Adopted Rules Title 34

TITLE 34. PUBLIC FINANCE

SUBCHAPTER A. BOND REVIEW RULES

The Texas Bond Review Board (BRB) adopts new rule §181.11 within Texas Administrative Code Title 34, Part 9, Chapter 181, Subchapter A. The new rule is adopted without changes as published in the August 18, 2023, issue of the Texas Register (48 TexReg 4474). The rule will not be republished.

Reasoned Justification for the Adoption of the New Rule

The adoption of this new rule within Texas Administrative Code, Title 34, Part 9, Chapter 181 implements the requirements of House Bill (HB) 1038 enacted by the 88th Legislature (2023 Regular Session). HB 1038 amends Chapter 1231 of the Texas Government Code by adding §1231.064 related to a biennial report on state lending and credit support programs.

HB 1038 calls for transparency, and this new rule facilitates the gathering of relevant information from state agencies or political subdivisions regarding lending and credit support programs within the state to enable the BRB to prepare a biennial report due by December 31 of each even-numbered year as mandated by §1231.064 of the Texas Government Code.

New rule §181.11, as adopted, requires the report to include but not be limited to the following: For each state lending and credit support program, a state agency or political subdivision shall provide a description of the program, the total amount of state money lent through or debt supported by the program, as applicable, a citation to the law authorizing each program, a reasonable estimate of the cost of default associated with each program computed in accordance with private-sector accounting standards for credit or other losses, and policies and procedures in place for each program to mitigate the risk of future default in the programs. Consistent with the legislative directive to increase fiscal transparency for state lending and credit support programs, the new rule requires affected entities to provide to BRB information determined to be necessary to enable the BRB to provide the report mandated by §1231.064 of the Government Code.

Public Comment and BRB Responses

The public comment period on the proposed new rule opened on August 18, 2023, and extended through midnight on Sunday, September 17, 2023.

The BRB held two public meetings to consider comments on the proposed new rule on Thursday, September 21, 2023, and Tuesday, October 10, 2023, at 10:00 a.m. in the Capitol Extension Room E2.028 at 1100 Congress Ave., Austin, Texas 78701. No public comments were made about the proposed rule at these meetings.

During the public comment period, the BRB received written comments from the Texas Water Development Board (TWDB). Specific comments are addressed below.

TWDB Comments

The TWDB provided written comments on new §181.11 in its letter addressed to Mr. Rob Latsha, the Executive Director of the BRB, dated September 15, 2023. Below are the TWDB's comments and the BRB's responses.

TWDB's Comments regarding §181.11(a) and the term "state lending program"

The TWDB comments that §181.11(a) directs state agencies to file with the Board an electronic report on state lending or credit programs within timeframes as determined by the rule and that HB 1038 defines "lending program" as a program through which "state money" is loaned, or otherwise provided with the expectation of repayment, to a public or private entity, but the phrase "state lending program" is not further defined in the proposed rule or added to the list of applicable definitions elsewhere in Chapter 181. TWDB asks the BRB to clarify whether "state lending program" as used in the proposed rule includes loans evidenced by the purchase of obligations including, bonds, notes, other instruments of indebtedness. The TWDB comments that "state lending program" should include only those monies or funds derived from state appropriations, as evidenced in its later comments on proposed subsection (b)(6).

BRB Response

The BRB disagrees and declines to make any changes based on these comments. Nothing in §1231.064 of the Government Code suggests that the term "state lending program" should be narrowly construed. Pursuant to §1231.064, BRB's intent is to collect data on state lending programs that consist of monies that are or were in the custody or control of a state agency or subject to the direction of a state agency and that are loaned or otherwise provided to a public or private entity with the expectation of repayment.

