How the Property Tax Replacement Plan Handles Bonds and Protects Texans

1

The Core Promise — No Bond Left Behind

What the TPTRP does, and does not do, when property taxes end

The Texas Property Tax Replacement Plan does not walk away from a single lawful bond obligation in Texas. Every school bond, county bond, city bond, water district bond, and hospital district bond issued under the promise of ad valorem taxation remains valid and enforceable after property taxes end. The payment schedule does not change. The bondholders do not lose a dollar. What changes is only where the money comes from.

That is the heart of the bond plan: bonds still get paid, on time and in full, but the payment path changes. Instead of collecting property taxes and routing them through local I&S levies to pay debt service, the TPTRP uses a Bond Service Levy — a dedicated, law-set component of the flat statewide sales and use tax — certified annually for each taxing entity by the Texas Comptroller of Public Accounts.

The Core Legal Principle

The United States Supreme Court has held that substituting an equivalent revenue source for a repealed tax does not constitute impairment of a bond contract if the bond obligation is fully preserved. United States Trust Co. v. New Jersey, 431 U.S. 1 (1977). The TPTRP bond framework is built precisely on that principle: it is a revenue substitution, not a diminishment.

For constituents, ending property taxes does not mean defaulting on school bonds, county bonds, city bonds, or other voter-approved debt. For legislators and committees, the bond portion of the TPTRP is designed as a coordinated legal transition — not a slogan — with reserve funds, certification rules, transition support, and a final state backstop built into the constitutional and statutory framework.

The constitutional amendment does the heavy legal lifting: it protects valid existing obligations, authorizes the replacement servicing structure, and sets the ground rules for future debt. The implementing legislation turns that constitutional framework into an operating system — amending the specific statutes that still assume a property-tax bond world and rewriting them so the new servicing structure can function day to day.

2

The Scale of Existing Debt

Why bond management is not an afterthought — it is a separate transition framework

The bond issue is not theoretical. As of August 31, 2025, Texas local governments had about $368.9 billion in outstanding local debt, including about $257.0 billion in tax-supported debt backed primarily by ad valorem taxation. That is why bonds cannot be handled as an afterthought in a property-tax abolition plan.

Table

Texas Local Government Outstanding Debt by Issuer Class — FY2025

Each issuer category and why it matters to the TPTRP bond management transition

Issuer Class	Outstanding Debt	TPTRP Relevance
Independent school districts	$148.4B	Largest local debt category; school bond statutes and school-finance law must be conformed
Cities and towns	$113.4B	Large volume of capital debt tied to local-government bond statutes
Water districts and authorities	$55.8B	Special-district debt requires district-specific conformity and transition handling
Counties	$20.4B	County bond statutes must be updated to remove ad valorem servicing assumptions
Other special districts	$19.0B	Confirms framework must extend beyond schools and cities
Community / junior college districts	$6.4B	Education-related debt remains part of the transition framework
Health and hospital districts	$5.5B	Requires handling under special-district and local bond provisions
PSF-guaranteed charter school bonds	$5.89B	Non-taxing-entity debt; covered by PSF primary + State co-guarantee simultaneous
Total local debt	~$368.9B	Why the transition must be legally and operationally precise

Source. Texas Bond Review Board, 2025 Local Government Annual Report, Fiscal Year Ended August 31, 2025. PSF charter figure as of October 31, 2025.

Note. Tax-supported debt totals approximately $257.0B. Totals may not sum exactly due to BRB rounding and scope limitations.

The BRB also reports that school district tax-supported debt naturally rolls off over time: approximately $28.8 billion retired within five years, $58.5 billion within ten years, and $113.8 billion within twenty years. That matters because the TPTRP bond plan is designed not only to keep payments whole now, but to allow the bond-related rate component to fall automatically over time as legacy obligations are paid down.

Charter School Bonds — A Special Category

Approximately $5.89 billion in charter school debt guaranteed by the Permanent School Fund was outstanding as of October 31, 2025. Because charter schools are not taxing entities, the amendment and legislation provide a dedicated charter bond framework: the PSF guarantee remains primary, and the State co-guarantee activates simultaneously upon any PSF draw.

3

How Bonds Are Paid Under the TPTRP

A step-by-step look at the new payment path — same schedule, different source

For existing debt, the public promise is straightforward: the payment schedule does not change. Principal and interest remain due on the same legal schedule, and the issuer's obligation to bondholders remains in force. Each taxing entity remains the primary obligor on its own outstanding bonds. What changes is how the money is gathered and administered.

Figure

Bond Debt Service Payment Flow Under the TPTRP

From Comptroller certification through bondholder payment — five steps, no gaps

📄

Certify

Comptroller certifies each entity's I&S Rate from statewide bond registry by Sept. 1

▶

Collect

Bond Service Levy collected as a dedicated line within the statewide sales & use tax system

🏠

Reserve

Collections remitted by Comptroller by 10th business day after month-end into I&S Reserve Fund

✅

Pay

Bondholders paid on original principal & interest schedule — on time and in full

↓

Reduce

I&S Rate automatically decreases as bonds retire — by law, without a governing body vote

The Bond Service Levy for each entity is a separate, dedicated, entity-specific line within the statewide sales and use tax collection system. The Comptroller remits Bond Service Levy collections directly to each entity's I&S Reserve Fund not later than the 10th business day after the end of each collection month.

Revenue Substitution — Not Impairment

For all purposes of any Pre-Abolition Bond resolution, indenture, official statement, or continuing disclosure agreement, the Bond Service Levy constitutes the legal successor to and substitute for the ad valorem Interest and Sinking levy pledged at issuance. No bondholder of any Pre-Abolition Bond shall have any claim that this substitution constitutes an impairment of the bond contract.

4

The I&S Component Is Law-Set and Self-Eliminating

When the bond is gone, the bond rate goes down — automatically, by law, without a vote

One of the most important protections in the bond plan is the separation between ordinary operating money and bond money. The I&S Rate is not set by the governing body — it is certified annually by the Texas Comptroller based on each entity's actual certified debt service requirement, plus a buffer of 5% to 10% to account for collection volatility.

“When a bond is paid, the rate goes down. That is not a political promise. It is a constitutional rule.”

— TPTRP Bond Management Amendment v3.0, Art. VIII §1-n(h)(4)

When a bond matures, is defeased, or is otherwise retired, the Comptroller's next annual recalculation automatically reduces the I&S Rate. No governing body vote, resolution, or ordinance is required. The reduction is mandatory. This means the I&S component is not meant to become a slush fund — it is constitutionally constrained to its purpose.

There is also an over-accumulation rule. If an entity's I&S Reserve Fund balance exceeds two times the entity's certified annual bond debt service, the Comptroller must automatically reduce the I&S Rate in the following fiscal year by the amount needed to prevent further accumulation above that maximum.

Asymmetric Rate Design — Citizens Always Win

Any increase in an entity's M&O rate requires a voter election. Any decrease — including automatic I&S Rate reductions on bond retirement or over-collection — takes effect without a voter election, by Comptroller certification alone. Citizens can always vote to reduce; they must always vote to increase.

5

Reserve Funds and the Backstop Cascade

Four layers of protection so a timing gap never becomes a missed payment

The bond-management plan does not depend on a single promise or a single account. It uses layered protection so that a temporary disruption or timing gap does not become a missed payment. There is a strict order of operations: smaller, closer reserve tools are used first; broader state-level support is the last backstop, not the first move.

Table

The Four-Tier Shortfall Backstop Cascade

Applied in order when Bond Service Levy collections are insufficient — no tier accessed until the prior tier is exhausted to its floor

Tier	Fund Used	Draw Floor	Who Controls It
Tier A	Entity Bond Reserve Fund	50% of required minimum balance (= 25% of annual debt service)	Entity; Comptroller may act if entity fails to draw
Tier B	Entity Rainy Day Fund	50% of six-month minimum balance	Entity; Comptroller may act if entity fails to draw
Tier C	County ESF (for ISDs, cities, SDs) / State ESF (for counties)	Per implementing legislation	Next-higher tier government
Tier D	State Economic Stabilization Fund (Art. III §49-g)	12-month projected statewide bond debt service reserve	Comptroller — mandatory, self-executing, no appropriation required

Source. Amendment v3.0, Art. VIII §1-o(f); Implementing Legislation v2.0, §404.0056; Gov. Code §316.0935 (new).

Note. No entity's Bond Reserve Fund beyond the originating entity is available in this cascade — only ESF funds at Tiers C and D. No act of the Legislature, no executive order, and no administrative directive may prevent or delay the cascade when triggered by a bond debt service shortfall. Comptroller must notify entity's governing body within 24 hours of any Comptroller-initiated draw.

The Comptroller has authority to initiate cascade draws directly — without prior action by the governing body — when it determines a bond payment is at risk of being missed due to an entity's administrative failure. Texas also enters this transition from a position of strong fiscal capacity: the BRB reported the constitutional debt-limit calculation at 1.58 percent of the 5 percent maximum as of August 31, 2025.

6

School District Bonds and School Finance Reform

Robin Hood ends. Every school bond still gets paid. Every district is fully funded.

School bonds are the most sensitive part of the transition because Texas school finance law is deeply entangled with property taxation. The legislation specifically amends Texas Education Code Section 45.001 to substitute the Bond Service Levy for the ad valorem I&S levy, while confirming that each ISD remains the primary obligor on its own outstanding bonds.

Simultaneously, the TPTRP repeals the Robin Hood recapture system. TEC Section 48.257 and all operative provisions of Chapter 49 are repealed effective on the Implementation Date. In their place, a Tier 4 equalization distribution mechanism funds every ISD proportionally by certified student enrollment, with no redistribution based on property values.

Table

School Finance Transition — What Changes, What Stays

How ISD bond servicing, funding, and equalization change under the TPTRP

Element	Current System	Under TPTRP
Bond debt service source	Local ad valorem I&S levy (TEC §45.001)	Bond Service Levy certified by Comptroller (Art. VIII §1-o)
I&S rate authority	Set by ISD board of trustees	Certified annually by Comptroller; no board action required or permitted
School funding formula	Foundation School Program + property wealth equalization	Tier 4 enrollment-weighted flat distribution; no property-wealth basis
Robin Hood recapture	TEC §48.257, Chapter 49 — operative	Repealed on Implementation Date; superseded by Tier 4 mechanism
PSF-guaranteed ISD bonds	PSF guarantee primary; ad valorem pledge supports	PSF guarantee primary; Bond Service Levy substitutes; State backstop secondary
Transition protection	None — existing system	Transition Fund and Transition Board provide supplemental support for any ISD that cannot be made whole under Tier 4 alone

Source. TPTRP Implementing Legislation v2.0, Art. 2; Amendment v3.0, Art. VIII §1-n(k).

Note. No ISD shall be placed in financial exigency solely as a result of the transition from property taxes to the Tier 4 system, as long as the entity has timely applied for Transition Fund assistance and is cooperating with restructuring recommendations.

7

Citizens First Bond Sale Requirement

Local voters approve the debt. Local citizens get first access to buy it.

