SECTION 180.2. Industrial Revenue Bond Program

(a) General.

(1) Filing of applications. Applications shall be filed by the applicant with the Finance Division of the Office. Each application shall be as complete as practicable, and not requiring addendum in order to be approved. To insure adequate time for review by the Office staff, an application should be filed with the Office at least 14 days prior to the Office's approval.

(2) Filing fee. Each application for approval shall be accompanied by a nonrefundable filing fee in the amount equal to one-tenth of 1.0% of the face amount of the bond issue or $25,000, whichever is less, but in no event less than $500. This fee is payable to the department upon the initial filing of such application.

(3) Definitions. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(A) Act--The Development Corporation Act, Texas Local Government Code, Title 12, as amended.

(B) Application--The application to the department, the contents of which are outlined in subsection (b) of this section.

(C) Approval--The approval of a lease, sale, or loan agreement or bonds issued by a corporation or any other document submitted as a part of the application to the department.

(D) Board of directors--The board of directors of any corporation organized pursuant to the Act.

(E) Bonds--Bonds, notes, and other evidences of indebtedness.

(F) City--Any municipality of the state incorporated under the provisions of:

(i) any general or special law; or

(ii) the home-rule amendment to the constitution.

(G) Corporation--An industrial development corporation organized pursuant to the Act, §4(a).

(H) Cost--The cost of acquisition, construction, reconstruction, improvement, and expansion, including the cost of the acquisition of all land, rights-of-way, property rights, easements, and interests, the cost of all machinery and equipment, financing charges, inventory, raw materials and other supplies, research and development costs, interest prior to and during construction and for one year after completion of construction, whether or not capitalized, necessary reserve funds, cost of estimates and of engineering and legal services, plans, specifications, surveys, estimates of cost and of revenue, other expenses necessary or incident to determining the feasibility and practicability of acquiring, constructing, reconstructing, improving, and expanding any such project, administrative expense and such other expense as may be necessary or incident to the acquisition, construction, reconstruction, improvement, and expansion thereof, the placing of the same in operation, and the financing or refinancing of any such project, including the refunding of any outstanding obligations, mortgages, or advances issued, made or given by any person for any of the cost mentioned in this definition.

(I) County--A county of this state.

(J) Development area--Any area or areas of a city that the city finds and determines, after a public hearing, should be developed in order to meet the development objectives of the city.

(K) District--A conservation and reclamation district established under authority of Texas Constitution, Article XVI, §59.

(L) Executive director--The executive director of the Office.

(M) Federally assisted new community--Those federally assisted areas which have received or will receive assistance in the form of loan guarantees under the National Housing Act, Title X, and a portion of the federally assisted area has received grants under the 42 U.S.C.A. §5307.

(N) Governing body--The board, council, commission, commissioners' court, or legislative body of the unit.

(O) Governmental agency--

(i) the United States or any political subdivision, agency, territory, or insular possession thereof;

(ii) the District of Columbia; or

(iii) the State of Texas or any other state of the United States, or any unit, county, city, municipal corporation, district, political subdivision, or agency of the State of Texas, or of any other state of the United States.

(P) Guarantor--

(i) any individual, partnership, corporation, or any other private entity that is a party to a contract with the user, if such entity is contractually obligated to make payments to or on behalf of the user in amounts at least equal to the payments required to be made by the user under its lease, sale, or loan agreement with the corporation, provided the user has assigned to the corporation its contractual rights to receive such payments in order to secure said user's obligations under the lease, sale, or loan agreement;

(ii) any individual, partnership, corporation, or any other private entity directly guaranteeing the user's payments in the amounts required under the lease, sale, or loan agreements;

(iii) any individual, partnership, corporation, or any other private entity directly guaranteeing payment of bonds issued to finance the project.

(Q) Office--The Economic Development and Tourism Office in the Office of the Governor.

(R) Population--The number of inhabitants within a geographical area as found and determined by the most recent federal decennial census.

(S) Project--The project as defined in the Act.

(T) Resolution--The resolution, order, ordinance, or other official action by the governing body of a unit.

(U) Rules--The rules of the Office.

(V) Unit--A city, county, or district which may create and utilize a corporation.

(W) User--An individual, partnership, corporation, or any other private entity, whether organized for profit or not for profit, or a city, county district, or any other political subdivision or public entity of the state.

