bill tightens local government borrowing and debt tax rates

The text as introduced · 4,240 words

By: Meyer
H.B. No. 19

A BILL TO BE ENTITLED

AN ACT

relating to the issuance and repayment of debt by local

governments, including the adoption of an ad valorem tax rate and

the use of ad valorem tax revenue for the repayment of debt.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 44.004(c), Education Code, is amended to

read as follows:

(c) The notice of public meeting to discuss and adopt the

budget and the proposed tax rate may not be smaller than one-quarter

page of a standard-size or a tabloid-size newspaper, and the

headline on the notice must be in 18-point or larger type. Subject

to Subsection (d), the notice must:

(1) contain a statement in the following form:

"NOTICE OF PUBLIC MEETING TO DISCUSS BUDGET AND PROPOSED TAX RATE

"The (name of school district) will hold a public meeting at

(time, date, year) in (name of room, building, physical location,

city, state). The purpose of this meeting is to discuss the school

district's budget that will determine the tax rate that will be

adopted. Public participation in the discussion is invited." The

statement of the purpose of the meeting must be in bold type. In

reduced type, the notice must state: "The tax rate that is

ultimately adopted at this meeting or at a separate meeting at a

later date may not exceed the proposed rate shown below unless the

district publishes a revised notice containing the same information

and comparisons set out below and holds another public meeting to

discuss the revised notice." In addition, in reduced type, the

notice must state: "Visit Texas.gov/PropertyTaxes to find a link to

your local property tax database on which you can easily access

information regarding your property taxes, including information

about proposed tax rates and scheduled public hearings of each

entity that taxes your property.";

(2) contain a section entitled "Comparison of Proposed

Budget with Last Year's Budget," which must show the difference,

expressed as a percent increase or decrease, as applicable, in the

amounts budgeted for the preceding fiscal year and the amount

budgeted for the fiscal year that begins in the current tax year for

each of the following:

(A) maintenance and operations;

(B) debt service; and

(C) total expenditures;

(3) contain a section entitled "Total Appraised Value

and Total Taxable Value," which must show the total appraised value

and the total taxable value of all property and the total appraised

value and the total taxable value of new property taxable by the

district in the preceding tax year and the current tax year as

calculated under Section 26.04, Tax Code;

(4) contain a statement of the total amount of the

outstanding and unpaid bonded indebtedness of the school district;

(5) contain a section entitled "Comparison of Proposed

Rates with Last Year's Rates," which must:

(A) show in rows the tax rates described by

Subparagraphs (i)-(iii), expressed as amounts per $100 valuation of

property, for columns entitled "Maintenance & Operations,"

"Interest & Sinking Fund," and "Total," which is the sum of

"Maintenance & Operations" and "Interest & Sinking Fund":

(i) the school district's "Last Year's

Rate";

(ii) the "Rate to Maintain Same Level of

Maintenance & Operations Revenue & Pay Debt Service," which:

(a) in the case of "Maintenance &

Operations," is the tax rate that, when applied to the current

taxable value for the district, as certified by the chief appraiser

under Section 26.01, Tax Code, and as adjusted to reflect changes

made by the chief appraiser as of the time the notice is prepared,

would impose taxes in an amount that, when added to state funds to

be distributed to the district under Chapter 48, would provide the

same amount of maintenance and operations taxes and state funds

distributed under Chapter 48 per student in average daily

attendance for the applicable school year that was available to the

district in the preceding school year; and

(b) in the case of "Interest & Sinking

Fund," is the tax rate that, when applied to the current taxable

value for the district, as certified by the chief appraiser under

Section 26.01, Tax Code, and as adjusted to reflect changes made by

the chief appraiser as of the time the notice is prepared, and when

multiplied by the district's anticipated collection rate, would

impose taxes in an amount that, when added to state funds to be

distributed to the district under Chapter 46 and any excess taxes

collected to service the district's debt during the preceding tax

year but not used for that purpose during that year, would provide

the minimum dollar amount required to be paid to service the

district's debt; and

(iii) the "Proposed Rate";

(B) contain fourth and fifth columns aligned with

the columns required by Paragraph (A) that show, for each row

required by Paragraph (A):