The TPTRP bond plan does more than protect old debt. It changes how future voter-approved bonds are first offered for sale. The framework gives citizen-residents of the issuing jurisdiction first access to a reserved share of the bond offering before the bonds are broadly released to institutional buyers. If local voters approve debt and the local economy will support the servicing structure, local citizens should have the first opportunity to purchase part of that debt and receive the income stream it produces.

Table

Citizens First — Five-Stage Hierarchical Bond Offering Cascade

No stage may be bypassed. Each citizen stage runs for 30 days. Unsold bonds pass to the next stage.

Stage	Who May Buy	Duration	Denomination	Reserved Allocation
Stage 1	Citizen-residents of the issuing entity's own jurisdiction	30 days	$100–$500/bond	≥25% of offering (up to 100% if demand)
Stage 2	Citizen-residents of the next-higher tier's jurisdiction	30 days	$100–$500/bond	All unsold from Stage 1
Stage 3	All Texas adult citizen-residents (statewide)	30 days	$100–$500/bond	All unsold from Stage 2
Stage 4	Texas-domiciled business entities (principal place of business in Texas)	30 days	$5,000/bond	All unsold from Stage 3
Stage 5	General institutional bond market	No limit	$5,000/bond	All unsold from Stage 4

Source. Amendment v3.0, Art. VIII §1-o(d); Implementing Legislation v2.0, Art. 6, Finance Code Ch. 160 (new).

Note. Citizens may subscribe through the Texas Comptroller's citizen bond portal or by mail. No brokerage account or financial intermediary is required. Interest earned is tax-exempt municipal bond interest under 26 U.S.C. §103. Bond proceeds may be directed to a Texas Family Fund Account. A bond placement with a Stage 5 participant before completion of Stages 1–4 is voidable by civil action; prevailing citizen awarded attorneys' fees.

Citizens First — The Bigger Idea

The Citizens First requirement reflects the broader philosophy of the TPTRP: the plan is not only about changing who collects the money; it is also about changing who gets first access to the economic benefit from public debt that local citizens approve. When the community votes yes on a bond, the community should have the first opportunity to earn the interest.

8

The Constitutional Amendment

Seven amendments — from the ad valorem abolition savings clause to the ISD equalization guarantee

A statutory change alone would not be enough. The current bond world was built around constitutional and statutory assumptions that property taxes exist and can be levied for debt service. If those assumptions are being replaced statewide, the legal authority for the replacement has to be strong enough to support the transition. That is why the bond protections and core servicing framework are placed directly into the Texas Constitution.

Table

Constitutional Amendment — Seven Articles at a Glance

What each amendment does and why it is constitutionally necessary

Amendment	Provision	What It Does
Amend. 1	Art. VIII §1-e — Ad Valorem Prohibition (Savings Clause)	Extends existing state-level prohibition to all political subdivisions; explicit savings clause preserves all bonds issued under prior ad valorem authority
Amend. 2	Art. VIII §1-n — Bond Rate Governance	Constitutionalizes the I&S Rate architecture, voter approval for all new debt, asymmetric rate design, and Tier 4 ISD equalization replacing Robin Hood
Amend. 3	Art. VIII §1-o — Bond Management, Guarantee, Citizens First	State irrevocable guarantee of all pre-abolition GO bonds; Bond Service Levy as legal successor; entity-level reserves; four-tier cascade; Citizens First five-stage offering; special district absorption; revenue bond definition
Amend. 4	Art. XI §5 — Home-Rule City Bonds (Conforming)	All home-rule cities subject to voter approval for all new debt and Citizens First requirement
Amend. 5	Art. VII §3(e) — ISD Ad Valorem Authority (Conforming)	Removes ad valorem authorization for ISDs; substitutes Tier 4 sales and use tax mechanism
Amend. 6	Art. VII §5 — PSF Preservation and Charter School Co-Guarantee	PSF guarantee preserved; Bond Service Levy substitutes for ISDs; charter school PSF-primary / State co-guarantee simultaneous structure
Amend. 7	Art. III §49-j — State Debt Limit (Conforming)	Bond Service Levy excluded from state debt-limit calculation; no reduction in state borrowing capacity

The amendment must be adopted as a House Joint Resolution (HJR) under Texas Constitution, Article XVII, Section 1, which requires passage by two-thirds of all members of each house of the Legislature, submission to voters at the next general election at least 90 days after adjournment, and ratification by a majority of voters. The HJR must be filed and passed before adjournment of the 90th Legislature to qualify for the November 2027 general election ballot.

9

The Implementing Legislation

17 articles — every statute that assumes property taxes still exist gets rewritten

The implementing legislation turns the constitutional framework into an operating system. It amends the specific statutes that still assume a property-tax bond world and rewrites them so the TPTRP bond-management structure can function day to day. All six open statutory issues from the first draft are resolved in Version 2.0.

Table

Implementing Legislation — 17 Articles at a Glance

What each article does and the primary statutes it amends

Article	Subject	Key Statutes
Art. 1	General Provisions and Definitions	Gov. Code §1.0052 (new)
Art. 2	ISD Bond Pledge Substitution and Recapture Repeal	TEC §§45.001, 45.0011, 45.003; §48.257 (repeal); Ch. 49 (repeal); §48.2575 (new)
Art. 3	Municipal and County Bond Authority Conforming	Gov. Code §§1331.001, 1251.001, 1471.011; LGC §271.041
Art. 4	Bond Reserve Fund, I&S Reserve Fund, Backstop Cascade	Gov. Code §§404.0051–404.0057 (new)
Art. 5	Bond Service Levy — Collection, Certification, Distribution	Tax Code §§321 Subch. G (new), 321.101(f), 151.051
Art. 6	Citizens First Bond Portal and Stage 4 Verification	Finance Code Ch. 160 (new)
Art. 7	State ESF Backstop Draw Procedure	Gov. Code §316.0935 (new)
Art. 8	Water Districts and Special District Absorption	Water Code §§49.108, 54.5015 (new); LGC Ch. 400 (new)
Art. 9	Transition Fund and Transition Board	Gov. Code Ch. 490 (new)
Art. 10	Charter School Bond Framework (contingent on AG opinion)	Educ. Code Ch. 12 Subch. I (new)
Art. 11	Saving Clauses, Transition, and Contingency	Multiple codes
Art. 12	Effective Date	September 1, 2027 (contingent on HJR ratification)
Art. 13	County Building and Water Improvement Bond Conforming	Gov. Code §§1472, 1473, 1474; LGC §271.062
Art. 14	Transit Authority Carve-Out — Confirmation	Tax Code §321.101(b)–(e) (no conflict confirmed)
Art. 15	Tax Code Ch. 151 — TLC Cross-Reference Sweep	Tax Code Ch. 151 (TLC instruction)
Art. 16	Special District Local Laws Code — Omnibus Conforming	SDLLC (all); Water Code §§49.001–49.002
Art. 17	Hospital District Bond Authority Conforming	H&S Code §§281.121, 281.107, 285.064; Chs. 282–289 (omnibus)

The relationship between amendment and statute is critical. The amendment answers what the state is constitutionally allowed and required to do; the legislation answers how officials actually certify, collect, reserve, distribute, report, and enforce the bond system. Neither is sufficient without the other. Both must be filed together with the implementing bill's contingency clause linking its effective date to the HJR ratification.

Proposed Legislation

Review the constitutional amendment and implementing bill in the tabs below. Each document is fully scrollable. Use the Download buttons to save a copy for review or submission.

Proposed Legislation — 90th Texas Legislature

TPTRP Bond Management Plan — Constitutional Amendment & Implementing Bill

Rep. Will Campbell · House District 109 · Select a tab to read each document in full

Joint Resolution TPTRP Bond Management Constitutional Amendment

90th Legislature • H.J.R. No. _____ • Rep. Will Campbell • HD109

By: ___________________ H.J.R. No. _____

A JOINT RESOLUTION

proposing a constitutional amendment relating to the abolition of ad valorem property taxes; the substitution of a tiered flat sales and use tax as the revenue source for all taxing entities; the protection of bondholders of pre-abolition general obligation bonds; the Bond Service Levy; entity-level Interest and Sinking Reserve Funds; Bond Reserve Funds; the Economic Stabilization Fund backstop cascade; the Citizens First Bond Sale Requirement; school district equalization and recapture elimination; and special district bond assumption.

BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:

ARTICLE 1. AMENDMENT OF ARTICLE VIII, SECTION 1-e
AD VALOREM PROHIBITION AND SAVINGS CLAUSE

SECTION 1.01. Article VIII, Texas Constitution, is amended by amending Section 1-e to read as follows:

Sec. 1-e. PROHIBITION OF AD VALOREM TAXES; SAVINGS CLAUSE.

(a) No State ad valorem taxes shall be levied upon any property within this State.

(b) No ad valorem tax on property — real, personal, or mixed — shall be levied, assessed, collected, or enforced by the State of Texas, or by any county, municipality, school district, or special district of this State. All ad valorem property taxes at every level of Texas government are hereby abolished and prohibited.

(c) Nothing in this section shall impair the obligation of any bond, note, or other obligation issued by any taxing entity in reliance upon the ad valorem taxing authority repealed herein. All such pre-abolition obligations remain valid and enforceable. Payment of such obligations is guaranteed and secured as provided in Article VIII, Section 1-o of this Constitution. The repeal of ad valorem taxing authority is a substitution of revenue source, not a diminishment of any bond obligation.

ARTICLE 2. AMENDMENT OF ARTICLE VIII — NEW SECTION 1-n
BOND RATE GOVERNANCE PROVISIONS

SECTION 2.01. Article VIII, Texas Constitution, is amended by adding Section 1-n to read as follows (bond-related subsections):

Sec. 1-n(h). INTEREST AND SINKING RATE — LAW-CERTIFIED, ENTITY-SERVICED, AUTOMATIC.

Within each taxing entity's total rate, a portion shall be designated as the Interest and Sinking Rate (I&S Rate) dedicated to the payment of certified annual bond debt service. Each taxing entity is the primary obligor on its own bonds and shall apply its I&S collections as the first priority use of revenues each fiscal period:

(1) Bond debt service payments by each entity are senior to all M&O expenditures, waterfall distributions, and reserve contributions.

(2) The Texas Comptroller of Public Accounts shall annually certify the I&S Rate for each entity as the amount required to fund certified annual debt service plus a buffer of not less than five percent and not to exceed 10 percent of annual debt service. The I&S Rate is established by this certification; it is not set by the governing body.

(3) Each entity shall report bond debt service payment status and I&S Reserve Fund balance to the Comptroller on a schedule established by implementing legislation. The Comptroller shall publish all reports on the Local Government Transparency Portal.

(4) The I&S Rate shall automatically decrease, without governing body action, when bonds are retired, defeased, or paid in full, with the reduction taking effect in the fiscal year following the Comptroller's annual recalculation.

(5) The I&S Rate shall automatically decrease, without governing body action, when an entity's I&S Reserve Fund balance exceeds two times certified annual bond debt service.

(6) The I&S Rate may not be increased above the level necessary to fund certified annual debt service plus the applicable buffer without a new voter-approved bond election.

