89R1489 AMF-F     By: Holt H.B. No. 4986       A BILL TO BE ENTITLED   AN ACT   relating to the issuance of certificates of obligation by local   governments.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  This Act shall be known as the Certificate of   Obligation Reform Act.          SECTION 2.  Section 271.043(7-a), Local Government Code, is   amended to read as follows:                (7-a)  "Public work" [for an issuer that is a   municipality or county:                      [(A)]  means:                      (A)  [any of the following public improvements as   authorized by law:                            [(i)]  a street, road, highway, bridge,   sidewalk, [or] parking structure,[;                            [(ii)  a] landfill,[;                            [(iii)  an] airport, or park;                      (B) [(iv)]  a part of a utility system, water   supply project, water treatment plant, wastewater treatment plant,   [or] water or wastewater conveyance facility,[;                            [(v)  a] wharf, [or] dock, or[;                            [(vi)  a] flood control and drainage   project;                            [(vii)  a public safety facility, including   a police station, fire station, emergency shelter, jail, or   juvenile detention facility;                            [(viii)  a judicial facility;                            [(ix)  an administrative office building   housing the governmental functions of the municipality or county;                            [(x)  an animal shelter;                            [(xi)  a library; or                            [(xii)  a park or recreation facility that   is generally accessible to the public and is part of the municipal   or county park system;                      [(B)  means the rehabilitation, expansion,   reconstruction, or maintenance of an existing stadium, arena, civic   center, convention center, or coliseum that is owned and operated   by the municipality or county or by an entity created to act on   behalf of the municipality or county; and]                      (C)  a telecommunications, wireless   communications, or information technology system and any computer   application hardware or software; or                      (D)  a cybersecurity system [does not include:                            [(i)  a facility for which more than 50   percent of the average annual usage is or is intended to be for   professional or semi-professional sports;                            [(ii)  a new stadium, arena, civic center,   convention center, or coliseum that is or is intended to be leased   by a single for-profit tenant for more than 180 days in a single   calendar year; or                            [(iii)  a hotel].          SECTION 3.  Section 271.045, Local Government Code, is   amended by amending Subsections (a) and (b) and adding Subsections   (f) and (g) to read as follows:          (a)  The governing body of an issuer may authorize   certificates only as necessary to pay a contractual obligation to   be incurred for the construction, creation, renovation, repair, or   improvement of a public work that is necessary:                (1)  to comply with a state or federal law or rule, but   only if the issuer has been officially notified of noncompliance   with the law or rule [construction of any public work];                (2)  to mitigate the impact of the following, as   determined by the governing body:                      (A)  a public health emergency in the jurisdiction   of the issuer that poses an imminent danger to the physical health   or safety of the residents of the issuer; or                      (B)  a natural disaster in the jurisdiction of the   issuer subject to a state of disaster declared or renewed by:                            (i)  the governor under Section 418.014,   Government Code, in the fiscal year that the certificates are   authorized; or                            (ii)  the presiding officer of the governing   body of the issuer under Section 418.108, Government Code, in the   fiscal year that the certificates are authorized [purchase of   materials, supplies, equipment, machinery, buildings, land, and   rights-of-way for authorized needs and purposes]; or                (3)  to respond to a court decision that requires the   issuer to construct, create, renovate, repair, or improve a public   work [payment of contractual obligations for professional   services, including services provided by tax appraisers,   engineers, architects, attorneys, map makers, auditors, financial   advisors, and fiscal agents].          (b)  If necessary because of a change order for a contractual   obligation incurred for the construction, creation, renovation,   repair, or improvement of a public work [orders], the governing   body of an issuer may authorize the issuance of certificates [may be   authorized] in an amount not to exceed 15 [25] percent of the [a]   contractual obligation [incurred for the construction of public   works], but certificates may be delivered only in the amount   necessary to discharge the contractual obligation [obligations].          (f)  The governing body of an issuer that authorizes the   issuance of a certificate shall enter into a contract for the   construction, creation, renovation, repair, or improvement of the   public work for which the issuance is authorized not later than the   90th day after the date the governing body authorizes the issuance.          (g)  The governing body of an issuer that authorizes a   certificate to pay a contractual obligation under Subsection   (a)(2)(A) shall adopt a resolution describing the conditions and   circumstances of the public health emergency.          SECTION 4.  Section 271.0461, Local Government Code, is   amended to read as follows:          Sec. 271.0461.  ADDITIONAL PURPOSE FOR CERTIFICATES:   DEMOLITION OF DANGEROUS STRUCTURES [OR RESTORATION OF HISTORIC   STRUCTURES].  Certificates may be issued by any municipality for   the payment of contractual obligations to be incurred in   demolishing dangerous structures [or restoring historic   structures] and may be sold for cash, subject to the restrictions   and other conditions of Section 271.050.          SECTION 5.  Sections 271.047(c) and (d), Local Government   Code, are amended to read as follows:          (c)  A certificate may not mature over a period greater than   30 [40] years from the date of the certificate and may not bear   interest at a rate greater than that allowed by Chapter 1204,   Government Code.          (d)  Except as provided by this subsection, the governing   body of an issuer may not authorize a certificate to pay a   contractual obligation to be incurred if a bond proposition to   authorize the issuance of bonds for the same purpose was submitted   to the voters during the preceding five [three] years and failed to   be approved.  A governing body may authorize a certificate that the   governing body is otherwise prohibited from authorizing under this   subsection:                (1)  in a case described by Sections 271.056(1)-(3);   and                (2)  to comply with a state or federal law, rule, or   regulation if the political subdivision has been officially   notified of noncompliance with the law, rule, or regulation.          SECTION 6.  Section 271.049(c), Local Government Code, is   amended to read as follows:          (c)  If before the date tentatively set for the authorization   of the issuance of the certificates or if before the authorization,   the municipal secretary or clerk if the issuer is a municipality, or   the county clerk if the issuer is a county, receives a petition   signed by at least two [five] percent of the registered [qualified]   voters of the issuer protesting the issuance of the certificates,   the issuer may not authorize the issuance of the certificates   unless the issuance is approved at an election ordered, held, and   conducted in the manner provided for bond elections under Chapter   1251, Government Code.          SECTION 7.  Section 271.057(a), Local Government Code, is   amended to read as follows:          (a)  Except as provided by Subsection (b), a contract let   under this subchapter for the construction, creation, renovation,   repair, or improvement of a public work [works] or the purchase of   materials, equipment, supplies, or machinery and for which   competitive bidding is required by this subchapter must be let to   the lowest responsible bidder and, as the governing body   determines, may be let on a lump-sum basis or unit price basis.          SECTION 8.  Section 271.059, Local Government Code, is   amended to read as follows:          Sec. 271.059.  CONTRACTOR'S BONDS.  If a contract is for the   construction, creation, renovation, repair, or improvement of a   public work [works] and is required by this subchapter to be   submitted to competitive bidding, the successful bidder must   execute a good and sufficient payment bond and performance bond.   The bonds must each be:                (1)  in the full amount of the contract price; and                (2)  executed, in accordance with Chapter 2253,   Government Code, with a surety company authorized to do business in   this state.          SECTION 9.  Section 271.046, Local Government Code, is   repealed.          SECTION 10.  The changes in law made by this Act apply only   to a certificate of obligation issued on or after the effective date   of this Act. A certificate of obligation issued before the   effective date of this Act is governed by the law in effect on the   date the certificate was issued, and the former law is continued in   effect for that purpose.          SECTION 11.  This Act takes effect September 1, 2025.