(i) the "Local Revenue per Student," which

is computed by multiplying the district's total taxable value of

property, as certified by the chief appraiser for the applicable

school year under Section 26.01, Tax Code, and as adjusted to

reflect changes made by the chief appraiser as of the time the

notice is prepared, by the total tax rate, and dividing the product

by the number of students in average daily attendance in the

district for the applicable school year; and

(ii) the "State Revenue per Student," which

is computed by determining the amount of state aid received or to be

received by the district under Chapters 43, 46, and 48 and dividing

that amount by the number of students in average daily attendance in

the district for the applicable school year; and

(C) contain an asterisk after each calculation

for "Interest & Sinking Fund" and a footnote to the section that, in

reduced type, states "The Interest & Sinking Fund tax revenue is

used to pay for bonded indebtedness on construction, equipment, or

both. The bonds, and the tax rate necessary to pay those bonds,

were approved by the voters of this district.";

(6) contain a section entitled "Comparison of Proposed

Levy with Last Year's Levy on Average Residence," which must:

(A) show in rows the information described by

Subparagraphs (i)-(iv), rounded to the nearest dollar, for columns

entitled "Last Year" and "This Year":

(i) "Average Market Value of Residences,"

determined using the same group of residences for each year;

(ii) "Average Taxable Value of Residences,"

determined after taking into account the limitation on the

appraised value of residences under Section 23.23, Tax Code, and

after subtracting all homestead exemptions applicable in each year,

other than exemptions available only to disabled persons or persons

65 years of age or older or their surviving spouses, and using the

same group of residences for each year;

(iii) "Last Year's Rate Versus Proposed

Rate per $100 Value"; and

(iv) "Taxes Due on Average Residence,"

determined using the same group of residences for each year; and

(B) contain the following information: "Increase

(Decrease) in Taxes" expressed in dollars and cents, which is

computed by subtracting the "Taxes Due on Average Residence" for

the preceding tax year from the "Taxes Due on Average Residence" for

the current tax year;

(7) contain the following statement in bold print:

"Under state law, the dollar amount of school taxes imposed on the

residence of a person 65 years of age or older or of the surviving

spouse of such a person, if the surviving spouse was 55 years of age

or older when the person died, may not be increased above the amount

paid in the first year after the person turned 65, regardless of

changes in tax rate or property value.";

(8) contain the following statement in bold print:

"Notice of Voter-Approval Rate: The highest tax rate the district

can adopt before requiring voter approval at an election is (the

school district voter-approval rate determined under Section

26.08, Tax Code). This election will be automatically held if the

district adopts a rate in excess of the voter-approval rate of (the

school district voter-approval rate)."; and

(9) contain a section entitled "Fund Balances," which

must include the estimated amount of interest and sinking fund

balances and the estimated amount of maintenance and operation or

general fund balances remaining at the end of the current fiscal

year that are not encumbered with or by corresponding debt

obligation, less estimated funds necessary for the operation of the

district before the receipt of the first payment under Chapter 48 in

the succeeding school year.

SECTION 2. Subchapter A, Chapter 41, Election Code, is

amended by adding Section 41.0051 to read as follows:

Sec. 41.0051. ELECTION TO ISSUE BONDS OR INCREASE AD

VALOREM TAX RATE. (a) An election to authorize the issuance of

general obligation bonds or to approve an increase in an ad valorem

tax rate shall be held on the November uniform election date.

(b) Notwithstanding Section 41.0011, an election described

by Subsection (a) may not be held as an emergency election under

that section.

(c) If a law outside this code requires an election

described by Subsection (a) to be held on a date other than the

November uniform election date, the authority administering the

election shall set the election date to comply with this section.

SECTION 3. Subchapter A, Chapter 1201, Government Code, is

amended by adding Section 1201.006 to read as follows:

Sec. 1201.006. LIMIT ON LOCAL GOVERNMENT DEBT. (a)

Notwithstanding any other law, including a provision in a municipal

charter, a political subdivision may not authorize additional debt

if the resulting annual debt service exceeds the limitation imposed

by this section. The maximum annual debt service in any fiscal year

on debt payable from property taxes may not exceed 20 percent of an

amount equal to the average of the amount of property tax

collections for the three preceding fiscal years.

SECTION 4. Chapter 1253, Government Code, is amended by

adding Section 1253.004 to read as follows:

Sec. 1253.004. ALLOCATION OF PROCEEDS. A political

subdivision shall allocate the proceeds from the issuance of

general obligation bonds authorized by the voters in the percentage

or amount stated in the ballot proposition to authorize the

issuance.