(7) When an entity's collections are insufficient to satisfy scheduled bond debt service after application of all I&S collections and I&S Reserve Fund balances, the Comptroller shall have authority to ensure payment from the backstop cascade established in Article VIII, Section 1-o.

Sec. 1-n(i). NEW DEBT — UNIVERSAL VOTER APPROVAL REQUIRED.

No taxing entity — including the State of Texas — may issue any indebtedness, bond, note, certificate of obligation, lease-purchase agreement, or other instrument creating a future payment obligation payable from public revenue without prior approval by a majority of the qualified voters at a duly called election.

(1) Before any bond election may be held, the Comptroller shall certify that the I&S Rate required to service the proposed bonds does not cause the entity's total rate to exceed its Constitutional Cap Rate (CCR). No bond election may be called for which the required I&S Rate would cause the entity's total rate to exceed its CCR.

(2) Each new bond issuance is subject to the Citizens First Bond Sale Requirement established in Article VIII, Section 1-o(d).

(3) No emergency, disaster declaration, executive order, or act of the Legislature may waive or suspend the voter approval requirement of this subsection.

Sec. 1-n(j). RATE CONTROL — ASYMMETRIC DESIGN.

Any increase in a taxing entity's total M&O rate above its currently applicable rate requires approval by a majority of the qualified voters of the entity's jurisdiction at a regular or special election held on a uniform election date. Any reduction in an entity's total rate, including reductions resulting from automatic I&S Rate decreases on bond retirement or over-collection, shall take effect without a voter election.

Sec. 1-n(k). TIER 4 — SCHOOL DISTRICT FULL FUNDING, EQUALIZATION, AND ROBIN HOOD REPLACEMENT.

The Tier 4 sales and use tax apportionment for school districts constitutes the Legislature's provision of an efficient system of public free schools, replacing the Foundation School Program state transfer and the excess local revenue recapture system of Texas Education Code Chapters 48 and 49.

(1) Full Funding Guarantee. No school district shall receive less than its certified enrollment-weighted Tier 4 allocation.

(2) Equalization by Enrollment, Not Property Wealth. The Comptroller shall distribute Tier 4 collections proportionally by certified student enrollment, adjusted only for weighted student allotments authorized by implementing legislation. No distribution shall be based on property valuations or the former recapture formula.

(3) Elimination of Recapture. The excess local revenue recapture provisions of Texas Education Code Chapters 48 and 49 are hereby superseded. No ISD shall be required to remit any portion of its Tier 4 allocation to the State or any other district. The Legislature shall repeal TEC Chapters 48 and 49 recapture provisions and shall not reenact any mechanism compelling redistribution based on property wealth.

(4) Transition Assistance. Any ISD whose Tier 4 allocation is insufficient to cover its certified budget during the transition period is eligible for assistance from the Transition Fund. No ISD shall be placed in financial exigency solely as a result of the transition.

ARTICLE 3. AMENDMENT OF ARTICLE VIII — NEW SECTION 1-o
BOND MANAGEMENT, STATE GUARANTEE, AND CITIZENS FIRST

SECTION 3.01. Article VIII, Texas Constitution, is amended by adding Section 1-o to read as follows:

Sec. 1-o(a). DEFINITIONS.

In this section:

(1) "Pre-Abolition Bond" means any general obligation bond, note, or other indebtedness issued by a Texas taxing entity with a pledge of ad valorem taxes and outstanding after the effective date of Article VIII, Section 1-e(b).

(2) "Bond Service Levy" means the dedicated I&S Rate portion of the flat sales and use tax certified for each entity by the Comptroller and set aside exclusively for the payment of principal and interest on Pre-Abolition Bonds and voter-approved bonds issued after the effective date.

(3) "I&S Reserve Fund" means the dedicated, entity-level reserve account into which all Bond Service Levy collections are deposited and from which bond debt service payments are made.

(4) "Bond Reserve Fund" means the dedicated, entity-level fund maintained at a minimum balance equal to 50 percent of the entity's certified annual bond debt service.

(5) "Rainy Day Fund" means each taxing entity's general fiscal reserve fund, required at a minimum balance equal to six months of the entity's most recently adopted annual full budget. For the State of Texas, the Economic Stabilization Fund established by Article III, Section 49-g serves as the state's Rainy Day Fund.

(6) "Economic Stabilization Fund" or "ESF" means: (A) for the State of Texas, the fund established by Article III, Section 49-g; (B) for counties, the county-level ESF required by implementing legislation; and (C) for municipalities, ISDs, and special districts, the entity-level reserve fund designated as that entity's ESF.

(7) "Citizens First Period" means the initial 30-day period following certification of a voter-approved bond election result during which adult citizen-residents have the exclusive right to purchase bonds in the Stage 1 offering.

(8) "Constitutional Cap Rate" or "CCR" means the tier-specific maximum total rate. No entity's total rate may exceed its CCR.

(9) "Revenue Bond" means a bond whose sole pledge and security is an identifiable, separately accounted stream of revenues from an enterprise owned and operated by the issuing entity, with no pledge — direct, contingent, or residual — against any tax revenue. Any bond not satisfying this definition is a general obligation bond for purposes of this section.

Sec. 1-o(b). ENTITY PRIMARY OBLIGATION AND STATE IRREVOCABLE GUARANTEE.

(1) Every taxing entity — including the State of Texas — is and remains the primary obligor on its own outstanding bonds. The substitution of the Bond Service Levy does not transfer, diminish, or extinguish any entity's obligation to service its own debt.

(2) Each entity shall apply Bond Service Levy collections, as the first priority use of all collected revenues each fiscal period, to fund its I&S Reserve Fund and satisfy its certified annual bond debt service when due.

(3) The Comptroller shall certify the annual I&S Rate for each entity; maintain the Comprehensive Bond Registry; monitor payment status; and provide technical assistance.

(4) Each entity shall report its bond payment status and I&S Reserve Fund balance to the Comptroller quarterly. The Comptroller shall publish all reports within 10 days of receipt.

(5) The State of Texas irrevocably guarantees the timely payment of all principal and interest on all Pre-Abolition Bonds when due, in accordance with each bond's original resolution and official statement. This guarantee is unconditional, irrevocable, and may not be diminished by any subsequent act of the Legislature. This guarantee is a backstop of last resort and does not alter each entity's primary servicing obligation.

Sec. 1-o(c). REVENUE SUBSTITUTION — BOND COVENANT CONTINUITY.

(1) For all purposes of any Pre-Abolition Bond resolution, indenture, official statement, or continuing disclosure agreement, the Bond Service Levy certified and collected for each entity constitutes the legal successor to and substitute for the ad valorem I&S levy pledged to such bonds at issuance.

(2) No bondholder of any Pre-Abolition Bond shall have any claim that the revenue substitution effected by this section constitutes an impairment of the bond contract.

(3) The Legislature shall enact conforming statutory changes providing that compliance with Bond Service Levy certification and collection under this section satisfies all statutory requirements for taxing entities to levy ad valorem taxes for bond debt service.

Sec. 1-o(d). CITIZENS FIRST BOND SALE REQUIREMENT.

(1) No taxing entity may complete the placement of any voter-approved bond with institutional investors unless the entity has first completed the hierarchical offering sequence established by this subsection. Noncompliance renders the placement voidable by any citizen in a district court of competent jurisdiction.

(2) Hierarchical Offering Sequence. Bonds shall be offered in the following mandatory order, with each stage opening only after the prior stage's allocation is filled or its period has expired:

(A) Stage 1 — Citizens First Period (30 days): Adult citizen-residents may purchase bonds directly at the same rate, face value, and maturity as the institutional offering. No brokerage account required. Minimum denomination: $100. Not less than 25 percent of the total offering is reserved. If citizen demand exceeds 25 percent, the entity may increase the citizen allocation to 100 percent.

(B) Stage 2 — Texas-Chartered Non-Profits (15 days): Texas-chartered non-profits whose mission is community development, affordable housing, economic development, or public benefit in the jurisdiction.

(C) Stage 3 — Texas Community Banks and Credit Unions (15 days): Texas-chartered community banks and credit unions with total assets of $10 billion or less and primary service area in the issuing jurisdiction.

(D) Stage 4 — Texas-Domiciled Entities (15 days): Entities whose principal place of business is in Texas — not merely registered — certified by the entity's authorized officer and verified against the Texas Secretary of State entity database.

(E) Stage 5 — Institutional Market: Any portion not purchased in Stages 1 through 4.

(3) The Comptroller shall establish and maintain a citizen bond purchasing portal for Stage 1 purchases and Stage 2 through 4 verification and compliance administration.

(4) Citizens may direct bond interest and principal repayment proceeds to their Texas Family Fund Account without any transfer fee or tax event under state law.

Sec. 1-o(e). I&S RESERVE FUND AND BOND RESERVE FUND REQUIREMENTS.

(1) Each taxing entity shall maintain a dedicated I&S Reserve Fund into which all Bond Service Levy collections are deposited and from which bond debt service payments are made exclusively.

(2) Each entity shall maintain a Bond Reserve Fund at a minimum balance of 50 percent of certified annual bond debt service, with a three-year funding timeline from the implementation date.

(3) Each entity's Rainy Day Fund shall be maintained at a minimum balance of six months of the entity's most recently adopted annual full budget.

(4) When an entity's I&S Reserve Fund balance exceeds two times certified annual bond debt service, the Comptroller shall automatically reduce the I&S Rate in the following fiscal year.

Sec. 1-o(f). BACKSTOP CASCADE — SHORTFALL RESOLUTION.

If any entity's I&S collections are insufficient to satisfy certified annual bond debt service when due, the following escalating response sequence applies in order:

(1) Tier A — Entity I&S Reserve Fund. The entity draws from its I&S Reserve Fund. The Comptroller shall automatically increase the entity's I&S Rate to replenish the Fund within 12 months.

(2) Tier B — Entity Bond Reserve Fund. If the I&S Reserve Fund is insufficient, the entity draws from its Bond Reserve Fund. The Comptroller shall adjust the I&S Rate to replenish within 36 months.

(3) Tier C — Entity Rainy Day Fund and County-Level ESF. If the Bond Reserve Fund is insufficient, the entity draws from its Rainy Day Fund. For county-level entities, the county-level ESF is available as an additional Tier C resource. Rainy Day Fund draws for bond debt service are mandatory and not subject to governing body discretion.

(4) Tier D — State ESF Backstop. If Tiers A through C are insufficient, the Comptroller shall draw from the State Economic Stabilization Fund and make direct payment to bondholders. The State retains the right of subrogation against the entity. No legislative appropriation is required; the Comptroller's authority under this subsection is self-executing.

(5) No bondholder shall experience default, delay, or reduction on any Pre-Abolition Bond or voter-approved bond as a result of any entity's inability to fund its debt service from its own revenues.

Sec. 1-o(g). SPECIAL DISTRICT BOND ASSUMPTION.

A special district that levies or has levied ad valorem taxes may be absorbed into a host county or municipality tier by a dual voter-approval process:

(1) A majority of voters within the special district's territory and a majority of voters within the absorbing entity must each separately approve absorption at a duly called election on the same uniform election date.