TWDB's Comments to §181.11(b)(6) and the term "state money"

The TWDB comments that §181.11(b)(6) requires each report prepared by a state agency to include information related to the "[t]otal amount of state money lent through the lending program." The TWDB notes that as with the term "state lending program" in subsection (a), the phrase "state money" is also undefined in the proposed rule; it is undefined in HB 1038; and it is undefined in other statute. In addition, TWDB comments that the proposed rule through several subsequent paragraphs interchangeably uses the terms "loan" and "debt" without making references to whether a loan is made, or a debt was incurred, through the provision of "state money." The TWDB states that it does not have a definition of "state money" in its rules or enabling statutes, and "state money" is undefined in statute or the proposed rule by the Board. The TWDB comments that it is unsure how state agencies can report accurate information and sufficiently comply with the Act without this term being defined.

If the term "state money" remains undefined at adoption of the rule, the TWDB further comments that it must presume a broad application of the phrase. Because the TWDB is not the state of Texas, but merely an agency operating within the executive branch of state government, it argues that it must apply a plain reading of the statute and define "state money" to mean money appropriated by the state to a state agency, to be lent through an applicable "state lending program," with the expectation of repayment. The TWDB further comments that the term "state money" should exclude any provision of assistance administered by a state agency where the money to be lent is federal dollars. The TWDB also comments that the term "state money" should exclude the lending of "local funds" provided by state agencies, which include (without limitation) proceeds obtained from the sale of state general obligation or revenue bonds to investors or from the accumulation of repayments, or otherwise funds known to be held outside the Treasury of the state. The TWDB comments that on occasion, it receives appropriations from the Legislature to lend money to program participants through the General Appropriations Act (GAA) (most recently in its state flood programs and its state revolving fund programs for "state match" dollars) and that the TWDB understands that this appropriated money would be considered "state money."

The TWDB proposes to clarify the rule, commenting that "state money" should be expressly defined as those monies, funds, or dollars specifically appropriated by the Legislature through appropriate budget riders in the GAA and directed for use by the Legislature to state agencies to be used by program participants in a lending or credit support program with the expectation of repayment. The TWDB comments that the proposed rule, where applicable, should make clarifying references to appropriately separate the concept of "state money" lent or "debt" supported by the state through applicable credit support programs.

BRB's Response

The BRB disagrees and declines to make any changes based on these comments. Nothing in §1231.064 of the Government Code suggests that the term "state money" should be narrowly construed. This is consistent with how Chapter 1231 of the Government Code does not limit "state security" to those paid only from appropriated general revenues. See Gov't Code §§1231.001(2); 1231.061(a). Pursuant to §1231.064, BRB's intent is to collect data on state lending programs that consist of monies that are or were in the custody or control of a state agency or subject to the direction of a state agency and that are loaned or otherwise provided to a public or private entity with the expectation of repayment.

TWDB's Comments regarding §181.11(b)(7)

The TWDB comments that §181.11(b)(7) requires each report prepared by a state agency to include information related to the "[t]otal amount of debt supported by the lending program" and that HB 1038 does not use the term "debt" in its definition of "lending program." In addition, the TWDB comments that the preceding subsection (b)(6) requires state agencies to report the "amount of state money lent (emphasis added)." Therefore, the TWDB assumes that the word "debt" used in subsection (b)(7) means the debt issued by the reporting agency or political subdivision.

The TWDB further states that if their assumption is incorrect, the TWDB would comment that subsection (b)(7) should only be applied to credit support programs and not applied to lending programs which are concerned with reporting the amounts of state money lent (emphasis added) and not debt supported by a credit support program.

Additionally, the TWDB asks:

Does the word "debt" as used in subsection (b)(7) refer to debt issued by the reporting agency of political subdivisions? And if it doesn't, how is it distinguishable from the phrase "state money" in subsection (b)(6)?

Does the information required to be reported under proposed subsection (b)(7) include debt not repaid with "state money"?

The TWDB also comments as follows:

The timeframe that state agencies are required to consider when providing information for the report is unclear. The TWDB comments that to meet the purposes of the Act, the "total amount of debt supported by the lending program," should be a current look at the agency's programs at the time the report is due and not a historical overview which could include extinguished debt.

