SECTION 363.931. Requirements for Loan Closing

(a) Instruments needed for closing. The documents which shall be required at the time of closing shall include the following:

(1) if not closing under the pre-design funding option, evidence that 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 bond ordinance, order or resolution adopted by the governing body authorizing the issuance of debt to be sold to the board, or an executed promissory note and loan agreement, that is acceptable to the executive administrator and which shall have sections providing as follows:

(A) if loan proceeds are to be deposited into an escrow account at the closing on all or a portion of the loan, then an escrow account shall be created that shall be separate from all other accounts and funds, as follows:

(i) the account shall be maintained by an escrow agent as defined in §363.2 of this title (relating to Definitions of Terms);

(ii) funds shall not be released from the escrow account without written approval by the executive administrator;

(iii) upon request of the executive administrator, the escrow account statements shall be provided to the executive administrator;

(iv) the investment of any loan or grant proceeds deposited into an approved escrow account shall be handled in a manner that complies with the Public Funds Investment Act, Texas Government Code, Chapter 2256; and

(v) the escrow account shall 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;

(B) that a construction account shall be created which shall be separate from all other accounts and funds of the applicant;

(C) that a final accounting be made to the board of the total sources and authorized use of project funds within 60 days of the completion of the project and that any surplus loan funds be used in a manner as approved by the executive administrator;

(D) that an annual audit of the rural community, prepared in accordance with generally accepted auditing standards by a certified public accountant or licensed public accountant be provided annually to the executive administrator;

(E) that the rural community shall fix and maintain rates and collect charges to provide adequate operation, maintenance and insurance coverage on the project in an amount sufficient to protect the board's interest;

(F) that the rural community shall maintain current, accurate and complete records and accounts in accordance with generally accepted accounting principles necessary to demonstrate compliance with financial assistance related legal and contractual provisions;

(G) that the rural community covenants to abide by the board's rules and relevant statutes, including the Texas Water Code, Chapters 15, 16, and 17;

(H) that the rural community, or an obligated person for whom financial or operating data is presented, will undertake, either individually or in combination with other issuers of the rural community's obligations or obligated persons, in a written agreement or contract to comply with requirements for continuing disclosure on an ongoing basis substantially in the manner 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 being for the benefit of the board and the beneficial owner of the rural community's obligations, if the board sells or otherwise transfers such obligations, and the beneficial owners of the board's bonds if the rural community is an obligated person with respect to such bonds under rule 15c2-12;

(I) that all payments shall be made to the board via wire transfer at no cost to the board;

(J) that the partial redemption of bonds or other authorized securities be made in inverse order of maturity;

(K) that insurance coverage be obtained and maintained in an amount sufficient to protect the board's interest in the project;

(L) that the rural community shall establish a dedicated source of revenue for repayment; and

(M) any other recitals mandated by the executive administrator;

(3) unqualified approving opinions of the attorney general of Texas and if bonds are issued, a certification from the comptroller of public accounts that such debt has been registered in that office;

(4) if bonds are issued, an unqualified approving opinion by a recognized bond attorney acceptable to the executive administrator, or if a promissory note and loan agreement is used, an opinion from the rural community's attorney which is acceptable to the executive administrator;

(5) executed escrow agreement entered into by the entity and an escrow agent satisfactory to the executive administrator, in the event that funds are escrowed, or a certificate of trust as defined in §363.2 of this title, if applicable;

(6) other or additional data and information, if deemed necessary by the executive administrator.

(b) Loan agreement and promissory note. The loan agreement and promissory note shall be executed at the time of closing. The loan agreement shall provide for the following:

(1) the term of the loan and a schedule for repayment of principal and interest;

(2) that an annual audit of the rural community, prepared in accordance with generally accepted auditing standards by a certified public accountant or licensed public accountant, be provided annually to the executive administrator for the term of the loan;

(3) that a final accounting be made to the executive administrator of the total sources and authorized use of project funds within 60 days of the completion of the project and that any surplus loan funds be used in a manner as approved by the executive administrator;

(4) that the rural community shall fix and maintain rates and collect taxes and/or charges to provide:

(A) adequate operation, maintenance and insurance coverage on the project in an amount sufficient to protect the board's interest; and

(B) adequate revenue to pay principal and interest on the loan as it comes due;

(5) that the rural community covenants to abide by the board's rules and relevant statutes, including the Texas Water Code, Chapter 15;

(6) that the rural community covenants to comply with all applicable state and federal environmental requirements prior to the initiation of construction and any mitigation which might be required after construction;

(7) that the rural community will apply any unused funds to the repayment of loan principal; in inverse order of maturity or in a manner as approved by the executive administrator;

(8) that the rural community shall maintain current, accurate and complete records and accounts in accordance with generally accepted accounting principles necessary to demonstrate compliance with financial assistance related legal and contractual provisions; and

(9) any additional conditions that may be imposed by the board or requested by the executive administrator.

(c) Bonds. If bonds are issued, the documents which shall be submitted by the time of closing shall comply with the requirements of §363.42 of this title (relating to Loan Closing).

Source Note: The provisions of this §363.931 adopted to be effective November 7, 2001, 26 TexReg 8848; amended to be effective May 6, 2003, 28 TexReg 3732; amended to be effective July 30, 2012, 37 TexReg 5597