By: Sparks S.B. No. 2490
A BILL TO BE ENTITLED
AN ACT
relating to the issuance of certificates of obligation by local
governments.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. This Act shall be known as the Certificate of
Obligation Reform Act of 2023.
SECTION 2. Sections 271.043, 271.045, and 271.0461, Local
Government Code, are amended to read as follows:
Sec. 271.043. DEFINITIONS. In this subchapter:
(10) "Public work" means:
(i) streets, roads, highways, bridges,
sidewalks, parks, landfills, parking structures, or airports;
(ii) telecommunications, wireless
communications, information technology systems, applications,
hardware, or software;
(iii) cybersecurity; or
(iv) as part of any utility system, water supply
project, water plant, wastewater plant, water and wastewater
distribution or conveyance facility, wharf, dock, or flood control
and drainage project.
Sec. 271.045. PURPOSES FOR WHICH CERTIFICATES MAY BE
AUTHORIZED. (a) The governing body of an issuer may authorize
only the necessary certificates to pay a contractual obligation to
be incurred for the construction, renovation, repair, or
improvement of a public work:
(1) to comply with a state or federal law, rule, or
regulation if the political subdivision has been officially
notified of noncompliance with the law, rule, or regulation;
(2) if the governing body believes the construction,
renovation, repair, or improvement of a public work is necessary to
mitigate the impact of:
(i) a public health emergency that poses an
imminent danger to a resident's physical health or safety in the
governing body's jurisdiction; or
(ii) a natural disaster in the governing body's
jurisdiction and:
(A) the governor declares or renews a
declaration of a state of disaster under Section 418.014,
Government Code, in that fiscal year, and the governor's
designation of the area threatened includes all or part of the
geographic territory of the local government; or
(B) the presiding officer of the governing
body of a political subdivision declares or renews a declaration of
a local state of disaster under Section 418.108, Government Code,
in that fiscal year, and the presiding officer's designation of the
area threatened includes all or part of the geographic territory of
the local government; or
(3) if a court renders a decision that requires the
local government to construct, renovate, repair, or improve a
public work.
[(1) construction of any public work;
(2) purchase of materials, supplies, equipment, machinery,
buildings, land, and rights-of-way for authorized needs and
purposes; or
(3) payment of contractual obligations for professional
services, including services provided by tax appraisers,
engineers, architects, attorneys, map makers, auditors, financial
advisors, and fiscal agents.]
(b) If necessary because of change orders, the governing
body of an issuer may authorize certificates [maybe authorized] in
an amount not to exceed 15 [25] percent of a contractual obligation
incurred for the construction of public works, but certificates may
be delivered only in the amount necessary to discharge contractual
obligations.
(c) The governing body of a municipality may issue
certificates of obligation to pay all or part of a municipality's
obligations incurred by contract for interests in and rights to
water or sewer treatment capacity in connection with a water supply
and transmission project or sewer treatment or collection project
to be constructed in whole or in part on behalf of the municipality
by another governmental entity or political subdivision pursuant to
a written agreement expressly authorized under Section 552.014 of
this code or Section 791.026, Government Code.
(d) In exercising its authority to issue certificates of
obligation for the purposes specified in Subsection (c), the
municipality must limit the principal amount of certificates to be
issued for the purpose of funding its contractual obligations to an
amount equal to (i) the aggregate of the contractual payments or the
total costs allocated or attributed, under generally accepted
accounting principles, to the capital costs of the project, as
opposed to any maintenance or operating costs to be paid under the
written agreement or (ii) the total cost of the project multiplied
by the percentage of the nameplate capacity of the project acquired
or conveyed by the written agreement to the municipality, whichever
limitation is applicable to the contractual interests or rights
being conveyed or identified in the written agreement.
(e) Work that is directly attributable under generally
accepted accounting principles to the costs of the project and that
is performed by employees of the issuer may be allocated or
attributed to the capital costs of the project.
(f) If the governing body of an issuer authorizes
certificates to pay a contractual obligation under this section,
the governing body must enter into a contract or written agreement
for the construction, renovation, repair, or improvement of a
public work not later than 90 days after the governing body
authorizes the certificates.
(g) If the governing body of an issuer authorizes
certificates to pay a contractual obligation under Subsection
(a)(2)(i), the governing body shall adopt a resolution stating the
conditions and circumstances of the public health emergency.
(h) The provisions of this subchapter relating to
advertisement for competitive bids apply to contractual
obligations to be incurred for a purpose for which certificates are
to be issued under this section.
Sec. 271.0461. ADDITIONAL PURPOSE FOR CERTIFICATES:
DEMOLITION OF DANGEROUS STRUCTURES [OR RESTORATION OF HISTORIC
STRUCTURES]. Certificates may be issued by any municipality for
the payment of contractual obligations to be incurred in
demolishing dangerous structures [or restoring historic
structures] and may be sold for cash, subject to the restrictions
and other conditions of Section 271.050.
SECTION 3. Sections 271.047(c) and (d), Local Government
Code, are amended to read as follows:
(c) A certificate may not mature over a period greater than
30 [40] years from the date of the certificate and may not bear
interest at a rate greater than that allowed by Chapter 1204,
Government Code.
(d) Except as provided by this subsection, the governing
body of an issuer may not authorize a certificate to pay a
contractual obligation to be incurred if a bond proposition to
authorize the issuance of bonds for the same purpose was submitted
to the voters during the preceding five [three] years and failed to
be approved. A governing body may authorize a certificate that the
governing body is otherwise prohibited from authorizing under this
subsection:
(1) in a case described by Sections 271.056(1)-(3);
and
(2) to comply with a state or federal law, rule, or
regulation if the political subdivision has been officially
notified of noncompliance with the law, rule, or regulation.
SECTION 4. Section 271.049(c), Local Government Code, is
amended to read as follows:
(c) If before the date tentatively set for the authorization
of the issuance of the certificates or if before the authorization,
the municipal secretary or clerk if the issuer is a municipality, or
the county clerk if the issuer is a county, receives a petition
signed by at least two [five] percent of the qualified voters of the
issuer protesting the issuance of the certificates, the issuer may
not authorize the issuance of the certificates unless the issuance
is approved at an election ordered, held, and conducted in the
manner provided for bond elections under Chapter 1251, Government
Code.
SECTION 5. Section 271.046, Local Government Code, is
repealed.
SECTION 6. Chapter 271, Local Government Code, as amended
by this Act, applies to a certificate issued on or after the
effective date of this Act.
SECTION 7. 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, 2023.