1 TAC §§4.1, 4.3, 4.5, 4.7, 4.9, 4.11, 4.13, 4.15, 4.17, 4.19
The Office of the Governor proposes new Chapter 4, §§4.1,
4.3, 4.5, 4.7, 4.9, 4.11, 4.13, 4.15, 4.17, 4.19, Texas Military Value Revolving
Loan Program Rules, relating to the Texas Military Preparedness Commission
(TMPC). The program provides for loans of state funds to assist defense dependent
communities in enhancing the military value of the military facility in their
area as they prepare for the Base Realignment and Closure (BRAC) process.
The program is authorized by Government Code, Chapter 436, Subchapter D, Fiscal
Provisions.
The proposed rules are necessary to implement the program, to accurately
reflect current law, and to disseminate proposed program practices.
Proposed rule §4.1 provides the introduction and purpose of the program
by providing a background, goal, and definitions applicable to the loan fund.
Proposed rule §4.3 states the period of time in which loan funds must
be expended.
Proposed rule §4.5 provides eligibility requirements communities must
meet to apply for loan funds.
Proposed rule §4.7 provides the maximum and minimum loan amounts that
may be awarded, the percentage amount of the cost of the project that may
be provided in the loan, and a certification requirement demonstrating local
efforts to obtain funding from other sources.
Proposed rule §4.9 provides application procedures and guidelines
for loan funds and sets out the documentation that will be required from loan
fund applicants, including the general, legal, and financial information requirements
to be in the application package. The financial information is divided into
requirements for debt to be secured by ad valorem taxes and other generally
accepted fees and for debt to be secured by enterprise or fee or service revenues.
Proposed rule §4.11 provides the processing and review criteria that
will be used to determine the creditworthiness of the loan fund applicant
in the areas of general obligation debt, revenue debt, sales tax bonds, and
special assessment bonds. The rule details the actions that will be taken
by the office of the TMPC and the Commission in evaluating the applications.
Proposed rule §4.13 provides availability of funds commitment procedures
if the project has been approved by the Commission.
Proposed rule §4.15 provides awardees responsibilities that must be
met in order to receive disbursement of loan funds that have been encumbered
to them.
Proposed rule §4.17 provides Commission responsibilities that will
be performed by the Commission in carrying out its duties and responsibilities
under the Act.
Proposed rule §4.19 requires awardees to provide written reports on
the status of projects and expenditures related to the loan will be as determined
by the Commission.
Michael Smith, Brig. Gen. (ret.), Director of the Texas Military Preparedness
Commission, has determined that for each year of the first five years that
the rules are in effect there will be no fiscal implications to the state.
The revolving loan account is to be funded through the issuance of general
obligation bonds by Texas Public Finance Authority and will be self-supporting
through loan payments made by political subdivisions receiving loans from
the program. Costs to local governments to implement these rules will depend
on each entity's participation. It is anticipated there will be an overall
positive fiscal impact for all parties involved from economic development
realized by maintaining current or increasing military presence in the state.
Gen. Smith has also determined that for each year of the first five years
the rules are in effect the public benefit will be a clear and consistently
applied understanding of the rules and processes for participation in the
loan fund program. No economic costs are anticipated to persons, small or
micro-businesses who are required to comply with the proposed rules.
Written comments on the proposed rules may be hand delivered to the Texas
Military Preparedness Commission, Office of the Governor, 1100 San Jacinto
St., Austin, Texas 78701, mailed to P.O. Box 12428, Austin, Texas 78711, faxed
to (512) 475-0108, or emailed to acasals@governor.state.tx.us. All communications
should be addressed to the attention of Al Casals, Program Director. Comments
must be received within 30 days of publication of the proposed rules.
The rules are proposed pursuant to Government Code §436.154(a),
which directs the governing board of the commission to adopt rules for administration
of the loan program and Government Code, Chapter 2001, Subchapter B which
prescribes the standards for rulemaking by state agencies.
Texas Government Code, Chapter 436, Subchapter D, is affected by this proposal.
§4.1.Introduction and Purpose.