BRB's Response

The BRB disagrees and declines to make any changes based on these comments. §1231.064(a)(2) defines "Lending Program" to mean "a program through which state money is loaned, or otherwise provided with the expectation of repayment, to a public or private entity." (emphasis added). When a state agency lends by issuing its own debt and using those proceeds to purchase the debt of a qualifying entity, the BRB believes that information on the debt of both the state agency making the loan and the underlying entity receiving the loan is necessary for the board to provide the information required by §1231.064 of the Government Code. BRB's intent is to collect data on state lending programs that consist of monies that are or were in the custody or control of a state agency or subject to the direction of a state agency and that are loaned or otherwise provided to a public or private entity with the expectation of repayment. With respect to reporting timeframes, §1231.064(b) requires the BRB to report on state lending and credit support programs no later than December 31 of each even-numbered year. To enable it to prepare the required biennial report by December 31, the rule requires the data for the report to be filed by the state agency or political subdivision no later than September 15 of each even-numbered year, covering the immediately preceding two fiscal year periods ending August 31.

TWDB's Comments regarding §181.11(b)(8)

TWDB comments that §181.11(b)(8) requires each report prepared by a state agency to include information related to the "[t]otal dollar amount of outstanding loans separated by program" and that HB 1038 appears to limit the information required to be reported by state agencies under their applicable lending programs to "state money" and that, therefore, it would be appropriate to read proposed subsection (b)(8) to be limited to only those lending programs that lend "state money."

The TWDB asks the BRB to clarify whether this dollar amount is meant to include all loans separated by program or only those loans made under a lending program with "state money" as contemplated by preceding subsection (b)(6).

Similarly, to the comments provided for subsection (b)(7), the TWDB comments that the timeframe that state agencies are required to consider when providing information for the report is unclear. The TWDB comments that to meet the purposes of the Act "the total amount of outstanding loans," to be reported should not be a historical accounting through all of the TWDB's financial assistance programs and instead should report a "total dollar amount," due at the time the report to the Board is due.

BRB's Response

The BRB disagrees and declines to make any changes based on these comments. Consistent with the fiscal transparency purposes of HB 1038, BRB's intent is to collect data on state lending programs that consist of monies that are or were in the custody or control of a state agency or subject to the direction of a state agency and that are loaned or otherwise provided to a public or private entity with the expectation of repayment. HB 1038 requires the BRB to report on state lending and credit support programs no later than December 31 of each even-numbered year. To enable it to prepare the required biennial report by December 31, the BRB is therefore requiring the data for the report to be filed by the state agency or political subdivision no later than September 15 of each even-numbered year covering the immediately preceding two fiscal year periods ending August 31.

TWDB's Comments on §181.11(b)(9)

The TWDB comments that §181.11(b)(9) requires each report prepared by a state agency to include a reasonable estimate of the costs of default associated with the program, computed in accordance with private-sector accounting standards for credit or other losses, and that the words "default" and "private-sector accounting standard," are undefined terms in 34 TAC, Chapter 181; in statute enacted by HB 1038; and in the proposed rule. In addition, the TWDB notes that certain affected state agencies may have a statute-derived definition of "default," but that the TWDB does not. The TWDB states that default, or an event of default, is a term that varies from one set of financial documents to another and may not be consistent from even one state agency to another, and that events of default are thusly definitive events, typically defined in financial documents pertaining to and related contracts on a transaction-by-transaction basis.

The TWDB comments that for state agencies to comply with the proposed rule, "default" should be defined based on the types of financial assistance programs administered by a state agency.

The TWDB proposes to clarify the rule, commenting that for those agencies with state lending programs that utilize "state money" (which TWDB asserts is limited to debt service or direct lending funded by state appropriations), "default" should be defined as an unresolved failure to receive repayments of principal and interest owed on an obligation entered pursuant to an applicable lending program. The TWDB argues that this definition of "default" is the most concordant reading of compliance with the rest of the proposed rule, specifically paragraph (13) of subsection (b), and that it takes into consideration the effect and impact of all of the words used in statute and rule e.g., "state money," "lending program," and "default" and results in a plain reading interaction between those terms.