SECTION 5. Section 1431.001(2), Government Code, is amended

to read as follows:

(2) "Eligible countywide district" means a flood

control district [ or a hospital district ] the boundaries of which

are substantially coterminous with the boundaries of a county with

a population of three million or more [ or a hospital district

created in a county with a population of more than 1.2 million that

was not included in the boundaries of a hospital district before

September 1, 2003 ].

SECTION 6. Section 1431.002, Government Code, is amended by

adding Subsection (d) to read as follows:

(d) Except as provided by this subsection, the governing

body of an issuer may not authorize an anticipation note to pay a

contractual obligation to be incurred if a bond proposition to

authorize the issuance of bonds for the same purpose was submitted

to the voters during the preceding five years and failed to be

approved. The governing body of an issuer may authorize an

anticipation note that the governing body is otherwise prohibited

from authorizing under this subsection in a case described by

Section 271.045(a)(1), Local Government Code.

SECTION 7. Section 1431.003(b), Government Code, is amended

to read as follows:

(b) Notwithstanding anything in this chapter to the

contrary and except as provided by Section 1431.002(d) , the

governing body may exercise the authority granted to the governing

body of an issuer with regard to issuance of obligations under

Chapter 1371, except that the prohibition in that chapter on the

repayment of an obligation with ad valorem taxes does not apply to

an issuer exercising the authority granted by this section.

SECTION 8. Sections 271.043(7) and (7-a), Local Government

Code, are amended to read as follows:

(7) "Issuer" means a municipality or [ , ] county[ , or

hospital district established under Chapter 281, Health and Safety

Code ].

(7-a) "Public work" [ for an issuer that is a

municipality or county:

[ (A) ] means any of the following public

improvements as authorized by law:

(A) [ (i) ] a street, road, highway, bridge,

sidewalk, or parking structure;

(B) [ (ii) ] a landfill;

(C) [ (iii) ] an airport;

(D) [ (iv) ] a utility system, water supply

project, water treatment plant, wastewater treatment plant, or

water or wastewater conveyance facility;

(E) [ (v) ] a wharf or dock; or

(F) [ (vi) ] a flood control and drainage

project[ ;

[ (vii) a public safety facility, including

a police station, fire station, emergency shelter, jail, or

juvenile detention facility;

[ (viii) a judicial facility;

[ (ix) an administrative office building

housing the governmental functions of the municipality or county;

[ (x) an animal shelter;

[ (xi) a library; or

[ (xii) a park or recreation facility that

is generally accessible to the public and is part of the municipal

or county park system;

[ (B) means the rehabilitation, expansion,

reconstruction, or maintenance of an existing stadium, arena, civic

center, convention center, or coliseum that is owned and operated

by the municipality or county or by an entity created to act on

behalf of the municipality or county; and

[ (C) does not include:

[ (i) a facility for which more than 50

percent of the average annual usage is or is intended to be for

professional or semi-professional sports;

[ (ii) a new stadium, arena, civic center,

convention center, or coliseum that is or is intended to be leased

by a single for-profit tenant for more than 180 days in a single

calendar year; or

[ (iii) a hotel ].

SECTION 9. Section 271.045, Local Government Code, is

amended by amending Subsections (a) and (b) and adding Subsections

(f) and (g) to read as follows:

(a) The governing body of an issuer may authorize

certificates only as necessary to pay a contractual obligation :

(1) to be incurred for the construction, renovation,

repair, or improvement of a public work that the governing body

determines is necessary :

(A) to comply with a state or federal law or rule,

but only if the issuer has been officially notified of

noncompliance with the law or rule [ (1) construction of any public

work ];

(B) to mitigate the impact of a public health

emergency in the jurisdiction of the issuer that poses an imminent

danger to the physical health or safety of the residents of the

issuer;

(C) to finance the cleanup, mitigation, or

remediation of a natural disaster in the jurisdiction of the issuer

subject to a state of disaster declared by:

(i) the governor under Section 418.014,

Government Code, in the fiscal year that the certificates are

authorized; or

(ii) the presiding officer of the governing

body of the issuer under Section 418.108, Government Code, in the

fiscal year that the certificates are authorized; or

(D) to comply with a court order [ (2) purchase of

materials, supplies, equipment, machinery, buildings, land, and

rights-of-way for authorized needs and purposes ]; or

(2) for professional services necessary for a public

work described by Subdivision (1) [ (3) payment of contractual

obligations for professional services, including services provided

by tax appraisers, engineers, architects, attorneys, map makers,

auditors, financial advisors, and fiscal agents ].

