(a) Applicability. This section contains closing requirements
for a water supply corporation or an eligible private Applicant or
other Applicant that is not authorized to issue bonds or other securities.
This section applies to financial assistance for either pre-design
or construction funding.
(b) Use of consultants. The executive administrator
may recommend, but not require, that the entity engage the services
of a financial advisor or other consultant to ensure the appropriateness
of the proposed debt and to provide advice to the entity.
(c) Documents required for closing. The following documents
and conditions are required for closing financial assistance secured
by promissory notes and deeds of trust:
(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) an executed promissory note and loan agreement
in a form approved by the executive administrator;
(3) a Deed of Trust and Security Agreement that must
contain a first mortgage lien evidenced by a deed of trust on all
the real and personal property of the water system provided; however,
this is not needed if the financial assistance consists of 100 percent
principal forgiveness;
(4) an owner's title insurance policy for the benefit
of the Board covering all the real property identified in the deed
of trust provided; however, this is not needed if the financial assistance
consists of 100 percent principal forgiveness;
(5) evidence that the rates on which the Applicant
intends to rely for repayment of the financial assistance have received
final and binding approval from the Utility Commission and, for Applicants
required to utilize a surcharge account, evidence that the approval
of the Utility Commission was conditioned on the creation of a surcharge
account;
(6) a certified copy of the resolution adopted by the
governing body authorizing the indebtedness and a certificate from
the secretary of the governing body attesting to adoption of the resolution
in accordance with the by-laws or rules of the governing body and
in compliance with the Open Meetings Act, if applicable;
(7) a legal opinion from Applicant's counsel that provides:
(A) that the entity has the legal authority to enter
into the loan agreement and to execute a promissory note;
(B) that the entity is not in breach or default of
any state or federal order, judgment, decree, or other instrument
which would have a material effect on the loan transaction;
(C) that there is no pending suit, action, proceeding,
or investigation by a public entity that would materially adversely
affect the enforceability or validity of the required financial assistance
documents;
(D) evidence that the entity is in good standing with
the Texas Office of the Secretary of State; and
(E) a statement addressing any other issues deemed
relevant by the executive administrator.
(8) evidence that an approved water conservation plan
has been adopted and will be implemented through the life of the project;
(9) evidence of the Applicant's agreement to comply
with special environmental conditions contained in the Board's environmental
finding;
(10) evidence that the Applicant has established a
dedicated source of revenue for repayment of the financial assistance;
(11) evidence that the Applicant has adopted final
water rates and charges that are not subject to appeal to the Utility
Commission;
(12) copies of executed service and revenue contracts;
(13) when any portion of the financial assistance is
to be held in an escrow account, the Applicant shall execute an escrow
agreement, approved as to form and substance by the executive administrator;
and
(14) any other documents relevant to the particular
transaction.
(d) if financial assistance proceeds are to be deposited
into an escrow account at the time of closing an escrow account separate
from all other accounts and funds must be created, as follows:
(1) the account must be maintained by an escrow agent
as defined in §375.1 of this title (relating to Definitions);
(2) funds cannot be released from the escrow account
without prior written approval of the executive administrator, who
shall issue written authorization for the release of funds;
(3) escrow account statements must be provided on a
monthly basis to the executive administrator upon request;
(4) 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
(5) the escrow account must be adequately collateralized
in a manner sufficient to protect the Board's interest in the project
and that complies with the Public Funds Collateral Act, Texas Government
Code Chapter 2257.
(e) Construction account. A construction account must
be created and must be kept separate from all other accounts and funds
of the Applicant.
(f) 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 for 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.
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Source Note: The provisions of this §375.92 adopted to be effective July 4, 2016, 41 TexReg 4853; amended to be effective March 18, 2019, 44 TexReg 1445; amended to be effective June 10, 2020, 45 TexReg 3869 |