Legislation Relating to Public Finance Enacted by the 86th Texas Legislature (Regular Session)

Public Finance Alert | June.25.2019

This document briefly summarizes a select list of legislation relating to public finance enacted by the 86th Legislature (Regular Session) that became law. Bills are arranged alphabetically by subject matter, separating laws of general applicability from laws generally governing special-purpose districts or a type of special-purpose district. Bills are listed in numerical order within each category, beginning with House Bills.

This document does not summarize the numerous local laws enacted to create or regulate a particular special-purpose district. In addition, for the most part, bills limited in application to a single district by use of a classification scheme (i.e., bracket bills) are not summarized.

General Laws

Charter Schools

HB 4258 relating to approval by the Attorney General of Texas (the “Attorney General”) of certain bonds issued to finance educational facilities for certain charter schools. Effective 9/1/2019.

HB 4258 moves TEFRA bond approval for state-approved public charter schools away from municipalities and authorizes the Attorney General’s office to issue an approval as required by Section 147(f) of the Internal Revenue Code of 1986.

Contracts

HB 793 relating to certain government contracts with companies that boycott Israel. Effective immediately.

HB 793 amends the existing boycott Israel statute, specifically revising Sections 2270.001 and 2270.002, Government Code, to exclude sole proprietorships and to exempt companies with fewer than ten (10) employees and contracts valued at less than $100,000 from the written verification required of companies contracting with Texas governmental entities (this bill was filed in response to a constitutional challenge to the boycott Israel statute).

It is expected that the Attorney General will continue to confirm compliance with the boycott Israel certification requirements in connection with the review and approval of bond transcripts.

HB 2826 relating to new requirements for contingency fee contracts (including public finance contracts under Section 1201.027, Government Code). Effective 9/1/2019.

HB 2826 imposes new requirements on the procurement of contingency fee contracts for legal services, including public finance contracts under Section 1201.027, Government Code. Specifically, the bill amends Subchapter C of Chapter 2254, Government Code, and makes public finance contracts under Section 1201.027 subject to the requirements of Sections 2254.1032, 2254.1034, 2254.1036 and 2254.1037.

For public finance contracts, under Section 2254.1032, the political subdivision must:

  • Select an attorney or law firm in accordance with Section 2254.003(a), meaning the political subdivision may not make the selection on the basis of competitive bids submitted for the contract or for the services; and
  • Satisfy the following additional requirements:

    • select a well-qualified attorney or law firm on the basis of demonstrated competence, qualifications, and experience in the requested services; and
    • attempt to negotiate for a fair and reasonable price.

Under Section 2254.1032, the political subdivision may:

  • Require indemnification from claims and liabilities resulting from negligent acts or omissions of the attorney or law firm or persons employed by the attorney or law firm (but may not require the law firm to indemnify for claims and liabilities resulting from negligent acts or omissions of the political subdivision or its employees).

Under subsection (a) of Section 2254.1036, the political subdivision may enter into a contingent fee contract only if it complies with new public notice posting and meeting requirements, including specifying the following:

  • The reasons for pursuing the matter and the desired outcome;
  • The qualifications and experience of the selected attorney or firm;
  • The nature of any relationship (including the beginning of the relationship) between the political subdivision and the firm;
  • The reasons why the services cannot be done in-house or with private attorneys under an hourly contract; and
  • The reasons why a contingent fee contract is in the best interests of the residents of the political subdivision.

Under subsection (a)(2) of Section 2254.1035, the contract must be approved in an open meeting.

Under subsection (b) of Section 2254.1036, on approval of a contingent fee contract, the political subdivision is required to state in writing that the political subdivision finds that:

  • There is a substantial need for the legal services;
  • The legal services cannot be adequately performed by the attorneys and supporting personnel of the political subdivision; and
  • The legal services cannot reasonably be obtained from attorneys in private practice under a contract providing only for the payment of hourly fees, without regard to the outcome of the matter, because of the nature of the matter for which the services will be obtained or because the political subdivision does not have funds to pay the estimated amounts required under a contract providing only for the payment of hourly fees.

Under Section 2254.1037, a contingent fee contract is public information subject to disclosure under Chapter 552, Government Code (commonly known as the “Public Information Act”).

Other items of interest:

  • Unlike litigation contracts, public finance contracts are not subject to the Attorney General review requirements of the bill.
  • Contracts that do not comply with the new requirements are void as against public policy, and no fees are authorized to be paid to any person under the contract or under any theory of recovery for work performed in connection with a void contract.
  • The bill repeals Section 403.0305, Government Code, which required the Comptroller of Public Accounts (the “Comptroller”) to approve certain contingency fee contracts of public agencies as defined in Section 30.003(3), Water Code.

Economic Development

HB 3143 relating to the Property Redevelopment and Tax Abatement Act. Effective 9/1/2019.

HB 3143 reauthorizes Chapter 312 of the Tax Code until September 1, 2029. In addition, HB 3143 adds requirements (i) that the governing body of a taxing unit adopting, amending, repealing or re-authoring guidelines and criteria covering tax abatement agreements must hold a public hearing prior to such action, (ii) that the taxing unit must maintain such guidelines and criteria on its internet website (if it maintains a website), (iii) to provide appraisals to the Comptroller for three years following the expiration of the tax abatement agreement, (iv) to provide additional information on the tax abatement agreement in the public notice of the meeting to adopt such agreement, and (v) clarifying that any tax abatement in a reinvestment zone must comply with the Section 312.207, Tax Code majority vote requirements.

Elections and Propositions

HB 3 relating to public school finance and public education; creating a criminal offense; authorizing the imposition of a fee. Subject to certain exceptions, effective 9/1/2019.

HB 3 amends Section 45.003, Education Code, to require the ballot proposition submitted to authorize the issuance of school building bonds to include the following statement: “THIS IS A PROPERTY TAX INCREASE.”

A more detailed summary of HB 3 is included in the section of this report captained “School Finance.”

HB 477 relating to the notice required before the issuance of certain debt obligations by political subdivisions. Effective 9/1/2019.

A summary of HB 477, including new election order, ballot and voter information document requirements for ad valorem tax bond elections, is included in the section of this report captioned “Transparency/Public Disclosure.”

SB 30 relating to new specific purpose requirements with respect to ballot language for a proposition seeking voter approval for the issuance of bonds. Effective 9/1/2019. Changes apply only to an election ordered on or after the effective date of the act.

For school district bond election propositions, SB 30 establishes separate categories of purposes that must be stated in separate propositions, including sports and recreation, performing arts, teacher housing and certain technology acquisitions and updates.

The following provisions (codified as new Sections 45.003(g) and (h), Texas Education Code) apply to school districts under SB 30, notwithstanding new Section 1251.052, Texas Government Code:

  • School districts may include in a single proposition the following:

    • construction, acquisition and equipment of school buildings;
    • purchase of new school buses; and
    • purchase of necessary sites for school buildings.
  • School districts must have the following purposes stated in a separate proposition:

    • construction, acquisition or equipment of stadium with 1,000 or more seats;
    • construction, acquisition or equipment of a natatorium;
    • construction, acquisition or equipment of another recreational facility (other than a gym, playground or play area);
    • construction, acquisition or equipment of a performing arts facility;
    • construction, acquisition or equipment of housing for teachers; and
    • acquisition or update of technology equipment (other than equipment for school security or technology infrastructure integral to the construction of a facility).
  • The question of whether to approve bonds for sports and recreation, performing arts and teacher housing facilities must be printed on the ballot as a separate ballot proposition regardless of whether the facility is proposed as part of the same building or complex containing traditional classroom facilities.
  • Each separate school district bond proposition must state the principal amount of bonds for the portion attributable to the use for sports/recreation, performing arts, teacher housing and traditional classrooms, as applicable.

