| (a) Applicability and required documents. This section
applies to closings for financial assistance with entities issuing
bonds or other authorized securities. The following documents and
conditions are required for closing financial assistance secured by
bonds or other authorized securities:
(1) evidence that applicable requirements and regulations
of all identified local, state, and federal agencies having jurisdiction
have been met, including but not limited to permits and authorizations;
(2) a certified copy of the ordinance or resolution
adopted by the governing body authorizing the issuance of debt to
be sold to the Board that is acceptable to the executive administrator.
The ordinance or resolution must have sections providing as follows:
(A) if financial assistance proceeds are to be deposited
into an escrow account at the time of closing then an escrow account
separate from all other accounts and funds must be created, as follows:
(i) the account must be maintained by an escrow agent
as defined in §371.1 of this title (relating to Definitions);
(ii) funds cannot be released from the escrow account
without prior written approval from the executive administrator, who
shall issue written authorization for the release of funds;
(iii) escrow account statements must be provided to
the executive administrator upon request;
(iv) the investment of any financial assistance proceeds
deposited into an approved escrow account must be handled in a manner
that complies with the Public Funds Investment Act, Texas Government
Code Chapter 2256; and
(v) the escrow account must be adequately collateralized
in a manner sufficient to protect the Board's interest in the project
and in compliance with the Public Funds Collateral Act, Texas Government
Code Chapter 2257.
(B) the Applicant shall fix and maintain rates in accordance
with state law, and collect charges to provide adequate operation
and maintenance of the project;
(C) a construction account must be created and must
be kept separate from all other accounts and funds of the Applicant;
(D) bonds must be closed in book-entry-only form;
(E) the use of a paying agent/registrar that is a Depository
Trust Company (DTC) participant is required;
(F) the payment of all DTC closing fees assessed by
the Board's custodian bank must be directed to the Board's custodian
bank by the Applicant;
(G) the Applicant must provide evidence that one fully
registered bond has been sent to the DTC or to the Applicant's paying
agent/registrar prior to closing;
(H) all payments, including the origination fee, must
be made to the Board via wire transfer at no cost to the Board;
(I) insurance coverage must be obtained and maintained
in an amount sufficient to protect the Board's interest in the project;
(J) the Applicant, or an obligated person for whom
financial or operating data is presented, either individually or in
combination with other issuers of the Applicant's obligations or obligated
persons, must undertake in a written agreement or contract to comply
with requirements for continuing disclosure as required by Securities
and Exchange Commission (SEC) rule 15c2-12 and determined as if the
Board were a Participating Underwriter within the meaning of such
rule. Such continuing disclosure undertaking is for the benefit of
the Board and the beneficial owner of the political subdivision's
obligations if the Board sells or otherwise transfers such obligations,
and the beneficial owners of the Board's bonds if the political subdivision
is an obligated person with respect to such bonds under rule 15c2-12.
The ordinance or resolution required in this paragraph of this subsection,
above, must also contain any other requirements of the SEC or the
IRS relating to arbitrage, private activity bonds, or other relevant
requirements regarding the securities held by the Board;
(K) current, accurate, and complete records and accounts
must be maintained in accordance with generally accepted accounting
principles to demonstrate compliance with requirements in the financial
assistance documents;
(L) the Applicant must annually submit an audit prepared
by a certified public accountant in accordance with generally accepted
auditing standards;
(M) the Applicant must submit a final accounting within
60 days of project completion;
(N) the Applicant must document the adoption and implementation
of an approved water conservation plan for the duration of the financial
assistance;
(O) the Applicant must comply with special environmental
conditions specified in the Board's environmental finding as well
as with any applicable Board laws or rules relating to use of the
financial assistance;
(P) the Applicant must establish a dedicated source
of revenue for repayment of the financial assistance;
(Q) interest payments must commence no later than one
year after the date of closing;
(R) annual principal payments must commence no later
than 18 months after completion of project construction; and
(S) any other recitals mandated by the executive administrator.
(3) unqualified approving opinions of the attorney
general of Texas and, if bonds or other authorized securities are
issued, a certification from the comptroller of public accounts that
such debt has been registered in that office;
(4) an unqualified approving opinion by a recognized
bond attorney;
(5) assurances that the Applicant will comply with
any special conditions specified by the Board's environmental finding;
(6) if the project will result in the development of
surface water or groundwater resources, the Applicant must provide
information showing that it has the legal right to use the water that
the project will provide. Upon receipt of the information, the executive
administrator will prepare a finding that the Applicant has a reasonable
expectation of obtaining the water rights to the water that the project
will provide prior to any release of funds for planning, land acquisition,
and design activities. Prior to the release of funds for construction,
a written water rights certification will be prepared by the executive
administrator. The certification will be based on the Applicant's
information showing the necessary water rights have been acquired.
(7) evidence that the Applicant has the technical,
managerial, and financial capacity to maintain the system unless the
use of the funds will be to ensure that the system has the technical,
managerial, and financial capacity to comply with the national primary
or applicable state drinking water regulations over the long term;
(8) a Private Placement Memorandum containing a detailed
description of the issuance of the debt to be sold to the Board. The
Applicant must submit a draft Private Placement Memorandum at least
30 days before closing of the financial assistance; a final electronic
version of the Memorandum must be submitted no later than seven days
before closing,
(9) when any portion of the financial assistance is
to be held in an escrow account, the Applicant must execute an escrow
agreement approved as to form and substance by the executive administrator;
(10) if applicable, a home rule municipality pursuant
to Texas Local Government Code Chapter 104 must execute a Certification
of Trust as defined in §371.1 of this title; and
(11) any additional information specified in writing
by the executive administrator.
(b) Certified bond transcript. Within sixty (60) days
of closing the financial assistance, the Applicant shall submit a
transcript of proceedings relating to the debt purchased by the Board
which must contain those instruments normally furnished by a purchaser
of debt.
(c) Phased closing. The executive administrator may
determine that closing the financial assistance in phases is appropriate
when:
(1) the project has distinct phases for planning, design,
acquisition, and construction, or if any one of the phases can be
logically and practically divided into discrete sections;
(2) the project utilizes the design-build or construction
manager-at-risk process or any process wherein there is simultaneous
design and construction;
(3) there are limitations on the availability of funds;
(4) additional oversight is required due to the financial
condition of the Applicant or the complexity of the project; or
(5) due to any unique facts arising from the particular
transaction.
(d) Financial assistance consisting of 100 percent
principal forgiveness. Notwithstanding subsection (a) of this section,
the following documents are required for closing financial assistance
consisting of 100 percent principal forgiveness:
Cont'd... |
