SECTION 181.8. General Terms and Conditions of the Office's Financial Commitment

(a) Permissible use of financial commitment. The Office's financial commitment shall to be used to finance the cost of the project identified in the application in accordance with the Act and the Office's program guidelines.

(b) Eligibility. To be eligible to participate, a city must not have experienced a "Largest Four Year Sales Tax Decline" of greater than 10%.

(c) Minimum amount of loan. There is no minimum loan amount.

(d) Maximum amount of loan. No city with a rating of BBB+/Baa or better shall account for more than $6,000,000 of program loans outstanding at any one time. No city with a rating less than BBB+/Baa, or city with no rating shall account for more than $5,000,000 of program loans outstanding at any one time.

(e) Interest. The program loan shall bear an interest rate as provided by the program guidelines in effect from time to time.

(f) Maximum loan term. No program loan may be amortized for a period longer than 15 years.

(g) Security. All program loans must be secured by a first lien pledge of tax receipt proceeds sufficient, as of the loan closing date, to comply with a "Debt Service Coverage Ratio," based on loan term and the "Largest Fifteen Year Sales Tax Decline," as required under the program guidelines.

(h) Pledge of tax receipt proceeds. All program loans must be on a parity with or superior to any other debt obligations secured by the tax receipt proceeds and owing or incurred while any portion of the program loan is outstanding to insure that the Office shall have no less than an equal claim to all pledged tax receipt proceeds.

(i) Other parity debt. If parity debt exists or is incurred during the term of the program loan, the "Debt Service Coverage Ratio" based on total "Projected Debt Service" must exceed the ratios set forth under the Program guidelines by a factor of 0.1 as of both the closing date of the program loan and the closing date of any parity debts subsequently incurred.

(j) Cross-default. The program loan shall be cross-defaulted with all parity debt obligations and the Office must be notified in advance of the issuance of any parity debt obligations.

(k) Purpose of loan. The purpose of the program loan and the use of funds must comply with all applicable requirements of the Act and the Office Program guidelines. EDCs are permitted to use the proceeds of a program loan to fund the eligible cost of any eligible project as defined by the Act and the Office program guidelines.

(l) Program loan approval. The program loan approval shall be evidenced by a loan commitment letter issued by the Office to the applicant. The loan commitment requires formal acceptance and response by the applicant and the city within 45 days from the date of the loan commitment letter. All program loan agreements must be approved by the executive director, or his/her designee, before loan closing.

(m) Conditions precedent to loan closing. The following events shall be conditions precedent to the closing of the program loan:

(1) Delivery to the Office of an opinion of counsel from counsel representing the EDC addressed to the Office, the Trustee, and the Bank in form and substance acceptable to the Office;

(2) Delivery to the Office of evidence of voter and city council approval of the economic development sales and use tax under the Act, Chapter 504 or Chapter 505 in a form acceptable to the Office;

(3) Delivery to the Office of a certificate of the chief financial officer of the city in a form acceptable to the Office that the "Debt Service Coverage Ratio" required by the Office program guidelines has been met;

(4) Delivery to the Office of an incumbency, signature identification and authority certificate for the EDC and the city in form and substance acceptable to the Office;

(5) Delivery to the Office of a certified copy of a resolution of the EDC authorizing and approving the program loan and pledging the economic development sales and use tax receipts in favor of the Office;

(6) Delivery to the Office of a copy of a letter addressed to the Texas State Treasury providing wire transfer instructions for the program loan proceeds; and

(7) Delivery to the Office of a certified copy of a resolution of the city authorizing and approving the program loan of the EDC.

Source Note: The provisions of this §181.8 adopted to be effective March 27, 1997, 22 TexReg 2871; amended to be effective December 10, 2001, 26 TexReg 10054; amended to be effective August 5, 2012, 37 TexReg 5730