TITLE 1. ADMINISTRATION

PART 2. TEXAS ETHICS COMMISSION

CHAPTER 20. REPORTING POLITICAL CONTRIBUTIONS AND EXPENDITURES

SUBCHAPTER B. GENERAL REPORTING RULES

1 TAC §20.50

The Texas Ethics Commission (the commission) adopts an amendment to Texas Ethics Commission Rules §20.50, regarding the disclosure of political contributions maintained at the end of a reporting period, without changes to the proposed text as published in the November 4, 2016, issue of the Texas Register (41 TexReg 8691). The amendment will not be republished.

Section 254.031(a)(8) of the Election Code states that a person filing a campaign finance report must disclose the total amount of political contributions accepted, including interest or other income on those contributions, maintained in one or more accounts in which political contributions are deposited as of the last day of the reporting period. Section 254.0611(a)(1) of the Election Code similarly requires reports filed by certain candidates for judicial offices to include the total amount of political contributions, including interest or other income, maintained in one or more accounts in which political contributions are deposited as of the last day of the reporting period. The amended rule is adopted in order to clarify that the total amount of political contributions maintained includes the balance of political contributions accepted and held in any online fundraising account over which the filer can exercise control by making a withdrawal, expenditure, or transfer.

Additionally, the amended rule defines a "de minimis" error in calculating or reporting the total amount of political contributions maintained for purposes of Section 254.031(a-1) of the Election Code. As provided by Section 254.031(a-1) of the Election Code, such a "de minimis" error is not a violation of Section 254.031(a)(8) of the Election Code. The rule provides that if the error in the amount of political contributions maintained does not exceed 10 percent of the amount disclosed or $2,500, whichever is less, then it is de minimis. The rule also provides that if the error is $250 or less, then it is also de minimis.

No public comments were received on this amended rule.

The amendment to rule §20.50 is adopted under §571.062, which authorizes the commission to adopt rules concerning the laws administered and enforced by the commission.

The amendment to rule §20.50 affects Chapter 254 of the Texas Election Code, including §254.031(a)(8), §254.031(a-1), and §254.0611(a)(1).

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on December 12, 2016.

TRD-201606558

Natalia Luna Ashley

Executive Director

Texas Ethics Commission

Effective date: January 1, 2017

Proposal publication date: November 4, 2016

For further information, please call: (512) 463-5800


CHAPTER 26. POLITICAL AND LEGISLATIVE ADVERTISING

1 TAC §26.1

The Texas Ethics Commission (the commission) adopts an amendment to Texas Ethics Commission Rules §26.1 to clarify the disclosure statement requirements for political advertising, without changes to the proposed text as published in the November 11, 2016, issue of the Texas Register (41 TexReg 8692). The amendment will not be republished.

Section 255.001(a) of the Election Code requires political advertising that is "published, distributed, or broadcast" and that contains express advocacy to "indicate in the advertising that it is political advertising" and the full name of either the person who paid for it, the political committee authorizing it, or the candidate or specific-purpose committee supporting the candidate if it is authorized by the candidate. Section 251.001(16) of the Election Code defines "political advertising" as, in part, a communication supporting or opposing a candidate or a measure that (A) in return for consideration, is published in a newspaper, magazine, or other periodical or is broadcast by radio or television, or (B) appears in certain forms of written communication or on an Internet website.

Section 255.001(a) of the Election Code clearly applies to paid radio broadcasts that contain express advocacy. However, Ethics Commission Rules §26.1, as currently written, may be reasonably interpreted in a manner to exclude radio broadcasts from the disclosure requirements of Election Code §255.001. Thus, the amendment to the rule is necessary to eliminate the rule's ambiguity and to clarify how the statutory disclosure requirements apply to radio broadcasts. The narrow amendment addresses only how a disclosure statement must appear in political advertising when it is required by Election Code §255.001.

The amendment adds that the disclosure statement must be "clearly spoken" in political advertising that does not include written text.

No public comments were received on this amended rule.

The amendment to rule §26.1 is adopted under §571.062, which authorizes the commission to adopt rules concerning the laws administered and enforced by the commission.

The amendment to rule §26.1 affects §255.001 of the Election Code.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 12, 2016.

TRD-201606559

Natalia Luna Ashley

Executive Director

Texas Ethics Commission

Effective date: January 1, 2017

Proposal publication date: November 4, 2016

For further information, please call: (512) 463-5800


CHAPTER 34. REGULATION OF LOBBYISTS

SUBCHAPTER B. REGISTRATION REQUIRED

1 TAC §34.43

The Texas Ethics Commission (the commission) adopts an amendment to Texas Ethics Commission Rules §34.43, regarding an exception to the lobby registration requirements, without changes to the proposed text as published in the November 11, 2016, issue of the Texas Register (41 TexReg 8692). The amendment will not be republished.

In 2015, the legislature amended §305.003 of the Government Code by providing that a person does not have to register for receiving compensation or reimbursement over the quarterly threshold if the person spends no more than 26 hours (including preparatory activity as defined by the commission), or another amount of time determined by the commission, for which the person is compensated or reimbursed to lobby.

Before the 2015 statutory amendment, the commission's rule §34.43(b) had exempted from the registration requirement, based on compensation or reimbursement, a person who does not spend more than five percent of their compensated time during a calendar quarter engaging in lobby activity. The amendment sets the threshold for the exemption at 40 hours in a calendar quarter. Thus, a person is not required to register, for purposes of the requirement to register based on compensation or reimbursement, if the person spends not more than 40 hours for which the person is compensated or reimbursed during a calendar quarter engaging in lobby activity, including preparatory activity. Preparatory activity is separately defined by Ethics Commission Rules §34.3.

No public comments were received on this amended rule.

The amendment to rule §34.43 is adopted under §571.062, Government Code, which authorizes the commission to adopt rules concerning the laws administered and enforced by the commission, and §305.003(b-3), Government Code.

The amendment to rule §34.43 affects §255.001 of the Election Code.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 12, 2016.

TRD-201606560

Natalia Luna Ashley

Executive Director

Texas Ethics Commission

Effective date: January 1, 2017

Proposal publication date: November 4, 2016

For further information, please call: (512) 463-5800


CHAPTER 46. DISCLOSURE OF INTERESTED PARTIES

1 TAC §46.4

The Texas Ethics Commission (the commission) adopts new Texas Ethics Commission Rules §46.4, regarding the requirement to file a disclosure of interested parties form (Form 1295) when a change is made to a contract, without changes to the proposed text as published in the November 11, 2016, issue of the Texas Register (41 TexReg 8693). The amendment will not be republished.

In 2015, the Texas Legislature adopted House Bill 1295, which states that a governmental entity or state agency may not enter into certain contracts with a business entity unless the business entity submits a disclosure of interested parties at the time the business entity submits the signed contract. House Bill 1295 also requires the commission to adopt rules necessary to implement the new disclosure requirement and to prescribe the disclosure form. The commission has adopted rules necessary to implement §2252.908; the rules are located in title 1, chapter 46, of the Texas Administrative Code.

Under the law, Form 1295 is only required for a contract that either (1) requires an action or vote by the governing body of the entity or agency or (2) has a value of at least $1 million. Section 46.3 of the commission's rules includes definitions of various terms and defines a "contract" as, in part, an amended, extended, or renewed contract.

The adopted new rule provides clarity regarding when a change to a contract, including a change order, is considered a "contract" under the rules and triggers a Form 1295 filing. The new rule states that a Form 1295 would only be required for a change made to an existing contract in certain circumstances:

1. If a Form 1295 was not filed for the existing contract, then a filing is only required if the changed contract either requires an action or vote by the governing body or the value of the changed contract is at least $1 million.

2. If a Form 1295 was filed for the existing contract, then another filing is only required for the changed contract if there is a change to the information disclosed in the Form 1295, the contract requires an action or vote by the governing body, or the value of the changed contract increases by at least $1 million.

Two public comments were received on this new rule:

Michael Gunderson of the City of Everman, Texas, stated that the Form 1295 reporting process is onerous and unnecessary and should be completely repealed. However, the filing requirements are provided by Section 2252.908 of the Government Code and the commission has authority to adopt rules necessary to implement that section and prescribe the disclosure form. The commission does not have authority to repeal §2252.908, Government Code.