The following provisions apply to all political subdivisions, including cities, counties, school districts and special districts, under SB 30 (Subchapter B, Chapter 1251, Texas Government Code):

  • For bond elections for debt obligations secured by and payable from ad valorem taxes (other than self-supporting debt), the ballot must specifically state the following:

    • a plain-language description of the single specific purposes for which the debt obligations are to be authorized (Note: this new requirement in Section 1251.052(a)(1) is different than the language in HB 477);
    • the total principal amount of the debt obligations to be authorized; and
    • that taxes sufficient to pay the principal of and interest on the debt obligations will be imposed.

Each single specific purpose for which debt obligations requiring voter approval are to be issued must be printed on the ballot as a separate proposition. A proposition may include as a specific purpose one or more structures or improvements serving substantially the same purpose and may include related improvements and equipment necessary to accomplish the specific purpose.

General Obligation Bonds

HB 440 relating to general obligation bonds issued by political subdivisions. Effective 9/1/2019.

HB 440 imposes new unspent proceeds, useful life and sample ballot requirements in connection with the issuance of general obligation bonds by political subdivisions.

The bill provides that unspent bond proceeds of a school district may be re-programmed at a public meeting of the board of trustees. The bill requires that:

  • The public meeting must be held only for the purpose of considering the use of the unspent proceeds; and
  • That separate votes be taken on the use of proceeds for:

    • a purpose other than to retire the bonds; and
    • the purpose specified at the time the vote is taken.

Unspent proceeds of a city, county or other political subdivision (other than a school district), are subject to the existing requirements that apply to cities (e.g. Chapter 1332, Government, which is repealed by HB 440), which have been re-codified in Section 1253.003. Specifically, the bill authorizes all other political subdivisions, including cities, counties and special districts, to use unspent proceeds of general obligation bonds for:

  • The specific purposes for which the bonds were authorized;
  • To retire the bonds; or
  • For another purpose if the original specific purpose is retired or abandoned and a majority of voters approve the new proposed purpose.

The bill also imposes a new state law useful life test on general obligation bonds as follows:

  • A political subdivision may not issue general obligation bonds to purchase, improve or construct one or more improvements to real property, to purchase one or more items of personal property, or to do both, if the weighted average maturity of the issue of bonds exceeds one hundred twenty percent (120%) of the reasonably expected weighted average economic life of the improvements and personal property financed with the issue of bonds.

The bill also requires political subdivisions to post a sample ballot on the political subdivision’s internet website during the twenty-one (21) days before the election.

Hotel Occupancy Tax Venue Projects

HB 1634 relating to the imposition, rate, and use of revenue derived from certain local hotel occupancy taxes; authorizing the imposition of a tax. Effective immediately.

HB 1634 amends Section 351.101, Tax Code to allow a municipality with a population of more than 10,000 that has a city hall located less than three (3) miles from a space center operated by an agency of the federal government, that is located in a county with a population of four (4) million or more, to use revenue from a hotel occupancy tax to construct, improve, enlarge, equip, renovate, repair or operate a venue related to the promotion of tourism, including a hotel, resort or convention center facility.

HB 1634 also amends Section 352.002, Tax Code by adding a subsection that allows Guadalupe County to impose a seven percent (7%) hotel occupancy tax. This hotel occupancy tax does not apply to a hotel located in a municipality that (i) has a population of 50,000 or more, (ii) is the county seat of a county adjacent to Guadalupe County and (iii) imposes a tax under Chapter 351 applicable to the hotel.

HB 3356 relating to the use of municipal hotel occupancy tax revenue in certain municipalities. Effective immediately.

HB 3356 expands the purposes for which certain municipalities may use revenue from the municipal hotel occupancy tax to include promoting tourism and the convention and hotel industry by constructing, improving, equipping, repairing, maintaining, operating, or expanding a coliseum or multiuse facility if the majority of the events at the coliseum or facility attract tourists who substantially increase economic activity at hotels in the municipality.

HB 4347 relating to the authority of certain municipalities to use certain tax revenue for hotel and convention center projects and other qualified projects. Effective 9/1/2019.

HB 4347 is a complete overhaul of the hotel and convention center project rebate scheme contained in Chapter 351, Tax Code. The bill:

  • Provides that more than forty (40) specific municipalities may receive the revenue derived from certain taxes generated, paid and collected by a qualified hotel, and each restaurant, bar and retail establishment located in or connected to the hotel or the related qualified convention center facility, that is located in the municipality. Such taxes include:

    • the State of Texas’ sales and use taxes and hotel occupancy taxes; and
    • if another political subdivision agrees in writing, certain sales and use taxes, hotel occupancy taxes and mixed beverage taxes of such political subdivision.
  • Provides that a limited number of the municipalities entitled to receive rebated revenues are also entitled to receive the revenue derived from certain taxes generated, paid, and collected from a “qualified establishment” located in the municipality. Such taxes include:

    • the State of Texas’ sales and use taxes; and
    • if another political subdivision agrees in writing, certain mixed beverage taxes of such political subdivision.
  • Limits the period of entitlement to rebated revenues to a period of ten (10) years from the date that the applicable qualified hotel is open for initial occupancy.
  • Allows a municipality to pledge the revenue derived from the Chapter 351, Tax Code hotel occupancy tax from a qualified hotel and rebated revenues to the payment of bonds, other obligations or contractual obligations issued or incurred for the qualified project.
  • Provides that a municipality is not entitled to receive rebated revenues unless the municipality has pledged a portion of the revenue derived from the tax imposed under Chapter 351, Tax Code and collected by the qualified hotel for the payment of bonds, other obligations, or contractual obligations issued or incurred for the qualified project.
  • Restricts municipalities with a population of less than 175,000 from pledging rebated revenues for more than one qualified project.
  • Allows a municipality to authorize a nonprofit corporation to act on its behalf for any purpose under the rebate provisions.
  • Explicitly provides that the changes to Chapter 351, Tax Code contained within the bill do not affect bonds, other obligations, or contractual obligations for which revenue was pledged or committed before the effective date of the bill and that such obligations are governed by the law in effect when the revenue was pledged.

Investment of Public Funds

HB 293 relating to investment training requirements for school district and municipal financial officers. Effective immediately.

HB 293 removes the requirement for the treasurer, chief financial officer, or investment officer of a school district to attend an investment training session not less than every two (2) years, if the school district (i) does not invest district funds or (ii) only deposits those funds in interest‑bearing deposit accounts or certificates of deposit and submits an affidavit to that effect.

HB 2706 relating to authorized investments for governmental entities and a study of the investment and management of funds by public schools. Effective 9/1/2019.

