufactured homes that have supportive documentation |
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| 259 | 259 | | showing they have foundations or are permanently affixed and taxed |
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| 260 | 260 | | as real property. |
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| 261 | 261 | | (f) "Qualifying improvement" includes any: |
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| 262 | 262 | | (1) Energy conservation and efficiency improvement, which |
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| 263 | 263 | | is a measure to reduce consumption through conservation or a more |
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| 264 | 264 | | efficient use of electricity, natural gas, propane, or other forms |
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| 265 | 265 | | of energy on the property, including, but not limited to, air |
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| 266 | 266 | | sealing; installation of insulation; installation of |
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| 267 | 267 | | energy-efficient heating, cooling, or ventilation systems; |
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| 268 | 268 | | building modifications to increase the use of daylight; replacement |
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| 269 | 269 | | of windows; installation of energy controls or energy recovery |
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| 270 | 270 | | systems; and installation of efficient lighting equipment. |
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| 271 | 271 | | (2) Weather and Fire resistance improvements, which |
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| 272 | 272 | | includes, but is not limited to: |
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| 273 | 273 | | (a) Improving the strength of the roof deck attachment; |
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| 274 | 274 | | (b) Creating a secondary water barrier to prevent water |
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| 275 | 275 | | intrusion; |
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| 276 | 276 | | (c) Installing wind-resistant shingles; |
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| 277 | 277 | | (d) Installing gable-end bracing; |
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| 278 | 278 | | (e) Reinforcing roof-to-wall connections; |
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| 279 | 279 | | (f) Installing storm shutters; or |
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| 280 | 280 | | (g) Installing opening protections. |
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| 281 | 281 | | (h) Installing lightning protection devices and |
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| 282 | 282 | | whole-structure surge protection systems. |
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| 283 | 283 | | (3) Wastewater treatment improvement, which includes, but |
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| 284 | 284 | | is not limited to the replacement or improvement of an onsite sewage |
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| 285 | 285 | | treatment and disposal system with an advanced onsite treatment and |
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| 286 | 286 | | disposal system or technology or the replacement of an onsite |
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| 287 | 287 | | sewage treatment and disposal system with a central sewage system. |
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| 288 | 288 | | (4) Flood and water damage mitigation and resiliency |
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| 289 | 289 | | improvement, which includes, but not limited to projects and |
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| 290 | 290 | | installation for the raising of a structure above the base flood |
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| 291 | 291 | | elevation to reduce flood damage; A flood diversion apparatus |
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| 292 | 292 | | and/or sea wall improvement, which includes seawall repairs and |
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| 293 | 293 | | seawall replacements; Flood damage resistant building materials; |
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| 294 | 294 | | Electrical, mechanical, plumbing, or other system improvements |
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| 295 | 295 | | that reduce flood damage; or, Other improvements that qualify for |
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| 296 | 296 | | reductions in flood insurance premiums. |
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| 297 | 297 | | (5) Environmental health improvement, which is an |
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| 298 | 298 | | improvement or measure intended to mitigate harmful environmental |
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| 299 | 299 | | health effects to property occupants, including, but not limited to |
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| 300 | 300 | | measures that do any of the following: |
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| 301 | 301 | | Mitigate the presence of lead, heavy metals, polyfluoroalkl |
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| 302 | 302 | | substance (PFAS) contamination, or other harmful contaminants in |
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| 303 | 303 | | potable water systems. Improvements may include, but are not |
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| 304 | 304 | | limited to, conversion of well water to municipal water systems, |
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| 305 | 305 | | replacing lead water service lines, or installing water filters; |
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| 306 | 306 | | Mitigate lead paint contamination in residential housing built |
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| 307 | 307 | | before 1978; and, Mitigate indoor air pollution or contaminants, |
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| 308 | 308 | | including, but not limited to, particulate matter (PM), viruses, |
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| 309 | 309 | | bacteria, and mold. |
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| 310 | 310 | | Sec. 400.009 PROGRAM ELIGIBILITY. The method for ensuring |
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| 311 | 311 | | a demonstration of financial ability of the residential property |
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| 312 | 312 | | owner to participate in the program must be based on appropriate |
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| 313 | 313 | | underwriting factors, including: |
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| 314 | 314 | | (a) providing for verification that: |
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| 315 | 315 | | (1) the property owner requesting to participate under the |
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| 316 | 316 | | program: |
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| 317 | 317 | | (A) is the legal owner of the benefited property; |
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| 318 | 318 | | (B) is current on mortgage and property tax payments; and |
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| 319 | 319 | | (C) is not insolvent or in bankruptcy proceedings; and |
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| 320 | 320 | | (2) the title of the benefited property is not in dispute; |