Dawn Berry of the Town of Little Elm stated that there is inconsistency in the interpretation across the state regarding the contracts to which the Form 1295 filing requirements apply and generally sought clarification on that matter. The commission adopted the new rule to help provide such clarity.

The new rule §46.4 is adopted under §2252.908(g), Texas Government Code, which requires and authorizes the commission to adopt rules necessary to implement §2252.908.

The adopted new rule, §46.4, affects section 2252.908 of the Government Code.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 12, 2016.

TRD-201606561

Natalia Luna Ashley

Executive Director

Texas Ethics Commission

Effective date: January 1, 2017

Proposal publication date: November 4, 2016

For further information, please call: (512) 463-5800


PART 3. OFFICE OF THE ATTORNEY GENERAL

CHAPTER 53. MUNICIPAL SECURITIES

SUBCHAPTER A. APPROVAL OF MUNICIPAL SECURITIES BY ATTORNEY GENERAL

1 TAC §§53.1 - 53.30

The Office of the Attorney General (OAG) adopts the repeal of §§53.1 - 53.30 of Subchapter A, Approval of Municipal Securities by Attorney General, as proposed in the July 1, 2016, issue of the Texas Register (41 TexReg 4737). Elsewhere in this issue of the Texas Register, OAG adopts a new Subchapter A consisting of 1 TAC §§53.1 - 53.22, concerning the Approval of Municipal Securities by Attorney General.

Pursuant to state law, including primarily Chapter 1202 of the Government Code, public securities and other obligations issued by an agency, authority, board, public body, department, district, instrumentality, municipal corporation, political subdivision, public corporation or subdivision of the state, or a non-profit corporation acting for or on behalf of any such entities as provided by law (collectively referred to herein as "Issuers") must be submitted for approval to OAG. OAG must approve the public securities if it finds that the public security has been authorized in accordance with law. The repeal of existing Subchapter A allows for an update to the general rules applicable to the submission of public securities and records of proceedings by Issuers and the review of such submissions by OAG in order to ensure the orderly and efficient review of such proceedings in compliance with state law.

The public comment period on the proposal began July 1, 2016, and ended August 1, 2016. OAG received no comments concerning the proposed repeal.

The repeal is adopted in accordance with Chapters 1202, 2001, and §402.044 of the Government Code, which collectively authorize the OAG to adopt rules regarding its review of public securities that by law require OAG approval. In addition to Chapter 1202, other statutes require OAG review and approval before public securities and certain other obligations may be issued, including, but not limited to, §§1371.057, 1371.059, 1431.009, and 1431.011 of the Government Code, §§271.004, 271.005, and 372.028 of the Local Government Code, Chapter 45 of the Education Code, and §49.184 of the Water Code.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 16, 2016.

TRD-201606642

Amanda Crawford

General Counsel

Office of the Attorney General

Effective date: January 5, 2017

Proposal publication date: July 1, 2016

For further information, please call: (512) 475-4163


1 TAC §§53.1 - 53.19, 53.21, 53.22

The Office of the Attorney General (OAG) adopts a new Subchapter A consisting of §§53.1 - 53.19, 53.21 - 53.22, concerning the Approval of Municipal Securities by Attorney General. Proposed §53.20 as published in the July 1, 2016, issue of the Texas Register (41 TexReg 4737) is being withdrawn. New §§53.1, 53.4, 53.6, 53.7, 53.9, 53.10, 53.13, 53.14, 53.15, 53.17, 53.18, 53.19, and 53.21 are adopted without changes to the proposed text as published in the July 1, 2016, issue of the Texas Register (41 TexReg 4737) and will not be republished. New §§53.2, 53.3, 53.5, 53.8, 53.11, 53.12, 53.16, and 53.22 are adopted with changes to the proposed text as published in the July 1, 2016, issue of the Texas Register (41 TexReg 4737). Elsewhere in this issue of the Texas Register, OAG adopts the repeal of existing §§53.1 - 53.30, which previously regulated the approval of municipal securities by the Attorney General.

Pursuant to state law, including primarily Chapter 1202 of the Government Code, public securities and other obligations issued by an agency, authority, board, public body, department, district, instrumentality, municipal corporation, political subdivision, public corporation or subdivision of the state, or a non-profit corporation acting for or on behalf of any such entities as provided by law (collectively referred to herein as "Issuers") must be submitted for approval to OAG. OAG must approve the public securities if it finds that the public security has been authorized in accordance with law. The new Subchapter A updates the general rules applicable to the submission of public securities and records of proceedings by Issuers and the review of such submissions by OAG in order to ensure the orderly and efficient review of such proceedings in compliance with state law.

SUMMARY OF COMMENTS AND AGENCY RESPONSES

The public comment period on the proposal began July 1, 2016, and ended August 1, 2016. The staff of the Public Finance Division held a public hearing on the proposed rules on July 26, 2016. OAG received written and/or oral comments from Allen Boone Humphries Robinson LLP; Bill Corsbie, P.C.; Bracewell LLP; McCall, Parkhurst & Horton L.L.P.; Norton Rose Fulbright US LLP; Radcliffe Bobbitt Adams Polley PLLC; Schwartz, Page & Harding, L.L.P.; and Winstead PC.

Comment: Several commenters suggested revising §53.2 to state that it applies only to records which are required to be sent to OAG for review or approval.

Response: OAG agrees and has removed the words "for approval" from §53.2(a) to recognize that certain of the statutes requiring submissions of proceedings to OAG do not require OAG's approval.

Comment: One commenter suggested revising §53.2 to allow for electronic submission of transcripts and other documents. The commenter argues that the use of email and electronic documents would be more efficient and cost-effective.

Response: OAG disagrees with the suggested revision as it is unable to accept electronic submission of bond transcripts at this time.

Comment: One commenter noted that several of the requirements under §53.3 refer to a "year," but do not specify if this refers to a fiscal, calendar, or tax year. The commenter suggested revising §53.3 to either provide such a specification or allow the issuer to choose its own.

Response: OAG disagrees. The wording of §53.3 was chosen to achieve general applicability, given the unique circumstances of each issuer.

Comment: One commenter suggested adding language to §53.3(a)(2) indicating that the authorizing document was approved by the governing body of an issuer.

Response: OAG disagrees. The wording of §53.3 was chosen to achieve general applicability, given the unique circumstances of each issuer. Certain circumstances require approval of the authorizing document by entities other than the issuer.

Comment: One commenter suggested revising §53.3(a)(2)(B) to permit the issuer to submit a purchase agreement as an alternative to a pricing certificate. The commenter argues that in a delegated sale, it is not necessary to have the terms of sale reflected in both a purchase agreement and a pricing certificate.

Response: OAG disagrees and notes the definition of "pricing certificate" in §53.3(a)(3) addresses the commenter's concern.

Comment: One commenter suggested revising §53.3(a)(2)(B) to permit the issuer to submit a signed paying agent agreement as an alternative.

Response: OAG disagrees. A political subdivision may contract only upon express authorization of its governing body by vote. See City of Bonham v. Southwest Sanitation, Inc., 871 S.W.2d 765, 767 (Tex. App.- Texarkana 1994, writ denied) (citations omitted). Therefore, the issuer must submit the order authorizing such execution as part of the proceedings.

Comment: Several commenters suggested revising §53.3(a)(2)(E) by removing the reference to issuer expense reimbursement. The commenters argued that reimbursement is authorized by statute and need not be separately identified.

Response: OAG agrees the reimbursement is authorized by statute and has deleted this provision from §53.3(a)(2)(E).

Comment: One commenter suggested revising §53.3(a)(2)(E) by removing the reference to interim borrowing because other applicable federal tax law is not incorporated into the proposed rule.

Response: OAG agrees this provision is not necessary, and has deleted this provision from §53.3(a)(2)(E).

Comment: One commenter requested a definition of the term "interim borrowing" in §53.3(a)(2)(E) because it is not defined elsewhere in the proposed rules or Chapter 1201 of the Texas Government Code. The commenter also requested an explanation of how the term applies to a legal review under Chapter 1201 of the Texas Government Code.

Response: OAG disagrees with this comment. However, OAG has deleted the referenced provision in response to another comment.

Comment: Several commenters suggested that general statutory purpose language, or language customarily used in similar transactions, was sufficient to satisfy the requirements of §53.3(a)(2)(E).