(2) The Comptroller must certify before any absorption election is called that the absorbing entity's total rate after assumption does not exceed its CCR.

(3) Upon completion of voter approval and Comptroller certification, the absorbing entity assumes by operation of this section all outstanding bond obligations of the absorbed district. Bondholders shall have no less security after absorption than before.

(4) Ad valorem taxing authority of the absorbed district ceases upon the effective date of absorption.

Sec. 1-o(h). REVENUE BONDS — CARVE-OUT.

A Revenue Bond as defined in subsection (a)(9) is not a Pre-Abolition Bond and is not subject to the I&S Reserve Fund, Bond Reserve Fund, backstop cascade, or Citizens First requirements of this section. Revenue Bond obligations are payable solely from pledged enterprise revenues. No taxing power under this Article may be pledged to any Revenue Bond obligation.

Sec. 1-o(i). COMPREHENSIVE BOND REGISTRY.

The Comptroller shall establish and maintain a Comprehensive Bond Registry containing for each outstanding bond: bond identification; issuer; original and current outstanding principal; final maturity date; annual debt service schedule; current certified I&S Rate; I&S Reserve Fund balance; and Bond Reserve Fund balance. The Registry is a public record published on the Local Government Transparency Portal and updated not less than quarterly.

ARTICLE 4. AMENDMENT OF ARTICLE VII, SECTION 5
PERMANENT SCHOOL FUND CONFORMING AMENDMENT

SECTION 4.01. Article VII, Section 5, Texas Constitution, is amended by adding Subsections (h) and (i) to read as follows:

(h) The PSF bond guarantee program shall continue in full force and effect. For each ISD or charter school bond guaranteed by the PSF, the PSF guarantee shall remain primary. Upon any PSF guarantee draw, the State shall simultaneously provide a co-guarantee backstop from the Economic Stabilization Fund to the extent necessary to make the bondholder whole.

(i) Charter School Bonds. Charter school bonds guaranteed by the PSF are not subject to the entity-level Bond Reserve Fund requirement or the backstop cascade of Article VIII, Section 1-o(f). Upon a PSF guarantee draw: (A) the PSF shall pay from its guarantee program; (B) the State co-guarantee activates simultaneously; (C) the charter school shall reimburse the PSF with interest; (D) charter school bonds shall be included in the Comptroller's Bond Registry; and (E) the Legislature shall establish the charter school bond framework by statute.

ARTICLE 5. AMENDMENT OF ARTICLE III, SECTION 49-j
BOND SERVICE LEVY EXCLUSION FROM STATE DEBT LIMIT

SECTION 5.01. Article III, Section 49-j, Texas Constitution, is amended by adding Subsection (b) to read as follows:

(b) The Bond Service Levy established by Article VIII, Section 1-o, and any bond debt service paid from Bond Service Levy collections, shall not be included in or counted against the five percent debt limit established by this section. The Bond Service Levy is a dedicated trust fund, not general revenue, and bond obligations serviced from the Bond Service Levy are not "net debt" for purposes of this section.

ARTICLE 6. AMENDMENT OF ARTICLE XI, SECTION 5
HOME-RULE CITY CONFORMING AMENDMENT

SECTION 6.01. Article XI, Section 5, Texas Constitution, is amended by adding the following:

Notwithstanding any other provision of this section, no home-rule city may levy, assess, or collect an ad valorem property tax after the effective date of Article VIII, Section 1-e(b). All home-rule city bond obligations outstanding as of that date shall be serviced from the Bond Service Levy and are subject to the state guarantee and backstop cascade of Article VIII, Section 1-o. All new home-rule city bonds are subject to the voter approval requirement of Article VIII, Section 1-n(i) and the Citizens First Bond Sale Requirement of Article VIII, Section 1-o(d). No home-rule charter may waive or modify the requirements of Article VIII, Sections 1-n or 1-o.

ARTICLE 7. TEMPORARY PROVISION, SAVING CLAUSE,
AND SUBMISSION TO VOTERS

SECTION 7.01. TEMPORARY PROVISION.

(a) These constitutional amendments take effect January 1 of the year following voter ratification (the "Implementation Date"). The Legislature shall enact implementing legislation not later than 60 days after voter ratification.

(b) The ad valorem property tax prohibition takes effect on the Implementation Date. All ad valorem tax levies and tax bills issued for tax years beginning on or after the Implementation Date are void. All levies and tax bills for prior tax years remain valid and collectible.

(c) The Comptroller's Comprehensive Bond Registry shall be fully populated not later than six months after the Implementation Date.

(d) Each entity shall begin establishing its I&S Reserve Fund and Bond Reserve Fund not later than the Implementation Date. Implementing legislation shall provide a three-year funding timeline for each entity to reach the 50 percent Bond Reserve Fund minimum, funded from the structural surplus at the 6.00 percent starting rate.

(e) During the period between voter ratification and the Implementation Date, no entity may issue new general obligation bonds backed by the ad valorem tax pledge.

(f) This temporary provision expires on the fifth anniversary of the Implementation Date.

SECTION 7.02. SAVING CLAUSE.

(a) The abolition of ad valorem property taxes does not impair the obligation of any bond outstanding as of the Implementation Date. All such obligations remain valid, enforceable, and payable. The Bond Service Levy and State guarantee constitute a substitution of revenue source for, and an enhancement of security for, all such obligations.

(b) All contracts, leases, and non-bond obligations of any entity outstanding as of the Implementation Date remain valid and shall be paid from the entity's M&O allocation.

(c) All ad valorem taxes assessed and due for tax years preceding the Implementation Date remain collectible under prior law. All pending tax suits, liens, and enforcement actions may be concluded under prior law.

SECTION 8.01. SUBMISSION TO VOTERS. This proposed constitutional amendment shall be submitted to the voters at an election to be held November 3, 2027. The ballot shall be printed to permit voting for or against the proposition: "The constitutional amendment abolishing ad valorem property taxes at all levels of Texas government; substituting a tiered flat sales and use tax; protecting all bondholders of existing property-tax-backed bonds through a state guarantee and a four-tier backstop fund; establishing entity-level Interest and Sinking Reserve Funds and Bond Reserve Funds; creating the Citizens First Bond Sale Requirement; eliminating school district property wealth recapture; and providing for special district bond assumption."

Formatted per Texas Legislative Council Drafting Manual, 89th Legislature • Tex. Const. Art. VIII §§1-e, 1-n, 1-o • Art. VII §5 • Art. III §49-j • Art. XI §5 Rep. Will Campbell, Texas House District 109 • willcampbellfortexas.com

House BillTPTRP Bond Management Implementing Act

90th Legislature • H.B. No. _____ • Rep. Will Campbell • HD109

By: ___________________H.B. No. _____

A BILL TO BE ENTITLED

AN ACT

relating to the implementation of the Texas Property Tax Replacement Plan bond management framework; amending the Texas Education Code to substitute the Bond Service Levy for the ad valorem interest and sinking levy in school district bond obligations and to repeal excess local revenue recapture provisions; amending the Texas Government Code to conform municipal, county, county building, road district, and public security statutes to the new framework; amending the Texas Tax Code to add the Bond Service Levy as a dedicated levy within the statewide sales and use tax collection system and to conform the state sales tax rate provision; amending the Texas Water Code and Special District Local Laws Code to remove ad valorem taxing authority from water districts and special districts; amending the Texas Local Government Code to require voter approval for all new local debt, to conform county certificate of obligation authority, and to establish special district absorption mechanics; amending the Health and Safety Code to conform hospital district bond authority; establishing the Bond Reserve Fund, Interest and Sinking Reserve Fund, backstop cascade, statewide bond registry, Transition Fund, and Transition Board; establishing the Texas Comptroller's Citizens First Bond Portal and Stage 4 Texas-domiciled entity verification process; providing civil penalties; making appropriations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

ARTICLE 1.&ensp;&ensp;GENERAL PROVISIONS AND DEFINITIONS

SECTION 1.01.&ensp;Chapter 1, Government Code, is amended by adding Section 1.0052 to read

as follows:

Sec. 1.0052. TPTRP BOND MANAGEMENT — DEFINITIONS.&ensp;In any statute implementing

the bond management provisions of the Texas Property Tax Replacement Plan, unless the context

clearly requires otherwise:

(1) "Bond Service Levy" means the dedicated, law-set Interest and Sinking Rate component

of the tiered flat sales and use tax established by Article VIII, Section 1-n, Texas

Constitution — as certified annually for each taxing entity by the Comptroller — set aside

exclusively for payment of principal and interest on Pre-Abolition Bonds and post-

Implementation Date voter-approved bonds, and for funding each entity's I&S Reserve Fund

and Bond Reserve Fund.

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(2) "Bond Reserve Fund" means the dedicated, entity-level first-line emergency reserve for

bond debt service required to be maintained by each taxing entity under Section 404.0051,

Government Code, at the minimum balance established by that section.

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(3) "I&S Reserve Fund" or "Interest and Sinking Reserve Fund" means the dedicated,

entity-level account maintained by each taxing entity and overseen by the Comptroller, funded

from the Bond Service Levy, from which the entity makes all bond debt service payments.

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(4) "Implementation Date" means the date on which the ad valorem prohibition of Article

VIII, Section 1-e, Texas Constitution, as amended, takes effect upon voter ratification of

the companion constitutional amendment.

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(5) "Pre-Abolition Bond" means any general obligation bond, note, or other indebtedness

issued by a Texas taxing entity with a pledge of ad valorem taxes for payment of principal

and interest that remains outstanding on or after the Implementation Date.

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(6) "Certified Annual Bond Debt Service" means the total principal and interest payments

due on a taxing entity's outstanding bonds during a fiscal year as certified annually by the

Texas Comptroller of Public Accounts from the statewide bond registry maintained under

Section 321.601, Tax Code.

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(7) "Constitutional Cap Rate" or "CCR" means the tier-specific maximum total rate

established for each class of taxing entity by Article VIII, Section 1-n, Texas Constitution.

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(8) "Transition Fund" means the fund established by Article 9 of this Act.

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(9) "Transition Board" means the board established by Article 9 of this Act.

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(10) "Revenue Bond" means a bond whose sole pledge is an identifiable stream of enterprise

operating revenues with no contingent claim on any tax revenue of any kind, as defined by

Article VIII, Section 1-o(a)(9), Texas Constitution, as amended.

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(11) "Public security" has the meaning assigned by Section 1201.002, Government Code.

ARTICLE 2.&ensp;&ensp;TEXAS EDUCATION CODE — ISD BOND PLEDGE SUBSTITUTION AND RECAPTURE REPEAL

Subchapter A. ISD Bond Authority — §45.001 Pledge Substitution

SECTION 2.01.&ensp;Section 45.001, Education Code, is amended to read as follows:

Sec. 45.001. BONDS AND BOND TAXES.