In the alternative, the TWDB comments that for those state agencies with financial assistance programs supported by general obligation (GO) or revenue bonds (and funded with "local funds"), the term "default" should be defined to follow the "material events" standard used by EMMA (the Electronic Municipal Market Access website). The TWDB argues that this will ensure that Legislators and bond buyers (two expressly enumerated stakeholders of the Act) will receive the same reporting information from state agencies. However, the TWDB strongly comments that "local funds" are clearly not within the scope of the Act, and that the Act strongly is focused on "state money," which local funds are not.

Lastly, the TWDB comments that those agencies should be allowed to use their own statutory or administrative definitions of "default," if they have one.

Additionally:

The TWDB comments that the proposed rule does not provide a definition of the "private-sector accounting standard" that state agencies are required to use. TWDB comments state agencies are not private sector financial institutions. The TWDB argues that the TWDB and state agencies should use the same accounting standard that the state itself uses. The TWDB comments that the proposed rule should define "private-sector accounting standard" as "generally accepted accounting principles" so that state agencies have one set of recognizable and easily obtainable accounting standards to use when forming initial reports.

BRB's Response

TWDB's Comments regarding §181.11(b)(10)

Section 181.11(b)(10) requires each report prepared by a state agency to include a current default rate of the lending program. The TWDB comments that "default rate" is undefined in 34 Texas Administrative Code Chapter 181 and in the proposed rule. In addition, the TWDB comments that the requirement to calculate a "default rate" does not appear to be required by HB 1038 and further comments that for state agencies to comply with the proposed rule, a methodology for calculating a "default rate" should be proposed with the proposed rule.

TWDB comments that it is unclear how requiring this information from state agencies relates to information expressly listed as a requirement of HB 1038 or other statutory authority relied upon for the proposed rulemaking. The TWDB asks the BRB to clarify how state agencies are required to comply with the provisions of this rule.

The TWDB asks the BRB to clarify the rule to provide a definition of "default rate" as used in the proposed rule.

The TWDB asks the BRB to clarify the rule to provide a methodology for calculating a "default rate" as contemplated by the rule.

The TWDB further comments that providing a definition of "default rate" and an appropriate methodology to calculate that default rate with a required numerator and denominator will allow state agencies to provide consistent reporting information to the Board.

The TWDB additionally comments that, notwithstanding the foregoing, the TWDB is broadly permitted by law to hold closed meetings to consider and discuss financial matters related to the investment or potential investment of the Board's funds, citing to §6.0601, Texas Water Code. The TWDB comments that it is imperative that the TWDB follow federal securities laws when making public statements, such as in the report required by the proposed rule, as evidenced by the Legislature granting the TWDB the specific authority to discuss financial matters in closed meetings to avoid violating federal securities law. The TWDB argues that publicly making statements about the current default rate of the lending program falls into the realm of said financial matters related to the investments or potential investments of the TWDB's lending programs. The TWDB additionally comments that it may not be able to comply with this provision of the rule as proposed to avoid violating federal securities laws.

BRB's Response

The BRB disagrees and declines to make any changes based on these comments. Consistent with the fiscal transparency requirements of HB 1038, the BRB's intent is to collect data on state lending programs that consist of monies that are or were in the custody or control of a state agency or subject to the direction of a state agency and that are loaned or otherwise provided to a public or private entity with the expectation of repayment. HB 1038 requires, for each lending program or credit support program, a reasonable estimate of the costs of default associated with the program, computed in accordance with private sector accounting standards for credit or other losses. The entity should identify the standard(s) used to complete the report, whether it be generally accepted accounting principles or other private-sector accounting standard, as §181.11 (b)(9) of the rule requires that the report include all assumptions, factors, formulas, and analysis used to calculate the cost of default. The current default rate of each lending program is requested in §181.11(b)(10) to accompany the cost of default requirement stated in §181.11(b)(9). The requested "current default rate" in subsection (b)(10) is relevant because such information is necessary to enable the board to provide a "reasonable estimate" of the costs of default in its report, as required by §1231.064(b)(3)(C) of the Government Code. Moreover, if a public or private entity defaults on the loan it receives from state money, such information is also relevant and necessary for the BRB to prepare the report required by §1231.064.