Response: OAG disagrees. The language in the referenced provision is designed to achieve general applicability, while at the same time providing sufficient specificity to assist OAG in carrying out its review of public securities. OAG believes that the requirements in the referenced provision, as amended, achieves that balance and conforms with relevant state law regarding the terms of sale of public securities.

Comment: One commenter asked whether §53.3(a)(2)(F)(iv) can be satisfied with similar language to the same effect (i.e., "most advantageous reasonably available").

Response: OAG disagrees. OAG believes the language in the referenced provision conforms with relevant state law regarding the terms of sale of public securities.

Comment: One commenter suggested adding language to §53.3(a)(2)(G)(ii) referencing the authorizing document approved by the governing body of an issuer.

Response: OAG disagrees. OAG intended the referenced provision to identify statutory limitations other than that in subsection (G)(i) applicable to certain issuers or types of issuances. OAG further believes that provision as written already addresses the commenter's concern.

Comment: One commenter suggested that unclaimed property disposition should be addressed in other transcript documents rather than in the authorizing document, as required by §53.3(a)(2)(H).

Response: OAG disagrees and believes the referenced provision conforms to the requirements of state law. Further, OAG notes that the referenced provision does not prohibit the inclusion of the language in additional documents suggested by the commenter, and as such addresses the commenter's concern.

Comment: One commenter requested clarification regarding what "lawfully delegated" means in §53.3(a)(2)(J). In addition to a delegation by an issuer to a pricing committee, the commenter asked if there were any other circumstances to which §53.3(a)(2)(J) might apply.

Response: The wording of the referenced provision was chosen to achieve general applicability, given the unique circumstances of each issuer. OAG believes the power to delegate is granted expressly by the legislature in the relevant statutes authorizing the issuance of debt.

Comment: One commenter asked whether §53.3(a)(2)(J) requires an issuer to state an itemized list of every previous authorization, or if the issuer may merely state the aggregate amount of its remaining authorization.

Response: OAG believes the referenced provision clearly requires a recitation of the specific voted authorization remaining from each election on which the issuer is relying.

Comment: Several commenters suggested that §53.3(a)(2)(K) should be qualified because the form of some contracts can be delegated to an authorized representative.

Response: OAG disagrees and believes the inclusion of the words "as applicable" in the referenced provision addresses the situation contemplated by the commenters.

Comment: One commenter suggested revising §53.3(a)(2)(K) to include a definition of the term "contracts." The commenter also suggested a provision for including any executed contracts as an alternative to an approval of their form in the authorizing document.

Response: OAG disagrees. The wording of the referenced provision was chosen to achieve general applicability. As such, OAG believes the requested definition is not appropriate. Regarding the inclusion of a contract as an alternative to an approval of its form, a political subdivision may contract only upon express authorization of its governing body by vote. See City of Bonham v. Southwest Sanitation, Inc., 871 S.W.2d 765, 767 (Tex. App.- Texarkana 1994, writ denied) (citations omitted). Therefore, the issuer must submit the order authorizing such execution as part of the proceedings.

Comment: One commenter suggested condensing §53.3(a)(3) into one sentence and removing the word "authorizing."

Response: OAG disagrees and believes the referenced provision conforms to the requirements of state law.

Comment: One commenter requested that §53.3(a)(4) be clarified to permit the inclusion in the general certificate of a signature identification and no-litigation certificate.

Response: OAG disagrees and believes that §53.3(a)(4)(H) addresses the commenter's concern.

Comment: One commenter suggested revising §53.3(a)(4)(A) to permit the incorporation by reference of debt retirement schedules included with the official statement.

Response: OAG disagrees and notes that the referenced provision does not prohibit the practice suggested by the commenter, and as such addresses the commenter's concern.

Comment: One commenter suggested that the requirements in §53.3(a)(4)(A)-(C) should not be considered part of the legal review required by statute if they do not address the legality of the bonds. Alternatively, the commenter requested that an issuer be permitted to provide the required items separately (i.e., not in the general certificate).

Response: OAG disagrees. OAG is unaware of any legal authority under Texas law for the issuance of moral obligation debt. Therefore, OAG believes the requirements of the referenced provisions reflect relevant state law requirements applicable to public securities submitted for review, and further that inclusion of these requirements in the general certificate will facilitate the public securities review process.

Comment: One commenter requested clarification regarding whether §53.3(a)(4)(A)(ii) would allow the debt service schedule to exclude self-supporting debt as authorized by proposed §53.3(a)(4)(A)(iv). Another commenter suggested that §53.3(a)(4)(A)(ii) be qualified with "except as provided in" proposed §53.3(a)(4)(A)(iv).

Response: OAG disagrees and notes that the provisions of §53.3(a)(4)(A) are cumulative, and as such address the commenters' concerns.

Comment: One commenter suggested revising §53.3(a)(4)(A)(ii) by replacing "regardless of" with "and" (between the words "source" and "lien").

Response: OAG disagrees. The language in the referenced provision is designed to present a complete picture of the debt service requirements for the proposed public securities. As this information is used by OAG to make the calculations under §53.6, OAG believes the proposed revisions would unduly narrow the scope of the public securities review.

Comment: Several commenters suggested revising §53.3(a)(4)(A)(iii) to allow for a commercial paper amortization period that is based upon a reasonable finding by the issuer, which period could cover the term of intended commercial paper refinancing bonds (as established in the authorization document). The commenters argued that, as written, §53.3(a)(4)(A)(iii) appears to limit an issuer's ability under §1371.057(c) of the Government Code to amortize commercial paper over a period of forty years or such longer period as may be authorized by law.

Response: OAG agrees that §1371.057(c) of the Government Code contains the applicable statutory limitation, and has revised the referenced provision accordingly.

Comment: Several commenters suggested that §53.3(a)(4)(A)(v) be deleted. The commenters argued that requiring a debt service schedule that includes the 2% sinking fund requirement might cause confusion, since most issuers incorporate the debt service schedule provided by their financial advisors, which shows the principal amount payable under the public security. One of the commenters stated that, although possible, creating an additional debt service schedule seems unnecessarily burdensome. Another of the commenters suggested that if there are other reasons for an issuer to include the debt service schedule described in the rule, then it could be provided on a case-by-case basis.

Response: OAG disagrees and believes the language in the referenced provision merely reflects and requires a demonstration of compliance with the requirements of Sections 5 and 7 of Article XI. City and county transactions in which at least 2% of the principal amount is paid annually should already exhibit compliance with this requirement. As it has been OAG's experience that very few of such transactions are structured in a manner which would require the production of additional schedules, OAG does not believe the requirement will result in any undue burden on the issuer or its attorneys.

Comment: One commenter suggested revising §53.3(a)(4)(B)(i) to read the "most recently available 3-year period" to clarify ambiguity about which figures are required.

Response: OAG disagrees and notes that the wording of the referenced provision was chosen to achieve general applicability, given the unique circumstances of each issuer.

Comment: Several commenters suggested revising §53.3(a)(4)(B)(iii) to allow a certification of the current rates as an alternative to providing a copy of the rate order, etc. The commenters argued that obtaining a copy of the actual order can be administratively burdensome, and that an issuer's certification of the rates should be sufficient.

Response: OAG disagrees and believes that any administrative burden caused by requiring a copy of the issuer's current rate order, ordinance, or schedule is outweighed by the benefit that inclusion of the information adds to the public securities review process. In exceptional cases where there would be undue burden to the issuer, §53.21 provides for a waiver upon good cause shown.

Comment: One commenter suggested the word "fiscal" should be inserted prior to the word "year" in §53.3(a)(4)(B)(iv). The commenter suggested that the current wording could be misconstrued to mean "as of the date of issuance."

Response: OAG disagrees and believes that the wording of the referenced provision provides sufficient context to avoid such a misinterpretation.

Comment: One commenter suggested that §53.3(a)(4)(C) might be clarified if made subject to proposed §53.5(5).

Response: OAG disagrees and notes that the wording of the referenced provision was chosen to achieve general applicability.

Comment: One commenter suggested that the determination of an issuer's population required under §53.3(a)(4)(D) should be accorded a level of deference consistent with the deference given to a governing body's population certification made in connection with a home rule charter election.

Response: OAG disagrees with the commenter as the measuring period for an issuer's population is statutorily defined, most generally by §311.005(3) of the Government Code. However, as certain state statutes use the word "inhabitants" instead of "population," OAG has amended the referenced provision to provide for a more general application.