(a) The governing board of an independent school district, including the city council or

commission that has jurisdiction over a municipally controlled independent school district,

the governing board of a rural high school district, and the commissioners court of a county,

on behalf of each common school district under its jurisdiction, may:

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(1) issue bonds for:

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>> (A) the construction, acquisition, and equipment of school buildings in the district;

>>

>> (B) the acquisition of property or the refinancing of property financed under a contract

>> entered under Subchapter A, Chapter 271, Local Government Code, or under a lease or

>> installment purchase contract authorized by law;

>>

>> (C) the purchase of new school buses; and

>>

>> (D) the purchase of computer equipment and technology;

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(2) before the Implementation Date as defined by Section 1.0052, Government Code, levy,

pledge, assess, and collect annual ad valorem taxes sufficient to pay the principal of and

interest on the bonds as or before the principal and interest become due; and

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(3) on and after the Implementation Date, satisfy the obligation to pay the principal of

and interest on the bonds exclusively through the Bond Service Levy collected and certified

under Article VIII, Section 1-o, Texas Constitution, and Section 321.601, Tax Code; a school

district may not levy, assess, or collect ad valorem taxes for bond debt service on or after

the Implementation Date.

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(b) Each school district remains the primary obligor on its outstanding bonds. The

substitution of the Bond Service Levy for the ad valorem Interest and Sinking levy does not

transfer, diminish, or extinguish the district's obligation to service its own bond debt in

accordance with the bond's original resolution, indenture, and official statement. Compliance

with the Bond Service Levy certification and collection requirements of Article VIII, Section

1-o, Texas Constitution, and Section 321.601, Tax Code, constitutes full satisfaction of the

ad valorem pledge formerly required by Subsection (a)(2) for all Pre-Abolition Bonds.

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(c) Each school district shall maintain an I&S Reserve Fund and Bond Reserve Fund as

required by Article 4 of this Act. Bond debt service payments are the first priority use of

each district's Bond Service Levy collections in each fiscal period, senior to all M&O

expenditures and any other distributions.

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(d) [Formerly (b)] The bonds must mature serially or otherwise not more than 40 years from

their date. The bonds may be made redeemable before maturity.

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(e) [Formerly (c)] Bonds may be sold at public or private sale as determined by the governing

board of the district, subject to the Citizens First Bond Sale Requirement of Article VIII,

Section 1-o(d), Texas Constitution, and Article 6 of this Act for all bonds issued on or

after the Implementation Date.

SECTION 2.02.&ensp;Section 45.0011, Education Code, is amended to read as follows:

Sec. 45.0011. TAX RATE; I&S RATE.

(a) Before the Implementation Date, a school district board of trustees shall set the

district's Interest and Sinking tax rate in the manner required by Chapter 26, Tax Code,

sufficient to pay the principal and interest on outstanding bonds.

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(b) On and after the Implementation Date, each school district's Interest and Sinking Rate

is determined exclusively by the annual certification of the Texas Comptroller of Public

Accounts under Section 321.603, Tax Code. The board of trustees has no authority to set,

increase, or decrease the I&S Rate; the I&S Rate is set by the Comptroller's certification

and is not subject to board action. The I&S Rate shall automatically decrease, without any

board resolution, upon bond retirement, defeasance, or I&S Reserve Fund over-accumulation as

provided by Section 321.603, Tax Code.

SECTION 2.03.&ensp;Section 45.003, Education Code, is amended by adding Subsection (a-2) to

read as follows:

Sec. 45.003. BOND AND TAX ELECTIONS.

(a) Bonds described by Section 45.001 may not be issued and taxes described by Section

45.001 or 45.002 may not be levied unless authorized by a majority of the qualified voters of

the district, voting at an election held for that purpose, at the expense of the district, in

accordance with the Election Code, except as provided by this section.

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(a-2) On and after the Implementation Date, a bond election under this section is not

an election to impose ad valorem taxes. The ballot proposition for a bond election held on

or after the Implementation Date must state:

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(1) the principal amount of the bonds to be authorized;

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(2) the specific purpose or purposes for which the bonds are to be issued;

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(3) that principal and interest on the bonds will be paid from the Bond Service Levy

collected under Article VIII, Section 1-o, Texas Constitution, and Section 321.603, Tax Code,

and not from ad valorem taxes; and

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(4) that the required I&S Rate for the proposed bonds has been pre-certified by the Texas

Comptroller of Public Accounts as within the district's remaining CCR headroom under

Article VIII, Section 1-n, Texas Constitution.

>

The Texas Comptroller must issue a CCR pre-certification as provided by Section 321.603, Tax

Code, before the school district may call a bond election.

Subchapter B. Repeal of Excess Local Revenue Recapture

SECTION 2.04.&ensp;Section 48.257, Education Code, is repealed, effective on the Implementation Date.

SECTION 2.05.&ensp;The following provisions of Chapter 49, Education Code, are repealed,

effective on the Implementation Date:

(1) Subchapter A (Sections 49.001 through 49.005);

(2) Subchapter B (Sections 49.051 through 49.060) — Purchase of Attendance Credits;

(3) Subchapter C (Sections 49.101 through 49.106) — Detachment and Annexation;

(4) Subchapter D (Sections 49.151 through 49.162) — Consolidation;

(5) Subchapter E (Sections 49.201 through 49.212) — Purchase of Education Program;

(6) Subchapter F (Sections 49.251 through 49.257) — Tax Base Consolidation; and

(7) Subchapter G (Sections 49.301 through 49.307) — Open-Enrollment Charter School

Recapture Provisions.

SECTION 2.06.&ensp;Chapter 48, Education Code, is amended by adding Section 48.2575 to read

as follows:

Sec. 48.2575. TIER 4 EQUALIZATION DISTRIBUTION — RECAPTURE SUPERSEDED.

(a) On and after the Implementation Date, each school district's entitlement to public

education funding is determined exclusively by the Tier 4 distribution formula established

under Article VIII, Section 1-n(k), Texas Constitution. No distribution under this chapter

may be reduced, withheld, or recaptured on the basis of a district's former taxable property

wealth or any formula based on property values.

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(b) The excess local revenue recapture provisions formerly codified in Section 48.257 and

Chapter 49 of this code are superseded by the Tier 4 mechanism and are of no further force

or effect on and after the Implementation Date.

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(c) The Texas Comptroller of Public Accounts shall distribute Tier 4 collections to each

school district proportionally by certified student enrollment, adjusted for weighted student

allotments authorized by this chapter, on a monthly basis not later than the 15th day of each

month for collections received in the preceding calendar month.

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(d) Districts that have made advance recapture payments or entered multi-year recapture

agreements under former Chapter 49 shall have such amounts reconciled by the Comptroller

within 90 days of the Implementation Date. Credits shall be applied to the district's

Transition Fund allocation or Tier 4 distribution as the Transition Board determines

appropriate.

Subchapter C. ISD Bond — PSF Registry and AG Approval Conforming

SECTION 2.07.&ensp;Chapter 45, Education Code, is amended by adding Section 45.0055 to read

as follows:

Sec. 45.0055. PSF-GUARANTEED BONDS — COMPTROLLER REGISTRY; AG APPROVAL; REPORTING.

(a) Each school district with bonds guaranteed by the Permanent School Fund under Chapter 45,

Subchapter C, and Article VII, Section 5, Texas Constitution, shall report to the Texas

Comptroller of Public Accounts not later than 30 days after the Implementation Date, and

annually thereafter:

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(1) the principal amount outstanding on each PSF-guaranteed bond;

(2) the annual debt service schedule for each PSF-guaranteed bond through final maturity;

(3) the CUSIP number and EMMA identifier for each PSF-guaranteed bond; and

(4) the district's current I&S Reserve Fund balance and Bond Reserve Fund balance.

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(b) The Comptroller shall include all PSF-guaranteed bonds reported under this section in

the statewide bond registry under Section 321.601, Tax Code, and shall incorporate those

bonds into the district's I&S Rate calculation under Section 321.603, Tax Code.

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(c) For purposes of the Attorney General bond approval process under Government Code Chapter

1202, the Bond Service Levy pledge established by Article VIII, Section 1-o, Texas

Constitution, and Section 321.601, Tax Code, constitutes a legally sufficient pledge for any

bond issued by a school district on or after the Implementation Date.

ARTICLE 3.&ensp;&ensp;GOVERNMENT CODE — MUNICIPAL AND COUNTY BOND AUTHORITY CONFORMING

Subchapter A. Chapter 1331 — Municipal Bond Authority

SECTION 3.01.&ensp;Section 1331.001, Government Code, is amended to read as follows:

Sec. 1331.001. AUTHORITY OF MUNICIPALITY TO ISSUE BONDS.

(a) Before the Implementation Date as defined by Section 1.0052, Government Code, a

municipality may issue bonds payable from ad valorem taxes in the amount it considers

expedient to: (1) construct or purchase permanent improvements inside the municipal

boundaries, including public buildings, waterworks, or sewers; (2) construct or improve the

streets and bridges of the municipality; or (3) construct or purchase building sites or

buildings for the public schools and other institutions of learning inside the municipality,

if the municipality has assumed exclusive control of those schools and institutions.

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(b) On and after the Implementation Date, a municipality may issue bonds payable from the

Bond Service Levy established by Article VIII, Section 1-o, Texas Constitution, for any

purpose listed in Subsection (a) or any other purpose authorized by law, subject to prior

voter approval under Section 1251.001, Government Code, as amended by this Act, and the CCR

pre-certification requirement of Section 321.603, Tax Code. A municipality may not issue

bonds payable from ad valorem taxes on or after the Implementation Date.

SECTION 3.02.&ensp;Section 1331.052, Government Code, is amended by adding Subsection (c) to

read as follows:

Sec. 1331.052. AUTHORITY OF HOME-RULE MUNICIPALITY TO ISSUE BONDS.

(c) On and after the Implementation Date, bonds issued by a home-rule municipality under

this section may not be secured by a pledge of ad valorem taxes. All bonds issued on or after

the Implementation Date are secured by the municipality's Bond Service Levy under Article

VIII, Section 1-o, Texas Constitution. A charter provision authorizing or requiring an ad

valorem tax pledge for bonds is superseded by this subsection on the Implementation Date.

Pre-Abolition Bonds issued under a prior charter ad valorem pledge remain governed by Article

VIII, Section 1-o, Texas Constitution.

Subchapter B. Chapter 1251 — Bond Elections: Conforming Amendments

SECTION 3.03.&ensp;Section 1251.001, Government Code, is amended to read as follows:

Sec. 1251.001. BOND ELECTION REQUIRED.

(a) Before the Implementation Date as defined by Section 1.0052, Government Code, a county

or municipality may not issue bonds that are to be paid from ad valorem taxes unless the

issuance is first approved by the qualified voters of the county or municipality in an

election as provided by this chapter.

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(b) On and after the Implementation Date, a county or municipality may not issue bonds of

any kind — payable from any source — unless the issuance is first approved by a majority

of the qualified voters of the county or municipality in an election held on a uniform

election date as provided by Chapter 41, Election Code, and this chapter. No emergency,

disaster declaration, or executive order may waive or suspend the voter approval requirement

of this subsection.

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(c) Any bond issuance by a county or municipality on or after the Implementation Date that

occurs without the voter approval required by Subsection (b) is void. Any citizen of the

issuing entity's jurisdiction may bring a civil action in a district court of competent

jurisdiction to void such an issuance. A prevailing citizen shall be awarded reasonable

attorneys' fees and costs from the entity.

