(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.
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