89R1489 AMF-F
By: Holt H.B. No. 4986
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.
SECTION 2. Section 271.043(7-a), Local Government Code, is
amended to read as follows:
(7-a) "Public work" [for an issuer that is a
municipality or county:
[(A)] means:
(A) [any of the following public improvements as
authorized by law:
[(i)] a street, road, highway, bridge,
sidewalk, [or] parking structure,[;
[(ii) a] landfill,[;
[(iii) an] airport, or park;
(B) [(iv)] a part of a utility system, water
supply project, water treatment plant, wastewater treatment plant,
[or] water or wastewater conveyance facility,[;
[(v) a] wharf, [or] dock, or[;
[(vi) a] flood control and drainage
project;
[(vii) a public safety facility, including
a police station, fire station, emergency shelter, jail, or
juvenile detention facility;
[(viii) a judicial facility;
[(ix) an administrative office building
housing the governmental functions of the municipality or county;
[(x) an animal shelter;
[(xi) a library; or
[(xii) a park or recreation facility that
is generally accessible to the public and is part of the municipal
or county park system;
[(B) means the rehabilitation, expansion,
reconstruction, or maintenance of an existing stadium, arena, civic
center, convention center, or coliseum that is owned and operated
by the municipality or county or by an entity created to act on
behalf of the municipality or county; and]
(C) a telecommunications, wireless
communications, or information technology system and any computer
application hardware or software; or
(D) a cybersecurity system [does not include:
[(i) a facility for which more than 50
percent of the average annual usage is or is intended to be for
professional or semi-professional sports;
[(ii) a new stadium, arena, civic center,
convention center, or coliseum that is or is intended to be leased
by a single for-profit tenant for more than 180 days in a single
calendar year; or
[(iii) a hotel].
SECTION 3. Section 271.045, Local Government Code, is
amended by amending Subsections (a) and (b) and adding Subsections
(f) and (g) to read as follows:
(a) The governing body of an issuer may authorize
certificates only as necessary to pay a contractual obligation to
be incurred for the construction, creation, renovation, repair, or
improvement of a public work that is necessary:
(1) to comply with a state or federal law or rule, but
only if the issuer has been officially notified of noncompliance
with the law or rule [construction of any public work];
(2) to mitigate the impact of the following, as
determined by the governing body:
(A) a public health emergency in the jurisdiction
of the issuer that poses an imminent danger to the physical health
or safety of the residents of the issuer; or
(B) a natural disaster in the jurisdiction of the
issuer subject to a state of disaster declared or renewed by:
(i) the governor under Section 418.014,
Government Code, in the fiscal year that the certificates are
authorized; or
(ii) the presiding officer of the governing
body of the issuer under Section 418.108, Government Code, in the
fiscal year that the certificates are authorized [purchase of
materials, supplies, equipment, machinery, buildings, land, and
rights-of-way for authorized needs and purposes]; or
(3) to respond to a court decision that requires the
issuer to construct, create, renovate, repair, or improve a public
work [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 a change order for a contractual
obligation incurred for the construction, creation, renovation,
repair, or improvement of a public work [orders], the governing
body of an issuer may authorize the issuance of certificates [may be
authorized] in an amount not to exceed 15 [25] percent of the [a]
contractual obligation [incurred for the construction of public
works], but certificates may be delivered only in the amount
necessary to discharge the contractual obligation [obligations].
(f) The governing body of an issuer that authorizes the
issuance of a certificate shall enter into a contract for the
construction, creation, renovation, repair, or improvement of the
public work for which the issuance is authorized not later than the
90th day after the date the governing body authorizes the issuance.
(g) The governing body of an issuer that authorizes a
certificate to pay a contractual obligation under Subsection
(a)(2)(A) shall adopt a resolution describing the conditions and
circumstances of the public health emergency.
SECTION 4. Section 271.0461, Local Government Code, is
amended to read as follows:
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 5. 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 6. 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 registered [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 7. Section 271.057(a), Local Government Code, is
amended to read as follows:
(a) Except as provided by Subsection (b), a contract let
under this subchapter for the construction, creation, renovation,
repair, or improvement of a public work [works] or the purchase of
materials, equipment, supplies, or machinery and for which
competitive bidding is required by this subchapter must be let to
the lowest responsible bidder and, as the governing body
determines, may be let on a lump-sum basis or unit price basis.
SECTION 8. Section 271.059, Local Government Code, is
amended to read as follows:
Sec. 271.059. CONTRACTOR'S BONDS. If a contract is for the
construction, creation, renovation, repair, or improvement of a
public work [works] and is required by this subchapter to be
submitted to competitive bidding, the successful bidder must
execute a good and sufficient payment bond and performance bond.
The bonds must each be:
(1) in the full amount of the contract price; and
(2) executed, in accordance with Chapter 2253,
Government Code, with a surety company authorized to do business in
this state.
SECTION 9. Section 271.046, Local Government Code, is
repealed.
SECTION 10. The changes in law made by this Act apply only
to a certificate of obligation issued on or after the effective date
of this Act. A certificate of obligation issued before the
effective date of this Act is governed by the law in effect on the
date the certificate was issued, and the former law is continued in
effect for that purpose.
SECTION 11. This Act takes effect September 1, 2025.