(a)
Background. The Texas Military Value Revolving Loan Fund
was authorized by Senate Bill 652 of the 78th Legislature adding Texas Government
Code, Chapter 436, Subchapter D. The purpose of the fund is to assist defense
communities in enhancing the military value of the military facility in their
area. Constitutional amendment Proposition 20 passed on September 13, 2003
authorized the issuance of general obligation bonds or notes not to exceed
$250 million payable from the general revenues of the state to provide loans,
which must be repaid, to defense communities for projects that enhance the
military value of military installations.
(b)
The primary goal of the program is to enhance the military
value of the military facility to make it operate as efficiently as possible.
(c)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise:
(1)
A Defense Dependent Community--A defense dependent community
in Texas that is a political subdivision, including a municipality, county,
or special district, that is adjacent to, is near, or encompasses any part
of a defense base, and that has a currently operating defense facility employing
2,500 or more workers in an urban area or 1,000 workers outside an urban area;
(2)
Agency--The Office of the Governor;
(3)
Awardee--The local governmental entity or combination of
entities whose loan application is approved by the Commission;
(4)
Commission--The Texas Military Preparedness Commission;
(5)
Commissioners--Members of the Texas Military Preparedness
Commission;
(6)
Defense worker--
(A)
An employee of the United States Department of Defense
(DoD), including a member of the armed forces or a federal civilian worker;
or
(B)
An employee of a government agency or private business,
or entity providing a Department of Defense related function, who is employed
on a defense facility;
(7)
Defense worker job--
(A)
A DoD authorized permanent position, such as a position
contained on the appropriate unit manning documents; or
(B)
A position held or occupied by one or more defense workers
for more than 12 months;
(8)
Executive director--The executive director of the Texas
Military Preparedness Commission;
(9)
Financial partners--Federal and state agencies, private
and public non-profit foundations, local taxing authorities, and private investors
who agree to provide money for projects eligible for funding under this program;
(10)
Fund--The Texas Military Value Revolving Loan Fund; and
(11)
Panel--The Revolving Loan Fund Review Panel, made up of
Commissioners who will evaluate loan applications and make loan recommendations
to the Commission.
§4.3.Program Coverage.
State funds provided under the Texas Military Value Revolving Loan
Fund must be expended completely within five (5) years from when the loan
was awarded.
§4.5.Eligibility for Funds.
A Defense Dependent Community, as defined per §4.1(c)(1) of this
chapter, is eligible for a loan from the Fund.
§4.7.Maximum and Minumum Awards.
(a)
Amount. The minimum amount of a loan will be $500,000 while
the maximum amount of a loan will be determined by the availability of funds
and the creditworthiness of the applicant.
(b)
Percentage. The state may provide up to 100% of the cost
of the described project, dependent upon the creditworthiness of the applicant.
(c)
Certification. Local governmental entities are encouraged
to acquire financial assistance for eligible development projects from a variety
of sources, including federal, state, local and private/public foundations.
The Chief Financial Officer of the local governmental entity or the local
governing body making application shall provide certification demonstrating
reasonable local community efforts to acquire funding from other sources when
the state is the only other financial partner.
§4.9.Application for Funds.
(a)
Introduction:
(1)
The Commission will develop a formal application form to
be included in the process to assist in the evaluation of the loan request.
The application may require certain attachments and certifications. A complete
application consists of the
Military Value Enhancement
Statement
and the general, legal, and fiscal information as outlined
below.
(2)
Ten (10) copies and two (2) unbound, double sided copies
of an application containing the following general, legal, and fiscal materials
should be submitted to the Texas Military Preparedness Commission.
(b)
General Information:
(1)
Full legal name and description of requesting loan "applicant"
and each participating political subdivision under which debt is being issued.
(2)
Description of the Governing body and contact information
for person authorized to represent the political subdivision ("applicant contact").
Include name, title, address, phone, fax number, and e-mail address.
(3)
Name, address, phone, fax number, e-mail address, and contact
person for legal counsel, financial advisor, contract administrator, project
engineer, and any other consultant representing the applicant before the Commission.