TWDB's Comments regarding §181.11(b)(11) and (b)(13)

Section 181.11(b)(11) requires each report prepared by a state agency to include the highest default rate experienced in the lending program. The TWDB comments that HB 1038 does not appear to require state agencies to report a "highest default rate" in a lending program as proposed by the rule.

The TWDB states that it is unclear how requiring this information from state agencies relates to information expressly listed as a requirement of HB 1038 or other statutory authority relied upon for the rulemaking. The TWDB asks the BRB to please clarify how state agencies are required to comply with the provisions of the rule.

As previously stated, the TWDB comments that state agencies need a definition for "default," and "default rate," to provide accurate reporting of information required by the rule. The TWDB re-submits its proposed definition of "default," and requests a definition of "default rate."

The TWDB further comments that subsequent subsection (b)(13) seems to indicate that an event of default with respect to the lending of "state money" is limited to the unresolved failure to repay principal and interest repayments.

The TWDB states that it would appreciate any clarification on complying with subsection (b)(11) that the Board could provide that will allow the TWDB to report accurate, non-speculative information to the Legislators and bond buyers.

BRB's Response

The BRB disagrees and declines to make any changes based on these comments. BRB's intent is to collect data on state lending programs that consist of monies that are or were in the custody or control of a state agency or subject to the direction of a state agency and that are loaned or otherwise provided to a public or private entity with the expectation of repayment. HB 1038 requires, for each lending program or credit support program, a reasonable estimate of the costs of default associated with the program, computed in accordance with private sector accounting standards for credit or other losses. The entity should identify the standard(s) used to complete the report, whether it be generally accepted accounting principles or other private-sector accounting standard, as §181.11 (b)(9) of the rule requires that the report include all assumptions, factors, formulas, and analysis used to calculate the cost of default. The highest default rate experienced in each lending program is requested in §181.11(b)(11) to accompany the cost of default requirement stated in §181.11(b)(9). The request in the new rule for the highest default rate experienced in each program and the total amount of principal and interest payments in default in subsections (b)(11) and (b)(13) is relevant because such information is necessary to enable the board to provide a "reasonable estimate" of the costs of default in its report, as required by §1231.064(b)(3)(C) of the Government Code. Further, as it relates to the requirements of the rule, BRB's intent is to collect information on payment defaults in which a public or private entity borrower fails to repay any part of the principal or interest on the loan or obligation when due.

TWDB's Comments regarding §181.11(b)(12)

Section 181.11(b)(12) requires state agencies to report the total amount of principal and interest payments received from borrowers for each applicable lending program.

The TWDB asks if the information to be reported is limited to repayments of principal and interest received from loans of "state money"?

The TWDB re-submits its prior comments on this rulemaking requesting additional clarification from the Board about the applicable timeframe the TWDB would be required to consider in its report.

BRB's Response

The BRB disagrees and declines to make any changes based on these comments. Consistent with the fiscal transparency requirements of HB 1038, BRB's intent is to collect data on state lending programs that consist of monies that are or were in the custody or control of a state agency or subject to the direction of a state agency and that are loaned or otherwise provided to a public or private entity with the expectation of repayment. Nothing in §1231.064 of the Government Code suggests that the term "state money" should be narrowly construed. HB 1038 requires, for each lending program or credit support program, the total amount of state money lent through or debt supported by the program, as applicable. The total amount of principal and interest payments received from borrowers is requested in §181.11(b)(12) to accompany the data requested in §181.11(b)(6) (total amount of state money lent through the lending program). §1231.064(c) requires a state agency or political subdivision to provide to the board in the manner provided by board rule any information necessary for the board to prepare the report required by §1231.064. The information requested in subsection (b)(12) is necessary to enable the board to prepare its legislatively mandated report. Regarding the reporting timeframe, §1231.064 requires the BRB to report on state lending and credit support programs no later than December 31 of each even-numbered year. To enable it to prepare the required biennial report by December 31, the BRB is therefore requiring the data for the report to be filed by the state agency or political subdivision no later than September 15 of each even-numbered year covering the immediately preceding two fiscal year periods ending August 31.