Comment: One commenter suggested revising §53.3(a)(4)(E) to permit a certification that there has been no charter amendment since the issuer's most recent bond issuance.

Response: OAG disagrees and believes that the certification required by the referenced provision is necessary to ensure the issuer has authority to issue its proposed public securities at the time of issuance, and to confirm that the issuer has complied with any applicable restrictions under its charter. Furthermore, OAG believes the certification to be minimally burdensome on the issuer.

Comment: One commenter asked whether §53.3(a)(4)(F) is intended to require inclusion of citations regarding the creation of counties within the authorizing document.

Response: OAG intends the referenced provision to apply to counties.

Comment: One commenter suggested revising §53.3(a)(5) to state that if an issuer submits a purchase agreement containing the terms of sale, then the transcript need not include a pricing certificate as outlined in §53.3(a)(3).

Response: OAG disagrees and believes that a pricing certificate may still be required to make certain statements not required in a purchase agreement, such as the requirement in §53.3(a)(2)(K).

Comment: One commenter suggested qualifying §53.3(a)(7)(B) "to the extent applicable" to recognize the distinction between an issuer purchasing bond insurance and a bondholder purchasing insurance.

Response: OAG disagrees and believes the general "as applicable" qualification in §53.3(a) addresses the commenter's concern. OAG notes, however, that the inclusion in the authorizing document of any language required under the insurance agreement would still need express approval of the governing body of the issuer.

Comment: Several commenters suggested qualifying §53.3(a)(8) as an official statement or offering document is not prepared for every proposed public security.

Response: OAG disagrees and believes the general "as applicable" qualification in §53.3(a) addresses the commenter's concern.

Comment: Several commenters recommended revising §53.3(a)(9) to address situations in which an issuer's specific authorizing statute(s) provides for different publication requirements.

Response: OAG agrees the referenced provision should provide for more general applicability and has revised it to recognize the various requirements of state law.

Comment: One commenter suggested revising §53.3(a)(9) to clarify that it does not apply to the publications referenced in proposed §53.4.

Response: OAG disagrees and believes that the more specific applicability discussed in §53.4 provides sufficient context to avoid such a misinterpretation.

Comment: One commenter questioned the inclusion of certain of the language required by §53.3(a)(10), given that this language may address matters which have not yet been resolved under state law.

Response: OAG disagrees and notes that the referenced provision was drafted to provide specificity for the review of public securities and guidance for the greater public finance community. However, in response to the comment and in recognition of the lack of resolution of the identified matters, OAG has revised the referenced section to provide for a more general application recognizing the various requirements of state law.

Comment: Several commenters opposed §53.3(a)(11) as overly broad, as it should only apply to documents that require OAG approval, or could be interpreted as requiring a certificate of authority for all documents within a transcript, including documents for which certificates have not previously been required (e.g., underwriters, bond purchasers, paying agents, CPAs with respect to coverage certificates, etc.). One commenter suggested revising §53.3(a)(11) to provide an exception for underwriters' representatives executing bond purchase agreements or bid documents. The commenter argued that these representatives generally object to providing the information required, and that the remedy of liquidated damages in purchase agreements or competitive bids is adequate to assure authority to purchase public securities.

Response: OAG agrees there are certain circumstances to which the requested certificate is not applicable, and has withdrawn proposed §53.3(a)(11) and renumbered the subsequent paragraphs in §53.3(a) accordingly.

Comment: One commenter suggested revising §53.3(a)(11) to provide an exception for sole member entities.

Response: OAG agrees there are certain circumstances to which the requested certificate is not applicable, and has withdrawn proposed §53.3(a)(11) and renumbered the subsequent paragraphs in §53.3(a) accordingly.

Comment: Several commenters recommended revising §53.3(a)(12) to permit as an alternative a certification that (1) all absent members were notified of the special meeting and (2) is signed by the official or officer charged with notifying the governing body. One commenter discussed the difficulty of obtaining the signature of an absent member if that member is on vacation or ill. The commenter also stated that this requirement could empower members to veto the issuance of a public security by intentionally missing a special meeting and refusing to submit the revised certificate. Another commenter discussed the difficulty of obtaining an acknowledgement from a member who has resigned from the governing body.

Response: OAG disagrees. It is the intent of the referenced provision to ensure that each absent board member has been notified of the occurrence of a special meeting. Therefore, OAG believes that the required acknowledgments should be executed by the absent board members, and consequently that the requested revisions would forgo any attempt by the issuer to secure such an acknowledgment. OAG notes that §53.21 permits a waiver of its rules, including the referenced provision, upon a showing of good cause, which sufficiently addresses the concerns raised in the comment.

Comment: One commenter suggested a revision to allow for the certificate required by §53.3(a)(14) to be combined with the general certificate. The commenter argued that this would reduce the number of documents that the issuer must sign.

Response: OAG disagrees with the suggested revision, because OAG believes that §53.3(a)(4)(H) addresses the commenter's concern.

Comment: One commenter suggested revising §53.3(a)(14)(C) to allow for a substantially similar certification. The commenter argued that a revision would afford bond counsel discretion in drafting their documents.

Response: OAG agrees in part and disagrees in part. As it is not OAG's intent to restrict the discretion of issuer's counsel in drafting its documents, OAG has revised the referenced provision in response to the comment, by including the word "confirming." However, OAG believes the certification language suggested in the referenced provision addresses the minimum disclosure requirements to ensure there is no impact on OAG's ability to approve the transaction pursuant to §53.9.

Comment: One commenter suggested revising §53.3(a)(14)(C) by inserting (1) a comma between the words "governing body of the issuer" and "or any other elected" and (2) the phrase "subscribing any document in the transcript" between the words "issuer" and "is being contested."

Response: OAG disagrees and believes that the referenced provision clearly states the applicable requirements.

Comment: Several commenters objected to the requirement under §53.3(a)(14)(D) that an issuer must notify the OAG of changes to "any transcript document to which the issuer is a party." One commenter suggested that the requirement should be limited to "material changes." Another commenter argued that the requirement should be deleted.

Response: OAG disagrees and has drafted the referenced provision broadly to require disclosure of any changes that may be relevant to the public securities review process. The determination of what is or is not material to its approval of proposed public securities should be made by OAG.

Comment: Several commenters opposed §53.3(a)(15). The commenters argued that the requirements are related to federal tax law, rather than state law governing public securities. The commenters further argued that §1201.042(c) of the Government Code provides specific authority to use bond proceeds to reimburse prior expenditures.

Response: OAG disagrees and believes the commenters misunderstand the intent of the rule. The documentation required under the referenced provision is intended to provide evidence of the issuer's intent to reimburse itself from the proceeds of a future public security issuance under state law. Consistent with past practice, OAG has looked to federal tax law for guidance regarding how the intent may be reflected. See paragraph 7 of the All Bond Counsel Letter, dated September 18, 1992, and paragraph 4 of the All Bond Counsel Letter, dated August 19, 1994.

Comment: Several commenters opposed §53.5(6). The commenters argued that the referenced bond allowable rates should be made through the formal rulemaking process.

Response: OAG disagrees with the comments. OAG believes it has authority pursuant to §402.044 of the Government Code to provide advice to the public finance community, which it has chosen for efficiency to do from time to time through the issuance of All Bond Counsel letters. See, e.g., paragraph 1 and Attachment 1 of All Bond Counsel Letter, dated August 17, 1999 (regarding school district coverage tests). However, in light of the duplicative nature of proposed §53.5(6) and §53.5(7) and the reservation of authority under proposed §53.22, OAG has deleted proposed §53.5(6) and has renumbered proposed §53.5(7) accordingly.

Comment: Several commenters opposed §53.5(7). The commenters argued that the referenced bond allowable rates should be made through the formal rulemaking process.

Response: OAG disagrees with the comments. OAG believes it has authority pursuant to §402.044 of the Government Code to provide advice to the public finance community, which it has chosen for efficiency to do from time to time through the issuance of All Bond Counsel letters. However, in light of the reservation of authority under proposed §53.22, OAG has revised the referenced provision to provide for a more general application.

Comment: One commenter opposed §53.6, arguing that coverage requirements are better addressed by statutory requirements and authorizing document provisions. The commenter also argued that rating agencies and market participants rely on existing coverage requirements when evaluating public securities.

