CHAPTER 1231. BOND REVIEW BOARD

GOVERNMENT CODE

TITLE 9. PUBLIC SECURITIES

SUBTITLE B. PROVISIONS APPLICABLE TO SECURITIES ISSUED BY STATE

GOVERNMENT

CHAPTER 1231. BOND REVIEW BOARD

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1231.001. DEFINITIONS. In this chapter:

(1) "Board" means the Bond Review Board.

(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.

(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);

(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.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

991, Sec. 2, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

991, Sec. 3, eff. September 1, 2007.

Sec. 1231.002. CERTAIN RIGHTS OF ISSUERS NOT AFFECTED. This

chapter does not affect the right of an issuer of state

securities to select its own bond counsel, underwriter, financial

advisor, or other service provider in connection with the

issuance of state securities.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

SUBCHAPTER B. BOND REVIEW BOARD

Sec. 1231.021. BOND REVIEW BOARD; PRESIDING OFFICER. (a) The

board is composed of:

(1) the governor;

(2) the lieutenant governor;

(3) the speaker of the house of representatives; and

(4) the comptroller.

(b) The governor is the presiding officer of the board.

(c) A member of the board may designate another person to act on

the member's behalf.

(d) If the speaker of the house of representatives is prohibited

by the constitution of this state from serving as a voting

member, the speaker serves as a nonvoting member.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999. Amended by Acts 2001, 77th Leg., ch. 1420, Sec. 8.0031,

eff. Sept. 1, 2001.

Sec. 1231.022. RULES. The board may adopt rules:

(1) relating to applications for review, the review process, and

reporting requirements;

(2) exempting certain state securities from the application of

Subchapter C if the board finds that review of the securities is

unnecessary or impractical; and

(3) delegating to the director of the bond finance office the

authority to approve a state security on behalf of the board.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.023. DEBT ISSUANCE POLICIES AND GUIDELINES. (a) The

board shall adopt debt issuance policies to guide issuers of

state securities and to ensure that state debt is prudently

managed. The policies must be sufficiently flexible to allow the

state and issuers of state securities to respond to changing

economic conditions.

(b) The board shall consult with issuers of state securities in

developing the policies.

(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.

Added by Acts 2001, 77th Leg., ch. 530, Sec. 1, eff. June 11,

2001.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

991, Sec. 4, eff. September 1, 2007.

SUBCHAPTER C. BOARD APPROVAL OF ISSUANCE OF STATE SECURITY

Sec. 1231.041. APPROVAL OF STATE SECURITY. An entity, including

a state agency, may not issue a state security unless:

(1) the board approves the issuance; or

(2) the security is exempted under Section 1231.022(2).

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.042. APPLICATION FOR APPROVAL OF ISSUANCE OF STATE

SECURITY. To obtain the approval of the board to issue a state

security, a state agency or other entity must:

(1) apply to the board, in the manner prescribed by the board;

and

(2) file with the application any information, including

documents, required by the board.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.043. APPROVAL OF ISSUANCE. The board shall approve

the issuance of a state security if, after examining the

application and documents or items of information required by the

board, the board determines that the issuance is advisable.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.044. STATE AUDITOR REVIEW OF STATE SECURITY PROCEEDS;

REPORT. (a) On the board's request, the state auditor shall

review the disposition of state security proceeds.

(b) The state auditor shall prepare a report of the review and

file a copy of the report with:

(1) the board;

(2) the governor;

(3) the lieutenant governor;

(4) the speaker of the house of representatives;

(5) the secretary of state; and

(6) each member of the legislature.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999. Amended by Acts 1999, 76th Leg., ch. 1064, Sec. 12, eff.

Sept. 1, 1999.

SUBCHAPTER D. REPORTS TO LEGISLATURE

Sec. 1231.061. REVIEW OF CERTAIN UNISSUED STATE SECURITIES;

BIENNIAL REPORT TO LEGISLATURE. (a) The board shall review all

state securities, including general obligation and revenue bonds,

that have been authorized but are unissued.

(b) Not later than October 31 of each even-numbered year, the

board shall submit to the legislature a report that recommends

whether the authorization for a state security should be revoked.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999. Amended by Acts 2001, 77th Leg., ch. 1420, Sec. 8.004, eff.

Sept. 1, 2001.

Sec. 1231.062. BIENNIAL DEBT STATISTICS REPORT. (a) Not later

than December 31 of each even-numbered year, the board shall

submit to the legislature a statistical report relating to:

(1) state securities; and

(2) bonds and other debt obligations issued by local

governments.

