S.B. No. 1332
 
 
 
 
AN ACT
  relating to the establishment of debt management policies and
  guidelines by the Bond Review Board, including the approval by the
  board of certain interest rate management agreements, and to other
  matters affecting public finance.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 1201.027, Government Code, is amended by
  adding Subsection (d) to read as follows:
         (d)  An issuer of a state security, as defined by Section
  1231.001, that selects or contracts with a person to provide
  services under Subsection (a) shall, on request, submit to the Bond
  Review Board:
               (1)  the request for proposals to provide the services
  not later than the date the request for proposals is published;
               (2)  each final proposal received to provide the
  services before a contract for the services is entered into by the
  issuer; and
               (3)  an executed contract entered into by an issuer for
  services under Subsection (a).
         SECTION 2.  Section 1231.001, Government Code, is amended by
  adding Subdivision (1-a) to read as follows:
               (1-a)  "Interest rate management agreement" means an
  agreement that provides for an interest rate transaction, including
  a swap, basis, forward, option, cap, collar, floor, lock, or hedge
  transaction, for a transaction similar to those types of
  transactions, or for a combination of any of those types of
  transactions. The term includes:
                     (A)  a master agreement that provides standard
  terms for transactions;
                     (B)  an agreement to transfer collateral as
  security for transactions; and
                     (C)  a confirmation of transactions.
         SECTION 3.  Subdivision (2), Section 1231.001, Government
  Code, is amended to read as follows:
               (2)  "State security" means:
                     (A)  an obligation, including a bond, issued by:
                           (i)  a state agency;
                           (ii)  an entity that is expressly created by
  statute and has statewide jurisdiction; or
                           (iii)  an entity issuing the obligation on
  behalf of this state or on behalf of an entity described by
  Subparagraph (i) or (ii); [or]
                     (B)  an installment sale or lease-purchase
  obligation that is issued by or on behalf of an entity described by
  Paragraph (A) and that has:
                           (i)  a stated term of more than five years;
  or
                           (ii)  an initial principal amount of more
  than $250,000; or
                     (C)  an obligation, including a bond, that is
  issued under Chapter 53, Education Code, at the request of or for
  the benefit of an institution of higher education as defined by
  Section 61.003, Education Code, other than a public junior college.
         SECTION 4.  Subsection (c), Section 1231.023, Government
  Code, is amended to read as follows:
         (c)  The board shall adopt policies that:
               (1)  provide a mechanism for evaluating the amount of
  state debt that can be managed prudently;
               (2)  address opportunities to consolidate debt
  authority;
               (3)  include guidelines for:
                     (A)  appropriate levels of reserves;
                     (B)  the types of state security that should be
  issued under various circumstances; and
                     (C)  the terms or structure of a state security;
               (4)  help the board and issuers of state securities to
  evaluate:
                     (A)  the potential risks involved in the issuance
  of a state security or in the execution of an interest rate
  management agreement; and
                     (B)  the effect that the issuance of a state
  security or that the execution of an interest rate management
  agreement will have on the finances and on the overall debt position
  of the issuer and of the state; and
               (5)  recommend other advisable practices related to the
  issuance of a state security.
         SECTION 5.  Subchapter D, Chapter 1231, Government Code, is
  amended by adding Section 1231.063 to read as follows:
         Sec. 1231.063.  DEBT AFFORDABILITY STUDY. (a)  The board,
  in consultation with the Legislative Budget Board, shall annually
  prepare a study regarding the state's current debt burden by:
               (1)  analyzing the state's historical debt use and
  financial and economic resources to determine the amount of
  additional not self-supporting debt the state can accommodate; and
               (2)  monitoring how annual changes and new debt
  authorizations affect the mechanism described in Subsection (b).
         (b)  The study must include a mechanism that can be used to
  determine, at a minimum, the state's debt affordability and serve
  as a guideline for debt authorizations and debt service
  appropriations. The mechanism must be designed to calculate:
               (1)  the not self-supporting debt service as a
  percentage of unrestricted revenues;
               (2)  the ratio of not self-supporting debt to personal
  income;
               (3)  the amount of not self-supporting debt per capita;
               (4)  the rate of debt retirement; and
               (5)  the ratio of not self-supporting debt service to
  budgeted or expended general revenue.