Response: OAG disagrees with the comment and believes that the referenced provision appropriately incorporates relevant state law concerning the issuance of proposed public securities. OAG is unaware of any legal authority under Texas law for the issuance of moral obligation debt. Therefore, OAG believes the requirements of the referenced provision reflect relevant state law requirements applicable to public securities submitted for review.

Comment: One commenter questioned how the requirements of §53.6 constituted a legal review under Chapter 1202 of the Government Code. The commenter also expressed an understanding that OAG only examined the financial feasibility of public securities that have not been approved by TCEQ.

Response: OAG disagrees with the commenter's concern and is unaware of any legal authority under Texas law for the issuance of moral obligation debt. Therefore, OAG believes the requirements of the referenced provision reflect relevant state law requirements applicable to public securities submitted for review.

Comment: One commenter suggested revising §53.6(2) to reflect three years of historic revenues.

Response: OAG disagrees and notes that the wording of the referenced provision was chosen to achieve general applicability.

Comment: Several commenters suggested revising §53.8 to reflect that an issuer of public securities containing a combined ad valorem tax and revenue pledge may capitalize interest-to the extent the issuer's anticipated revenues are sufficient to pay the debt service-through the period of construction plus one year.

Response: OAG agrees, and has deleted any reference to capitalized interest from this provision.

Comment: Several commenters requested clarification to §53.8(b) regarding whether the requirements applied to combination tax and revenue obligations. Alternatively, one commenter suggested adding a subsection to clarify that proceeds for combination ad valorem tax and revenue public securities may be used for capitalized interest for a time period authorized by law.

Response: OAG disagrees with the requested revision, but has revised the referenced provision in response to another comment.

Comment: One commenter indicated it was in favor of §53.9, but felt it needed a stronger enforcement mechanism. The commenter suggested adding the following sentences at the end of the section: "An issuer should discuss any pending litigation of which it has actual knowledge with the Public Finance Division prior to submitting a transcript of proceedings. Failure to discuss pending litigation of which the issuer has actual knowledge with the Public Finance Division prior to submission of the transcript of proceedings may result in the Public Finance Division rejecting the transcript."

Response: OAG disagrees and believes that the referenced provision, together with the rest of new Subchapter A, provides sufficient enforcement mechanisms to ensure disclosure in accordance with state law concerning public securities.

Comment: Several commenters opposed §53.11. The commenters argued that the seal used on transaction documents should be the issuer's official seal-as adopted by the governing body-which may or may not include the official title of the issuer.

Response: OAG agrees and has revised §53.11 to provide for a more general application.

Comment: One commenter recommended revising §53.12(b) to give "advance refunding" the same definition as under federal law to avoid any confusion in terminology. The commenter also noted that some transactions may require an overnight escrow, but would not qualify as a current refunding under the proposed rules.

Response: OAG disagrees and believes the referenced provision conforms to the requirements of state law.

Comment: Several commenters suggested revising §53.12(c) to require sufficient proceeds to advance refund to "maturity or redemption, as applicable," when referencing both net and gross defeasances. One commenter argued that the revision should account for instances when bonds are defeased, but not called, prior to their original maturity date.

Response: OAG agrees and has revised the referenced provision to provide for a more general application recognizing the various scenarios highlighted in the comments.

Comment: One commenter recommended revising the definitions of "net defeasance" and "gross defeasance" in §53.12(c) to account for the deposit and use of cash contributions from the issuer that may be required by federal tax law.

Response: OAG agrees and has revised the referenced provision in response to the comment.

Comment: One commenter recommended revising §53.12(c)(2) to apply only to agreements entered into pursuant to §1207.062(d) of the Government Code.

Response: OAG agrees this is the intent of the referenced provision and has made the revision in response to the comment.

Comment: One commenter suggested revising §53.12(d)(1) to require a receipt of notice of redemption from the paying agent/registrar only when the issuer is already within the specified timeframe in which they are required to provide notice. In other instances, the commenter suggested that an acknowledgement of redemption through or in connection with the requirements of proposed §53.12(d)(2) should be sufficient.

Response: OAG disagrees and notes that the wording of the referenced provision was chosen to achieve general applicability, given the unique circumstances of each issuance.

Comment: One commenter suggested revising §53.12(g) to reference a debt service savings/loss schedule, as applicable.

Response: OAG agrees and has revised the referenced section to provide such clarification.

Comment: One commenter suggested revising §53.12(i) to remove the word "municipal" because municipalities are not the only political subdivisions which consolidate and/or annex land belonging to another political subdivision.

Response: OAG agrees and has revised the referenced section to provide such clarification.

Comment: One commenter recommended that the certification required by §53.15 should be included in the authorizing document rather than the general certificate.

Response: OAG disagrees and requests inclusion of the certification in the general certificate for administrative efficiency, but notes that the referenced provision does not prohibit the practice suggested by the commenter.

Comment: One commenter suggested revising §53.16 to allow an issuer's transcript submission letter to request that the preliminary approval letter be sent by email rather than by fax. The commenter also requested that corrected pages for the transcript may be submitted by email rather than fax.

Response: OAG disagrees with the suggested revision and notes that the referenced provision does not prohibit the practice suggested by the commenter. However, OAG also notes that the provision in §53.16(m) would still apply.

Comment: One commenter requested clarification of the term "working day" for the purposes of §53.16(b) and throughout Chapter 53. The commenter also opposed the use of All Bond Counsel letters to increase submission time periods under §53.16(b).

Response: OAG disagrees and believes that the wording of the referenced provision provides sufficient context to avoid any confusion. OAG believes it has authority pursuant to §402.044 of the Government Code to provide advice to the public finance community, which it has chosen for efficiency to do from time to time through the issuance of All Bond Counsel letters. OAG also believes the use of All Bond Counsel letters to augment submission time periods under §53.16(b) is consistent with past practice and will allow OAG to respond to changes in workload.

Comment: One commenter suggested qualifying §53.16(e) to the extent final and executed (or certified) copies of a transaction document are required for OAG review and approval.

Response: OAG agrees and has revised the referenced section to provide the requested clarification.

Comment: One commenter suggested revising §53.16(f) to state that if the transcript is fully approved by OAG five working days prior to closing, then the bonds will be sent to the Comptroller four working days before closing. The commenter also requested that if the preliminary approval letter notes cure items, then the bonds will be sent to the Comptroller either the working day after the cure items are provided or two working days before closing. The commenter argued that issuers often use banks with an out-of-town office for closings, which requires bond counsel to overnight the registered bonds to the closing bank at least one day prior to closing to have the bonds delivered on the closing date.

Response: OAG disagrees and believes the wording of §53.16(f) is sufficiently broad to achieve general applicability and conformity with state laws covering public securities. In addition, OAG notes that §53.16(j) provides an issuer the option to submit records of proceedings in advance if approval is requested a certain number of days prior to closing.

Comment: One commenter argued that requiring resubmission of contracts for subsequent issuances under §53.16(g) could be unduly burdensome because some transactions would require the annual resubmission of several contracts that have not changed since the initial issuance. The commenter suggests a revision that requires a representative contract following initial approval of the related public securities. The commenter additionally argued that a certification of the issuer that the contracts have not been amended since the previous transcript submission-similar to a certification that a city charter has not been amended-should be sufficient for §53.16(g).

Response: OAG disagrees and believes that the burden of supplying the applicable contracts is outweighed by the benefit of their inclusion to the public securities review process. OAG also notes that the referenced provision does not prohibit the practice suggested by the commenter, and as such addresses the commenter's concern.

Comment: Several commenters suggested revising or deleting the last sentence of §53.16(i). One of the commenters argued that issuers are entitled to rely on the prescribed timeline to determine when an approving opinion will be issued if they have met all timing requirements and satisfied all legal requirements. The commenter argued that issuers can incur financial penalties if they fail to close a bond issuance on a predetermined date. The commenter suggested that if division workload requires an increase in filing deadlines, then OAG should provide notice of any change to the bond counsel community so that appropriate accommodations to the timeline can be met. Another of the commenters argued that §53.16(i) introduces an element of uncertainty to the transcript approval process that could result in market confusion. The commenter suggested amending §53.16(i) by confining the disclaimer in the last sentence to issuers who fail to submit proceedings within the time frame set forth in Chapter 53.

