HomeMy WebLinkAbout2021-049 Legislative Update - HB 1869 ImpactsDate: July 9, 2021 Report No. 2021-049
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT: State Legislative Update – HB 1869
BACKGROUND:
HB 1869 modifies the definition of “debt” for purposes of the Interest and Sinking (I&S) rate. As
a reminder, the tax rate is made up of the Maintenance and Operations (M&O) tax rate and the
I&S, tax rate (which is used to fund debt service). The bill would make it more difficult for cities
to issue certain Certificates of Obligation (Cos) and other forms of non-voted debt secured by ad
valorem taxes by requiring the property tax revenues pledged to the non-voted debt to be included
as an M&O expense subject to the property tax cap formula under SB 2, rather than as a debt
expense which is excluded from the formula. Though, exceptions in the legislation significantly
limit potential impacts.
DISCUSSION:
This bill went through many iterations and amendments over its course of becoming legislation. It
passed in a negotiated form that ultimately modifies the definition of “debt” for the purposes of
the debt service property tax rate calculation to include only debt that meets certain clearly defined
requirements. In summary, the final version of HB 1869 doesn’t require self-supporting debt,
utility systems, streets, facility maintenance, Technology Services (IT), and vehicles be supported
by the M&O portion of the tax rate. It’s important to note that debt issuances prior to September 1,
2021 are grandfathered in and are not subject to the new requirements. Below is a detailed list of
debt categories not required to be funded by the M&O portion of the tax rate:
(1) has been approved at an election;
(2) self-supporting debt;
(3) evidences a loan under a state or federal financial assistance program;
(4) is issued for “designated infrastructure”, which means infrastructure, including a facility,
equipment, rights-of-way, or land, for the following purposes:
(a) streets, roads, highways, bridges, sidewalks, parks, landfills, parking structures, or
airports;
(b) telecommunications, wireless communications, information technology systems,
applications, hardware, or software;
(c) cybersecurity;
(d) as part of any utility system, water supply project, water plant, wastewater plant,
water and wastewater distribution or conveyance facility, wharf, dock, or flood control and
drainage project;
(e) police stations, fire stations, or other public safety facilities, jails, juvenile detention
facilities, or judicial facilities, and any facilities that are physically attached to these facilities;
(f) as part of any school district; or
(g) as part of any hospital district that includes a teaching hospital;
(5) is a refunding bond;
(6) is issued in response to an emergency related to a hurricane or tropical storm;
(7) is issued for renovating, improving, or equipping existing buildings or facilities;
Date: July 9, 2021 Report No. 2021-049
(8) is issued for vehicles or equipment; or
(9) is issued for a tax increment reinvestment zone or a transportation reinvestment zone.
This bill takes effect on September 1, 2021, and will not apply to this fiscal year’s debt issuance.
CONCLUSION:
Staff will discuss any impacts of this bill through the annual budget process or when debt purchases
are considered by the Council, as necessary.
STAFF CONTACT:
Ryan Adams
Customer Service & Public Affairs
Ryan.Adams@cityofdenton.com
Rachel Balthrop Mendoza
City Manager’s Office
Rachel.Mendoza@cityofdenton.com
REQUESTOR:
Staff Initiated