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RULE §371.70 Financial Assistance Secured by Bonds or Other Authorized Securities

Published: 2015

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(a) Applicability and required documents. This section
applies to closings for financial assistance with entities issuing
bonds or other authorized securities. The following documents are
required for closing financial assistance secured by bonds or other
authorized securities:
  (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) a certified copy of the ordinance or resolution
adopted by the governing body authorizing the issuance of debt to
be sold to the Board that is acceptable to the executive administrator.
The ordinance or resolution shall have sections providing as follows:
    (A) if financial assistance proceeds are to be deposited
into an escrow account at the time of closing 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 §371.1 of this title (relating to Definitions);
      (ii) funds shall not be released from the escrow account
without prior written approval from the executive administrator who
shall issue written authorization for the release of funds;
      (iii) upon request of the executive administrator,
escrow account statements shall be provided to the executive administrator;

      (iv) the investment of any financial assistance proceeds
deposited into an approved escrow account shall be handled in a manner
that complies with the Public Funds Investment Act, 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, Government
Code, Chapter 2257;
    (B) that the Applicant shall fix and maintain rates,
in accordance with state law, and collect charges to provide adequate
operation and maintenance of the project;
    (C) that a construction account shall be created which
shall be kept separate from all other accounts and funds of the Applicant;

    (D) that bonds shall be closed in book-entry-only form;
    (E) the use of a paying agent/registrar that is a Depository
Trust Company (DTC) participant;
    (F) that the payment of all DTC closing fees assessed
by the Board's custodian bank be directed to the Board's custodian
bank by the Applicant;
    (G) evidence that one fully registered bond has been
sent to the DTC or to the Applicant's paying agent/registrar prior
to closing;
    (H) that all payments are made to the Board via wire
transfer at no cost to the Board;
    (I) that the partial redemption of bonds or other authorized
securities be made in inverse order of maturity;
    (J) that insurance coverage be obtained and maintained
in an amount sufficient to protect the Board's interest in the project;
    (K) that the Applicant, or an obligated person for
whom financial or operating data is presented, will undertake, either
individually or in combination with other issuers of the Applicant's
obligations or obligated persons, in a written agreement or contract
to comply with requirements for continuing disclosure on an ongoing
basis as 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
political subdivision's obligations, if the Board sells or otherwise
transfers such obligations, and the beneficial owners of the Board's
bonds if the political subdivision is an obligated person with respect
to such bonds under rule 15c2-12. The ordinance or resolution shall
also contain any other requirements of the SEC or the IRS relating
to arbitrage, private activity bonds or other relevant requirements
regarding the securities held by the Board;
    (L) the maintenance of current, accurate and complete
records and accounts in accordance with generally accepted accounting
principles to demonstrate compliance with requirements in the financial
assistance documents;
    (M) that the Applicant shall annually submit an audit,
prepared by a certified public accountant in accordance with generally
accepted auditing standards;
    (N) that the Applicant shall submit a final accounting
within 60 days of the completion of the project;
    (O) that the Applicant shall document the adoption
and implementation of an approved water conservation program for the
duration of the financial assistance;
    (P) that the Applicant's agreement to comply with special
environmental conditions specified in the Board's environmental determination
as well as with any applicable Board laws or rules relating to use
of the financial assistance;
    (Q) that the Applicant shall establish a dedicated
source of revenue for repayment of the financial assistance;
    (R) that interest payments shall commence no later
than one year after the date of closing and annual principal payments
will commence no later than one year after completion of project construction;
    (S) any other recitals mandated by the executive administrator;

  (3) unqualified approving opinions of the attorney
general of Texas and, if bonds or other authorized securities are
issued, a certification from the comptroller of public accounts that
such debt has been registered in that office;
  (4) an unqualified approving opinion by a recognized
bond attorney;
  (5) assurances that the Applicant will comply with
any special conditions specified by the Board's environmental determination
until all financial obligations to the State have been discharged;
  (6) if the project will result in the development of
surface water or groundwater resources, the Applicant shall provide
information showing that it has the legal right to use the water that
the project will provide. Upon receipt of the information, the executive
administrator shall prepare a finding that the Applicant has a reasonable
expectation of obtaining the water rights to the water that the project
will provide prior to any release of funds for planning, land acquisition
and design activities. Prior to the release of funds for construction,
a written water rights certification shall be prepared by the executive
administrator. The certification shall be based upon the Applicant's
information showing the necessary water rights have been acquired;
  (7) evidence that the Applicant has the technical,
managerial, and financial capacity to maintain the system unless the
use of the funds will be to ensure that the system has the technical,
managerial, and financial capacity to comply with the national primary
or applicable state drinking water regulations over the long term;
  (8) a Private Placement Memorandum containing a detailed
description of the issuance of the debt to be sold to the Board. The
Applicant shall submit a draft Private Placement Memorandum at least
30 days prior to the closing of the financial assistance; a final
electronic version of the Memorandum shall be submitted no later than
seven days before closing;
  (9) 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;

  (10) if applicable, a home rule municipality pursuant
to Chapter 104, Local Government Code, shall execute a Certification
of Trust as defined in §371.1 of this title (relating to Definitions);
  (11) any additional information specified in writing
by the executive administrator.