Public Finance Alert
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.
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.
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:
Under Section 2254.1032, the political subdivision may:
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:
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:
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:
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:
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):
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:
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 bill also imposes a new state law useful life test on general obligation bonds as follows:
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:
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:
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.
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
The bill provides for a tax rate adjustment for qualifying county indigent defense compensation expenditures and eligible county hospital expenditures.
Unused Increment Rate
Calculating and Adopting Tax Rates; Elections and Petitions
Transparency Improvements and Appraisal Reforms
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.
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.
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
Special Panels and Protest Hearings
Property Owner Assistance
Notices of Appraised Values and Potential Exemptions
Estimate of Taxable Values
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.
Property Tax Changes and Compression
Basic Allotment and Teacher Compensation
Golden Pennies and Copper Pennies
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.
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.
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:
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:
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.
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:
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:
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:
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 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:
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:
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:
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:
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.