TWDB's Comments regarding §181.11(b)(13)

Regarding the requirement in §181.11(b)(13) to report the total amount of principal and interest payments in default, the TWDB re-submits its prior comments related to the need for a consistent definition of "default."

The TWDB asks if default is limited to the failure of a recipient of funds under a lending program to repay principal and interest?

The TWDB asks if default is limited to the failure of a recipient of funds under a lending program to repay principal and interest of only "state money"?

Additionally, the TWDB comments that regular reporting through EMMA applies to those events deemed to be "material." The TWDB offers that the Board could clarify that the information to be reported pursuant to proposed subsection (b)(13) would be similarly limited to material events, consistent with the standard of EMMA reporting.

BRB's Response

TWDB's Comments regarding §181.11(b)(14)

Section 181.11(b)(14) requires state agencies to report on the "[a]ssets, if any, pledged as collateral to secure existing loans".

The TWDB asks the BRB to clarify whether the Board means assets held by the lending program participant or assets pledged by the Board to support the debt it has issued?

The TWDB asks the BRB to clarify how this information should be presented and whether this information should be presented as the value of the assets or specific detail related to the nature of the assets?

If the Board means assets held by the lending program participant, the TWDB comments that some of the information requested is not updated from year-to-year on an entity-by- entity basis and any information submitted could result in inaccurate reporting.

The TWDB comments that the rule be revised to eliminate proposed subsection (b)(14).

BRB's Response

TWDB's Comments regarding §181.11(b)(15)

Section 181.11(b)(15) requires state agencies to report "for each of the items" in "paragraphs (6) through (14)" a "total amount broken down by each entity in the lending structure, if the public or private entity receiving funds also lends the money to another public entity or private entity."

The TWDB comments that applying subsection (b)(15) on an entity-by-entity basis for all of the paragraphs listed in the rule is unclear. The TWDB re-submits its comment that information for how some of the categories in subsections (b)(6) through (b)(14) is not updated, which may result in inaccurate reporting. As one example, the TWDB usually holds a deed of trust for real property owned by its water supply corporation borrowers and may receive an appraisal before making financing available, but the TWDB does not, as a matter of course, get a real property appraisal every other year while the loan is in repayment.

The TWDB comments that the rule be revised to eliminate proposed subsection (b)(15).

In the alternative and notwithstanding the forgoing, the TWDB comments that only the proposed paragraphs in the rule that are not expressly program specific should apply as follows:

In subsection (b)(6), the TWDB comments that state agencies would report a "total amount of state money lent" to each entity in a lending structure.

The TWDB asks the BRB to clarify that the rule requires state agencies to report the total amount of principal or par amount of state money lent to each entity in a lending structure.

The TWDB re-submits its comments about the definition of "state money."

In subsection (b)(8), the TWDB comments that state agencies would report a "total dollar amount of outstanding loans separated by" each entity.

The TWDB asks the BRB to clarify that the rule requires state agencies to report the sum of each loan owed by an entity on an individual basis.

If that is the case, the TWDB asks what is the substantive difference between subsections (b)(7) and (b)(8)?

In subsection (b)(9), the TWDB comments that state agencies would report a "reasonable estimate of the costs of default associated with the program..."

The TWDB asks the BRB to clarify that the rule requires state agencies to report a reasonable estimate of the costs of default for each individual loan held by an entity at the state agency level.

In other words, the TWDB asks whether the rule requires state agencies to report the agency's costs to cure a default experienced on an individual basis based on the amount of funds each lending program participant has received?

