31 Tex. Admin. Code § 375.92 - Financial Assistance Secured by Promissory Notes and Deeds of Trust
(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.
Notes
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