(4) Fee schedules and bond procedures. Each corporation shall file with the Office a schedule of all fees charged by, collected by, or otherwise involved with the corporation, directly or indirectly, in the application for approval to issue industrial revenue bonds. In addition, a complete set of the corporation's written procedures for application of industrial revenue bond projects shall be submitted prior to the Office review of industrial revenue bond applications involving such corporations. Such written procedures and fee schedules shall be updated upon amendment, such update to be filed with the Office within 30 days from the effective date of such amendment. In the event that the procedures and fee schedule already on file with the Office are still in full force and effect at the time an application is submitted to the Office, a letter from the issuer stating such shall be included in the application. All bond procedures filed with the Office must contain the name, street address, mailing address, and telephone number of the corporation's authorized agent or representative.

(b) Application contents.

(1) Generally.

(A) The project description prepared by the user shall include:

(i) a brief description of the project, its location, and intended use;

(ii) estimates of the number and type of jobs to be created as a result of the project and the estimated annual payroll of employees working at the project. If there is a probability that loss of existing jobs would occur within the unit as a result of the disapproval of the lease, sale, or loan agreement, estimate the number and type of existing jobs which would be lost and the estimated annual payroll of employees currently holding such jobs;

(iii) a statement indicating who presently owns the project site describing any liens and encumbrances, and representing that all necessary interest in real estate required for the construction, installation, and operation of the project has been or can be acquired; that all necessary access roads, utilities, and drainage facilities have been or can be provided; and that all approvals, permits, consents, or authorizations of any governmental or public agency, authority, or person required in connection with the construction, installation, and operation of the project have been or can be obtained;

(iv) a detailed showing of the estimated costs of the project, together with a list of the sources from which payment will be made, which statement shall show actual, or if not possible, estimated, cost of items as follows:

(I) the acquisition, construction, reconstruction, improvement, and expansion, including the cost of the acquisition of all land, rights-of-way, property rights, and easements; if none, so state;

(II) machinery and equipment; if none, so state;

(III) building costs; if none, so state;

(IV) financing charges, specifically designated fees and expenses of original purchasers, issuer, issuer's counsel, underwriters, financial advisors, placement agents, bond counsel, other legal counsel, bond delivery and printing expenses, the cost of preparing and processing the application, engineering fees, plans, specifications, surveys, and all other fees and/or expenses in connection with the financing;

(V) interest prior to and during construction and for one year after completion of construction, if applicable; otherwise, state inapplicable;

(VI) any reserve funds; if none, so state;

(VII) all other expenses, such as the costs of financing or refinancing of any project, including the refunding of any outstanding obligations, mortgages, or advances issued, made, or given by any person for any of the aforementioned costs; if none, so state;

(VIII) contingencies; if none, so state;

(IX) inventory, raw materials, and other supplies;

(X) research and development costs;

(v) the approximate date of commencement and completion of construction of the project.

(B) The list of participants shall include the name, street, mailing address, and telephone number of each of the following:

(i) the user, the user's representative, the user's counsel, counsel's representative, and the user's corporation's counsel, accounting firm and accounting firm's representative;

(ii) the corporation, the corporation's representative, and corporation's counsel, counsel's representative;

(iii) the original purchaser, the purchaser's representative, the purchaser's counsel, and counsel's representative;

(iv) the guarantor, the guarantor's representative, guarantor's counsel, counsel's representative, the guarantor's accounting firm, and accounting firm's representative, or a statement that there is no guarantor;

(v) the financial advisor or placement agent, and such advisor's or agent's representative, counsel, and counsel's representative or a statement that there is no financial advisor or placement agent; no financial advisor or placement agent;

(vi) the underwriter, the underwriter's representative counsel, and counsel's representative or a statement that there is no underwriter;

(vii) the trustee or depository, and the trustee's or depository's representative, counsel, and counsel's representative or a statement that there is no trustee or depository;

(viii) the paying agent, such agent's representative, counsel, and counsel's representative, or a statement that there is no paying agent;

(ix) the letter of credit bank, the letter of credit bank's representative, or a statement that there is no letter of credit bank; and

(x) bond counsel and bond counsel's representative.

(2) The corporation.

(A) The description of corporation shall include:

(i) the name, street address, and mailing address of the members of the board of directors of the corporation;

(ii) a description of any other bonds which have been issued by the corporation to finance a project and a statement as to whether there has been a default in the payment of principal or of premium, if any, or interest on any such bonds.

(B) The resolution of the corporation shall be certified by the board of directors and include a description of the purpose of the bonds, set out the specific amount of bonds to be issued, and make the appropriate findings required by the Act, §2(10).