(b) If necessary because of a change order for a contractual

obligation incurred for the construction, renovation, repair, or

improvement of a public work [ orders ], the governing body of an

issuer may authorize the issuance of certificates [ may be

authorized ] in an amount not to exceed 15 [ 25 ] percent of the [ a ]

contractual obligation [ incurred for the construction of public

works ], but certificates may be delivered only in the amount

necessary to discharge the contractual obligation [ obligations ].

(f) The governing body of an issuer that authorizes the

issuance of a certificate shall enter into a contract for the

construction, renovation, repair, or improvement of the public work

for which the issuance is authorized not later than the 180th day

after the date the governing body authorizes the issuance.

(g) The governing body of an issuer that authorizes a

certificate to pay a contractual obligation under Subsection

(a)(1)(B) shall adopt a resolution describing the conditions and

circumstances of the public health emergency and making a

determination that the emergency exists.

SECTION 10. Section 271.0461, Local Government Code, is

amended to read as follows:

Sec. 271.0461. ADDITIONAL PURPOSE FOR CERTIFICATES:

DEMOLITION OF DANGEROUS STRUCTURES [ OR RESTORATION OF HISTORIC

STRUCTURES ]. Certificates may be issued by any municipality for

the payment of contractual obligations to be incurred in

demolishing dangerous structures [ or restoring historic

structures ] and may be sold for cash, subject to the restrictions

and other conditions of Section 271.050.

SECTION 11. Sections 271.047(c) and (d), Local Government

Code, are amended to read as follows:

(c) A certificate may not mature over a period greater than

30 [ 40 ] years from the date of the certificate and may not bear

interest at a rate greater than that allowed by Chapter 1204,

Government Code.

(d) Except as provided by this subsection, the governing

body of an issuer may not authorize a certificate to pay a

contractual obligation to be incurred if a bond proposition to

authorize the issuance of bonds for the same purpose was submitted

to the voters during the preceding five [ three ] years and failed to

be approved. A governing body may authorize a certificate that the

governing body is otherwise prohibited from authorizing under this

subsection[ :

[ (1) ] in a case described by Section 271.045(a)(1)

[ Sections 271.056(1)-(3); and

[ (2) to comply with a state or federal law, rule, or

regulation if the political subdivision has been officially

notified of noncompliance with the law, rule, or regulation ].

SECTION 12. Sections 271.049(c) and (d), Local Government

Code, are amended to read as follows:

(c) If before the date tentatively set for the authorization

of the issuance of the certificates or if before the authorization,

the municipal secretary or clerk if the issuer is a municipality, or

the county clerk if the issuer is a county, receives a petition

signed by at least two [ five ] percent of the registered [ qualified ]

voters of the issuer protesting the issuance of the certificates,

the issuer may not authorize the issuance of the certificates

unless the issuance is approved at an election ordered, held, and

conducted in the manner provided for bond elections under Chapter

1251, Government Code.

(d) This section does not apply to certificates issued for

the purposes described by Section 271.045(a)(1) [ Sections

271.056(1)-(4) ].

SECTION 13. Section 271.0525(c), Local Government Code, is

amended to read as follows:

(c) A petition to protest the issuance of refinancing

certificates under this section must be signed by at least two

percent of the registered [ a number of qualified ] voters of the

county [ , residing in the county, equal to at least five percent of

the number of votes cast in that county for governor in the most

recent general election at which that office was filled ].

SECTION 14. Section 271.057(a), Local Government Code, is

amended to read as follows:

(a) Except as provided by Subsection (b), a contract let

under this subchapter for the construction , renovation, repair, or

improvement of public works or the purchase of materials,

equipment, supplies, or machinery and for which competitive bidding

is required by this subchapter must be let to the lowest responsible

bidder and, as the governing body determines, may be let on a

lump-sum basis or unit price basis.

SECTION 15. Section 271.059, Local Government Code, is

amended to read as follows:

Sec. 271.059. CONTRACTOR'S BONDS. If a contract is for the

construction , renovation, repair, or improvement of public works

and is required by this subchapter to be submitted to competitive

bidding, the successful bidder must execute a good and sufficient

payment bond and performance bond. The bonds must each be:

(1) in the full amount of the contract price; and

(2) executed, in accordance with Chapter 2253,

Government Code, with a surety company authorized to do business in

this state.

SECTION 16. Section 26.012(3), Tax Code, is amended to read

as follows:

(3) "Current debt service " means the minimum dollar

amount required to be expended for debt service for the current

year.