SECTION 3.04.&ensp;Section 1251.004, Government Code, is amended to read as follows:

Sec. 1251.004. BOND SERVICE LEVY CERTIFICATION — SUBSTITUTION FOR TAX QUESTION.

(a) Before the Implementation Date, at an election ordered on the issuance of bonds of a

county or municipality, or of a political subdivision or defined district of a county or

municipality, the governing body shall also submit the question of whether to impose a tax on

property in the county, municipality, political subdivision, or defined district to pay

interest on the bonds and to provide a sinking fund to redeem the bonds.

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(b) On and after the Implementation Date, at an election ordered on the issuance of bonds of

a county or municipality, or of a political subdivision or defined district of a county or

municipality, the governing body shall include in the election materials a Comptroller

pre-certification issued under Section 321.603, Tax Code, confirming that the proposed bonds'

required I&S Rate, when added to the entity's current total rate, does not exceed the

entity's Constitutional Cap Rate. The question of imposing an ad valorem tax shall not appear

on the ballot at a bond election held on or after the Implementation Date.

SECTION 3.05.&ensp;Section 1251.052(a), Government Code, is amended to read as follows:

Sec. 1251.052. BALLOT PROPOSITION FORM.

(a) The ballot for a measure seeking voter approval of the issuance of debt obligations by

a political subdivision shall specifically state:

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(1) a general description of the purposes for which the debt obligations are to be authorized;

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(2) the total principal amount of the debt obligations to be authorized; and

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(3) before the Implementation Date, that taxes sufficient to pay the principal of and

interest on the debt obligations will be imposed; and

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(4) on and after the Implementation Date, that the principal and interest on the debt

obligations will be paid from the Bond Service Levy collected under Article VIII, Section 1-o,

Texas Constitution, and not from ad valorem property taxes, and that the Texas Comptroller of

Public Accounts has pre-certified that the required Interest and Sinking Rate for the

proposed bonds does not cause the entity's total rate to exceed its Constitutional Cap Rate.

Subchapter C. Chapter 1431 — Tax Notes: Conforming Amendment

SECTION 3.06.&ensp;Chapter 1431, Government Code, is amended by adding Section 1431.0025 to

read as follows:

Sec. 1431.0025. PROHIBITION ON AD VALOREM PLEDGE; POST-IMPLEMENTATION DATE.

On and after the Implementation Date as defined by Section 1.0052, Government Code, a

political subdivision may not issue tax notes or any other obligation under this chapter that

is payable from or secured by ad valorem taxes. Any obligation issued under this chapter on

or after the Implementation Date must be payable from revenues, the Bond Service Levy, or

other non-ad-valorem sources, and must receive prior voter approval as required by Section

1251.001(b), Government Code, as amended by this Act, unless the obligation is payable solely

from operating revenues with no contingent tax claim.

Subchapter D. Chapter 1471 — County Road Bonds: Conforming Amendment

SECTION 3.07.&ensp;Section 1471.011, Government Code, is amended by adding Subsection (c-1)

to read as follows:

Sec. 1471.011. AUTHORITY TO ISSUE ROAD BONDS — POST-IMPLEMENTATION.

(c-1) On and after the Implementation Date as defined by Section 1.0052, Government Code,

a political subdivision may not impose ad valorem taxes to pay interest on bonds issued under

this chapter or to provide a sinking fund for the redemption of such bonds. Subsection (c)

is operative only before the Implementation Date. On and after the Implementation Date, bond

debt service on road bonds is payable exclusively from the Bond Service Levy certified under

Section 321.603, Tax Code, and road bonds must receive prior voter approval consistent with

Section 1251.001(b), Government Code, as amended by this Act.

Subchapter E. Chapter 1201 — Public Security Procedures Act: AG Approval Conforming

SECTION 3.08.&ensp;Chapter 1201, Government Code, is amended by adding Section 1201.0055 to

read as follows:

Sec. 1201.0055. BOND SERVICE LEVY — RECOGNIZED VALID PLEDGE.

(a) For purposes of all statutes governing the issuance and approval of public securities,

including the Attorney General approval process under Chapter 1202, the Bond Service Levy

established by Article VIII, Section 1-o, Texas Constitution, and Section 321.601, Tax Code,

constitutes a legally sufficient pledge for any public security issued by a taxing entity on

or after the Implementation Date as defined by Section 1.0052, Government Code.

>

(b) The Attorney General shall approve any public security issued on or after the

Implementation Date that is pledged to the Bond Service Levy and that otherwise complies with

applicable law, provided the Comptroller has issued a current CCR pre-certification for the

issuing entity consistent with Section 321.603, Tax Code.

Subchapter F. Local Government Code — City Certificates of Obligation: Conforming

SECTION 3.09.&ensp;Section 271.041, Local Government Code, is amended by adding Subsection

(d) to read as follows:

Sec. 271.041. CITY CERTIFICATES OF OBLIGATION — VOTER APPROVAL REQUIRED POST-IMPLEMENTATION.

(d) On and after the Implementation Date as defined by Section 1.0052, Government Code, no

certificate of obligation may be issued under this subchapter without prior voter approval as

required by Section 1251.001(b), Government Code, as amended by this Act, regardless of

whether a sufficient petition of registered voters has been filed. No certificate of

obligation issued on or after the Implementation Date may be secured by a pledge of ad

valorem taxes; all certificates of obligation issued on or after the Implementation Date are

secured by the Bond Service Levy or by non-ad-valorem revenues as provided by this chapter

and Article VIII, Section 1-o, Texas Constitution.

ARTICLE 4.&ensp;&ensp;GOVERNMENT CODE — I&S RESERVE FUND, BOND RESERVE FUND, AND BACKSTOP CASCADE

Subchapter A. Bond Reserve Fund

SECTION 4.01.&ensp;Chapter 404, Government Code, is amended by adding Subchapter K to read

as follows:

SUBCHAPTER K. BOND RESERVE FUND; I&S RESERVE FUND; BACKSTOP CASCADE

Sec. 404.0051. BOND RESERVE FUND — REQUIRED ESTABLISHMENT.

(a) Each taxing entity subject to Article VIII, Section 1-o, Texas Constitution — including

the State of Texas, each county, each municipality, each school district, and each special

district — must establish and maintain a Bond Reserve Fund as a dedicated, first-line

emergency reserve for bond debt service.

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(b) The Bond Reserve Fund of each entity must be maintained at a minimum balance equal to

50 percent of the entity's Certified Annual Bond Debt Service as certified by the Comptroller

under Section 321.603, Tax Code.

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(c) Each entity must achieve the minimum Bond Reserve Fund balance not later than three years

after the Implementation Date, funded from the structural surplus generated at the starting

rate.

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(d) The Bond Reserve Fund is separate from, and may not be commingled with, the I&S Reserve

Fund, Rainy Day Fund, general fund, or any other fund.

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(e) Each entity shall report its Bond Reserve Fund balance to the Comptroller quarterly, not

later than the 15th day after the end of each fiscal quarter.

Sec. 404.0052. BOND RESERVE FUND — DRAW RESTRICTION.

A taxing entity may not draw from its Bond Reserve Fund in an amount that would reduce the

fund's balance below 50 percent of its required minimum balance. Upon reaching that floor in

any draw, the entity must initiate the next tier of the backstop cascade under Section

404.0056 before making any further draws from the Bond Reserve Fund.

Subchapter B. I&S Reserve Fund

Sec. 404.0053. I&S RESERVE FUND — ESTABLISHMENT AND OPERATING RULES.

(a) Each taxing entity subject to Article VIII, Section 1-o, Texas Constitution, must

establish and maintain an Interest and Sinking Reserve Fund maintained at not less than one

times and not more than two times the entity's Certified Annual Bond Debt Service.

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(b) The I&S Reserve Fund is funded from the entity's Bond Service Levy collections as the

first priority use of each period's collections, prior to any M&O expenditure or other

distribution.

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(c) Each entity shall apply I&S Reserve Fund collections to satisfy its scheduled bond debt

service when due.

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(d) When an entity's I&S Reserve Fund balance exceeds two times its Certified Annual Bond

Debt Service, the Comptroller shall automatically reduce the entity's I&S Rate in the

following fiscal year by the amount necessary to prevent accumulation above the two-times

maximum.

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(e) The I&S Reserve Fund is a legally segregated, purpose-restricted fund. No amount may be

transferred from it to the general fund, M&O budget, or any other purpose, except for payment

of bond principal and interest or contribution to the cascade under Section 404.0056.

Subchapter C. Entity-Level ESF and Rainy Day Fund Requirements

Sec. 404.0054. ENTITY-LEVEL ECONOMIC STABILIZATION FUNDS.

(a) Each county must establish and maintain a county-level Economic Stabilization Fund at a

minimum balance equal to six months of the county's most recently adopted annual full budget.

The county ESF is available as Tier C in the backstop cascade for shortfalls of any special

district, ISD, or municipality within the county.

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(b) Each municipality, school district, and special district must establish and maintain an

entity-level Economic Stabilization Fund at a minimum balance equal to three months of the

entity's most recently adopted annual full budget. The entity's ESF is available as Tier C

in the cascade only after the entity's Rainy Day Fund has been drawn to its 50 percent floor.

Sec. 404.0055. RAINY DAY FUND — MINIMUM BALANCE.

Each taxing entity subject to Article VIII, Section 1-o, Texas Constitution, must maintain

a Rainy Day Fund at a minimum balance equal to six months of the entity's most recently

adopted annual full budget. No amount may be drawn from the Rainy Day Fund for bond debt

service that would reduce it below 50 percent of the six-month minimum balance.

Subchapter D. Backstop Cascade — Tiered Draw Procedures

Sec. 404.0056. BACKSTOP CASCADE — TIERED DRAW PROCEDURE.

(a) When a taxing entity's Bond Service Levy collections in any fiscal period are

insufficient, after application of all I&S Reserve Fund collections, to satisfy its scheduled

bond debt service, the following cascade applies in the order listed. No tier may be accessed

until the prior tier is exhausted to its floor:

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(1) Tier A — Entity Bond Reserve Fund. Draw first from the entity's own Bond Reserve Fund.

Draws may not reduce the Bond Reserve Fund below 50 percent of the required minimum under

Section 404.0052. Upon reaching that floor, escalate to Tier B.

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(2) Tier B — Entity Rainy Day Fund. Draw from the entity's own Rainy Day Fund. Draws may

not reduce the Rainy Day Fund below 50 percent of the six-month minimum under Section

404.0055. Upon reaching that floor, escalate to Tier C.

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(3) Tier C — Next-Tier ESF. If the entity is a special district, ISD, or municipality, the

county ESF is available. If the entity is a county, the State ESF is available.

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(4) Tier D — State Economic Stabilization Fund. If Tier C resources are insufficient, the

State Economic Stabilization Fund shall provide the remaining amount. A draw under this tier

is mandatory and self-executing; no appropriation act is required.

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(b) No entity's Bond Reserve Fund, other than the originating entity's own, is available in

this cascade.

