HBA-MPM H.B. 347 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 347 By: Averitt Corrections 2/10/1999 Introduced BACKGROUND AND PURPOSE Due to overcrowded conditions in local jails, certain municipalities and counties in Texas financed new jail facilities (facilities) commencing in the mid-1980's. Commonly, the municipality or county contracted with a nonprofit corporation that acted on behalf of the governmental unit, thereby allowing the governmental unit to lease-purchase, or lease with an option to purchase, the facilities from the nonprofit corporation which, in turn, issued certificates of participation (certificates) representing a "pass-through" of the lease payments of the governmental unit. Proceeds from the sale of these certificates were then applied to build the facilities. Typically, the obligation of the municipality or county to make lease payments has been subject to annual appropriations made by the governing body. Additionally, most of the financing arrangements have included a deed of trust and security agreement entered into by the nonprofit corporation with a trustee to secure for the benefit of the purchasers of the certificates a mortgage on the financed facility. Many of the certificates were initially sold at a high interest rate, relative to current bond market rates. Certain municipalities and counties desire to refinance the facilities through issuance of refunding bonds but have been unable to do so because there is an apparent lack of statutory authorization for the refinancing of the facilities in this manner. H.B. 347 permits municipalities, counties, and nonprofit corporations acting on their behalf to refinance facilities originally financed through certificates of participation. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sections 361.051 (4) and (5), Local Government Code, as follows: (4) Redefines the term "lease obligation" to mean an obligation incurred by the Texas Board of Criminal Justice (board) under Section 495.021, Government Code (Lease-Purchase, Installment Contracts), rather than the Texas Department of Corrections under Article 6166g 4, Revised Statutes (repealed by Acts 1989, 71st Legislature, Chapter 212, Section 3.03, effective September 1, 1998). Section 495.021, Government Code, authorizes the board to contract with the commissioners court of a county to use, lease-purchase, purchase on an installment contract, or acquire in any other manner a secure correctional facility financed and constructed under the authority of the county; provides that the contract must be subject to specific appropriative authority in the General Appropriations Act; and provides that the facility must be managed by the institutional division. Further establishes that a contract under this section is subject to review and approval by the bond review board under the provisions of Chapter 1078, Acts of the 70th Legislature, Regular Session, 1987 (Article 717k-7, V.T.C.S.), without regard to the amount or the duration of the contract. (5) Expands the definition of "obligations" under this section to include contractual obligations incurred by an entity under a lease agreement, lease-purchase agreement, purchase on an installment contract, or other agreement providing for the lease, leasepurchase, installment purchase, or other acquisition of title to an eligible project. "Entity" under Section 361.051, Local Government Code, means a home-rule city or county or a non-profit corporation acting on behalf of a home-rule city or county. "Eligible project" under Section 361.051, Local Government Code, means the acquisition, construction, equipping, or enlarging of facilities at any location in the state for, with relation to, or incidental in the administration of criminal justice, including, without limitation, correctional facilities or other accommodations for handling, processing, and detention of prisoners. SECTION 2. Amends Section 361.052, Local Government Code, to include obligations incurred, rather than only issued, in connection with an eligible project as one of the obligations which the governing body of an entity is empowered and authorized to issue. Specifies that this subsection is applicable regardless of when the obligations are due, or when title to the project is transferred to the entity. Includes revenues derived by an entity from the operation of an eligible project, in addition to money to be paid pursuant to a lease obligation, among things which may be pledged to secure or pay the entity's obligations, in whole or in part. Makes nonsubstantive changes. SECTION 3. Amends Section 361.053(d), Local Government Code, to include a deed of trust granting a security interest in an eligible project, in addition to a trust indenture, among things which may additionally secured by bonds. SECTION 4. Emergency clause. Effective date: upon passage.