HB 2706 makes several changes to the Public Funds Investment Act, Chapter 2256, Government Code, (the “PFIA”), including:

  • Expands the security for a fully collateralized repurchase agreement to include a combination of cash and obligations that include commercial paper or, if applicable, authorized investments for school districts;
  • Modifies the definition of repurchase agreement to include repurchase agreements for commercial paper or, if applicable, authorized investments for school districts;
  • Changes the stated maturity of commercial paper from 270 days or fewer to 365 days or fewer;
  • With respect to school district authorized investments, the bill repeals the provision making corporate bonds not eligible as an authorized investment for a public fund investment pool;
  • Adds a new provision allowing local governments to invest bond proceeds or pledged revenue to the extent permitted by the PFIA and in accordance with statutory provisions governing the debt issuance and the local government’s investment policy; and
  • Adds certain requirements for an investment pool to be eligible to receive funds from and invest funds on behalf of an entity under the PFIA.

The bill also directs the Texas Education Agency to conduct a study regarding the investment and management of funds by school districts and open-enrollment charter schools. This section expires 9/1/2021.

Private Activity Bonds

SB 1474 relating to private activity bonds. Effective 9/1/2019.

SB 1474 amends Chapter 1372, Government Code, to update the Private Activity Bond program by increasing per project amounts across all issuers and decreasing an unutilized sub‑ceiling to meet the increased demand in other categories. SB 1474 also caps some application fees, allows issuers to reassign carryforward volume cap to other projects under certain conditions, and modifies certain deadlines.

Property Tax

SB 2 relating to property tax reform. Subject to certain exceptions, effective 1/1/2020.

SB 2 makes significant changes to the manner by which certain taxing units (generally, cities, counties and developed water districts) may set property tax rates by reducing the amount that the property tax revenue collected may increase year over year from eight percent (8%) to three and one-half percent (3.5%). The bill also makes significant changes to the manner in which property is appraised in Texas and improves the transparency in the tax rate setting and appraisal process.

Note: Earlier versions of this legislation had restrictions on non-voted debt that would have required certificates of obligations and tax notes to be included in the rollback formula, which would have been a change from existing law. This non-voted debt issue is expected to be the subject of an interim study and will likely be revisited by the legislature next session.

Property Tax Reforms

Overview of Property Tax Reforms

  • SB 2 revises the manner by which the property tax rates of a taxing unit, other than a special taxing unit as defined by the bill, are set by:

    • reducing the amount that the property tax revenue collected may increase year over year from eight percent (8%) to three and one-half percent (3.5%);
    • requiring voter approval of an adopted tax rate that exceeds that three and one‑half percent (3.5%) cap;
    • providing for the imposition of an amount of taxes equal to $500,000 before that cap applies (see discussion relating to “de minimis rate” below); and
    • providing for the rollover of unused revenue growth below the cap for up to three (3) years (see discussion relating to “unused increment rate” below).

The bill provides for a tax rate adjustment for qualifying county indigent defense compensation expenditures and eligible county hospital expenditures.

Definitional Changes

  • Bill changes the term “rollback tax rate” to “voter approval tax rate.” Also “effective M&O rate” becomes “no new revenue M&O rate” and “effective tax rate” becomes “no new revenue tax rate.”
  • Bill defines “special taxing unit” as a taxing unit, other than a school district, for which the M&O tax rate proposed for the current tax year is 2.5 cents or less per $100 of taxable value; a junior college district; or a hospital district.
  • The bill also amends or adds new defined terms for:

    • De minimis rate” to mean the rate equal to the sum of a taxing unit’s no-new revenue M&O rate; the rate that, when applied to a taxing unit’s current total value, would impose an amount of tax equal to $500,000; and a taxing unit’s current debt rate.
    • Excess collections” by changing reference to “rollback rate” to “voter approval tax rate.”
    • Last year’s tax levy” by including a reference to “the portion of taxable value of property that is the subject of an appeal under Chapter 42 on July 25 that is not in dispute.”
    • Special taxing unit” to mean a taxing unit, other than a school district, for which the M&O tax rate proposed for the current tax year is 2.5 cents or less per $100 of taxable value; a junior college district; or a hospital district.

Unused Increment Rate

  • The bill establishes procedures for the “unused increment rate” to allow for the rollover or “banking” of unused revenue growth below the cap for up to three years. The unused increment rate is the greater of zero or the difference between the aggregate rate by which a taxing unit’s voter-approval tax rate exceeded the taxing unit’s actual tax rate in the preceding three tax years, beginning in tax year 2020.

Calculating and Adopting Tax Rates; Elections and Petitions

  • Designated officer or employee of a taxing unit is required to use tax rate calculation forms prescribed by the Comptroller in calculating the no-new-revenue tax rate and the voter-approval tax rate.
  • The taxing unit must post prominently on the taxing unit’s internet website tax rate and debt information in the form prescribed by the Comptroller.
  • Governing body of a taxing unit must include as an appendix to the taxing unit’s budget the tax rate calculation forms used to determine the no-new-revenue tax rate and the voter approval tax rate.
  • Bill establishes differing voter-approval tax rate calculations for taxing units.

    • For a special taxing unit as defined, the percentage by which the no-new-revenue M&O tax rate would be increased in the voter-approval tax rate calculation would remain at eight percent (8%).
    • For other taxing units (except school districts) the percentage would be three and one-half percent (3.5%). The other taxing units would also be able to include their unused increment rate in calculating the voter-approval tax rate.
  • The bill allows adjustments to the no-new-revenue M&O rate for certain indigent defense compensation expenditures and county hospital expenditures.
  • Special taxing units and municipalities with a population of 30,000 or more that adopt a tax rate above the voter-approval tax rate would be required to hold an election to approve the adopted rate.
  • Taxing units (other than special taxing units) and municipalities with a population of less than 30,000 (regardless of whether the municipality is a special taxing unit) that adopt a tax rate above the voter-approval tax rate or the de minimis rate (whichever is higher) would have to hold an election to approve the adopted rate.
  • If voters do not approve the adopted rate, then the taxing unit’s tax rate for the current year is the voter-approval rate.
  • The bill provides certain petition requirements for taxing units (other than special taxing units, school districts, or cities with a population of 30,000 or more) that adopt a rate higher than the voter-approval rate but less than the de minimis rate to petition for an election when the de minimis rate exceeds the voter-approval rate.
  • If registered voters submit a valid petition, the election would determine whether to lower the rate to the voter-approval rate.
  • Water districts under Chapter 49, Water Code would not be subject to automatic elections if the water district is not a developed district or does not have an operation and maintenance tax rate adopted for the current tax year of 2.5 cents or less per $100 of taxable value; instead these districts would be subject to petition triggered tax rate elections.

Transparency Improvements and Appraisal Reforms

Introduction

SB 2 also imposes new transparency requirements and makes significant changes to the property tax administration system in Texas, including the appraisal process. Several of these new requirements are discussed below.

  • The bill requires the Comptroller to prescribe the format by which an appraisal district or taxing unit must submit values and tax rates to the Comptroller for the biennial report and further requires the Comptroller to review counties, cities, and school district information in detail and to collect and review special district information.
  • The bill requires the chief appraiser of each appraisal district to create and maintain a database of certain property-tax-related information and requires each taxing unit to maintain a website, or have access to a generally accessible website, on which the taxing unit is required to post certain tax rate and budget information.
  • The bill establishes a new Property Tax Administration Advisory Board appointed by the Comptroller. The board may make recommendations regarding best practices, complaint resolution procedures under SB 2 summary and other ways to improve the administration and effectiveness of the property tax system.

New Appraisal Manual Requirements

The bill requires the appraisal of property to be done in accordance with appraisal manuals prepared by the Comptroller in accordance with law.