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| 321 | 321 | | and |
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| 322 | 322 | | (3) requiring an appropriate ratio of the amount of the |
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| 323 | 323 | | assessment to the assessed value of the property. |
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| 324 | 324 | | (b) The local government shall make the report available for |
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| 325 | 325 | | public inspection: |
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| 326 | 326 | | (1) on the local government's Internet website; and |
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| 327 | 327 | | (2) at the office of the representative designated to enter |
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| 328 | 328 | | into written contracts on behalf of the local government under the |
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| 329 | 329 | | program. |
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| 330 | 330 | | Sec. 400.010 LIENS. |
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| 331 | 331 | | (a) A contractual assessment under this chapter and any |
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| 332 | 332 | | interest or penalties on the assessment: |
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| 333 | 333 | | (1) is a first and prior lien against the real property on |
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| 334 | 334 | | which the assessment is imposed from the date on which the notice of |
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| 335 | 335 | | contractual assessment is recorded as provided by this Chapter and |
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| 336 | 336 | | until the assessment, interest, or penalty is paid; and |
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| 337 | 337 | | (2) has the same priority status as a lien for any other ad |
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| 338 | 338 | | valorem tax. |
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| 339 | 339 | | (b) After the notice of a contractual assessment is recorded |
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| 340 | 340 | | as provided under this Chapter, the lien may not be contested on the |
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| 341 | 341 | | basis that the improvement is not a qualified improvement, or the |
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| 342 | 342 | | project is not a qualified project. |
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| 343 | 343 | | (c) The lien runs with the land, and that portion of the |
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| 344 | 344 | | assessment under the assessment contract that has not yet become |
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| 345 | 345 | | due is not eliminated by foreclosure of a property tax lien. |
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| 346 | 346 | | (d) The assessment lien may be enforced by the local |
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| 347 | 347 | | government in the same manner that a property tax lien against real |
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| 348 | 348 | | property may be enforced by the local government to the extent the |
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| 349 | 349 | | enforcement is consistent with Section 50, Article XVI, Texas |
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| 350 | 350 | | Constitution. |
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| 351 | 351 | | (e) Delinquent installments of the assessments incur |
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| 352 | 352 | | interest and penalties in the same manner as delinquent property |
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| 353 | 353 | | taxes. |
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| 354 | 354 | | (f) A local government may recover costs and expenses, |
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| 355 | 355 | | including attorney's fees, in a suit to collect a delinquent |
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| 356 | 356 | | installment of an assessment in the same manner as in a suit to |
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| 357 | 357 | | collect a delinquent property tax. |
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| 358 | 358 | | Sec. 400.011. CONTRACT FOR COLLECTION OF ASSESSMENTS; NO |
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| 359 | 359 | | PERSONAL LIABILITY. |
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| 360 | 360 | | (a) The governing body of a local government may contract |
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| 361 | 361 | | with the governing body of another taxing unit, as defined by |
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| 362 | 362 | | Section 1.04, Tax Code, or another entity, including a county |
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| 363 | 363 | | assessor-collector, to perform the duties of the local government |
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| 364 | 364 | | relating to collection of assessments imposed by the local |
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| 365 | 365 | | government under this chapter. |
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| 366 | 366 | | (b) A county assessor-collector who performs the duties of a |
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| 367 | 367 | | local government relating to collection of assessments imposed by a |
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| 368 | 368 | | local government under this chapter is not personally liable as a |
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| 369 | 369 | | result of exercising those duties under this chapter. |
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| 370 | 370 | | Sec. 400.012 CONSUMER PROTECTIONS. In order to protect the |
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| 371 | 371 | | property owners' interest each program administrators under this |
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| 372 | 372 | | Chapter shall provide the following: |
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| 373 | 373 | | (a) Financial Disclosures. Provide a financing estimate and |
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| 374 | 374 | | disclosure to the qualifying residential real property owner |
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| 375 | 375 | | entering into an assessment financing contract that includes: |
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| 376 | 376 | | (1) The total amount estimated to be funded including the |
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| 377 | 377 | | cost of the qualifying improvements, program fees, and capitalized |
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| 378 | 378 | | interest, if any; |
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| 379 | 379 | | (2) The annual estimated payment amount; |
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| 380 | 380 | | (3) The term of the assessment; |
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| 381 | 381 | | (4) The fixed interest charged and estimated annual |
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| 382 | 382 | | percentage rate; |
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| 383 | 383 | | (5) The qualifying improvement(s); |