The TWDB re-submits its comments that it is broadly permitted by law to hold closed meetings to discuss financial matters related to the investment or potential investments of the TWDB's funds.

In subsection (b)(10), the rule requires state agencies to report the "current default rate of the program."

The TWDB asks the BRB to clarify that the rule requires state agencies to report the current default rate of an individual program participant.

The TWDB re-submits its prior comments regarding the undefined terms of "default" and "default rate."

The TWDB re-submits its prior comment that the requirement to calculate a "default rate" does not appear to be required by HB 1038.

The TWDB states that state agencies currently report unresolved defaults of the repayment of principal and interest through several channels, including EMMA or preliminary official statements. In addition, the TWDB re-submits its prior comments about its broad authority permitting it to discuss certain financial matters in a closed meeting, and potentially actionable as a violation of federal securities laws, if the rule requires state agencies to publicly make statements through an analysis of the potentiality of a program participant defaulting.

In subsection (b)(11), the rule requires state agencies to report the "highest default rate experienced in the program."

The TWDB asks the BRB to clarify that the rule requires state agencies to report the historical "highest default rate" of an individual program participant.

The TWDB asks the BRB to clarify how subsection (b)(10) is distinguishable from subsection (b)(11). A "current default rate," appears to be identical to a "highest default rate" from a plain reading of the proposed rule. The TWDB asks the BRB to define the difference for state agencies.

The TWDB re-submits its prior comment that HB 1038 does not appear to require state agencies to report a "highest default rate" in a lending program as proposed by the rule.

In subsection (b)(12), the rule requires state agencies to report the "[t]otal amount of principal and interest payments received from borrowers."

The TWDB asks the BRB to clarify how subsection (b)(12) is distinguishable from subsections (b)(7) and (b)(8).

The TWDB re-submits its prior comments on whether the information to be reported limited on an individual program participant basis is repayments of principal and interest received from loans of "state money."

In subsection (b)(13), the rule requires state agencies to report the "[t]otal amount of principal and interest payments in default."

The TWDB re-submits its prior comments related to the definition of "default" and offers that the Board could clarify that the information to be reported pursuant to this proposed paragraph would be limited to material events.

In subsection (b)(14), the rule requires state agencies to report the assets, if any, pledged as collateral to secure existing loans on an individual program participant basis.

The TWDB re-submits its prior comments on this provision of the proposed rule.

BRB's Response

The BRB disagrees and declines to make any changes based on these comments. BRB's intent is to collect data on state lending programs that consist of monies that are or were in the custody or control of a state agency or subject to the direction of a state agency and that are loaned or otherwise provided to a public or private entity with the expectation of repayment. HB 1038 requires, for each lending program or credit support program, the total amount of state money lent through or debt supported by the program, as applicable. Section 181.11(b)(15) requests the items described in paragraphs (6) through (14) be broken down for each entity in the lending structure if the public or private entity receiving funds also lends the money to another public entity or private entity. This section also requests the total amounts for each entity. BRB's intent is to collect data on state lending programs to determine if various lending arrangements exist. If a public or private entity receiving state money is also lending the same funds it received to another public or private entity, this information is necessary for the BRB to determine the final disposition of state money lent. This requirement is consistent with the fiscal transparency objectives of HB 1038. Regarding TWDB's renewed comments to subsections (b)(6), (8), (9), (10), (11), (12), (13), and (14), please see BRB's response to the comments to those subsections, above.

Statutory Authority

The new rule is adopted under Texas Government Code §1231.022(1), which authorizes the board to adopt rules relating to reporting requirements, and §1231.064(c), which provides that a state agency or political subdivision of this state shall provide to the board in the manner provided by board rule any information necessary for the board to prepare the biennial report on state lending and credit support programs.

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 January 18, 2024.

TRD-202400197

Rob Latsha

Executive Director

Texas Bond Review Board

Effective date: February 7, 2024

Proposal publication date: August 18, 2023

For further information, please call: (512) 463-1741