         (c)  Not later than December 1 of each year, the board shall
  submit the annual study to:
               (1)  the governor;
               (2)  the comptroller;
               (3)  the presiding officer of each house of the
  legislature; and
               (4)  the Senate Committee on Finance and House
  Appropriations Committee.
         (d)  The annual study submitted under Subsection (c) must
  include a target and limit ratio for not self-supporting debt
  service as a percentage of unrestricted revenues.
         SECTION 6.  Subchapter C, Chapter 1232, Government Code, is
  amended by adding Section 1232.124 to read as follows:
         Sec. 1232.124.  PREFERENCE FOR TEXAS BUSINESSES. If the
  authority contracts with a private entity to issue bonds under this
  chapter, the authority shall consider contracting with:
               (1)  an entity that has a place of business in this
  state; and
               (2)  a historically underutilized business as defined
  by Section 2161.001.
         SECTION 7.  Chapter 1371, Government Code, is amended by
  adding Subchapter D to read as follows:
  SUBCHAPTER D. ADVISERS RETAINED FOR THE ISSUANCE OF PUBLIC
  SECURITIES AND RELATED MATTERS
         Sec. 1371.151.  DEFINITIONS. In this subchapter:
               (1)  "Advice" means the advice provided by an adviser
  regarding activities described by Sections 1371.154(b)(2)(A)-(C).
               (2)  "Adviser" means a person who provides advice
  regarding activities described by Sections 1371.154(b)(2)(A)-(C).
               (3)  "Interest rate management agreement" means an
  agreement that provides for an interest rate transaction,
  including:
                     (A)  a swap, basis, forward, option, cap, collar,
  floor, lock, or hedge; or
                     (B)  any combination of these types of agreements
  or transactions.
               (4)  "Municipal finance professional" means an
  individual, other than an individual whose functions are solely
  clerical or ministerial, whose activities include:
                     (A)  underwriting, trading, or the sale of
  municipal securities;
                     (B)  financial advisory or consultant services
  for issuers in connection with the issuance of public securities,
  the execution and delivery of interest rate management agreements,
  or the investment of the proceeds of public securities;
                     (C)  research or investment advice with respect to
  municipal securities, provided that the research or advice relates
  to an activity described by Paragraph (A) or (B); or
                     (D)  any other activity that involves direct or
  indirect communication with public investors regarding public
  securities, provided that the activity relates to an activity
  described by Paragraph (A) or (B).
               (5)  "Public security" has the meaning assigned by
  Section 1202.001.
         Sec. 1371.152.  EXEMPTIONS. This subchapter does not apply
  to:
               (1)  an issuer who has more than $3 billion in
  outstanding obligations as of September 1, 2007, or to a nonprofit
  corporation investing funds on behalf of such an issuer;
               (2)  a person acting as a financial adviser with
  respect to an issuance of public securities by an issuer created
  under Chapter 222, Water Code, delivered before January 1, 2010,
  under a contract that was in effect on September 1, 2007, and that
  has not been modified since that date;
               (3)  an employee of an issuer providing advice to the
  issuer or to another issuer;
               (4)  a state agency:
                     (A)  created by Section 49-b, Article III, Texas
  Constitution; or
                     (B)  the head of which is an officer in the
  executive department under Section 1, Article IV, Texas
  Constitution; or
               (5)  a corporation created under Section 4B,
  Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas
  Civil Statutes), by a municipality located in a county bordering
  the Rio Grande River.
         Sec. 1371.153.  EXEMPTIONS FOR CERTAIN ADVICE.  This
  subchapter does not apply to advice to an issuer regarding:
               (1)  a loan or a line of credit by a depository
  institution to an issuer in a transaction not involving the
  issuance of a public security offered to a third party or parties;
  or
               (2)  a deposit of funds with a depository institution
  in compliance with another statute of this state.