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| 384 | 384 | | (6) A disclosure that if the property owner sells or |
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| 385 | 385 | | refinances their property, the property owner may be required by a |
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| 386 | 386 | | mortgage lender to pay off the assessment as a condition of sale or |
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| 387 | 387 | | refinancing; |
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| 388 | 388 | | (7) A disclosure that the assessment will be collected along |
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| 389 | 389 | | with the property owner's property taxes and will result in a lien |
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| 390 | 390 | | on their property from the date of the assessment contract; and, |
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| 391 | 391 | | (8) A disclosure that failure to pay the assessment may |
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| 392 | 392 | | result in penalties and fees, along with the issuance of a tax |
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| 393 | 393 | | certificate that could result in the property owner losing the |
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| 394 | 394 | | home. |
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| 395 | 395 | | (b) Confirmation Call. Complete, with a qualifying |
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| 396 | 396 | | residential real property owner or an authorized representative of |
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| 397 | 397 | | a qualifying residential real property owner, an oral confirmation |
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| 398 | 398 | | call in plain language via a live telephone call, which shall be |
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| 399 | 399 | | recorded in an audio format in accordance with Texas law. A |
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| 400 | 400 | | voicemail to the qualifying residential real property owner will |
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| 401 | 401 | | not satisfy this requirement. As part of this call, the following |
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| 402 | 402 | | shall be included: |
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| 403 | 403 | | (1) Confirm that at least one qualifying residential real |
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| 404 | 404 | | property owner has access to a copy of the assessment contract and |
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| 405 | 405 | | financing estimates and disclosures; |
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| 406 | 406 | | (2) Ask the qualifying residential real property owner if |
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| 407 | 407 | | they would like to communicate primarily in a language other than |
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| 408 | 408 | | English; |
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| 409 | 409 | | (3) Confirm with the qualifying residential real property |
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| 410 | 410 | | owner the following: |
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| 411 | 411 | | (A) The qualifying improvement(s) being financed; |
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| 412 | 412 | | (B) The total estimated annual costs the qualifying |
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| 413 | 413 | | residential real property owner will have to pay under the |
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| 414 | 414 | | assessment contract including applicable fees; |
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| 415 | 415 | | (C) The total estimated average monthly equivalent amount |
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| 416 | 416 | | of funds the qualifying residential real property owner would have |
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| 417 | 417 | | to save in order to pay the annual costs of the assessment including |
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| 418 | 418 | | applicable fees; |
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| 419 | 419 | | (D) The estimated date the qualifying residential real |
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| 420 | 420 | | property owner's first assessment related property tax payment will |
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| 421 | 421 | | be due; |
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| 422 | 422 | | (E) The term of the assessment contract; |
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| 423 | 423 | | (F) That payments for the assessment contract will cause the |
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| 424 | 424 | | qualifying residential real property owner's annual tax bill to |
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| 425 | 425 | | increase, that payments will be made through an additional annual |
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| 426 | 426 | | assessment on the property, and will be paid either directly to the |
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| 427 | 427 | | county tax collector's office as part of the total annual secured |
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| 428 | 428 | | property tax bill or may be paid through the qualifying residential |
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| 429 | 429 | | real property owner's mortgage impound (escrow) account; |
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| 430 | 430 | | (G) That the qualifying residential property owner has |
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| 431 | 431 | | disclosed whether the property has received or is seeking |
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| 432 | 432 | | additional program assessments and has disclosed all other |
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| 433 | 433 | | assessments or special taxes that are or about to be placed on the |
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| 434 | 434 | | property; |
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| 435 | 435 | | (H) That the property will be subject to a lien during the |
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| 436 | 436 | | term of the assessment contract and that the obligations under the |
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| 437 | 437 | | agreement may be required to be paid in full before the qualifying |
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| 438 | 438 | | residential real property owner sells or refinances the property; |
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| 439 | 439 | | (I) That any potential utility or insurance savings are not |
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| 440 | 440 | | guaranteed and will not reduce the assessment payments or total |
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| 441 | 441 | | assessment amount; |
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| 442 | 442 | | (J) That the Administrator or contractor do not provide tax |
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| 443 | 443 | | advice and that the qualifying residential real property owner |
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| 444 | 444 | | should seek professional tax advice if he or she has questions |
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| 445 | 445 | | regarding tax credits, tax deductibility, or other tax impacts of |