(C) The opinion of corporation counsel shall be submitted on counsel's letterhead in substantially the form to be delivered at closing, as to the incorporation and existence of the corporation and the authority, the actions and other proceedings of the corporation in connection with the project and the bonds, and further stating that the lease, sale, or loan agreement constitutes a legal and binding obligation of the corporation.

(3) The unit. A certified copy of the resolution of the governing body of the unit satisfying the requirements of the Act, §25(f), and authorizing the specific bond amount and purpose of the bonds shall be included.

(4) The user.

(A) The description of the user shall include:

(i) the name and address of the user;

(ii) the state or other jurisdiction of incorporation or organization, the form of organization, and a complete description of the organizational structure, including parent, subsidiaries, and affiliates;

(iii) a statement of the history and type of business engaged in by the user;

(iv) the names and ages of executive or managing officers and directors of the user, an account of the business experience of each such officer or director, including his principal occupation and employment and the name and principal business of the corporation or other organization in which such occupation and employment was carried on;

(v) a statement of the user's debt security rating or listing by any published rating agency, or, if none, such fact shall be noted;

(vi) financial statements as available for the previous three years;

(vii) in lieu of the information required by clauses (ii) - (vi) of this subparagraph, the user's Form 10-K for each of the three preceding fiscal years, together with the user's most recent Form 10-Q.

(B) Certificate of user. A certificate signed by an officer of the user to the same effect as the finding required to be made by the board of directors of the corporation under paragraph (2)(B) of this subsection.

(C) The proposed opinion of user counsel shall be submitted on counsel's letterhead in substantially the form to be delivered at closing, as to the creation and existence of the user and the authority, actions and other proceedings of the user in connection with the project and the bonds, and stating that the lease, sale, or loan agreement constitutes a legal and binding obligation of the user. User counsel must be licensed in the State of Texas or a supplemental opinion must be provided by Texas counsel.

(5) Guarantor.

(A) The description of guarantor shall provide the same information required of the user in paragraph (4)(A) of this subsection.

(B) The opinion of guarantor counsel shall be on counsel's letterhead to include an opinion of counsel for each guarantor, in substantially the form to be delivered at closing, as to the creation and existence of the guarantor and the authority, the actions and other proceedings of the guarantor in connection with the project and the bonds, and stating that the instrument of guarantee constitutes a legally binding obligation of the guarantor.

(6) The bonds.

(A) The description of the bonds shall include:

(i) no total amount of bonds to be issued;

(ii) a maturity schedule for the bonds;

(iii) the proposed date of closing and delivery of the bonds;

(iv) if the bonds have been rated by any published rating agency, or if application for such rating has been made, such fact shall be noted with the ratings assigned. A letter must be submitted regarding rating or application for rating;

(v) the security for the bonds.

(B) Investment letters shall include investment letters from the original purchasers of the bonds, or the purchasers of the bonds from the underwriter, in the form to be delivered at closing, substantially to the effect that said purchaser:

(i) is a financial institution or other accredited investor as defined in the Securities Act of 1933, Regulation D, 17 Code Federal Regulations §230.501(a);

(ii) has been furnished with all necessary information that it desires in order to enable it to make an informed decision concerning investment in the bonds; and

(iii) intends to purchase the bonds for its own account (subject to certain rights to sell, pledge, transfer, convey, hypothecate, mortgage, or dispose of such bonds at some future date). The investment letter is not required if the letter regarding bonds in subparagraph (C) of this paragraph is provided; and

(iv) prior to the release of the Office's approval letter, investment letters must be signed by purchasers and include the following information:

(I) name of purchaser;

(II) signature of purchaser or authorized representative;

(III) typed name and title of purchaser or authorized representative; and

(IV) address and telephone number of purchaser;

(v) the investment letter is not required if the letter regarding bonds in subparagraph (C) of this paragraph is provided.

(C) The letter regarding the bonds shall include a letter from the underwriter, and/or a letter from the placement agent or financial adviser, submitted on letterhead, that the bonds are marketable; provided, that the following requirements are met:

(i) either the user or any guarantor has a current rating on any of its outstanding securities from Moody's Investors Service of Ba or higher or from Standard and Poor's Corporation of BB or higher; or

(ii) the bonds sought to be issued have received a rating from either Moody's or Standard and Poor's of at least Baa or BBB, respectively.

(D) The bond counsel opinion, included in the application, shall be submitted on counsel's letterhead in substantially the form to be delivered at closing as to the effect that the bonds have been duly issued and delivered by the corporation in compliance with the Act. Bond counsel must be licensed in the State of Texas or a supplemental opinion must be provided by Texas bond counsel.