  • The purpose of the appraisal manuals is to determine the market value of property based on generally accepted appraisal methods and techniques.
  • The bill adds appraisal manual compliance to the appraisal district operating standards reviewed by the Comptroller and reported on every two years, as well as the performance audit of the appraisal district conducted by the Comptroller.
  • The bill provides that appraisal methods and techniques included in the most recent versions of the following would be considered generally accepted appraisal methods and techniques for the purposes of the Property Tax Code:

    • the Appraisal of Real Estate published by the Appraisal Institute;
    • the Dictionary of Real Estate Appraisal published by the Appraisal Institute;
    • the Uniform Standards of Professional Appraisal Practice published by The Appraisal Foundation; and
    • a publication that includes information related to mass appraisal.

  Note: According to the Fiscal Note for SB 2, the exclusion of publications of the International Association of Assessing Officers from publications that would be considered generally accepted appraisal methods and techniques could create a cost to taxing units by depriving appraisal districts of an approved mass appraisal source in future litigation.

Appraisal Districts, Appraisal Review Boards and Arbitrators

  • The bill modifies the eligibility requirements for board members and employees of an appraisal district.
  • The bill provides that a member of the board of an appraisal district is allowed to submit without comment a complaint by a property owner or taxing unit to the chief appraiser about the appraisal of a specific property, provided the transmission is in writing.
  • The bill expands the list of individuals ineligible to serve on an appraisal review board and makes changes regarding the size of an appraisal review board, including provisions for expanding the size of an appraisal review board for an appraisal district in a county with a population of one million or more.
  • The bill changes the method for selecting the chairman and secretary for the appraisal review board (by local administrative district judge rather than by resolution of the board).
  • Also, the bill provides that a concurrence of a majority of members of the appraisal review board present, or a panel of the board present, at a meeting of the board, or panel of the board, is sufficient for action of the appraisal review board, or for a recommendation by the panel. The bill provides that concurrence of more than a majority may not be required.
  • The bill prohibits an appraisal review board from determining the appraised value of a protested property to be an amount greater than the appraised value of the property as shown in the appraisal records submitted to the board by the chief appraiser, except as requested and agreed to by the property owner. This does not apply when the action being protested is the cancellation, or denial of an exemption or the determination that the property does not qualify for certain agricultural or timber special appraisal.
  • The bill modifies the training and continuing education requirements for members of an appraisal board to include classroom education and training.
  • The bill provides for the preparation and dissemination of an appraisal review board survey that allows certain affected individuals to provide comments and suggestions to the Comptroller regarding an appraisal review board and requires the Comptroller to issue an annual report summarizing the information submitted during the preceding year.
  • The bill provides for a more uniform and robust training program for persons who have agreed to serve as arbitrators in binding arbitrations of property tax appeals.
  • The Comptroller is required to approve the curriculum for arbitrator training, make materials for use in training freely available online, and establish and supervise the training program. The qualifications for arbitrators now include requirements for completion of new property tax and appraisal review board training programs.
  • The bill requires an arbitrator to complete any revised training required by the Comptroller before being able to renew the arbitrator’s agreement to serve as an arbitrator and provides for the removal of a person from the registry of arbitrators for a failure to complete required training within the prescribed time frame.

Special Panels and Protest Hearings

  • The bill establishes authority for special appraisal review board panels in districts described by Section 6.41(b-2), Tax Code (e.g. located in a county with a population of one million or more).
  • In such districts, the appraisal review board shall establish special panels to conduct protest hearings for property meeting minimum eligibility requirements (property appraised value of $50 million or more for Tax Year 2020 with a CPI escalator for future years) and property classified as commercial, utility, and industrial and manufacturing real and personal property.
  • The bill specifies the size and eligibility requirements for special panels for protest hearings.
  • The chief appraiser is required to give notice to property owners in such districts with additional information relating to the right of protest before a special panel of the appraisal review board.
  • The bill authorizes an appraisal review board to schedule the hearings on all protests filed by a property owner or the designated agent of the owner to be held consecutively and requires an appraisal review board to schedule a hearing on a protest filed by a property owner who is sixty-five (65) years of age or older, disabled, a military service member, a military veteran or the spouse of a military service member or military veteran before scheduling a hearing on a protest filed by a designated agent of a property owner.

Property Owner Assistance

  • SB 2 provides that an owner of residential property can send a request in writing to the chief appraiser asking for information relating to a change in value for property, eligibility for an exemption, or the grant, denial, cancellation or other change in status of an exemption or exemption application.
  • The bill provides that the chief appraiser may maintain a list of individuals who complete and submit a form to the chief appraiser who are willing to provide free assistance to an owner of residential property, including:

    • licensed real estate brokers,
    • appraisers, and
    • property tax consultants.
  • This list shall be provided to a property owner on request and shall be organized by county with contact information and job title of each individual who will provide free assistance.
  • The list shall be made available on the appraisal district’s website, if it maintains one.

Notices of Appraised Values and Potential Exemptions

  • The bill modifies the content of notices of appraised value provided by the chief appraiser to property owners.
  • For property increasing in value, the notice no longer has to include the amount of tax that would be imposed on the property on the basis of the tax rate for the preceding year.
  • For appraisal districts described by Section 6.41(b-2), Tax Code (located in county with population of one million or more), the chief appraiser is required to provide additional information relating to the right of protest before a special panel of the appraisal review board.
  • The chief appraiser is required to send notice to (i) owners of residential property about potential residence homestead exemptions and (ii) owners of single-family residences about certain canceled or reduced exemptions.

Estimate of Taxable Values

  • The bill requires the chief appraiser to certify to the tax assessor/collector for each taxing unit an estimate of taxable value not later than July 25 if the appraisal review board has not approved appraisal records for the appraisal district by July 20.

Historic Structures

  • The bill provides that a taxing unit may not repeal or reduce a historic site exemption unless the property owner consents or the taxing unit provides written notice 5 years in advance of the repeal or reduction.

Water Districts

  • The bill codifies Sections 49.23601, 49.23602 and 49.23602, Water Code, with different rollback calculations and requirements for various types of water districts, as follows:

    • Section 49.23601: A district governed by a board of directors that has adopted an operation and maintenance tax rate for the current tax year that is two and one-half (2.5) cents or less per $100 of taxable value is, among other things, subject to the eight percent (8%) rollback rate (voter approval rate rate) and the election requirements specified in Section 49.23601, Water Code.
    • Section 49.23602: Developed districts are subject to the three and one-half percent (3.5%) rollback rate (voter approval rate rate) and the election requirements specified in Section 49.23602, Water Code.

      • Subsection (a)(1) of Section 49.23602, Water Code, defines “developed district” to mean a district that has financed, completed and issued bonds to pay for all land, works, improvements, facilities, plants, equipment and appliances necessary to serve at least ninety-five percent (95%) of the projected build-out of the district in accordance with the purposes for its creation or the purposes authorized by the constitution, this code or any other law.
    • Section 49.23603: A district that is not subject to Sections 49.23601 or 49.23602 is subject to Section 49.23603, which, among other things, provides for an eight percent (8%) rollback rate (voter approval rate rate) and a petition requirement for an election to reduce to the tax rate.