(4)
A
Military Value Enhancement Statement
as described in Senate Bill 652, 78th Legislative, Regular Session
and codified in Local Government Code, §397.002.
(5)
Description of the project, including a description of
the use of the project by general public, private business, etc.
(6)
A summary overview of the use of the funds including the
total amount of loan required and partners involved in financing the project,
including their shares.
(7)
Applicant shall submit an engineering feasibility report
signed and sealed by a professional engineer registered in the State of Texas.
The report shall provide: description and purpose of the project; entities
to be served; current and future population of the entity or project; the
cost of the project; a description of innovative technology considered and
reasons for the selection of the project proposed; sufficient information
to evaluate the engineering feasibility; and maps and drawings as necessary
to locate and describe the project area. The Commission may request additional
information or data as necessary to evaluate the project.
(8)
The total number of jobs to be created or retained as a
result of the project.
(9)
Project timeline, including description of when loan proceeds
will be needed. If possible, include an anticipated draw or expenditure schedule
of loan proceeds on a monthly or quarterly basis.
(10)
For each participating political subdivision and federal
and state agency, provide a breakdown of ownership interest in the project
and an allocation of project costs including financing sources and current
project status.
(11)
Project budget, including most current itemized project
cost estimates (include all costs, specifically construction, engineering
services, legal, and fiscal costs, and funding sources and percentage contribution
in a Sources and Uses Statement format). Identify source of these estimates,
i.e., engineer, finance director, financial advisor, etc.
(12)
A current Capital Improvement Plan, which addresses at
least five (5) years of the applicant's future infrastructure construction
needs.
(13)
Three (3) years of audited financial statements of the
applicant and current unaudited year to date information.
(14)
Disclose all issues (i.e., lawsuits, injunctions, etc.)
that may affect the applicant's ability to repay debt.
(15)
Other uses for the project in the event of base closure
or realignment.
(16)
General economic and demographic information for the area
being served. Provide five (5) years of history for such items as:
(A)
Population; and
(B)
Economic statistics such as:
(i)
Consumer price indexes;
(ii)
Non-agricultural employment broken down by sector;
(iii)
Unemployment rate;
(iv)
Housing starts;
(v)
Apartment occupancy rates;
(vi)
Non-residential building permits;
(vii)
Office space occupancy; and
(viii)
Top ten employers.
(c)
Legal Information:
(1)
One (1) certified original of:
(A)
A resolution/ordinance requesting financial assistance
from the Commission, authorizing the submission of the application and designating
the official representative(s) for submitting the application, executing any
necessary documents and appearing before the Commission.
(B)
An affidavit executed by the official representative stating
that the facts contained in the application are true and correct to the best
of their knowledge and belief.
(C)
An affidavit executed by the official representative stating
that the application was approved by the governing board of the political
subdivision in an open meeting.
(D)
A certificate of compliance executed by an official representative
which warrants compliance by the participating political subdivision with
all representations in the application, all federal (where applicable), state,
and local laws, and all rules/published policies of the Commission.
(E)
A statement of pending claims or litigation against the
applicant that might affect the ability of the applicant to issue debt or
that could affect the Commission's ability to recover its investment.
(2)
One (1) copy of the following executed documents:
(A)
Any option, sales, or lease agreement(s) necessary for
the project.
(B)
Any actual or proposed service contracts for electrical,
water supply, or sewer service indicating adequate supply or capacity for
the life of the proposed loan.
(C)
Any actual or proposed contracts between the applicant
and any other entity which will generate revenues pledged to the repayment
of the proposed debt.
(D)
All executed contracts for consultant services included
in the total project cost.
(d)
Financial Information: The financial information being
requested is broken down into two categories, ad valorem tax supported debt
and debt support by a specific revenue stream. Please fill out the basic information
regarding the nature of the entity and then the information for the relevant
revenue stream pledge.
(1)
Financial Information for debt secured by ad valorem taxes
and other generally applicable fees:
(A)
Description of the legal authorization for levying a tax.
(i.e. Bond Authorization, or Certificates of Obligation).
(B)
Description of taxing procedures and property exempt from
taxation.
