bill sharply limiting certificates of obligation

The text as introduced · 1,456 words

89R1489 AMF-F

By: Holt
H.B. No. 4986

A BILL TO BE ENTITLED

AN ACT

relating to the issuance of certificates of obligation by local

governments.

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

SECTION 1. This Act shall be known as the Certificate of

Obligation Reform Act.

SECTION 2. Section 271.043(7-a), Local Government Code, is

amended to read as follows:

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

municipality or county:

[ (A) ] means :

(A) [ any of the following public improvements as

authorized by law:

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

sidewalk, [ or ] parking structure , [ ;

[ (ii) a ] landfill , [ ;

[ (iii) an ] airport , or park ;

(B) [ (iv) ] a part of a utility system, water

supply project, water treatment plant, wastewater treatment plant,

[ or ] water or wastewater conveyance facility , [ ;

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

[ (vi) a ] flood control and drainage

project;

[ (vii) a public safety facility, including

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

juvenile detention facility;

[ (viii) a judicial facility;

[ (ix) an administrative office building

housing the governmental functions of the municipality or county;

[ (x) an animal shelter;

[ (xi) a library; or

[ (xii) a park or recreation facility that

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

or county park system;

[ (B) means the rehabilitation, expansion,

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

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

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

behalf of the municipality or county; and ]

(C) a telecommunications, wireless

communications, or information technology system and any computer

application hardware or software; or

(D) a cybersecurity system [ does not include:

[ (i) a facility for which more than 50

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

professional or semi-professional sports;

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

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

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

calendar year; or

[ (iii) a hotel ].

SECTION 3. Section 271.045, Local Government Code, is

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

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

(a) The governing body of an issuer may authorize

certificates only as necessary to pay a contractual obligation to

be incurred for the construction, creation, renovation, repair, or

improvement of a public work that is necessary :

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

only if the issuer has been officially notified of noncompliance

with the law or rule [ construction of any public work ];

(2) to mitigate the impact of the following, as

determined by the governing body:

(A) a public health emergency in the jurisdiction

of the issuer that poses an imminent danger to the physical health

or safety of the residents of the issuer; or

(B) a natural disaster in the jurisdiction of the

issuer subject to a state of disaster declared or renewed by:

(i) the governor under Section 418.014,

Government Code, in the fiscal year that the certificates are

authorized; or

(ii) the presiding officer of the governing

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

fiscal year that the certificates are authorized [ purchase of

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

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

(3) to respond to a court decision that requires the

issuer to construct, create, renovate, repair, or improve a public

work [ payment of contractual obligations for professional

services, including services provided by tax appraisers,

engineers, architects, attorneys, map makers, auditors, financial

advisors, and fiscal agents ].

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

obligation incurred for the construction, creation, renovation,

repair, or improvement of a public work [ orders ], the governing

body of an issuer may authorize the issuance of certificates [ may be

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

contractual obligation [ incurred for the construction of public

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

necessary to discharge the contractual obligation [ obligations ].

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

issuance of a certificate shall enter into a contract for the

construction, creation, renovation, repair, or improvement of the

public work for which the issuance is authorized not later than the

90th day after the date the governing body authorizes the issuance.

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

certificate to pay a contractual obligation under Subsection

(a)(2)(A) shall adopt a resolution describing the conditions and

circumstances of the public health emergency.

SECTION 4. Section 271.0461, Local Government Code, is

amended to read as follows:

Sec. 271.0461. ADDITIONAL PURPOSE FOR CERTIFICATES:

DEMOLITION OF DANGEROUS STRUCTURES [ OR RESTORATION OF HISTORIC

STRUCTURES ]. Certificates may be issued by any municipality for

the payment of contractual obligations to be incurred in

demolishing dangerous structures [ or restoring historic

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

and other conditions of Section 271.050.

SECTION 5. Sections 271.047(c) and (d), Local Government

Code, are amended to read as follows:

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

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

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

Government Code.

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

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

contractual obligation to be incurred if a bond proposition to

authorize the issuance of bonds for the same purpose was submitted

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

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

governing body is otherwise prohibited from authorizing under this

subsection:

(1) in a case described by Sections 271.056(1)-(3);

and

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

regulation if the political subdivision has been officially

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

SECTION 6. Section 271.049(c), Local Government Code, is

amended to read as follows:

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

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

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

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

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

voters of the issuer protesting the issuance of the certificates,

the issuer may not authorize the issuance of the certificates

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

conducted in the manner provided for bond elections under Chapter

1251, Government Code.

SECTION 7. Section 271.057(a), Local Government Code, is

amended to read as follows:

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

under this subchapter for the construction , creation, renovation,

repair, or improvement of a public work [ works ] or the purchase of

materials, equipment, supplies, or machinery and for which

competitive bidding is required by this subchapter must be let to

the lowest responsible bidder and, as the governing body

determines, may be let on a lump-sum basis or unit price basis.

SECTION 8. Section 271.059, Local Government Code, is

amended to read as follows:

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

construction , creation, renovation, repair, or improvement of a

public work [ works ] and is required by this subchapter to be

submitted to competitive bidding, the successful bidder must

execute a good and sufficient payment bond and performance bond.

The bonds must each be:

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

(2) executed, in accordance with Chapter 2253,

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

this state.

SECTION 9. Section 271.046, Local Government Code, is

repealed.

SECTION 10. The changes in law made by this Act apply only

to a certificate of obligation issued on or after the effective date

of this Act. A certificate of obligation issued before the

effective date of this Act is governed by the law in effect on the

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

effect for that purpose.

SECTION 11. This Act takes effect September 1, 2025.