(b) A report must include:

(1) total debt service as a percentage of total expenditures;

(2) tax-supported debt service as a percentage of general

revenue expenditure;

(3) per capita total debt;

(4) per capita tax-supported debt;

(5) total debt and tax-supported debt as a percentage of

personal income;

(6) total personal income per capita;

(7) total debt per capita as a percentage of total personal

income per capita;

(8) total debt and tax-supported debt as a percentage of real

property valuations;

(9) total debt and tax-supported debt as a percentage of annual

revenues and expenditures;

(10) principal required to be repaid in five years and principal

required to be repaid in 10 years;

(11) growth rates of total debt per capita and total debt per

dollar of personal income;

(12) recent trends in the issuance of short-term notes;

(13) recent trends in issuance costs;

(14) savings from recent refundings;

(15) recent trends in capitalized interest use;

(16) debt service coverage ratios, if applicable; and

(17) other information the board considers relevant.

(c) The attorney general, each state agency, and each local

government shall provide to the board, at the times required by

the board, information that the board determines to be necessary

to prepare the statistical report.

(d) The board may enter into a contract for the procurement of

services related to the collection and maintenance of information

on the indebtedness of local governments and state agencies

necessary to prepare the statistical report.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

1416, Sec. 1, eff. June 19, 2009.

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 February 15 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.

Added by Acts 2007, 80th Leg., R.S., Ch.

991, Sec. 5, eff. September 1, 2007.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

1416, Sec. 2, eff. June 19, 2009.

SUBCHAPTER E. SECURITY TRANSACTION REPORTS

Sec. 1231.081. GENERAL REQUIREMENTS. (a) Each entity that

issues a state security shall report to the board its security

transactions.

(b) A report must:

(1) be itemized;

(2) state in dollars the information required by Subsection (c)

or Sections 1231.082-1231.085 for money paid to each business and

classify each of the businesses that money was paid to according

to:

(A) the race, ethnicity, and gender of the controlling ownership

of each business; and

(B) whether the business is domestic or foreign; and

(3) be made in compliance with board rule.

(c) For any security transaction, the report must state each

issuance cost, including the cost of:

(1) bond counsel;

(2) financial advisor;

(3) rating agencies;

(4) official statement preparation;

(5) official statement printing;

(6) bond printing;

(7) paying agent or registrar;

(8) escrow agent;

(9) escrow verification agent;

(10) trustee;

(11) attorney general;

(12) dealer fee;

(13) remarketing fee; and

(14) credit enhancement.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.082. REPORT OF STATE SECURITY SOLD COMPETITIVELY. A

report concerning a state security that is sold competitively

must state:

(1) the components of the gross spread, including:

(A) gross takedown;

(B) expenses; and

(C) syndicate profit and loss;

(2) a summary of obligation orders and allotments by maturity,

firm, and order type; and

(3) each syndicate firm's gross takedown and share of syndicate

profit or loss.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.083. REPORT OF STATE SECURITY SOLD THROUGH

NEGOTIATION. A report concerning a state security sold through

negotiation must state:

(1) the components of the spread, including:

(A) management fee;

(B) structuring fee;

(C) underwriting risk;

(D) takedown; and

(E) spread expenses;

(2) each firm's share of underwriting risk;

(3) the underwriter's counsel;

(4) a summary of obligation orders and allotments by maturity,

firm, and order type; and

(5) each syndicate firm's share of management fee, structuring

fee, underwriting risk fee, and takedown.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.084. REPORT OF STATE SECURITY SOLD THROUGH PRIVATE

PLACEMENT. A report concerning a state security sold through

private placement must state:

(1) each component of the private placement fee, including the:

(A) management fee;

(B) placement agent fee; and

(C) expenses; and

(2) the placement agent's counsel's fee.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.085. REPORT OF REFUNDING OR ESCROW-RELATED

TRANSACTION. A report concerning a refunding or escrow-related

transaction must state the spread paid on the purchase or sale of

an escrow security.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.086. ANNUAL BOARD REPORTS. (a) On May 15 of each

year, the board shall send to the joint committee charged with

monitoring the implementation of goals for participation by

historically underutilized businesses a report of the information

received under this subchapter for the six months preceding March

1 of that year.

(b) On November 15 of each year, the board shall send to the

lieutenant governor, the speaker of the house, each member of the

legislature, and the joint committee a report of the information

received under this subchapter for the fiscal year ending August

31 of that year.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

SUBCHAPTER F. BOND FINANCE OFFICE

Sec. 1231.101. BOND FINANCE OFFICE. (a) The board shall

appoint a director to:

(1) manage the bond finance office; and

(2) select the staff of the office.

(b) When practical, the office shall make use of:

(1) the resources of the Legislative Budget Board; and

(2) the offices of the governor and the comptroller.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.102. ANNUAL REPORT. Not later than 90 days after the

end of each state fiscal year, the bond finance office shall

publish a report listing:

(1) the amount of state securities outstanding;

(2) applicable repayment schedules; and

(3) other information the office considers relevant.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1231.103. PROVISION OF INFORMATION RELATING TO OTHER BONDS.

The bond finance office may provide information for inclusion in

a prospectus related to any bond issued under authority of state

law or municipal ordinance.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.