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.