(C)
Current credit rating(s), if any, and copies of most recent
rating reports from major rating agencies.
(D)
Description of pledged revenues (i.e. ad valorem tax, sales
and use tax, franchise charges and fees).
(E)
Disclosure of any tax rate limitations.
(F)
Total outstanding debt of the political subdivision. Segregate
by type (G.O. or Revenue) and present a consolidated schedule for each, showing
total annual debt service requirements.
(G)
Schedule of authorized, but unissued debt, and schedule
of projected issuance dates.
(H)
Amount of variable rate debt outstanding, if any and description
of interest rate mode and liquidity facilities for each program.
(I)
Description of any credit agreements with bond insurers.
(J)
Description of any leases over $1 million that are paid
from the general fund.
(K)
Current adopted budget and capital improvement program,
if any.
(L)
Direct and overlapping tax rate table.
(M)
Overlapping debt table.
(N)
Full description of any derivatives products outstanding,
such as interest rate swaps.
(O)
Description of any defaults and circumstances surrounding
the default.
(P)
Historical information for the last five (5) years for:
(i)
Tax rolls or other taxes;
(ii)
Top ten taxpayers;
(iii)
Tax rate and collection history;
(iv)
Debt issuance including issuance of tax and revenue anticipation
notes;
(v)
Description of transfers into the general fund from other
funds;
(vi)
General Fund Undesignated Fund Balance; and
(vii)
Rating reports, if any.
(Q)
Pro forma debt service schedule, with tax rate impact.
Describe assumptions related to growth and tax collection rates.
(2)
Financial Information for debt secured by enterprise or
fee or service revenues:
(A)
Description of the authorization to charge or collect fees
(i.e. water and sewer c charges, developer impact fees, hotel occupancy tax).
Full legal name and a description of the
security
for the proposed debt.
(B)
Description of revenue collection process and ability to
change rates.
(C)
Current credit rating(s), if any, and copies of most recent
rating reports from major rating agencies.
(D)
Current adopted budget of the enterprise system, and capital
improvement program, if separately prepared.
(E)
Description of future additional bonds contemplated to
be issued and secured by the revenue stream.
(F)
Description of existing debt secured by revenue stream
including rate covenants.
(G)
Description of the proposed flow of funds.
(H)
Description of debt service reserve funds and their investments.
(I)
Description of additional bonds tests.
(J)
Amount of variable rate debt outstanding, if any and description
of interest rate mode and liquidity facilities for each program.
(K)
Full description of any derivatives products outstanding,
such as interest rate swaps.
(L)
Historical information for the last five (5) years for:
(i)
Consumption data related to volume of services or product
provided (e.g. how much water provided to customers);
(ii)
Description of the top ten customers;
(iii)
Rate history related to revenue stream being pledged
(e.g. water rates on a water system);
(iv)
Revenues collected;
(v)
Collection rates;
(vi)
Capital expenditure;
(vii)
Capital reserves;
(viii)
Undesignated Fund Balance; and
(ix)
Rating reports, if any.
(M)
Description of the facilities of the system used to generate
revenues and their physical condition (age, etc.).
(N)
Any limitation or potential issues related to continue
to provide service.
(O)
Pro forma financials: detailing projected gross revenues,
operating and maintenance expenditures, net revenues available for debt service
showing coverage of current and proposed debt paid from revenues, as well
as on a net basis taking into consideration expenses and required contributions
to capital reserves.
(P)
List of ten (10) largest customers of the electrical, water
and wastewater systems.
(Q)
Five-year comparative utility system operating statement,
including audited prior years and un-audited year-to-date, with number of
customers for each year.
(R)
State whether applicant is a
4a
or
4b
community for economic development
tax purposes.
§4.11.Processing and Review of Applications.
(a)
The local governing entity will submit applications for
the program to the Executive Director of the Commission.
(b)
The Commission may request any additional information needed
to evaluate the application, and may return any incomplete applications.
(c)
Creditworthiness Criteria: The following criteria will
be used to determine the creditworthiness of an application:
(1)
General Obligation Debt
(A)
Economic Base:
(i)
Demographics.
