HBA-LJP C.S.H.B. 2816 77(R)    BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 2816
By: Brown, Fred
Higher Education
4/8/2001
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Under current law, qualified scholarship funding corporations are
authorized at the request of a city or cities to issue revenue bonds to
acquire student loan notes guaranteed under the federal education loan
program. In 1996, Congress amended law to authorize these non-profit
corporations to change their tax status to that of a 501(c)(3) corporation,
but retain the original tax exemptions on the bonds by transferring them to
a taxable subsidiary.  To enable a nonprofit corporation to transfer all of
its bond obligations under the federal requirements of these amendments,
current provisions regulating higher education authorities need to be
amended.  C.S.H.B. 2816 authorizes a governing body of a city or cities to
create a nonprofit corporation as a higher education authority to issue
revenue bonds and loan the proceeds to an entity that has assumed the
obligations of the nonprofit corporation for the purpose of refunding the
tax-exempt obligations. 

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. 

ANALYSIS

C.S.H.B. 2816 amends the Education Code to authorize the governing body of
a city to create a nonprofit corporation as a higher education authority in
the manner provided by the Texas Non-Profit Corporation Act to act on its
behalf with an appointed board of directors that are selected in the manner
specified by the articles of incorporation.  The bill provides that the
governing body of the city must approve the articles of incorporation of
the nonprofit corporation and any amendments in the ordinance or resolution
authorizing the creation of the nonprofit corporation.  The bill requires
the secretary of the state to indicate on the certificate of incorporation
that the nonprofit corporation is created under the provisions regarding
higher education authorities. 

The bill authorizes the nonprofit corporation, upon approval of the city,
to issue revenue bonds and loan the proceeds of the revenue bonds to an
entity that has assumed the outstanding bond obligations of a nonprofit
corporation.  The bill requires that the loan be for the purpose of
refunding outstanding bonds. The bonds to be refunded must be originally
issued as qualified scholarship funding bonds by a nonprofit corporation,
in accordance with the provisions regarding bonds for purchase of loan
notes, that subsequently elects to cease operation as a qualified
scholarship funding corporation.  The bill provides that any refunded bond
is the sole obligation of the nonprofit corporation and the nonprofit
corporation is prohibited from constituting a debt or obligation of the
city. 

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 2816 modifies the original to establish provisions for the
articles of incorporation of a nonprofit  corporation created as a higher
education authority and to provide that the governing body of the nonprofit
corporation is selected in the manner specified by the articles of
incorporation, rather than appointed and subject to removal by the
governing board of the city.