Response: OAG disagrees and has carefully crafted the language of the referenced provision to provide notice that an unexpected change in circumstances, or other factors outside OAG's control, may necessitate a delay in the approval of proposed public securities.

Comment: One commenter suggested deleting the twenty-page prohibition under §53.16(m). Alternatively, the commenter suggested providing an alternative means of immediate delivery (such as e-mail) when a revision to a transcript document is required by the OAG and necessitates the repagination of a document in excess of twenty pages.

Response: OAG disagrees and declines to make the suggested revision in the referenced provision. OAG believes the printing and reprinting of voluminous documents is not a cost properly borne by the state.

Comment: One commenter suggested that §53.18 should be clarified or deleted. The commenter questioned the meaning of the terms "independent investigation" and "extrinsic evidence," and asked how they applied to OAG review of public securities. The commenter stated that issuer representations, certifications and findings submitted with a transcript of proceedings should be entitled to deference.

Response: OAG disagrees with the comment and believes that the wording of the referenced provision allows for a thorough public securities review process in accordance with state law.

Comment: One commenter suggested inserting "and City" in the title of §53.20 (between the words "County" and "State"). The commenter also suggested inserting a reference to Chapter 1510 of the Government Code.

Response OAG disagrees and declines to make the requested revision. However, OAG is withdrawing the referenced provision.

Comment: One commenter suggested deleting §53.22. The commenter argued that any changes to the proposed rules after adoption should be done through the formal rulemaking process.

Response: OAG disagrees with the comment. OAG's believes it has authority pursuant to §402.044 of the Government Code to provide advice to the public finance community, which it has chosen for efficiency to do from time to time through the issuance of All Bond Counsel letters. However, in response to the comment, OAG has revised the referenced provision to indicate that All Bond Counsel letters "may" and not "will" be used.

STATUTORY AUTHORITY

The new rules are adopted in accordance with Chapters 1202, 2001, and §402.044 of the Government Code, which collectively authorize OAG to adopt rules regarding its review of public securities that by law require OAG approval. In addition to Chapter 1202, other statutes require OAG review and approval before public securities and certain other obligations may be issued, including, but not limited to, §§1371.057, 1371.059, 1431.009, and 1431.011 of the Government Code, §§271.004, 271.005, and 372.028 of the Local Government Code, Chapter 45 of the Education Code, and §49.184 of the Water Code.

§53.2.Form of Records.

Records of proceedings shall be submitted to the Public Finance Division of the Office of the Attorney General. All records of proceedings shall conform to the following requirements:

(1) each transcript shall be submitted in an appropriately sized expanding file folder;

(2) the transcript page size shall not exceed 8 1/2 by 11 inches, and each line of each page should be entirely legible. (Oversize documents, such as maps and charts, should be folded within the 8 1/2 by 11 inch requirement);

(3) each transcript shall contain a table of contents;

(4) each transcript shall have the table of contents keyed to right side tab numbers; and

(5) each transcript shall be arranged in chronological order or in some other consistent, logical arrangement that will permit an efficient review.

§53.3.Content of Transcripts.

(a) Transcript Requirements. Each transcript shall include the following, as applicable:

(1) Initial Public Securities. The initial public securities executed in accordance with applicable law;

(2) Authorizing Document. The authorizing ordinance, order or resolution and, as applicable, indenture of trust for the proposed public securities, including the following:

(A) citation to the legal authority for the issuance of the proposed public securities;

(B) the terms of the proposed public securities, including the title, numbering, denominations, date, persons authorized to sign, method of signing, principal and interest payment dates, redemption terms, if any, place of payment and registration and form of paying agent and registrar agreement, and substantially final form of the public securities; provided, however, that to the extent specific terms of the public securities have been lawfully delegated to a representative or committee for determination, those terms shall be set forth in the pricing certificate;

(C) citation to the legal authority for the issuer to construct or acquire the proposed improvements or services, to pledge the specified payment source, and, as applicable, to contract with other parties for payment of principal and interest and other payments relating to the proposed public securities;

(D) identification of a specified revenue source and/or a levy of a tax, which shall be pledged in amounts sufficient, within any applicable limitation, to pay the annual debt service requirements of the proposed public securities for the current year and each succeeding year during which the proposed public securities are outstanding. Cities and counties issuing public securities supported in whole or in part by ad valorem taxes constitutionally must provide for an annual levy sufficient to collect a sinking fund of not less than 2% of the principal amount of the proposed public securities regardless of the year in which the first principal payment is due;

(E) a reasonably complete and detailed description of the improvements, services, or projects being financed and the intended use of the proceeds, including whether any of the proceeds are being used to pay capitalized interest or fund a reserve fund;

(F) a recitation of the following:

(i) the manner of the sale, whether negotiated or competitively bid,

(ii) the identification of the purchaser,

(iii) the purchase price, including any discount or premium, and

(iv) the finding that the terms of the sale were in the issuer's best interest, and additionally, if competitively bid, that the sale was awarded based on the lowest net effective interest rate, or other applicable standard as permitted by law;

(G) for proposed public securities with a floating, variable, or adjustable interest rate, a provision limiting the maximum rate of interest to:

(i) a net effective interest rate not to exceed the maximum interest rate provided for and calculated in accordance with Chapter 1204 of the Government Code; or

(ii) such other limit applicable to the securities and/or the issuer;

(H) incorporation of the provisions of Title 6 of the Property Code (Unclaimed Property) regarding the disposition and reporting of unclaimed principal and interest payments, specifically requiring compliance with the reporting requirements of Chapter 74 of the Property Code;

(I) provisions to account for the use of surplus public securities proceeds, premiums, and interest earnings on public securities proceeds;

(J) if issuing public securities under voted authorization, recitation of amounts previously issued under such voted authorization and the amount of voted authorization remaining after the issuance of the proposed public securities; provided, however, that if a determination of the amount of the public securities to be issued has been lawfully delegated, the amount of remaining voted authorization shall be stated in the pricing certificate; and

(K) approval of the form of contracts included in the transaction, as applicable;

(3) Pricing Certificate. A pricing certificate, when appropriate to facilitate a lawful delegation of specific terms of proposed public securities to an identified representative of the issuer. The certificate shall be signed by the representative(s) identified in the authorizing ordinance, order, or resolution, and shall reflect compliance with any parameters established therein;

(4) General Certificate. A general certificate, signed by a senior executive officer or an elected or appointed official of the issuer, and the official custodian of records of the issuer, and, if appropriate, any other officers or authorized representatives of the issuer, which certificate includes the following:

(A) for all public securities, a debt retirement schedule that:

(i) is current as of the date of the sale of the proposed public securities;

(ii) includes the combined debt service requirements of the proposed public securities and all other outstanding indebtedness payable in whole or in part from the same source regardless of lien priority, including any additional series of public securities being issued at the same time as the proposed public securities,

(iii) calculates interest as follows:

(I) at the actual interest rates sold, if known;

(II) in the case of future interest for variable rate debt, at the lesser of the maximum interest rate permissible under the ordinance, order, resolution or trust indenture authorizing the debt, or the maximum rate under applicable state law; or

(III) in the case of commercial paper, in accordance with §1371.057(c) of the Government Code;

(iv) for outstanding indebtedness or proposed public securities payable from a combination of ad valorem taxes and another pledged source, includes the debt service requirements as though such indebtedness were payable solely from ad valorem taxes, unless it is shown that such indebtedness can be and is paid, or with respect to proposed public securities, is intended to be paid, from the other pledged sources;

(v) for cities and counties constitutionally required to levy taxes sufficient to collect an annual 2% sinking fund for principal, reflects the annual 2% sinking fund amount in the debt service requirements even if no principal is due in a given year; and

(vi) for indebtedness with a related interest rate management agreement, as that term is defined in Chapter 1371 of the Government Code, taking into account the effect of the agreement on the interest rate(s) of the indebtedness in calculating the debt service requirements;

(B) for all proposed revenue and combination limited tax and revenue public securities:

(i) a history of the pledged revenue collections during the most recent three year period or, if revenues are being relied upon to show coverage, a revenue projection in the event a revenue history is unavailable or insufficient to provide debt service coverage. A revenue projection must include an explanation of the circumstances, such as a recent increase in the applicable rates, fees, or charges, that support a projected increase in revenues;