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(c) When the Comptroller determines that a governing body has failed to initiate the cascade

timely and a bond payment is at risk, the Comptroller may initiate draws from the applicable

cascade tier directly.

Subchapter E. Reporting and Transparency

Sec. 404.0057. COMPTROLLER — BOND DEBT SERVICE REPORTING.

(a) The Comptroller shall publish on the Local Government Transparency Portal, updated

quarterly: (1) for each taxing entity: Certified Annual Bond Debt Service, I&S Rate, I&S

Reserve Fund balance, Bond Reserve Fund balance, and Rainy Day Fund balance; (2) the

statewide aggregate of all entity-level bond debt service obligations by tier; and (3) any

cascade draw that has occurred under Section 404.0056 in the preceding quarter, identifying

the entity, tier drawn, and amount.

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(b) The Comptroller shall submit to the Legislature an annual Bond Management Status Report

not later than December 1 of each year.

ARTICLE 5.&ensp;&ensp;TAX CODE — BOND SERVICE LEVY; COMPTROLLER COLLECTION AND DISTRIBUTION

Subchapter A. Chapter 321 — New Subchapter G: Bond Service Levy

SECTION 5.01.&ensp;Chapter 321, Tax Code, is amended by adding Subchapter G to read as

follows:

SUBCHAPTER G. BOND SERVICE LEVY — COLLECTION, CERTIFICATION, AND DISTRIBUTION

Sec. 321.601. STATEWIDE BOND REGISTRY.

(a) The Comptroller shall establish and maintain a statewide bond registry containing, for

each taxing entity: each outstanding Pre-Abolition Bond and post-Implementation Date

voter-approved bond (by CUSIP and EMMA identifier); outstanding principal balance and

remaining debt service schedule through final maturity; Certified Annual Bond Debt Service

for the current fiscal year; certified I&S Rate; and entity I&S Reserve Fund and Bond Reserve

Fund balances.

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(b) Each taxing entity must register all outstanding bonds with the Comptroller not later

than 90 days after the Implementation Date and must update the registry within 30 days of any

new issuance, redemption, or defeasance.

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(c) The Comptroller shall make the statewide bond registry publicly accessible on the Local

Government Transparency Portal, updated not less than monthly.

Sec. 321.602. BOND SERVICE LEVY — SEPARATE COLLECTION LINE.

(a) The Bond Service Levy for each taxing entity is a separate, dedicated, entity-specific

line within the statewide sales and use tax collection and distribution system. The Comptroller

shall maintain Bond Service Levy collections for each entity separately from M&O collections

and any waterfall distribution amounts.

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(b) The Comptroller shall remit Bond Service Levy collections directly to each entity's I&S

Reserve Fund not later than the 10th business day after the end of each collection month.

Sec. 321.603. I&S RATE CERTIFICATION — ANNUAL COMPTROLLER DETERMINATION.

(a) Not later than September 1 of each year, the Comptroller shall certify for each taxing

entity the Interest and Sinking Rate for the following fiscal year. The I&S Rate is the rate

necessary to fund the entity's Certified Annual Bond Debt Service plus a buffer of not less

than 5 percent and not more than 10 percent of the entity's Certified Annual Bond Debt

Service, based on the Comptroller's assessment of collection volatility in the entity's

jurisdiction.

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(b) The I&S Rate certified under this section takes effect on the first day of the following

fiscal year. No governing body vote, resolution, or ordinance is required.

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(c) The I&S Rate shall automatically decrease, without any governing body action, when:

(1) bonds are retired, defeased, or paid in full — reduction takes effect in the fiscal year

following the Comptroller's annual recalculation; or (2) an entity's I&S Reserve Fund balance

exceeds two times its Certified Annual Bond Debt Service.

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(d) The Comptroller shall provide written notice to each entity of its certified I&S Rate not

later than September 15 of each year.

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(e) The Comptroller shall issue a CCR pre-certification to any taxing entity that requests

one in connection with a proposed bond election, confirming whether the proposed bonds'

required I&S Rate, when added to the entity's current total rate, would exceed the entity's

Constitutional Cap Rate. No bond election may be called without a current CCR

pre-certification. A CCR pre-certification expires 365 days after issuance.

Subchapter B. Chapter 321 — 2% Local Cap: Conforming Amendment

SECTION 5.02.&ensp;Section 321.101(f), Tax Code, is amended to read as follows:

Sec. 321.101(f). TWO PERCENT LOCAL CAP — BOND SERVICE LEVY EXCLUDED.

(f) Before the Implementation Date as defined by Section 1.0052, Government Code, a

municipality may not adopt or increase a sales and use tax or an additional sales and use tax

under this section if as a result of the adoption or increase of the tax the combined rate of

all sales and use taxes imposed by the municipality and other political subdivisions of this

state having territory in the municipality would exceed two percent at any location in the

municipality.

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(f-1) On and after the Implementation Date, the two percent local cap of this subsection

does not apply to the Bond Service Levy collected under Subchapter G of this chapter. The

Bond Service Levy is a mandated, law-set constitutional levy and is not an optional local

sales and use tax for purposes of the two percent cap.

Subchapter C. Section 151.051 — State Sales Tax Rate Conforming Amendment

SECTION 5.03.&ensp;Section 151.051, Tax Code, is amended by adding Subsection (b-1) to read

as follows:

Sec. 151.051(b-1). TIER 1 RATE — POST-IMPLEMENTATION.

(b-1) On and after the Implementation Date as defined by Section 1.0052, Government Code,

the state sales and use tax rate is the Tier 1 rate established for the State of Texas under

Article VIII, Section 1-n, Texas Constitution, as certified by the Comptroller. Subsection

(b) is suspended from the Implementation Date forward and applies only to transactions

occurring before the Implementation Date.

ARTICLE 6.&ensp;&ensp;FINANCE CODE / COMPTROLLER — CITIZENS FIRST BOND PORTAL AND STAGE 4 VERIFICATION

SECTION 6.01.&ensp;Subtitle B, Title 3, Finance Code, is amended by adding Chapter 160 to read

as follows:

CHAPTER 160. CITIZENS FIRST BOND SALE — PORTAL AND ADMINISTRATION

Sec. 160.001. DEFINITIONS.&ensp;In this chapter:

(1) "Citizens First Period" means the 30-day offering period for each stage of the Citizens

First cascade.

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(2) "Issuing Entity" means any taxing entity subject to Article VIII, Section 1-o, Texas

Constitution, that has received voter approval to issue bonds.

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(3) "Citizen-Resident" means an adult natural person who is a permanent resident of the

geographic jurisdiction of an issuing entity and who is not acting as a nominee, agent, or

front for a non-qualifying entity.

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(4) "Texas-Domiciled Entity" has the meaning assigned by Section 160.051.

Sec. 160.011. COMPTROLLER PORTAL — ESTABLISHMENT AND OPERATION.

(a) The Comptroller shall establish and maintain a citizen bond purchasing portal through

which citizen-residents may subscribe to purchase bonds in Stages 1, 2, and 3 of any Citizens

First offering subject to Article VIII, Section 1-o(d), Texas Constitution.

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(b) The portal must: (1) accept electronic subscriptions and paper subscriptions by mail;

(2) require no brokerage account or minimum balance; (3) allow purchases in denominations of

$100 or more; (4) allow citizens to direct proceeds to a Texas Family Fund Account; and

(5) provide real-time subscription status information.

Sec. 160.012. OFFERING SEQUENCE — FIVE-STAGE CASCADE.

(a) The Comptroller shall administer the five-stage offering sequence for each bond issuance

subject to Article VIII, Section 1-o(d), Texas Constitution:

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(1) Stage 1 — Entity Citizens (30 days): reserved for citizen-residents of the issuing

entity's jurisdiction;

(2) Stage 2 — Next-Tier Citizens (30 days): available to citizen-residents of the

next-higher jurisdictional tier;

(3) Stage 3 — Statewide Citizens (30 days): available to all Texas resident adults;

(4) Stage 4 — Texas-Domiciled Entities (30 days): available to entities qualifying under

Section 160.051; and

(5) Stage 5 — General Institutional Market: released to the entity's underwriter or

placement agent of record.

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(b) No stage may be bypassed. The Comptroller shall enforce this sequence for every

qualifying offering.

Sec. 160.013. ENFORCEMENT — VOID PLACEMENT.

(a) A bond placement with a Stage 5 participant that occurs before completion of Stages 1

through 4 is voidable. Any citizen-resident may bring a civil action in a district court of

competent jurisdiction to void a noncompliant placement.

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(b) A prevailing citizen shall be awarded reasonable attorneys' fees and costs. An issuing

entity is subject to a civil penalty of not more than $10,000 per bond placement in

violation. All penalties collected shall be deposited to the Transition Fund.

Sec. 160.051. TEXAS-DOMICILED ENTITY — DEFINITION AND STAGE 4 VERIFICATION.

(a) A "Texas-domiciled entity" for Stage 4 purposes means a corporation, limited liability

company, partnership, trust, or other legally formed entity that satisfies BOTH: (1) organized

under the laws of the State of Texas or registered to do business in Texas with the Secretary

of State; AND (2) its primary executive offices and primary decision-making location are

physically in Texas.

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(b) An entity with only a registered agent in Texas, without primary executive offices

physically in Texas, does not qualify.

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(c) The Comptroller's Stage 4 verification process shall: (1) cross-reference the Texas

Secretary of State's entity registration database; (2) require the purchasing entity's

authorized officer to execute a sworn certification of principal Texas place of business; and

(3) flag for further review any entity whose registered agent address and certified principal

place of business address are the same.

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(d) A person who executes a false certification under Subsection (c)(2) is subject to a

civil penalty of not more than $50,000 per false certification and is liable to the State for

damages equal to three times the face value of bonds purchased in reliance on the false

certification.

ARTICLE 7.&ensp;&ensp;GOVERNMENT CODE — STATE ESF BACKSTOP DRAW PROCEDURE

SECTION 7.01.&ensp;Chapter 316, Government Code, is amended by adding Section 316.0935 to

read as follows:

Sec. 316.0935. ECONOMIC STABILIZATION FUND — BOND BACKSTOP DRAW; MANDATORY PROCEDURE.

(a) A draw from the Economic Stabilization Fund for bond debt service under the Tier D

backstop cascade of Article VIII, Section 1-o(f)(4), Texas Constitution, and Section

404.0056(a)(4), Government Code, is mandatory and self-executing. No appropriation act is

required.

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(b) When the Comptroller determines Tier D backstop funds are required, the Comptroller shall

initiate the draw from the ESF and direct payment to the applicable bondholders or trustee

not later than two business days before the scheduled bond payment date.

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(c) The Comptroller shall provide written notice to the Legislative Budget Board and the

Governor of any Tier D draw within 24 hours.

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(d) The Legislature may not appropriate or encumber ESF funds for any purpose that would

reduce the Fund's balance below the amount required to meet the next 12 months of projected

statewide bond debt service as certified by the Comptroller annually not later than December 1.