Effective Date

  • SB 2 was passed into law and is effective January 1, 2020. except that:

    • certain provisions relating to appraisal review boards and taxpayer protest hearings take effect September 1, 2020;
    • certain provisions relating to the appraisal and assessment process take effect January 1, 2021; and
    • certain provisions relating to the notice of appraised value for a single-family residence that qualifies for a residence homestead tax exemption take effect January 1, 2022.

School Finance

HB 3 relating to public school finance and public education; creating a criminal offense; authorizing the imposition of a fee. Subject to certain exceptions, effective 9/1/2019.

Overview

  • The bill transfers certain sections of the Education Code from Chapter 42 to Chapter 48 and certain sections from Chapter 41 to Chapter 49 and revises formulas used to determine entitlement under the Foundation School Program.
  • The overall price tag for HB 3 is $11.6 billion, of which

    • $6.55 billion will go to public education (increasing the State’s share of funding for public education from thirty-eight percent (38%) to forty-five percent (45%)); and
    • $5.05 billion will go toward tax compression in an effort to help lower property tax bills.
  • The bill is estimated to result in a $3.6 billion reduction in recapture statewide (a forty-seven percent (47%) reduction from the current biennium).
  • The basic allotment is increased to $6,160 per student.
  • Of the additional funding for public education, $2 billion is allocated for teacher compensation that will be used to fund pay raises.
  • Veteran teachers with six (6) or more years will get a raise of about $4,000 on average and districts may develop an optional merit-based raise system at the local level.
  • A ballot proposition under Section 45.003(b), Election Code, for a bond election called by a school district must include a statement that says “THIS IS A PROPERTY TAX INCREASE.”
  • The bill provides for full day Pre-K Funding.
  • The bill provides $12 million/biennium for blended learning instruction grants, $100 million/year for New Instructional Facilities Allotment, $452 million/biennium for College Career & Military Readiness Outcomes Bonuses and funds transportation at $1 per mile reimbursement.

Property Tax Changes and Compression

  • Current year property tax values are used for certain formula funding determinations.
  • Beginning in fiscal year 2021, there is a two and one-half percent (2.5%) hybrid statewide/local tax compression as a result of a mechanism in the bill by which districts’ maximum compressed tax rates are compressed for property value growth exceeding two and one-half percent (2.5%). This two and one-half percent (2.5%) cap results in an additional automatic tax rate buy-down based on local school district property value growth beginning the second year of the biennium. Tax relief using this provision can be on a district-by-district basis and not uniform.
  • The bill also provides for uniform tax relief for the biennium resulting from the $0.07 compression on the Tier 1 M&O tax rate ($0.93 from $1.00) and additional tax rate compression in the enrichment tier (Tier 2) at the copper penny level due to the increase in yield.
  • For a school year in which a district’s guaranteed level of state and local funds for its copper pennies results in greater revenue per weighted student per cent of tax effort than for the preceding school year, a district would have to reduce its tax rate for that tax year to a rate that results in the amount of revenue that was available to the district for the preceding year.
  • If the State lowers the basic allotment, the district is permitted to raise taxes to address the reduction.
  • Under Section 48.2552, Texas Education Code, districts can have no greater than a ten percent (10%) difference in compressed tax rates.
  • The tax rate reduction in HB 3 creates an ongoing cost to the State.
  • The Legislative Budget Board is charged with conducting a study on district tax rate compression, including potential revenue sources to reduce M&O taxes.
  • The bill also creates the Tax Reduction and Excellence in Education Fund (TREE) for tax relief and Tier I allotment costs. Uses $300 million in sales tax revenue from the Wayfair court decision and additional Available School Fund revenue.
  • Under Section 45.0021, Education Code, school districts are prohibited from increasing M&O rates to create a surplus to pay off debt service. If a district violates this prohibition, an owner of taxable property in the district is entitled to an injunction if the suit to enjoin is filed before the district delivers substantially all of its tax bills.

Basic Allotment and Teacher Compensation

  • The basic allotment is increased from $5,140 to $6,160. The bill requires districts to use thirty percent (30%) of the revenue gain for compensation increases for full-time employees other than administrators.
  • Of this amount, seventy-five percent (75%) must be used for full-time teachers, counselors, nurses, and librarians, prioritizing differentiated compensation for classroom teachers with more than five years of experience. The other twenty-five (25%) of the gain may be used for increased compensation paid to full-time district employees.

Recapture

  • The increase in the basic allotment and other formula changes will mitigate recapture by approximately $3.6 billion over the next biennium.
  • Recapture options are transferred from Chapter 41 to Chapter 49, Education Code.
  • Under Chapter 49, a district has six options to reduce its local revenue level so that it does not exceed the equalized wealth level:

    • consolidate by agreement with one or more districts to form a consolidated district
    • detach property for annexation by a property-poor district;
    • purchase attendance credits from the State;
    • contract to educate nonresident students from a property-poor district by sending money directly to one or more property-poor districts;
    • execute an agreement to provide students of one or more other districts with career and technology education; or
    • consolidate by agreement with one or more districts to form a consolidated taxing district solely to levy and distribute tax revenue.
  • HB 3 allows districts that purchase attendance credits to pay the recapture amount owed to the State in one payment no later than August 15 or in equal monthly installments as provided under prior law.

Golden Pennies and Copper Pennies

  • HB 3 changes the benchmark for the golden penny yield by repealing the link to the Austin ISD wealth level and replacing it in Section 48.202, Education Code, with a guaranteed yield equal to the greater of the tax effort available to a school district at the 96th percentile of wealth per weighted student or one hundred sixty percent (160%) of the basic allotment for “golden pennies” and eighty percent (80%) of the basic allotment for “copper pennies.”
  • The bill allows for eight (8) golden pennies.
  • The bill increases the copper penny yield from $31.95 to $49.28 (eighty percent (80%) of the basic allotment).
  • Copper penny revenue per weighted student is limited to the revenue received by the district in the preceding year, so the increase in the yield results in additional tax rate compression at the copper penny level of the enrichment tier.
  • Districts continue to be subject to recapture at the copper penny level.
  • Under Section 45.003(d-1), Education Code, a school district with a 2019 rollback rate greater than $1.04 may not have a tax rate election in 2019 unless the district adopted a strategic plan prior to January 1, 2019.

Efficiency Audits

  • Under Section 11.184, Education Code, school districts will be required to conduct an efficiency audit before seeking voter approval to adopt M&O tax rate.
  • The Legislative Budget Board is required to develop guidelines identifying the scope of the audit.
  • Section 11.184 is effective January 1, 2020.

Full-Day Pre-Kindergarten

  • HB 3 requires districts to provide full-day Pre-K to eligible 4-year-old students. Districts may seek a waiver for up to six years if seat availability is an issue.
  • The bill requires each Pre-K class to comply with the program standards required for high quality Pre-K programs.
  • The bill provides sufficient funding for full-day Pre-K through the Early Education Allotment. Specifically, the bill creates the early education allotment, which provides an additional weight of 0.1 to each student in grades kindergarten through three that is educationally disadvantaged or a student of limited English proficiency in a bilingual education or special language program, and provides a weight of 0.2 for students in grades kindergarten through three who are both educationally disadvantaged and a student of limited English proficiency in a bilingual or special language program.
  • Districts are required to solicit partnerships with local providers before construction of new Pre-K facilities.