(ii) for a revenue projection based on an expanded system, a certificate of a licensed engineer or qualified consultant, as appropriate;

(iii) a copy of the current rate order or ordinance or adopted rate schedule of the issuer; and

(iv) a statement of the annual operating and maintenance expenses for the most recent year;

(C) for ad valorem tax public securities, certified statements of taxable values, and, if an issuer intends to rely on a collection rate greater than 90%, a certificate of the issuer's collection rates for the most recent three years;

(D) for general law city ad valorem tax public securities, certification of the type of general law city and the city's population;

(E) for home rule cities, certification of the date of the most recent amendment to the city charter and a certified copy of any charter amendment not previously submitted with a transcript;

(F) for issuers other than municipalities, citation to the statutory and, if applicable, constitutional provisions authorizing the issuer's creation and, if applicable, its taxing power;

(G) certification of incumbency, including the following:

(i) certification of the incumbency of each issuer's executive or administrative officer subscribing any document in the transcript; and

(ii) certifications of incumbency for city secretaries, county clerks, and other officers customarily certifying incumbencies, which certifications may be made by the presiding officer of the governing body of the issuer or, in his or her absence, any other member of the governing body; and

(H) at the discretion of the issuer, any other certifications required by this chapter;

(5) Purchase Agreement. For negotiated sales, executed original of any purchase agreement relating to the sale of the proposed public securities;

(6) Bid Form. For competitive sales, evidence of the winning bid form;

(7) Insurance. For financings for which insurance is obtained:

(A) a copy of the insurance commitment letter, executed by the insurer, if applicable;

(B) certified proceedings authorizing the insurance, which may be in the ordinance, order or resolution authorizing the public securities;

(C) if a statement of insurance is to be printed on the public securities, express authorization by the issuer in the ordinance, order or resolution authorizing the public securities or pricing certificate; and

(D) in the case of any agreement entered into with the insurer, if the agreement constitutes an authorized credit agreement pursuant to Chapter 1371 of the Government Code, submission of the proceedings authorizing the agreement;

(8) Offering Document. An official statement or other offering document; if a preliminary official statement is initially provided, a final official statement is to be provided prior to approval by the Office of the Attorney General;

(9) Affidavit of Publication. An affidavit of publication, executed by a representative of the newspaper, establishing that the newspaper meets the requirements under state law with a copy of a clipping of the published material attached;

(10) Paying Agent/Registrar Agreement. The paying agent/registrar agreement in substantially final form;

(11) Acknowledgment of Special Meeting. Acknowledgment of timely receipt of notice of a special meeting signed by each member of the issuer's governing body who failed to attend the meeting of the governing body at which a transcript document was approved;

(12) Certification of Official Actions. A certificate for each action taken by the governing body relating to the issuance of the proposed public securities, executed by the custodian of records of the governmental body, indicating presence of appropriate quorum, type of meeting (special, regular, or emergency), introduction and adoption of the action and the number of votes for, against, and abstaining. Such actions must be certified as true and correct copies of originals on file in the body's official minutes and all meetings at which such actions have been taken must be certified as having been held in full compliance with Chapter 551 of the Government Code;

(13) Signature Identification and No-Litigation Certificate. An undated signature identification and no-litigation certificate signed by the officers who executed the proposed public securities that complies with the following requirements:

(A) signatures shown on the certificate must substantially conform to the signatures on the proposed public securities;

(B) signatures must be certified as genuine by a bank or acknowledged by a notary public;

(C) certificate must include certification confirming that no litigation is pending or to the best of the knowledge of the issuer, threatened, against the issuer seeking to restrain or enjoin the issuance of the public securities, questioning the issuance or sale of the public securities or the authority or action of the governing body relating to the issuance or sale of the public securities, or the levy of taxes or collection of revenues or the pledge of taxes or revenues to the principal of and interest on the securities, as appropriate, or materially affecting the assessment or collection of taxes to pay the principal of and interest on the public securities, when appropriate; and that neither the corporate existence or boundaries of the issuer nor the right to hold office of any member of the governing body of the issuer or any other elected or appointed official of the issuer is being contested or otherwise questioned; and

(D) authorization for the Office of the Attorney General to insert the date of the approving opinion on the certificate must be provided, along with a representation that the issuer will notify the Office of the Attorney General by phone if it becomes aware of any changes with respect to any representation in the certificate or any transcript document to which the issuer is a party that occur between the date of the approving opinion and the date of closing;

(14) Reimbursement of Expenditures. If applicable, documentation evidencing intent to use the public security proceeds to reimburse the issuer for its prior expenditures;

(15) Bond Review Board Information. Bond Review Board information required by §1202.008 of the Government Code along with an additional copy of the official statement; and

(16) Election Proceedings. Certified election proceedings as provided in §53.14 of this subchapter.

(b) Execution of Documents. All certificates must be originally signed and, if required, sealed. All issuer contracts providing security or otherwise affecting the marketing or terms of public securities and governmental orders must either be originally signed and, if required, sealed, or legible copies certified to be true and correct copies.

§53.5.Determination of Bond Allowable Rate.

The following apply to determinations of the ad valorem tax bond allowable rate:

(1) "bond allowable rate" means the portion of the maximum authorized tax rate available for debt service;

(2) except as provided below, and except for good cause shown, all political subdivisions have a bond allowable rate equal to 2/3 of the maximum tax rate authorized by law;

(3) home rule cities and general law cities authorized by §5 of Article XI of the Texas Constitution to levy a tax of up to $2.50 per $100 valuation have a bond allowable rate of $1.50 per $100 valuation, unless the tax rate is further limited by the city's charter;

(4) counties have a bond allowable rate of $.40 per $100 valuation, plus an additional bond allowable rate of 1/2 of the tax rate voted for "further maintenance of public roads" authorized by §9 of Article VIII of the Texas Constitution up to a maximum additional tax of $.075 per $100 for public securities payable from that tax;

(5) annual tax funds available for debt service shall be calculated assuming a collection rate of 90% or a higher rate based on the average collection rate for the most recent three years, as certified by the issuer. In calculating the average collection rate, the annual collection rate used for any year may not exceed 100%; and

(6) the bond allowable rate may be further restricted by state law.

§53.8.Appropriated Funds and Capitalized Interest.

When an issuer must pay debt service on a proposed ad valorem tax public security or combination ad valorem tax and revenue public security before the initial tax levy can be collected, the issuer must provide certification that the issuer has appropriated lawfully available funds for such payment.

§53.11.Seals.

Seals should be the official seal as adopted by the governing body. Seals on certificates must exactly correspond to seals on securities.

§53.12.Refunding Bonds.

(a) Definitions. For purposes of this section, the term "bonds" includes commercial paper used for refunding purposes, and the term "public securities" includes other obligations authorized to be refunded by law that do not constitute public securities under §1202.001 of the Government Code.

(b) Types of Refundings. Refundings may be accomplished by the issuance of advance or current refunding bonds sold for cash or exchange refunding bonds issued in exchange for the refunded obligations. For state law purposes, all refundings in which the public securities being refunded are not paid and discharged the same day as the refunding bonds are issued are considered to be "advance refundings."

(c) Advance Refundings. Transcripts for net defeasance advance refunding must include documentation from an accounting firm or other qualified entity, other than the issuer, verifying the sufficiency of the investments of the escrowed proceeds to redeem on the redemption date or pay at maturity, as applicable, the refunded public securities. For a gross defeasance, a certificate of sufficiency from the paying agent for the refunded obligations or other qualified entity, other than the issuer, is required. For purposes of this section, "net defeasance" means a deposit of refunding proceeds and any issuer contribution upon closing in escrow, which requires the accrual of investment earnings in order to provide sufficient funds to pay the refunded public securities on the redemption date or at maturity, as applicable; and "gross defeasance" means a deposit of refunding proceeds and any issuer contribution upon closing, which is sufficient to pay the refunded public securities on the redemption date or at maturity, as applicable, without further investment. For an advance refunding pursuant to Subchapter C of Chapter 1207 of the Government Code:

(1) the financial institution with whom the refunding bond proceeds are to be deposited must enter into an escrow or similar agreement if required by §1207.062 of the Government Code, or otherwise execute an agreement or certificate confirming its agreement to hold the refunding proceeds and any issuer contribution in trust for the owners of the refunded public securities; each agreement shall collateralize uninvested funds until their payment at redemption or maturity to the extent not insured by the Federal Deposit Insurance Corporation; and

(2) a certification of incumbency, including specimen signatures, and corporate authority of the financial institution executing the agreement required by subsection (d)(1) must be included in the transcript.