(7) Agreements.

(A) Any agreements between the participants involved in the transaction, including, but not limited to, the loan lease, or sale agreement and the trust indenture, in which:

(i) the user and/or guarantor agrees to pay all project costs which are not or cannot be paid or reimbursed from the proceeds of bonds; and

(ii) the user and/or guarantor agrees at all times, to indemnify and hold harmless the corporation, Office against all losses, costs, damages, expenses, and liabilities of whatsoever nature (including, but not limited to, attorney's fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments) directly or indirectly resulting from, arising out of, or related to the issuance, offering, sale, delivery, or payment of the bonds, and interest thereon, or the design, construction, installation, operation, use, occupancy, maintenance, or ownership of the project;

(iii) written notification is provided to the Office by the trustee, depository, or lender as appropriate, in the event of a default in the timely payment of monies due in payment of the bonds or interest coupons or upon notification of the trustee by the Internal Revenue Service that the interest is, or may be, subject to federal income taxation;

(iv) a provision is included stating that no additional or refunding bonds will be issued or delivered without prior Office approval; and

(v) a provision is included stating that, by virtue of the project being financed under the Act, the user has not and will not maintain that it is entitled to an exemption from Texas sales or use taxes on personal property acquired in connection with the project.

(B) Copies of official statement, placement agent agreement, bond purchase agreement, letter of credit agreement, and instrument of guarantee, if any, shall be included as part of the application submitted to the Office.

(C) If applicable, public hearing information required by the Tax Reform Act of 1986, §147(f), shall be included.

(8) Project approval standards--generally.

(A) The proposed project will contribute to the economic growth or stability of the unit by:

(i) increasing or stabilizing employment opportunity;

(ii) significantly increasing or stabilizing the property tax base; and

(iii) promoting commerce within the unit and the state.

(B) The user has no present intention of disposing of or abandoning the proposed project.

(C) The user has no present intention of directing the proposed project to a use other than the purposes represented to the Office and, if appropriate, the city or county.

(D) If applicable, the user must certify and represent that no car, truck, mobile unit, or any vehicle of any kind whatsoever, which is financed in whole or in part by the proceeds of the bonds, will be away from the project site for more than 30 continuous calendar days and that all cars, trucks, mobile units, or vehicles of any kind whatsoever, financed in whole or in part by the proceeds of the bonds, will be rendered on the local tax rolls.

(9) Special rules for commercial projects in economically depressed counties. The Office will not approve the financing of projects which are to be used for commercial projects in counties except in conformity with this section and the project approval standards set forth in paragraph (8) of this subsection.

(A) To establish an eligible county, the commissioners' court of the county (the governing body) shall provide evidence satisfactory to the Office that:

(i) the county is a federally designated economically distressed county; and

(ii) the population of the county is less than 50,000 according to the last federal decennial census.

(B) The Office may, but shall not be required to suggest limitations as to the amount or type of projects to be financed for commercial purposes under the Act and this chapter within such county.

(C) If the governing body of the county shall conclude to request the Office to approve projects for commercial uses, it shall adopt a resolution citing the Act and this chapter, and further containing:

(i) a description or a map of the boundaries of the county, and if practicable, the location of any proposed project;

(ii) a description of the overall objectives of the county for redevelopment and recovery of the county, if any;

(iii) a finding and representation to the Office that the availability of financing of projects for commercial uses under the Act will contribute significantly to the alleviation of the economically depressing conditions found to exist in the county;

(iv) a description of the type of projects for commercial uses desired and authorized by the county to enhance its redevelopment efforts, together with a description of any exclusions or limitations by type or amount of commercial project uses which the county would consider detrimental to its efforts to redevelop the county; and

(v) based upon the county's best estimates at the time of adoption of the resolution, a description of proposed public improvements, if any, to be made within reasonable proximity to the proposed commercial project, the estimated commencement date of such public improvements, the approximate schedule for such improvements, and the sources of funds which the county will use for such purposes.

(D) Upon certification of the eligibility of the affected county as set forth in subparagraph (C) of this paragraph, the Office will approve projects for commercial uses in the county only after the applicant demonstrates that:

(i) the specific project conforms with any limitations specified in the resolution as provided in this section;

(ii) the governing body of the county has approved the project and made the determinations and findings required by this chapter; and

(iii) the specific project to be financed for commercial uses will significantly contribute to the fulfillment of the overall redevelopment objectives of the county, if any; and the project conforms to the project approval standards specified in paragraph (8) of this subsection.