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| 446 | 446 | | the qualifying improvements or the assessment contract. |
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| 447 | 447 | | (c) Confirmation of Completion. Before disbursing all funds |
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| 448 | 448 | | for qualifying improvements on qualifying residential real |
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| 449 | 449 | | property to either a licensed contractor in the State of Texas |
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| 450 | 450 | | performing work under the program or the residential property |
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| 451 | 451 | | owner, the Administrator shall first confirm the work has been |
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| 452 | 452 | | completed, either through written certification from the property |
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| 453 | 453 | | owner, a recorded telephone call with the property owner, or a site |
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| 454 | 454 | | inspection through a third party means. |
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| 455 | 455 | | (d) No Disclosure of maximum assessment financing. A local |
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| 456 | 456 | | government or program Administrator shall not directly disclose the |
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| 457 | 457 | | maximum assessment financing amount a qualifying residential real |
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| 458 | 458 | | property owner is eligible for to any contractor or to any third |
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| 459 | 459 | | party engaged in soliciting a assessment contract from a qualifying |
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| 460 | 460 | | residential real property owner. |
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| 461 | 461 | | (e) Three Day Right to Cancel - The qualifying residential |
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| 462 | 462 | | real property owner shall be given the right to cancel the |
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| 463 | 463 | | assessment contract within no less than three business days after |
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| 464 | 464 | | signing the assessment contract without any financial penalty for |
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| 465 | 465 | | doing so. |
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| 466 | 466 | | Sec. 400.013 PROHIBITED FINANCING. |
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| 467 | 467 | | (a) The term of the assessment contract shall not exceed the |
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| 468 | 468 | | useful life of the qualifying improvement being installed or the |
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| 469 | 469 | | weighted average useful life of all qualifying improvements being |
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| 470 | 470 | | financed if multiple qualifying improvements are being financed. In |
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| 471 | 471 | | either case the financing term shall not exceed 30 years. |
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| 472 | 472 | | (b) A program Administrator shall not offer assessment |
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| 473 | 473 | | financing on qualifying residential real property that includes one |
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| 474 | 474 | | or more of the following: |
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| 475 | 475 | | (1) Negative amortization schedule |
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| 476 | 476 | | (2) Balloon payments, or |
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| 477 | 477 | | (3) Pre-payment fees (other than nominal administrative |
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| 478 | 478 | | costs). |
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| 479 | 479 | | (4) No reverse mortgages (HECM) |
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| 480 | 480 | | (5) No assessment on properties gifted to borrowers by |
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| 481 | 481 | | charitable organizations |
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| 482 | 482 | | Sec. 400.014. FINANCING REQUIREMENTS. Before a qualifying |
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| 483 | 483 | | residential real property owner enters into an assessment contract, |
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| 484 | 484 | | the program Administrator shall reasonably determine the property |
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| 485 | 485 | | owner has an ability to pay the estimated annual assessment and the |
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| 486 | 486 | | property meets the minimum eligibility criteria including the |
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| 487 | 487 | | following: |
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| 488 | 488 | | (a) Utilize commercially reasonable standards to |
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| 489 | 489 | | determine the real property owner's ability to repay. |
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| 490 | 490 | | (b) Less than 20% of property value for the first $700k |
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| 491 | 491 | | (inclusive of existing assessments, capitalized interest and fees) |
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| 492 | 492 | | plus <10% of property value for amounts above $700k. |
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| 493 | 493 | | (c) All debt secured by the property may not exceed 90% of |
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| 494 | 494 | | the Property's fair market value ("FMV"), at the time the |
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| 495 | 495 | | application is submitted. Residential property owners shall have a |
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| 496 | 496 | | minimum of 10% equity in the subject property prior to receiving |
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| 497 | 497 | | financing through the Program. The max loan-to-value of the |
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| 498 | 498 | | residential property, inclusive of mortgage debt and assessments at |
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| 499 | 499 | | time of financing may not exceed 100% of FMV. The sum of all debt |
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| 500 | 500 | | secured by the subject Property, the new assessment and all |
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| 501 | 501 | | involuntary liens as described herein must not exceed the |
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| 502 | 502 | | Property's market value. |
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| 503 | 503 | | (d) Mortgages must be current with no more than 1 x 30 day |
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| 504 | 504 | | late in the past 6 months or period of ownership whichever is |
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| 505 | 505 | | shorter. |
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| 506 | 506 | | (e) The total amount of any annual property taxes and |
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| 507 | 507 | | assessments, including all assessments under this Chapter shall not |