(ii)
Tax Base.
(iii)
Employment Base:
(I)
The industry mix and employment by sector to identify diversification
trends or structural changes in the economy over time. Specifically, contributions
from manufacturing, services, trade, construction, government, and agriculture
sectors and how these have changed over time relative to national and state
trends.
(II)
Concentration in major employers or reliance on particular
industries.
(III)
Employer commitment to the community importance of local
facilities and employees to the overall strategy of local employers, business
development plans, age of plant, and industry prospects.
(IV)
Unemployment rates over the last decade and labor force
growth. The match between jobs and the skill level of the labor force.
(V)
The regional patterns of employment and growth.
(VI)
The level of retail sales as well as growth trends over
time.
(B)
Financial Indicators:
(i)
Accounting and financial reporting methods (GAAP, GASB
compliant, etc).
(ii)
Annual operating and budgetary performance.
(iii)
Financial leverage and equity position.
(iv)
Budget and financial planning practices.
(v)
Revenue and expenditure structure and patterns:
(I)
The composition of the municipalities' revenue stream over
a three- to five-year period and the stability of major revenues, such as:
property, sales, and income taxes; user charges; intergovernmental aid; and
investment income.
(II)
The composition and stability of expenditures; the nature
and impact of large expenditure items; and the existence of extraordinary
or nonrecurring expenditures.
(III)
The existence and effect of any revenue transfers among
other governmental and capital funds. The level of general fund and/or debt
service fund support from interfund transfers; policy guidelines and historical
transfer practices.
(vi)
Balance sheet position - liquidity, fund balance position,
and the composition of assets and liabilities, including: the volatility and
patterns of the tax revenue stream, the predictability of government spending,
the availability of unencumbered reserves or contingency funds, and the ability
of public officials to sustain a strong financial position.
(vii)
Use of cash flow borrowing or other short-term financing.
(viii)
Pensions and other long-term liabilities.
(C)
Existing Debt Burden:
(i)
Amount and type of existing debt.
(ii)
Nature of security pledge.
(iii)
Repayment structure.
(iv)
Current debt service burden as a percentage of current
expenditures.
(v)
Future capital needs.
(D)
Management and Administration:
(i)
Financial management.
(ii)
Annual budget process.
(iii)
Long-term capital program.
(iv)
Property tax administration.
(v)
Labor settlements and litigation.
(vi)
Investment guidelines.
(2)
Revenue Debt
(A)
Engineer's report, feasibility study, rate study.
(B)
Regulatory approvals (local, state, federal).
(C)
Amount of existing debt and legal provisions/restrictions
of existing loan covenants tied to the revenue stream.
(D)
Population trends.
(E)
Income trends.
(F)
Composition of employment by sector.
(G)
Unemployment rates.
(H)
Largest employers in the service area.
(I)
Tax base trend (property, sales).
(J)
Building permit activity.
(K)
System connections.
(3)
Sales Tax Bonds
(A)
Size and Diversity of Tax base.
(B)
History of Sales tax collections.
(C)
Ten largest retail sales generators.
(D)
Amount of debt already supported by the sales tax, if any.
(4)
Special Assessment Bonds
(A)
Make-up and economic base of the assessment district.
(B)
Assessment basis.
(C)
Collection methods.
(D)
Loan-to-value ratios.
(E)
Lien position.
(F)
Security interest in the property.
(G)
Foreclosure/bankruptcy provisions.
(d)
The Commission will:
(1)
Publicize the program to potential applicants and provide
loan solicitation information.
(2)
Evaluate each application for completeness. The Office
will work closely with the applicant to ensure all relevant information is
included in the application.
(3)
Evaluate the creditworthiness of the local governing entity
or revenue stream pledged to repay the loan, as appropriate, based on the
above criteria and application procedures.
(4)
Appoint a review panel consisting of five members to evaluate
applications and appoint a review panel chairman.
(5)
The review panel will:
(A)
Review applications and make recommendations to the Commission.