         Sec. 1371.154.  FINANCIAL ADVISER OR INVESTMENT ADVISER
  QUALIFICATIONS AND REQUIREMENTS FOR CERTAIN AGREEMENTS AND
  TRANSACTIONS. (a)  This section applies to a financial adviser or
  an investment adviser who advises the issuer in connection with:
               (1)  an interest rate management agreement;
               (2)  the execution or delivery of a public security; or
               (3)  the investment of the public security proceeds.
         (b)  To be eligible to be a financial adviser or an
  investment adviser under this subchapter, the adviser must:
               (1)  be registered:
                     (A)  as a dealer or investment adviser in
  accordance with Section 12 or 12-1, The Securities Act (Article
  581-12 or 581-12-1, Vernon's Texas Civil Statutes); or
                     (B)  with the United States Securities and
  Exchange Commission under the Investment Advisers Act of 1940 (15
  U.S.C. Section 80b-1 et seq.), if the adviser is providing advice on
  the investment of bond proceeds and not on the issuance of a public
  security or an interest rate management agreement;
               (2)  have relevant experience in providing advice to
  issuers in connection with:
                     (A)  the issuance of public securities;
                     (B)  the valuation of interest rate management
  agreements; or
                     (C)  the investment of public security proceeds;
  and
               (3)  acknowledge in writing to the issuer that in
  connection with the transaction for which the adviser is providing
  advice the adviser:
                     (A)  is acting as the issuer's agent; and
                     (B)  has complied with the requirements of this
  subchapter.
         Sec. 1371.155.  REQUIREMENTS. (a)  An adviser, including an
  adviser that is not required to be registered under Section
  1371.154(b)(1)(A), shall comply with the following with respect to
  all services contemplated under this subchapter to be provided in
  this state:
               (1)  in conducting services as an adviser of the
  issuer, the adviser shall deal fairly with all persons and may not
  engage in any deceptive, dishonest, or unfair practice;
               (2)  in recommending to an issuer any transaction
  involving the issuance of public securities, the execution and
  delivery of interest rate management agreements, or the investment
  of proceeds of securities, the adviser shall have reasonable
  grounds for making the recommendation based on the information made
  available by the issuer or information the adviser otherwise knows
  about the issuer;
               (3)  the adviser may not in any year, directly or
  indirectly, give or permit to be given to an employee or an elected
  or appointed official of an issuer gifts or services of value,
  including gratuities, that have a total cumulative value of more
  than $100;
               (4)  the adviser may not, directly or indirectly,
  provide or agree to provide payment to a person who is not
  affiliated with the adviser for a solicitation of advisory business
  for the adviser; and
               (5)  the adviser may not act as adviser to an issuer
  before the second anniversary of the date of making a contribution
  to an official of the issuer if the contribution is made by:
                     (A)  the adviser;
                     (B)  a municipal finance professional associated
  with the adviser; or
                     (C)  a political action committee controlled by
  the adviser or by a municipal finance profession associated with
  the adviser.
         (b)  Notwithstanding Subsection (a)(3), this section does
  not prohibit an adviser, including an adviser that is not required
  to be registered under Section 1371.154(b)(1)(A), from:
               (1)  giving an employee or an elected or appointed
  official of an issuer occasional gifts of meals or tickets to
  theatrical, sporting, or other entertainments hosted by the
  adviser;
               (2)  sponsoring legitimate business functions for the
  issuer that are recognized by the Internal Revenue Service as
  deductible business expenses; or
               (3)  providing to the issuer or an employee or elected
  or appointed official of the issuer gifts of reminder advertising.
         (c)  A gift or sponsorship given or provided by an adviser,
  including an adviser that is not required to be registered under
  Section 1371.154(b)(1)(A), to an issuer under Subsection (b) may
  not be so frequent or so extensive that a question of impropriety is
  raised.