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| 508 | 508 | | exceed twenty percent (20%) of the Property's FMV. |
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| 509 | 509 | | (f) Property tax payments for the property must be current |
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| 510 | 510 | | and the homeowner must certify that there is no more than one late |
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| 511 | 511 | | payment for the shorter of the previous three years or since the |
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| 512 | 512 | | present homeowner acquired the Property, whichever period is |
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| 513 | 513 | | shorter. |
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| 514 | 514 | | (g) The Property must not have any involuntary liens with a |
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| 515 | 515 | | balance greater than one thousand Dollars ($1,000.00) or notices of |
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| 516 | 516 | | default currently recorded that have not been rescinded. |
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| 517 | 517 | | (h) The residential property owner may not currently be in |
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| 518 | 518 | | bankruptcy or in forbearance. |
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| 519 | 519 | | Sec. 400.015 CONTRACTOR REQUIREMENTS. Minimum contractor |
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| 520 | 520 | | requirements include: |
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| 521 | 521 | | (a) Contractor Licensing, Bonding and Insurance - A program |
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| 522 | 522 | | Administrator shall not provide payment to either the contractor |
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| 523 | 523 | | offering assessment financing on qualifying residential real |
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| 524 | 524 | | property or the contracting residential property owner on an |
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| 525 | 525 | | assessment financing project unless all of the following |
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| 526 | 526 | | requirements are met: |
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| 527 | 527 | | (1) The contractor maintains in good standing an |
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| 528 | 528 | | appropriate license from the State of Texas, if applicable, as well |
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| 529 | 529 | | as any other permits, licenses, or registrations required for |
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| 530 | 530 | | engaging in its business in the jurisdiction where it operates and |
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| 531 | 531 | | maintains all state required bond and insurance coverage. |
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| 532 | 532 | | (2) The program Administrator obtains the State-licensed |
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| 533 | 533 | | contractor's written agreement that they and/or relevant third |
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| 534 | 534 | | parties will act in accordance with applicable advertising and |
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| 535 | 535 | | marketing laws and regulations and all other applicable laws. |
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| 536 | 536 | | (b) Contractor Application Review, Approval, and Onboarding |
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| 537 | 537 | | Processes. A program enacted under this Chapter within the State, |
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| 538 | 538 | | shall maintain processes for qualifying eligible State-licensed |
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| 539 | 539 | | contractors that include the following reasonable review of the |
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| 540 | 540 | | following for each contractor: |
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| 541 | 541 | | (1) Relevant work/project history, |
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| 542 | 542 | | (2) Financial and reputational background checks, |
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| 543 | 543 | | (3) Criminal background checks, and |
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| 544 | 544 | | (4) Status on Better Business Bureau and/or other online |
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| 545 | 545 | | platforms that track contractor reviews. |
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| 546 | 546 | | 400.016 PROHIBITED MARKETING AND COMMUNICATIONS PRACTICES. |
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| 547 | 547 | | Under this Chapter: |
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| 548 | 548 | | (a) A local government, program Administrator, or any |
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| 549 | 549 | | contractor within the State of Texas are prohibited from the |
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| 550 | 550 | | following: |
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| 551 | 551 | | (1) Suggesting or implying in any way that assessment |
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| 552 | 552 | | financing is a government assistance program, |
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| 553 | 553 | | (2) Suggesting or implying that qualifying improvements are |
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| 554 | 554 | | free or that assessment financing is a free program, or |
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| 555 | 555 | | (3) Suggesting or implying that financing qualifying |
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| 556 | 556 | | improvements using the program does not require the property owner |
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| 557 | 557 | | to repay the financial obligation. |
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| 558 | 558 | | (b) No Tax Advice. A local government, program |
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| 559 | 559 | | administrator, or contractor shall not make any representation as |
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| 560 | 560 | | to the tax deductibility of an assessments on qualifying |
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| 561 | 561 | | residential real property. A local government, administrator, or |
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| 562 | 562 | | contractor may encourage property owners to seek the advice of a tax |
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| 563 | 563 | | professional regarding tax matters related to assessments. |
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| 564 | 564 | | (c) Project Pricing. Contractors shall not present a higher |
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| 565 | 565 | | price for a project on qualifying residential real property |
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| 566 | 566 | | financed by an assessment contract than the contractor would |
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| 567 | 567 | | otherwise reasonably present if the project were not being financed |
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| 568 | 568 | | through an assessment contract. |
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| 569 | 569 | | SECTION 2. This Act takes effect September 1, 2021. |
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