SENATE FINANCE INTERIM REPORT

The Senate Committee on Finance recently released its interim report, in which it considered four interim charges.  The report’s city-related recommendations are as follows:

Review and make recommendations regarding existing and future public debt at all levels of government in Texas, including independent school districts, cities, other local governments, and the Texas Guaranteed Tuition Plan.

  • Issue 1: Total Public Debt and Debt-Like Obligations
    • Require the Texas Bond Review Board (BRB) to add two new sections to its annual report, applicable only to even-numbered years, that would: (1) track certain debt-like obligations and liabilities, including (but not limited to) pass-through financing and toll-equity agreements, pre-paid tuition plans, bond guarantee programs, and the existing debt allotment; and (2) provide a more comprehensive and detailed look at the status of local debt in Texas.
  • Issue 2: Credit Ratings and Bond Market Access
    • Consider requiring municipal issuers of public debt to issue in each odd-numbered year a three-year credit enhancement plan based on the strengths and weaknesses indentified by relevant credit rating agencies, and to make that plan publically available. 
  • Issue 3: Limitations on Debt and Voter Approval Requirement
    • Designate the BRB as the state’s repository of detailed local debt information.  Require the BRB to establish a searchable database available to voters statewide that includes definitions of relevant financial terms and information on the current debt burden at the state and local levels.  Require voter notification of the database prior to bond elections.  Allow the BRB to contract with the Municipal Advisory Council of Texas to fulfill these requirements and increase the BRB’s appropriation as needed to achieve this recommendation. 
    • Repeal Local Government Code Section 107.003, authorizing the sale of pension obligation bonds, or set voter approval requirements or election petition window parameters for such sales. 
    • Consider creating voter approval requirements or election petition window parameters for city/county highway system bonds.
    • Study the impact of: (1) setting a cap on the maximum amount of outstanding certificates of obligation (COs) and maximum amount of outstanding tax revenue anticipation notes (TRANs) with maturity dates over one year; (2) requiring voter approval of all COs and any TRAN with a maturity date over one year; and (3) extending the CO election petition window to sixty days and establishing an election petition window of thirty days for all TRANs with maturity dates over one year.
    • Study options for increasing reporting requirements and oversight for COs, TRANs, pension bonds, and city/county highway system bonds. 
  • Issue 4: Interest Rate Swaps
    • Require legal review by the attorney general of any interest rate swap agreement at the state or local level, regardless of when it is initiated. 
    • Require local issuers that use interest rate swap agreements to report information on those agreements to the BRB on an annual basis, and require the BRB to include high-level summary information on swaps at the local level in its annual report.  

Identify and evaluate potential improvements to the property tax system.

  • Issue 1:  Increasing Public Participation in the Tax-Rate Setting Process and Ensuring Fairness in Appraisal Protests and Appeals
    • Continue to monitor the effectiveness of past legislative mandates designed to increase public participation and fairness.
    • Consider a legislative proposal to promote transparency and simplify the local government tax rate setting process.
    • Consider requiring voter approval for city and county tax revenue increases of more than four percent. 
  • Issue 2:  Property Appraisal Values
    • Consider proposing a constitutional amendment to reduce the current $15,000 homestead exemption for school property taxes in an amount necessary to offset the cost of lowering the current ten-percent appraisal cap for residence homesteads to five percent.
  • Issue 3:  Community Housing Development Organization (CHDO) Exemptions
    • Consider clarifying that CHDOs partnering with for-profit developers to develop multi-family properties must actually own the property to be eligible for an ad valorem tax exemption, due to concerns raised by recent legal challenges. 
    • Alternatively, propose an amendment to the Texas Constitution that would allow for-profit entities in partnership with CHDOs to develop a multi-family property and receive an ad valorem tax limitation, even though the CHDO is not the actual owner of the property, in exchange for offering extremely affordable rents for difficult-to-serve populations. 
  • Issue 4: Real Property Interests in Oil and Gas
    • Continue to have the comptroller’s office prepare the market condition factors using the forecasted price for crude oil and natural gas, but eliminate the requirement that the forecasts be based on “revenue estimating methodology” to enable the comptroller’s office to better focus on incorporating market value methodology in its estimates.

The full text of the report is available online at
http://www.senate.state.tx.us/75r/senate/commit/c540/c540.InterimReport81.pdf.


TML member cities may use the material herein for any purpose.
No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the
Texas Municipal League.

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