Other Changes

  • The bill includes formula transition grants and provides for various other changes in the school finance system, including the following:

    • an incentive for additional instructional days for students to attend up to thirty (30) days of school during the summer; and
    • various other adjustments to the weights and formulas for determining funding under the Foundation School Program, including adjustments based on average daily attendance and adjustments for transportation, compensatory education for economically disadvantaged census blocks, special education, dyslexia and bilingual education, dual language and career and technology programs.
  • The bill also creates reading standards for kindergarten through third grade.

SB 11 relating to policies, procedures, and measures for school safety and mental health promotion in public schools and the creation of the Texas Child Mental Health Care Consortium. Effective immediately.

SB 11 adds Section 42.168, Education Code, which requires the Commissioner to provide to a school district an annual allotment in the amount provided by appropriation for each student in average daily attendance to be used to improve school safety and security. A school district that is required to take action under Chapter 41 to reduce its wealth per student to the equalized wealth level is entitled to a credit, in the amount of the allotments to which the district is to receive as provided by appropriation, against the total amount required for the district to purchase attendance credits.

The bill also amends Section 45.001(a), Education Code, to allow school districts to issue bonds for two new purposes: (i) the retrofitting of school buses with emergency, safety, or security equipment and (ii) the purchase or retrofitting of vehicles to be used for emergency, safety or security purposes.

Public Utilities

SB 700 relating to retail public utilities that provide water or sewer service. Effective 9/1/19. The changes in law made by SB 700 apply only to an application for an amendment of a certificate of public convenience and necessity or an application for a rate change or adjustment filed on or after the effective date.

SB 700 establishes new customer classes including new tap or connection thresholds for Class B and Class C utilities and adds a new Class D utility (fewer than 500 taps or connections). SB 700 also grants certain authority to the Texas Commission on Environmental Quality to issue emergency orders, with or without a hearing. In addition, among other provisions, SB 700 makes changes regarding ratemaking, system improvement charges, the notice requirements for statements of intent to change rates, the information requirements for applications submitted by utilities to change rates, and a Class A utility’s application to the Public Utility Commission for an amendment of a certificate of convenience and necessity.

Texas Water Development Board

HB 1052 relating to the Texas State Water Investment Fund Act. Effective 9/1/2019.

HB 1052 provides authority for the Texas Water Development Board (the “TWDB”) to use the state participation account of the water development fund to provide financial assistance for the development of interregional water supply projects. Such interregional projects shall be selected by the TWDB based on criteria outlined in Section 16.145, Water Code. Not less than fifty percent (50%) of money used from the state participation account in any fiscal year must be used for such interregional projects.

HB 1052 also directs the Texas Comptroller of Public Accounts to establish the state participation account II within the water development fund. The TWDB may transfer money in the state participation account to the state participation account II and use such money to provide financial assistance for the development or acquisition of a desalinization or aquifer storage and recovery facility included in the State Water Plan, as outlined in Section 16.146, Water Code.

SB 7 relating to flood planning, mitigation and infrastructure projects and creating the flood infrastructure fund to be administered by the TWDB. SB 7 takes effect immediately; Article 2 of SB 7 establishing the flood infrastructure fund takes effect January 1, 2020, but only if the constitutional amendment proposed by the 86th legislature is approved by the voters.

Article 2 of SB 7 amends Chapter 15, Water Code to add Subchapter I, which establishes the flood infrastructure fund to be administered and used by the TWDB. SB 7 restricts the use of the flood infrastructure fund by the TWDB only for the following uses: (1) to make a loan to an eligible political subdivision at or below market interest rates for a flood project; (2) to make a grant, low interest loan or zero interest loan to an eligible political subdivision for a flood project to serve an area outside of a metropolitan statistical area to ensure that the flood project is implemented or for a flood project to serve an economically distressed area; (3) to make a loan at or below market interest rates for planning and design costs, permitting costs and other costs associated with state or federal regulatory activities with respect to a flood project; (4) to make a grant to an eligible political subdivision to provide matching funds to enable the eligible political subdivision to participate in a federal program for a flood project; (5) as a source of revenue or security for the payment of principal and interest on bonds issued by the TWDB if the proceeds of the sale of the bonds will be deposited in the fund; and (6) to pay the necessary and reasonable expenses of the TWDB in administering the fund.

SJR 79 relating to a proposed constitutional amendment to authorize the TWDB to issue additional general obligation bonds for the benefit of economically distressed areas.

SJR 79 provides for a constitutional amendment to be submitted to voters of the State at the general election to be held November 5, 2019. The proposed constitutional amendment would provide authority for the TWDB to issue additional general obligation bonds, in an amount outstanding at any one time not exceeding $200 million, at its determination and on a continuing basis, for the economically distressed areas program account of the Texas Water Development Fund II. Such authorization is independent of previously authorized general obligation bonds for the economic economically distressed areas program account.

Toll Road/Transportation

HB 71 relating to the creation of regional transit authorities; granting the power of eminent domain; providing authority to issue bonds and charge fees; creating a criminal offense. Effective immediately.

HB 71 allows the creation of a regional transit authority in the Rio Grande Valley. Specifically, it allows by election, the creation of a regional transit authority in Cameron, Willacy and Hidalgo counties. Similar to other statutes governing regional transit authorities, this bill provides for confirmation of a regional transit authority, a governing structure, general powers, ability to acquire property, eminent domain, the authority to operate a public transportation system, the ability to impose and enforce fares and other regulations of a regional transit authority.

HB 803 relating to financial reporting requirements of a toll project entity. Effective 9/1/2019.

HB 803 imposes new financial reporting requirements for toll project entities, with a report required to be posted on the toll entity’s internet website within one hundred eighty (180) days after fiscal year end. The financial report shall include:

  • Maturity date for all bonds issued by the entity for a toll project or system;
  • Toll revenue for each project for prior fiscal year;
  • An accounting of total revenue collected and expenses incurred by the entity for the previous fiscal year, such as debt service, M&O costs and other miscellaneous expenses and any surplus revenue; and
  • A capital improvement plan with proposed or expected capital expenditures over a period determined by the entity.

A toll project entity must prominently display on the entity’s internet website a link to the above-mentioned report. The report must be posted separately from the entity’s certified audited financial report.

HB 2830 relating to certain requirements for and limitations on design-build contracts for highway projects of the Texas Department of Transportation (“TxDOT”). Effective 9/1/2019.

HB 2830 provides that the current restriction on TxDOT entering into only three (3) design‑build projects per fiscal year is modified to allow up to six (6) design-build projects per fiscal biennium. Also, prior to being posted as a formal design-build request for proposal, thirty percent (30%) of the design must have been completed.

SB 198 relating to payment for the use of a highway toll project. Effective 9/1/2020.

SB 198 imposes new requirements on notices for toll collections and malfunctioning transponders. The following key provisions are applicable to all tolling entities:

  • Prior to mailing an invoice or a notice of unpaid tolls to a customer or charging any administrative fee, the toll entity must first determine whether there is an active account connected to a vehicle transponder. If the account exists and is sufficiently funded and the customer has properly mounted and activated the transponder, the toll entity must satisfy the unpaid toll from the account.
  • The customer using a transponder must activate and mount it properly, provide accurate license plate and contact information to the tolling entity and update the information as necessary.
  • Ensures that, if a toll customer has more than ten (10) transponder misreads in a month and the tolling entity determines that the transponder must be replaced, then the tolling entity must inform the customer that there may be a problem with the transponder and it must be replaced.
  • Notices or invoices of unpaid tolls sent by tolling entities must clearly state that the document is a bill that must be paid.
  • All tolling entities can provide invoices via email to customers who authorize this contact delivery method.
  • Authorizes information sharing among toll project entities for the purposes of customer service, toll collection and enforcement, and reporting requirements.
  • Provides that a contract between toll project entities for the collection of tolls must specify which entity is responsible for making the determinations and sending notices relating to malfunctioning transponders and include terms to ensure that customers do not receive invoices from more than one entity for the same transaction.