         (d)  Notwithstanding Subsection (a)(5), this section does
  not prohibit an adviser, including an adviser that is not required
  to be registered under Section 1371.154(b)(1)(A), from acting as an
  adviser to an issuer if the only contributions made to an official
  of the issuer before the second anniversary of the date of making a
  contribution described by Subsection (a)(5):
               (1)  were made by municipal finance professionals who
  were entitled to vote; and
               (2)  were not in excess of $250 for each election.
         SECTION 8.  Section 1372.031, Government Code, is amended to
  read as follows:
         Sec. 1372.031.  PRIORITIES FOR RESERVATIONS AMONG CERTAIN
  ISSUERS. (a)  Except as provided by Subsection (b) and subject
  [Subject] to Sections 1372.0321 and 1372.0231, if, on or before
  October 20, more than one issuer in a category described by Section
  1372.022(a)(2), (3), (4), or (6) applies for a reservation of the
  state ceiling for the next program year, the board shall grant
  reservations in that category in the order determined by the board
  by lot.
         (b)  Until August 1 of the program year, within the category
  described by Section 1372.022(a)(6), the board shall grant priority
  to the Texas Economic Development Bank for projects that the Texas
  Economic Development and Tourism Office determines meet the
  governor's criteria for funding from the Texas Enterprise Fund.
  Notwithstanding the priority, the Texas Economic Development Bank
  may not receive an amount greater than one-sixth of the portion of
  the state ceiling available under Section 1372.022(a)(6) on January
  1 of the program year.
         (c)  In selecting projects for reservations of the state
  ceiling for a program year under Subsection (b), among those
  projects the Texas Economic Development and Tourism Office
  determines meet the governor's criteria for funding from the Texas
  Enterprise Fund the office shall give priority to obtaining
  reservations for those projects located or to be located in an
  economically depressed or blighted area, as defined by Section
  2306.004, or in an enterprise zone designated under Chapter 2303.
         (d)  This section and Section 1372.063 do not give a priority
  to any project described by Subsection (b) for the purpose of
  selecting projects for reservations under Section 1372.022(b).
         (e)  The Texas Economic Development Bank is subject to
  Section 1201.027(d).
         SECTION 9.  Section 1372.063, Government Code, is amended to
  read as follows:
         Sec. 1372.063.  PRIORITY 1 CARRYFORWARD CLASSIFICATION. The
  priority 1 carryforward classification applies to:
               (1)  an issuer of a state-voted issue; and
               (2)  a state agency, other than an issuer of a
  state-voted issue, that applies for a carryforward designation for
  a project that:
                     (A)  is described by Section 1372.067(a)(2); and
                     (B)  the Texas Economic Development and Tourism
  Office determines meets the governor's criteria for funding from
  the Texas Enterprise Fund.
         SECTION 10.  Subsection (d), Section 1201.027, Government
  Code, as added by this Act, applies only to:
               (1)  a contract for which the solicitation of
  applicable bids, offers, qualifications, proposals, or other
  similar expressions of interest is published on or after September
  1, 2007; or
               (2)  if no solicitation described by Subdivision (1) of
  this section is published in relation to the contract, a contract
  entered into on or after September 15, 2007.
         SECTION 11.  (a)  Except as provided by Subsection (b) of
  this section, this Act takes effect September 1, 2007.
         (b)  Sections 1371.154 and 1371.155, Government Code, as
  added by this Act, take effect January 1, 2008.
 
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 1332 passed the Senate on
  May 3, 2007, by the following vote:  Yeas 31, Nays 0;
  May 25, 2007, Senate refused to concur in House amendments and
  requested appointment of Conference Committee; May 26, 2007, House
  granted request of the Senate; May 27, 2007, Senate adopted
  Conference Committee Report by the following vote:  Yeas 30,
  Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 1332 passed the House, with
  amendments, on May 23, 2007, by the following vote:  Yeas 138,
  Nays 9, one present not voting; May 26, 2007, House granted request
  of the Senate for appointment of Conference Committee;
  May 27, 2007, House adopted Conference Committee Report by the
  following vote:  Yeas 145, Nays 0, two present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
             Date
 
 
  ______________________________ 
            Governor