HBA-KDB H.B. 3357 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 3357
By: Kuempel
Financial Institutions
3/25/2001
Introduced



BACKGROUND AND PURPOSE 

Under current law, the board of directors of a river authority engaged in
the distribution and sale of electric energy is authorized to create a
nonprofit corporation to act on behalf of the river authority as its
authority and instrumentality.  Such a nonprofit corporation has most of
the same powers as the creating river authority, including the issuance of
the bonds and public securities.  However, it may take time for a newly
formed nonprofit corporation to develop credit ratings suitable for the
issuance of bonds and other securities.  If a creating river authority was
authorized to guarantee the obligations of the nonprofit corporation, the
potential lower interest rates and improved marketability might reduce
costs to the public. House Bill 3357 authorizes a river authority to
guarantee with its own assets public securities and other obligations of a
nonprofit corporation established by the authority. 

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

House Bill 3357 amends the Water Code to authorize a creating river
authority of a nonprofit corporation engaged in the distribution and sale
of electric energy to guarantee or otherwise provide credit support for any
public security or other obligation or contract of such a corporation
provided the governing board of the creating river authority determines
that the guarantee or other credit agreement is beneficial to a public
purpose of the river authority and for the public purpose of development
and diversification of the economy of the state, the elimination of
unemployment or underemployment in the state, or the development or
expansion of commerce in the state.  The bill provides that a determination
by a governing board of a creating river authority is conclusive.     

The bill authorizes a guarantee or other credit agreement to provide for
the guarantee of or other credit support for public securities or other
obligations or contracts of the corporation, all or a portion of which, may
be authorized, executed, and delivered in the future.  The bill requires
provisions relating to the examination and registration of public
securities to apply to any guarantee or other credit agreement and the term
public security is required to have the meaning given in such provisions.
For purposes of such provisions, a guarantee or other credit agreement
constitutes a public security. 

EFFECTIVE DATE

September 1, 2001.