(d) Paying Agent for Refunded Public Securities. All paying agents for public securities to be redeemed must acknowledge:

(1) receipt of a notice of redemption and, in cases in which a notice of redemption is required to be published or mailed to the registered owners prior to the delivery of the refunding bonds, evidence of such publication or a certification by the paying agent/registrar as to provision of notice to registered owners must be included in the transcript; and

(2) satisfaction of paying agent fees; if fees will not be paid at closing, the paying agent must certify that it will not look to the bond proceeds as payment for its fees but its sole remedy will be an action for payment under the paying agent agreement.

(e) Exchange Refundings. Exchange refunding bonds issued pursuant to the authority of §1207.081 of the Government Code may be sent to the Comptroller for registration after approval if the transcript includes instructions from the issuer to the paying agent for the refunding bonds to hold the bonds and deliver them only upon surrender of the public securities being refunded, and a representation that the refunding bonds will be delivered to the paying agent for further delivery as instructed and not to any other party, or provides a similar mechanism for ensuring delivery only in exchange for the public securities being refunded.

(f) Combination New Money and Refunding Public Securities. For combination new money/refunding bonds issued pursuant to Chapter 1207 of the Government Code, the issuer must provide documentation in accordance with these rules evidencing compliance with any election, notice, or publication requirements for the new money portion.

(g) Public Purpose and Required Findings. A refunding pursuant to Chapter 1207 of the Government Code for which the aggregate amount of payments to be made on the refunding bonds will or may exceed the aggregate amount of payments to be made on the public securities being refunded must include the finding required by §1207.008(a)(1) and must include the finding required by §1207.008(a)(2), unless, as provided by subsection (b) of that section, the governing body of the issuer determines and states in the order, ordinance, or resolution authorizing the refunding that the manner in which the refunding is being executed does not make it practicable to make the determination required by subsection (a)(2) of that section. Refunding transcripts must include a debt service savings or loss schedule showing the amount of debt service savings or loss, reflecting the calculation of any issuer contribution and showing the methodology used. If there is no gross savings or the issuer has made a finding of impracticability under §1207.008(b), a statement must be included in the bond order, ordinance, or resolution explaining the public purpose of the refunding.

(h) Submission of Refunded Public Securities Documents. All refunding transcripts must contain a copy of the order, ordinance or resolution authorizing, or a copy of the trust indenture securing, the public securities being refunded. The documentation submitted should include the pricing certificate for public securities sold pursuant to delegated authority.

(i) Refunding Assumed Public Securities. For refunding bonds being issued to refund public securities for which the obligation to pay has been assumed through annexation of another political subdivision or special district, the following must be included in the transcript:

(1) if applicable, a certified copy of the action taken by the governing body that conducted the annexation calling the public hearing and authorizing publication of the notice of the hearing;

(2) if applicable, an original or certified copy of the affidavit of publication of the notice of the hearing with the newspaper clipping attached; and

(3) a certified copy of the action taken by the governing body annexing the land and assuming the debt.

§53.16.Submission and Approval of Transcripts.

(a) Submitting Attorney. A transcript must be submitted by an attorney licensed in Texas.

(b) Submission Deadlines. An issuer must submit its record of proceedings at least 10 working days prior to closing for traditional financings, and at least 12 working days prior to closing for nonprofit corporation or other conduit issuer financings. In the cover letter for the transcript submission, bond counsel must advise the Public Finance Division of public securities requiring the delivery of an approving opinion earlier than normally provided and must submit the record of proceedings a corresponding amount of additional time prior to the proposed closing date. These time periods may be increased with advance notice from the Public Finance Division in an All Bond Counsel Letter. Record of proceedings must be submitted in substantially final form. Preliminary or pro-forma proceedings will not be accepted for review without prior approval for good cause shown when the current Public Finance Division workload allows. Black-lined pages identifying changes must accompany any changed pages to the record of proceedings. An issuer's failure to submit a substantially complete record of proceedings prior to the expected release date of a preliminary approval letter under subsection (d) of this section may prevent the release of approved public securities by the proposed closing date.

(c) Initial Public Securities. Initial public securities must be submitted no later than five working days prior to closing.

(d) Preliminary Approval Letters. No preliminary approval letter from the Public Finance Division should be expected until the end of the fifth working day preceding the date set for closing, or an earlier date as requested by bond counsel in writing, if the time requirements for an earlier approval date have been met. If the issuer fails to submit a substantially complete record of proceedings, the Public Finance Division may delay the release of the preliminary approval letter until such time as a substantially complete record of proceedings is received. After receipt by bond counsel of a preliminary approval letter relative to a given issue, bond counsel shall supply a written response to any questions, enclosing, when requested, missing or substituted documentation. Intervening telephone discussion is welcome, and confirmation of any verbal waivers or modifications to the preliminary approval requirements should be included in the reply letter.

(e) Submission of Final Documents. Any outstanding requirements for final approval as well as the final versions of documents originally submitted in unexecuted or uncertified form, which shall be executed as required by law, must be submitted no later than three working days prior to closing. Exceptions to this requirement may be granted by the Public Finance Division for good cause, if the current workload allows.

(f) Registration of Public Securities. If all requirements have been satisfied, approved public securities generally will be sent by the Public Finance Division to the Texas Comptroller of Public Accounts for registration two days prior to the proposed closing date.

(g) Approval of Certain Contracts. For record of proceedings in which specific approval by the Office of the Attorney General of a contract providing revenue or security to pay the public security is required, the proceedings, including the contract, must be supplied in final and executed or certified form by the time of approval.

(h) Agreements to be Registered by Texas Comptroller of Public Accounts. For agreements required by law to be registered by the Texas Comptroller of Public Accounts, such as lease purchase agreements, the issuer must submit two fully executed agreements. One will be registered with the Texas Comptroller of Public Accounts and returned to the issuer, and the second will remain with the transcript file.

(i) No Guarantee of Final Approval. Receipt of a preliminary approval letter does not constitute a guarantee of final approval of the public securities and should not be relied upon as such. Closings may be delayed if required documents are not timely filed or if there are unresolved legal issues. Furthermore, the Office of the Attorney General does not represent, assure or guarantee completion of transcript examination or the issuance of transcript approval by any specific date or time.

(j) Calculation of Deadlines. For calculations under this section, the day of submission is counted if the record of proceedings is received by 3:00 p.m., but the day of closing is not counted. If bond counsel states that it is satisfactory for the public securities to be registered by the Comptroller of Public Accounts the day before closing, then one day may be subtracted from the time requirements. If approval is requested a certain number of days prior to closing, then the time requirements are counted back from the requested approval day, not from closing.

(k) Review of Forward Deliveries. An opinion for forward delivery public securities will not be delivered until shortly before the delivery date of the public securities. A preliminary approval letter will be provided, and subsequently, if requested, the reviewing attorney will confirm that all outstanding requirements have been satisfied, to the extent this has occurred. An extensive "settlement certificate" generally setting forth information of the nature required to be in general and no-litigation certificates and confirming that there have been no material changes made to the transcript previously reviewed by this office will be required before the opinion is given.

(l) Return of Record of Proceedings. A record of proceedings on file with the Public Finance Division for six (6) months with no action will be returned to bond counsel. Should any such proceedings be resubmitted, a new fee will be required.

(m) Facsimile Transmissions. Unless specifically requested or approved by the Public Finance Division, no fax transmissions of more than 20 pages may be sent to the Public Finance Division. Unless specifically requested, material should not be faxed in the late afternoon or evening if it is being sent by overnight delivery.

§53.22.Interpretation.

These rules and the applicable laws may be interpreted from time to time by the issuance of All Bond Counsel Letters by the Public Finance Division pursuant to §402.044 of the Government Code. All substantive All Bond Counsel Letters from November 1987, and selected letters from before that date, are on the Attorney General's website.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 16, 2016.

TRD-201606643

Amanda Crawford

General Counsel

Office of the Attorney General

Effective date: January 5, 2017

Proposal publication date: July 1, 2016

For further information, please call: (512) 475-4163