HBA-KDB C.S.H.B. 3285 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3285 By: Farrar Financial Institutions 4/16/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Under current law, a county, municipality, and eligible school district are authorized to issue anticipation notes with a maturity of up to seven years to pay contractual obligations relating to the construction of a public work. Anticipation notes have been used by these entities for successful commercial programs. However, these entities have used these programs to provide low-cost variable financing for facilities that in some instances have useful lives greater than seven years. In addition, a legal issue regarding the maturity of anticipation notes has been raised concerning whether the notes mature under provisions relating to refunding bonds or under provisions relating to anticipation notes. Currently, counties with a population of three million or more are not authorized to issue anticipation notes for a flood control district or a hospital district (eligible countywide district). In addition, a county may wish to enter into a contract with its flood control district under which the district would undertake flood control projects on behalf of the county. Such contracts are authorized, but a source of payment or security for the contract payments is not specified. C.S.H.B. 3285 authorizes an eligible countywide district to issue anticipation notes, increases the maturity period to 15 years for anticipation notes, allows refunding bonds to be used, and provides funding for projects performed on behalf of a county. 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. 3285 amends the Government Code to modify provisions relating to anticipation notes. The bill provides that the governing body of an eligible countywide district may authorize the issuance of an anticipation note (Sec. 1431.002). The bill establishes that provisions relating to the additional authority of counties and certain municipalities apply to an issuer that is also an eligible countywide district (Sec. 1431.003). The bill prohibits anticipation notes issued for operating or current expenses, in the fiscal year the attorney general approves the notes, for an eligible county countywide district, from exceeding 50 percent of the revenue or taxes anticipated to be collected in that year (Sec. 1431.006). The bill authorizes the governing body of a flood control district operating as a conservation and reclamation district that issues anticipation notes for a contractual obligation to provide that the anticipation notes be paid from and secured by revenue or the proceeds of bonds to be issued by the issuer and to pledge to the payment of the anticipation notes revenues or the proceeds of bonds to be issued by the issuer (Sec. 1431.007). The bill provides that an anticipation note issued by a county with a population of three million or more, an eligible countywide district, or an eligible school district for a specified purpose must mature before the 15th anniversary of the date that the attorney general approves the note. The bill provides that a refunding bond to refund an anticipation note issued by a county, municipality, or eligible countywide district for a contractual obligation or by an eligible school district for a contractual obligation or for other specified purposes is subject to the limitation on maturity for refunding bonds and not the limitation on maturity for anticipation notes (Sec. 1431.009). C.S.H.B. 3285 amends the Local Government Code to authorize the contract for carrying out plans and programs for flood control and soil conservation to provide that payments due under the contract are payable from and secured by a pledge of any revenue of the county or the county's ad valorem taxes or a combination of such revenue and taxes (Sec. 411.003). The bill transfers applicable provisions of law relating to eligible school districts from session law to the Government Code. EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 3285 modifies the original bill by increasing from 2 million or more to 3 million or more the population of a county which is used to determine the eligibility of a countywide district.