SB 1091 relating to vehicles eligible for veteran toll discount programs. Effective immediately.

SB 1091 establishes limitations for the veteran toll discount programs. The bill provides that a toll project entity may limit the number of transponders issued to a participant in the toll project entity’s veteran toll discount program to no more than two (2) transponders. A toll project entity may issue one (1) extra transponder to a participant in the veteran toll discount program on a demonstration of hardship by such participant, as determined by the toll project entity.

SB 1311 relating to the electronic transmission of an invoice or notice of toll nonpayment by a toll project entity. Effective 9/1/2019.

SB 1331 authorizes electronic transmission of invoices and notices: (1) if the recipient of the information agrees to the transmission of the information as an electronic record; and (2) on terms acceptable to the recipient.

Transparency/Public Disclosure

HB 305 relating to the requirement that certain political subdivisions with authority to impose a tax post certain information on an internet website. Applies only to a meeting held on or after 9/1/2019.

HB 305 amends Chapter 2051, Government Code by requiring political subdivisions that have the authority to impose a tax and have maintained a publicly accessible website at any time since January 1, 2019, to post on the website the political subdivision’s contact information (including a mailing address, telephone number, and email address), each elected officer, each candidate for elected office, the date and location of the next election for officers, the requirements and deadlines for filing for candidacy of each elected office (which shall be continuously posted for at least one (1) year before the election day for the office), each notice of a meeting and each record of a meeting.

The new requirements do not apply to a county with a population of less than 10,000, a municipality with a population of less than 5,000 located within a county with a population of less than 25,000, or a school district with a population of less than 5,000 in the district’s boundaries and located in a county with a population of less than 25,000.

HB 477 relating to the notice required before the issuance of certain debt obligations by political subdivisions. Effective 9/1/2019. Ballot and election changes apply only to an election ordered on or after the effective date. Changes in law for certificates of obligation apply only to certificates for which a notice of intent is published on or after the effective date.

HB 477 imposes new transparency requirements in connection with elections for debt obligations secured by and payable from property taxes and in connection with the issuance of certificates of obligations by cities and counties.

The bill modifies the required content of debt obligation election orders under Section 3.009, Election Code, including certain changes to make the election order contents more consistent with the new voter information document disclosure requirements in Section 1251.052(b), Government Code.

The document ordering an election to authorize the issuance of debt obligations must distinctly state:

  • A general description of the purposes of the debt obligation:
  • The total principal amount of the debt obligations to be authorized;
  • That taxes sufficient to pay principal and interest may be imposed;
  • A statement of the estimated tax rate if the debt obligations are authorized or of the maximum interest rate of the debt obligations or any series of the debt obligations, based on the market conditions at the time of the election order;
  • The maximum maturity date of the debt obligations to be authorized or that the debt obligations may be issued to mature over a specified number of years not to exceed the maximum number of years authorized by law;
  • The aggregate amount of the outstanding principal of the issuer’s debt obligations as of the date the election is ordered;
  • The aggregate amount of the outstanding interest on debt obligations of the issuer as of the date the election is ordered, which may be based on the issuer’s expectations relative to variable rate debt obligations; and
  • The ad valorem debt service tax rate for the issuer at the time the election is ordered, expressed as an amount per $100 valuation of taxable property.

The bill repeals the bond proposition requirements in Section 52.072, Election Code, and instead moves them to new Subchapter B, Chapter 1251, Government Code, and codifies a new subsection (f) of Section 52.072, Election Code, to provide as follows:

  • A political subdivision that submits to the voters a proposition for approval of the issuance of debt obligations shall prescribe the wording of the proposition that is to appear on the ballot in accordance with the requirements of Subchapter B, Chapter 1251, Government Code.

The bill codifies a new Subchapter B, Chapter 1251, Government Code, with new definitions for “debt obligation,” “debt obligation election order” and “political subdivision,” as well as new ballot requirements and a new voter information document requirement. The term “debt obligation” means a public security secured by and payable from ad valorem taxes (but does not include self-supporting debt).

For bond elections for debt obligations secured by and payable from ad valorem taxes (other than self-supporting debt), the ballot must specifically state the following:

  • General description of the purposes for which the debt obligations are to be authorized (Note: this new requirement in Section 1251.052(a)(1) is different than the language in SB 30);
  • The total principal amount of the debt obligations to be authorized; and
  • That taxes sufficient to pay principal and interest on debt obligations will be imposed.

The bill imposes new bond election transparency requirements for political subdivisions with at least 250 registered voters, which now must prepare a voter information document for each proposition under subsection (b) of Section 1251.052, Government Code. The voter information document must distinctly include the following:

  • The language that appears on the ballot;
  • The following information formatted as a table:

    • the principal of the debt obligations to be authorized;
    • the estimated interest for the debt obligations to be authorized;
    • the estimated combined principal and interest required to pay on time and in full the debt obligations to be authorized; and
    • as of the date of adoption of the debt obligation election order:

      • the principal of all outstanding debt obligations of the issuer;
      • the estimated remaining interest on all outstanding debt obligations of the issuer, which may be based on the issuer’s expectations relative to the interest due on any variable rate debt obligations;
      • the estimated combined principal and interest required to pay on time and in full all outstanding debt obligations of the issuer, which may be based on the issuer’s expectations relative to the interest due on any variable rate debt obligations; and
      • the estimated maximum annual increase in the amount of property taxes that would be imposed on a residence homestead with an appraised value of $100,000 to repay the debt obligations to be authorized, if approved, based upon assumptions made by the governing body of the issuer (including: the amortization of the political subdivision’s debt obligations, including outstanding debt obligations and the proposed debt obligations; changes in estimated future appraised values within the political subdivision; and the assumed interest rate on the proposed debt obligations); and
  • Any other information considered relevant or necessary to explain the above-mentioned information.

The political subdivision is required to post the voter information document in the same manner as a debt obligation election order under Section 4.003(f), Election Code, and may include the voter information document in the debt obligation election order. If the political subdivision maintains an internet website, this information must be displayed on the website in an easily accessible manner beginning not later than the twenty-first (21st) day before election day and ending on the day after the date of the debt obligation election.

The bill also includes changes to certain requirements relating to the issuance of certificates of obligations, including as follows:

  • The first publication of notice for certificates of obligation must be before the forty-fifth (45th) day (rather than before the thirtieth (30th) day under prior law) before the date tentatively set for passage of the ordinance or order authorizing the issuance of the certificates;
  • If the issuer maintains an internet website, the notice of intent must be published continuously on the website at least forty-five (45) days before the date tentatively set for passage of the ordinance or order authorizing the issuance of the certificates; and
  • The notice of intent now must include new disclosure requirements similar to the disclosure in the voter information document, including:

    • the time and place tentatively set for passage of the ordinance or order;
    • the purpose of the certificates to be authorized;
    • the manner in which the certificates will be paid (taxes, revenue or both);
    • the then-current principal of all outstanding debt obligations of the issuer;
    • the then-current combined principal and interest required to pay on time and in full all outstanding debt obligations of the issuer (which may be based on the issuer’s expectations with respect to variable rate debt);
    • the maximum principal amount of certificates to be authorized;
    • the estimated combined principal and interest to pay the certificates to be authorized on time and in full;
    • the estimated interest rate or that the maximum interest rate for the certificates may not exceed the maximum legal rate; and
    • the maximum maturity date of the certificates to be authorized.