(B)
Provide evaluations and recommendations for all loan applications
received based on the following criteria:
(i)
Did the community complete a
Military Value Enhancement Statement
?
(ii)
Will the project enhance the
military value
of the installation?
(iii)
What is the anticipated value (in terms of use) of the
project if the installation is closed or realigned?
(iv)
Is this a joint use (community and military installation)
project?
(v)
What is the overall benefit of the project to:
(I)
State;
(II)
Community; and
(III)
Military installation.
(vi)
What percentage of the total project cost is the community
requesting in funding from the Fund? Are there federal funds involved? Other
state funds?
(vii)
What is the timeline or schedule for completion of this
project?
(viii)
Are there any environmental concerns? Any negative factors
that will affect the community or military installation?
(ix)
Are all parties involved in the project acceptable to
the Commission?
(x)
Based on the value of the project and creditworthiness
of the applicant, what is the likelihood that the loan will be repaid on schedule
and be sufficient to pay the debt service on the bonds?
(e)
The Commission will approve or disapprove the award of
the loan by a vote of at least seven (7) of the nine (9) members.
§4.13.Availability of Funds.
(a)
Funds commitment. If the project has been approved by the
Commission, funds become committed to the awardee subject to the sale of the
general obligation bonds by the state.
(b)
Upon sale of bonds, funds will be disbursed to the awardee
by the Office of the Comptroller.
§4.15.Awardee Responsibilities.
In order to receive disbursement of loan funds that have been encumbered
to them, awardees may be required by contract with the Commission to:
(1)
Have a system established in writing to ensure that appropriate
officials provide necessary internal reviews and approvals for the expenditure
of funds and for monitoring project performance and adherence to state terms
and conditions.
(2)
Have financial management systems that meet the requirements
of the Commission.
(3)
Retain financial management records, supporting documents,
statistical records, and other materials pertinent to the award until the
debt is retired and make these records available to the Commission upon request.
(4)
Be responsible for performing the duties and tasks described
under all project loan agreements.
(5)
Provide the Commission with copies of all project documentation
required by federal or other financial partners.
(6)
Provide project demonstrations, site inspections, photo
or other additional documentation, including written materials to substantiate
benefit to the community's economy and enhancement of the military value of
the facility as requested by the Commission.
(7)
Honor intellectual property rights of project participants
as outlined in any agreements made to facilitate fulfillment of award activities.
(8)
Agree that the loan may be suspended or terminated if the
awardee fails to comply with Commission terms and conditions of the loan or
if the financial partnership is suspended or terminated.
(9)
Agree that when two or more entities are participating
together as an awardee, if one or more of the entities does not fulfill its
loan repayment obligation, then the remaining entity or entities are still
liable for repayment of the entire loan amount.
(10)
Agree that no person shall be excluded from participation
in, be denied benefits of, or be otherwise subjected to discrimination under
the Texas Military Value Revolving Loan Program based on grounds of race,
color, national origin, religious affiliation, handicap, or sex.
(11)
Agree that the Commission shall not be held liable in
the event of damages to persons or property which may occur in the course
of activities conducted as a result of the award or its cancellation or withdrawal.
(12)
Agree to such other terms and conditions as the Commission
may require.
§4.17.Commission Responsibilities.
In carrying out its duties and responsibilities under the Act, the
Commission shall:
(1)
Solicit loan applications and publicize application deadlines.
(2)
Establish and conduct the evaluation and award process
in a responsive manner to maximize the opportunity to acquire federal and
other funding.
(3)
Develop contracts with awardees that include sufficient
performance measures, audit requirements, and reporting requirements to ensure
prudence and due diligence in the expenditure of state funds.
(4)
Minimize reporting requirements that may be repetitive
of reporting required by federal grant agencies or unnecessary for the effective
monitoring of the program.
§4.19.Reporting Responsibilities.
Awardees will be required to provide written reports on the status
of projects and expenditures related to the loan as determined by the Commission.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 31, 2004.
TRD-200402232
Robin Abbott
Assistant General Counsel
Office of the Governor
Earliest possible date of adoption: May 16, 2004
For further information, please call: (512) 936-0517