(10) Refunding issues.

(A) A complete application shall be submitted to the Office for approval of a refunding issue, unless such bond issue does not exceed the outstanding amount of the refunded bond.

(B) If the refunding issue does not exceed the outstanding amount of the refunded bond, then the application to the Office shall contain the following:

(i) information outlined in paragraphs (1) - (6) of this subsection; and

(ii) pursuant to paragraph (7) of this subsection, the application shall also include the official statement and any supplemental agreements relating to the refunding issue, if any, and all others that have not been previously approved by the Office.

(C) The application for approval of a refunding issue shall reference, by Office docket number, the application originally approved by the Office.

(11) Miscellaneous information.

(A) Closing information. Each application shall contain the proposed time, date, and location for the closing of the transaction and delivery of the bonds.

(B) Proposed approval letter. Each application shall contain the proposed approval letter in the same form and content to which it is desired the Office give its approval.

(c) Final transcript of proceedings.

(1) Executed documents. If the Office gives approval to an application, upon delivery of the bonds described in the application, there shall be submitted to the Office a final transcript of proceedings, containing a copy of the application, and the following instruments.

(A) Certificate of issuer. A certificate signed by an officer of the issuer substantially to the effect that:

(i) as of the closing date there has been no material adverse change in the affairs of the issuer from that described in the application for approval to the Office or otherwise disclosed to and approved by the Office; and

(ii) the instruments provided to the Office pursuant to subsection (b)(2)(B) and (3) of this section, as executed and delivered by the respective parties, are substantially in the form previously approved by the Office.

(B) Certificate of user. A certificate signed by an officer of the user substantially to the effect that:

(i) as of the closing date there has been no material adverse change in the affairs of the user from that described in the application for approval to the Office or otherwise disclosed to and approved by the Office; and

(ii) the instruments provided to the Office pursuant to subsection (b)(2)(B) and (3) of this section, as executed and delivered by the respective parties, are substantially in the form previously approved by the Office.

(C) Certificate of guarantor. A certificate for each guarantor signed by an officer of the guarantor substantially to the effect that, as of the closing date, there has been no material adverse change in the affairs of the guarantor from that described by the application or otherwise disclosed to and approved in writing by the Office.

(D) Opinions of counsel. Executed opinions of counsel, in substantially the forms previously approved by the Office in accordance with subsection (b)(2)(C), (4)(C), (5)(B), and (6)(D) of this section and the opinion of the attorney general authorizing the issuance of the bonds.

(E) Investment letter. As appropriate, executed investment letters from the original purchasers of the bonds, or the purchasers of the bonds from the underwriter, in substantially the form previously approved by the Office in accordance with subsection (b)(6)(B) of this section, or if appropriate, subsection (b)(6)(C) of this section.

(F) Issuance and delivery notification. Within five days of issuance and delivery of bonds a certified letter signed by an officer of the issuer, addressed to the Office stating bonds are issued and delivered including the following information:

(i) time;

(ii) date; and

(iii) location.

(G) Other agreements. Executed copies of all agreements in substantially the same form as originally submitted in the application in compliance with subsection (b)(7) of this section.

(H) Additional information. The Office may require additional information at any time as a precondition to conditional or final approval, or otherwise, and the costs thereof shall be borne by the user.

(2) Filing of transcript of proceedings. The Office requires a complete transcript of all proceedings relating to the authorization, issuance, sale, and delivery of the bonds to be bound as a permanent record, spine labeled as to issue, amount and date, and be submitted to it within 45 days after the bond closing. This requirement is not a precondition to final approval by the Office; however, the Office will not review any additional applications submitted by the issuer until such complies with this requirement, unless an application is submitted within the 45 day time period. The binding shall be of such quality as will preserve the enclosures for the term of the bonds.

Source Note: The provisions of this §180.2 adopted to be effective October 13, 1981, 6 TexReg 3632; amended to be effective August 16, 1984, 9 TexReg 4178; amended to be effective October 1985; amended to be effective April 29, 1986, 11 TexReg 1823; amended to be effective February 19, 1988, 13 TexReg 605; amended to be effective March 23, 1990, 15 TexReg 1291; amended to be effective August 30, 1990, 15 TexReg 4694; amended to be effective September 29, 1999, 24 TexReg 8161; amended to be effective August 5, 2012, 37 TexReg 5730