SB 943 relating to the disclosure of certain contracting information under the public information law. Effective 1/1/2020.

            SB 943 makes several changes to the Public Information Act, which imposes various requirements on governmental bodies with respect to public information. SB 943:

  • Overrules Boeing Co. v. Paxton, 466 S.W.3d 831 (Tex. 2015), which permitted a third party to claim the competitive disadvantage/bidding exception within Section 552.104 of the Public Information Act. Now, only a governmental entity may claim this exception. With respect to bidding situations, a governmental entity must now show that release of the information is likely to cause recurring harm to the governmental entity.
  • Revises the trade secrets exception to disclosure contained within Section 552.110 of the Public Information by defining “trade secrets” and making other clarifying changes.
  • Adds Section 552.1101 of the Public Information Act, which creates a new exception for proprietary information of a vendor, contractor, potential vendor or potential contractor. Under this exception, such an entity must demonstrate that, based on specific factual evidence, releasing the information would reveal certain types of information listed within the statute and would give an advantage to a competitor. Such information must have been provided to the governmental entity at issue in response to a request for a bid, proposal, or qualification.
  • Explicitly provides that the exceptions to disclosure contained within Sections 552.110 and 552.1101 of the Public Information Act do not apply to certain contract terms or their functional equivalents, including certain pricing information, contract duration, remedy provisions and other similar matters.
  • Adds the term “contracting information,” which information is deemed to be public information subject to the Public Information Act unless an exception applies. Such term includes certain information maintained by a governmental body or sent between a governmental body and a vendor, contractor, potential vendor or potential contractor.
  • Subjects certain confinement facilities, civil commitment facilities and entities managing the Alamo to the requirements of the Public Information Act and excludes certain economic development corporations from the Public Information Act’s requirements.
  • Allows economic development entities to claim the exception to disclosure for certain economic development information contained within Section 552.131 of the Public Information Act if such information is in such an entity’s custody or control.
  • Adds Subchapter J to the Public Information Act, which:

    • adds Section 552.371 of the Public Information Act, which applies to certain contracts providing for or resulting in the expenditure of $1 million or more in public funds (a “Material Contract”) where a non-governmental entity will have custody or possession of public information related to such a contract. Requires a governmental entity that is a party to a Material Contract to provide written notice to a non-governmental entity within three (3) business days of receipt of an open records request related to such information. Sets forth a framework for requests for Attorney General decisions concerning open records requests implicating such information; and
    • requires that a Material Contract contain provisions obligating the non-governmental entity to: (1) preserve all contracting information for the full duration required by the records retention requirements of the governmental entity, (2) promptly provide information in its custody or possession on request of the governmental entity and (3) on completion of the Material Contract, provide contracting information to the governmental entity or continue to preserve same for the full duration required by the records retention requirements of the governmental entity. Requires that most Material Contracts (notably excluding bond purchase agreements and certain other public finance related agreements) contain a termination provision if the non-governmental party fails to comply with its public information obligations. Prohibits a governmental entity from accepting a competitive bid if the bidder has previously knowingly or intentionally failed to comply with similar provisions unless the governmental entity determines that adequate steps have been taken to ensure future compliance.

Special-Purpose Districts

County Assistance Districts

HB 1174 relating to the authority of certain county assistance districts to provide a grant or loan. Effective 9/1/2019.

HB 1174 grants a county assistance district created under Chapter 387, Local Government Code the ability to provide a grant or a loan to a political subdivision to assist in funding in the performance of one or more functions of a county assistance district under Chapter 387, Local Government Code.

Municipal Management Districts

HB 304 relating to the governance and operation of municipal management districts. Effective 9/1/2019.

HB 304 makes several changes to Chapter 375, Local Government Code, which relates to the creation and operation of municipal management districts (each, an “MMD”), including:

  • Modifies the signatories required for a petition to create an MMD. Creation petitions now must be signed by owners of a majority of the assessed value of the real property in the proposed MMD that would be subject to assessment by the MMD.
  • With respect to MMDs with a population of 1,000 or less, eliminates residency within the MMD as a sufficient qualification for service on an MMD board of directors.
  • With respect to MMDs with a population of more than 1,000, requires residency plus satisfaction of one of the qualifications for MMDs with a population of 1,000 or less.
  • Permits owners of a majority of assessed value of property subject to assessment by an MMD to recommend potential board members for consideration.
  • Clarifies that, regardless of whether an improvement is inside or outside of an MMD, an improvement must directly benefit the MMD in order for it to be acquired, constructed, completed, developed, owned, operated or maintained by an MMD.
  • Makes certain clarifying changes to the petition required to finance improvement projects or services. Further, such bill requires that a petition concerning a proposed assessment that will be apportioned by special benefit be signed by owners of a majority of the surface area of the real property subject to such assessment.
  • Provides that petitions for bond elections require the signature of the owners of a majority of the assessed value of the property subject to assessment or taxation by the MMD.
  • Provides that petitions for dissolution of an MMD require the signature of the owners of two-thirds of the assessed value of the property subject to assessment or taxation by the MMD.

Navigation Districts/Port Authorities

HB 3850 relating to the funding of certain ship channel improvements; authorizing the Texas Transportation Commission (“TCC”) to issue revenue bonds. Effective immediately.

Chapter 56, Transportation Code establishes the ship channel improvement revolving fund and the revolving loan program, which are overseen by the TCC. The revolving loan program uses money from the fund to provide financing to navigation districts for qualified ship channel projects. It has been suggested that refining the ways in which financing can be provided through the ship channel improvement revolving fund would allow for greater flexibility in providing needed aid for ship channel projects.

HB 3850 revises the methodology through which certain ship channel improvements are funded. HB 3850 also amends the Transportation Code to authorize the TCC to issue revenue bonds for the purpose of providing money for the ship channel improvement revolving fund and requires bond proceeds to be deposited into the fund.

Under the bill, the revolving loan program will use money from the ship channel improvement revolving fund to enhance the financing capabilities of entities responsible for the local share of qualified project costs by providing revenue or security for:

  • low-interest loans;
  • longer repayment terms for loans; and
  • flexible loan repayment terms, including loan structures similar to a line of credit and the authorized prepayment of loans.

Tourism Public Improvement Districts

HB 1136 relating to a common characteristic or use project in a public improvement district established by a municipality. Effective immediately.

HB 1136 revises Chapter 372, Local Government Code by authorizing all municipalities, as opposed to only certain municipalities, to establish and undertake a project within a common characteristic public improvement district or tourism public improvement district (“TPID”) that is composed entirely of hotels within the municipality and funded solely with a self-assessed fee.

A TPID created after September 1, 2019, may only undertake a project for advertising, promotion or business recruitment directly related to hotels. The bill also allows the governing body of a municipality, subject to certain requirements, to include hotels in a TPID regardless of whether the record owners of the hotel signed the original petition to create the TPID.

Updated August 28, 2019 to add SB 11.