SECTION 17. Section 26.04(e), Tax Code, is amended to read

as follows:

(e) By August 7 or as soon thereafter as practicable, the

designated officer or employee shall submit the rates to the

governing body. The designated officer or employee shall post

prominently on the home page of the taxing unit's Internet website

in the form prescribed by the comptroller:

(1) the no-new-revenue tax rate, the voter-approval

tax rate, and an explanation of how they were calculated;

(2) the estimated amount of interest and sinking fund

balances and the estimated amount of maintenance and operation or

general fund balances remaining at the end of the current fiscal

year that are not encumbered with or by corresponding existing debt

obligation; and

(3) a schedule of the taxing unit's debt obligations

showing:

(A) the minimum dollar amount of principal and

interest required to [ that will ] be paid to service the taxing

unit's debts in the next year from property tax revenue, including

payments of lawfully incurred contractual obligations providing

security for the payment of the principal of and interest on bonds

and other evidences of indebtedness issued on behalf of the taxing

unit by another political subdivision and, if the taxing unit is

created under Section 52, Article III, or Section 59, Article XVI,

Texas Constitution, payments on debts that the taxing unit

anticipates to incur in the next calendar year;

(B) the amount by which taxes imposed for debt

are to be increased because of the taxing unit's anticipated

collection rate; and

(C) the total of the amounts listed in Paragraphs

(A)-(B), less any amount collected in excess of the previous year's

anticipated collections certified as provided in Subsection (b).

SECTION 18. Section 26.05, Tax Code, is amended by adding

Subsections (a-1) and (a-2) to read as follows:

(a-1) The governing body of a taxing unit may approve a rate

described by Subsection (a)(1) that exceeds the rate for the taxing

unit as determined under that subsection only if:

(1) the rate is proposed to be approved by a motion

that:

(A) states the rate determined under Subsection

(a)(1);

(B) states the proposed rate;

(C) states the difference between the proposed

rate and the rate determined under Subsection (a)(1); and

(D) describes the purpose for which the excess

revenue collected from the proposed rate will be used; and

(2) the motion is approved by at least 60 percent of

the members of the governing body.

(a-2) If the governing body of a taxing unit approves a rate

described by Subsection (a)(1) under Subsection (a-1) for a tax

year, the rate approved under Subsection (a-1) is considered to be

the current debt rate of the taxing unit for that tax year. The

officer or employee designated by the governing body to calculate

the voter-approval tax rate of the taxing unit under this chapter

shall recalculate that rate to account for the new current debt

rate, and that recalculated voter-approval tax rate is considered

to be the voter-approval tax rate of the taxing unit for that tax

year.

SECTION 19. Section 26.07, Tax Code, is amended by adding

Subsection (h) to read as follows:

(h) Notwithstanding any other law, an increase in a taxing

unit's maintenance and operations tax revenue derived from an

election under this chapter may not be used or transferred to repay

debt in installment payments or otherwise.

SECTION 20. The following provisions are repealed:

(1) Section 271.046, Local Government Code;

(2) Sections 26.012(7)(A)(ii)(d), (g), and (h), Tax

Code; and

(3) Section 26.012(9), Tax Code.

SECTION 21. (a) This Act applies only to ad valorem taxes

imposed for an ad valorem tax year that begins on or after the

effective date of this Act.

(b) The changes in law made by this Act apply only to an

anticipation note or certificate of obligation issued on or after

the effective date of this Act. An anticipation note or certificate

of obligation issued before the effective date of this Act is

governed by the law in effect on the date the anticipation note or

certificate was issued, and the former law is continued in effect

for that purpose.

(c) The changes in law made by the Act apply only to an

election ordered on or after the effective date of this Act. An

election ordered before the effective date of this Act is governed

by the law in effect on the date the election was ordered, and that

law is continued in effect for that purpose.

SECTION 22. (a) Except as otherwise provided by this Act,

this Act takes effect September 1, 2025.

(b) The following provisions take effect January 1, 2026:

(1) Section 44.004(c), Education Code, as amended by

this Act;

(2) Section 41.0051, Election Code, as added by this

Act;

(3) Section 1201.006, Government Code, as added by

this Act;

(4) Section 26.012(3), Tax Code, as amended by this

Act;

(5) Section 26.04(e), Tax Code, as amended by this

Act; and

(6) Sections 26.05(a-1) and (a-2), Tax Code, as added

by this Act.