ARTICLE 8.&ensp;&ensp;WATER CODE AND SPECIAL DISTRICT LAWS — AD VALOREM AUTHORITY REMOVAL

Subchapter A. Water Code Chapter 49 — All-Districts General Law

SECTION 8.01.&ensp;Section 49.108, Water Code, is amended to read as follows:

Sec. 49.108. TAX LEVY FOR DEBT SERVICE; BOND SERVICE LEVY SUBSTITUTION.

(a) [Existing language — preserved and applicable before the Implementation Date.]

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(b) On and after the Implementation Date as defined by Section 1.0052, Government Code, a

district may not levy, assess, or collect an ad valorem tax for any purpose, including

payment of bond principal and interest. On and after the Implementation Date, bond debt

service for all Pre-Abolition Bonds of a district is paid exclusively from the Bond Service

Levy certified for the district under Section 321.603, Tax Code.

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(c) Each district must register its outstanding bonds with the Comptroller under Section

321.601, Tax Code, not later than 90 days after the Implementation Date.

Subchapter B. Water Code Chapter 54 — MUD Conforming Amendment

SECTION 8.02.&ensp;Chapter 54, Water Code, is amended by adding Section 54.5015 to read as

follows:

Sec. 54.5015. AD VALOREM BOND TAX AUTHORITY — PROHIBITION POST-IMPLEMENTATION.

(a) On and after the Implementation Date, a municipal utility district may not levy, assess,

or collect an ad valorem tax for payment of bond principal and interest. This section controls

over any provision of this chapter, any special district local law, or any district order or

resolution that purports to authorize an ad valorem bond tax on or after the Implementation

Date.

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(b) Bond elections held by a municipal utility district on or after the Implementation Date

are subject to the universal voter approval requirement of Section 1251.001(b), Government

Code, and to the Citizens First Bond Sale Requirement of Article VIII, Section 1-o(d), Texas

Constitution, and Article 6 of this Act.

Subchapter C. Voter-Approved Special District Absorption Mechanics

SECTION 8.03.&ensp;Subtitle A, Title 12, Local Government Code, is amended by adding Chapter

400 to read as follows:

CHAPTER 400. SPECIAL DISTRICT ABSORPTION — VOTER-APPROVED PROCEDURES

Sec. 400.001. PURPOSE.&ensp;This chapter establishes procedures by which a special district

classified in Tier 5 under Article VIII, Section 1-n, Texas Constitution, may be absorbed into

a host-tier entity through a voter-approved process consistent with Article VIII, Section

1-o(g), Texas Constitution.

Sec. 400.002. CCR PRE-CERTIFICATION REQUIRED.&ensp;Before any absorption election may be

called, the Comptroller must certify in writing that the combined total rate of the proposed

host entity — including its current M&O rate, its current I&S rate, and the I&S rate that would

be added to service the special district's assumed bonds — does not exceed the CCR for the host

entity's tier.

Sec. 400.003. DUAL ELECTION REQUIREMENT.

(a) An absorption requires affirmative vote of a majority of qualified voters in both:

(1) the proposed host entity's jurisdiction; and (2) the special district's jurisdiction.

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(b) Both elections must be held on the same uniform election date. Both must pass. The failure

of either election defeats the absorption. No partial absorption is permitted.

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(c) A governing body may not call an absorption election more than once in any 24-month

period for the same proposed absorption.

Sec. 400.004. BOND ASSUMPTION.

(a) Upon voter-approved absorption, all outstanding bonds of the absorbed district are

assumed by the host entity.

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(b) The Comptroller shall add the absorbed district's Certified Annual Bond Debt Service to

the host entity's I&S Rate calculation not later than 30 days after the effective date of

absorption.

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(c) No assumption under this section impairs the obligation of any bond of the absorbed

district. Bondholders have the same guarantee rights under Article VIII, Section 1-o, Texas

Constitution, and the same access to the cascade under Section 404.0056, Government Code.

ARTICLE 9.&ensp;&ensp;TRANSITION FUND AND TRANSITION BOARD

SECTION 9.01.&ensp;Subtitle A, Title 4, Government Code, is amended by adding Chapter 490 to

read as follows:

CHAPTER 490. TPTRP TRANSITION FUND AND TRANSITION BOARD

Sec. 490.001. TRANSITION FUND — ESTABLISHMENT.

(a) The TPTRP Transition Fund is a special fund in the state treasury outside the general

revenue fund.

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(b) The Fund consists of: (1) appropriations made by the Legislature; (2) the structural

surplus generated during the transition period from the difference between each tier's

starting rate and its total obligation floor rate; (3) civil penalties collected under Article

6 of this Act; and (4) interest earned on Fund balances.

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(c) Money in the Fund may be used only for: (1) supplemental distributions to taxing entities

whose tier allocation is insufficient to cover their certified budget during the transition

period; (2) operational restructuring assistance and technical support to taxing entities; and

(3) administrative expenses of the Transition Board not to exceed [TO BE CONFIRMED] percent

of annual Fund appropriations.

Sec. 490.002. TRANSITION FUND — DURATION.&ensp;The Transition Fund shall remain active for

not less than five years from the Implementation Date. The Fund may be extended by legislative

appropriation.

Sec. 490.011. TRANSITION BOARD — ESTABLISHMENT AND COMPOSITION.

(a) The TPTRP Transition Board is established as an independent body of state government.

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(b) The Board consists of nine members: three appointed by the Governor (including at least

one school finance expert and one local government finance expert), three by the Lieutenant

Governor, and three by the Speaker of the House of Representatives.

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(c) Members serve staggered six-year terms, maximum two consecutive terms.

Sec. 490.012. TRANSITION BOARD — POWERS AND DUTIES.

(a) The Transition Board shall: (1) review applications for supplemental distributions and

certify approved amounts to the Comptroller; (2) make rate-adjustment recommendations to the

Legislature; (3) provide operational restructuring assistance and technical support to taxing

entities; (4) report annually to the Legislature and the Governor not later than December 1;

and (5) identify entities that may require assistance.

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(b) No school district, county, municipality, or special district shall be placed in financial

exigency solely as a result of the transition from the ad valorem system to the TPTRP sales

and use tax system, as long as the entity has timely applied for and is receiving Transition

Fund assistance and cooperating with restructuring recommendations.

Sec. 490.013. TRANSITION BOARD — ISD PRIORITY.

(a) The Transition Board shall give priority to ISD applications over other entity types.

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(b) The Transition Board shall develop for each assisted ISD a multi-year financial plan

projecting the district's path to full self-funding under the Tier 4 mechanism.

ARTICLE 10.&ensp;&ensp;CHARTER SCHOOL BOND FRAMEWORK — CONTINGENT PROVISIONS

SECTION 10.01.&ensp;Chapter 12, Education Code, is amended by adding Subchapter I to read as

follows:

Sec. 12.1601. APPLICABILITY; AG OPINION REQUIRED.

(a) Sections 12.1602 through 12.1604 are contingent on receipt of an Attorney General

opinion as provided by this section.

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(b) The Comptroller shall request, and the Attorney General shall issue, not later than 90

days after the Implementation Date, a formal opinion on whether open-enrollment charter

schools that are not political subdivisions of the State are subject to the entity-level

obligations of Article VIII, Section 1-o(b), Texas Constitution, or solely to the PSF

guarantee mechanism of Article VII, Section 5, Texas Constitution.

Sec. 12.1602. PSF GUARANTEE — PRIMARY; STATE CO-GUARANTEE — SIMULTANEOUS.

For bonds guaranteed by the Permanent School Fund under Article VII, Section 5, Texas

Constitution:

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(1) The PSF guarantee is the primary payment mechanism. The State simultaneously

co-guarantees payment through the Bond Service Levy and the State ESF. The co-guarantee is

automatic and self-executing upon any PSF guarantee draw.

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(2) A charter school bondholder shall be made whole on the same timeline as all other

guaranteed bond obligations.

Sec. 12.1603. COMPTROLLER REGISTRY — CHARTER SCHOOL BONDS.&ensp;The Comptroller shall

include all PSF-guaranteed charter school bonds in the statewide bond registry under Section

321.601, Tax Code.

Sec. 12.1604. PSF SUBROGATION RIGHTS PRESERVED.&ensp;The PSF's subrogation rights against

a charter school upon a guarantee draw are preserved.

ARTICLE 11.&ensp;&ensp;SAVING CLAUSE, TRANSITION, AND CONTINGENCY

SECTION 11.01. SAVING CLAUSE — PRE-ABOLITION BONDS.&ensp;This Act does not impair the

obligation of any Pre-Abolition Bond. The substitution of the Bond Service Levy for the ad

valorem Interest and Sinking levy is a revenue substitution, not a diminishment of any bond

obligation.

SECTION 11.02. SAVING CLAUSE — RECAPTURE OBLIGATIONS.&ensp;No school district is relieved

of any recapture obligation that accrued and became due before the Implementation Date. Prior

accrued amounts shall be reconciled by the Comptroller within 90 days of the Implementation Date.

SECTION 11.03. SAVING CLAUSE — PENDING BOND ELECTIONS.&ensp;A bond election duly called

and pending as of the Implementation Date is not invalidated by this Act.

SECTION 11.04. TRANSITION — COMPTROLLER RULES AND SYSTEMS.&ensp;The Comptroller shall

adopt the rules, certification procedures, portal infrastructure, and reporting systems required

by this Act not later than six months after this Act's effective date.

SECTION 11.05. TRANSITION — BOND RESERVE FUND PHASE-IN.&ensp;Each entity required to

establish a Bond Reserve Fund under Section 404.0051, Government Code, must achieve the

required minimum balance within three years of the Implementation Date.

SECTION 11.06. CONTINGENCY — VOTER RATIFICATION REQUIRED.&ensp;This Act takes effect

only if the constitutional amendment proposed by H.J.R. No. ___, 90th Legislature, Regular

Session, 2027, is approved by the voters at an election. If that amendment is not approved, this

Act has no effect.

ARTICLE 12.&ensp;&ensp;EFFECTIVE DATE

SECTION 12.01. EFFECTIVE DATE.&ensp;Except as provided by Sections 11.04 and 11.06, and

subject to the contingency in Section 11.06, this Act takes effect September 1, 2027.

ARTICLE 13.&ensp;&ensp;GOVERNMENT CODE — COUNTY BUILDING AND WATER IMPROVEMENT BOND AUTHORITY CONFORMING (CHS. 1472, 1473, 1474); LGC §271.062 COUNTY COs

*(Resolves Open Issues 1 and 5 from v1.1)*

Subchapter A. Chapter 1472 — Causeway Refunding Bonds

SECTION 13.01.&ensp;Section 1472.002, Government Code, is amended by adding Subsection (a-1)

to read as follows:

Sec. 1472.002. AUTHORITY TO ISSUE REFUNDING BONDS — POST-IMPLEMENTATION SOURCE SUBSTITUTION.

(a-1) On and after the Implementation Date as defined by Section 1.0052, Government Code, a

county may not impose ad valorem taxes to pay the interest on or provide a sinking fund for

the redemption of bonds issued under this chapter. On and after the Implementation Date, all

bond debt service on bonds issued under this chapter is payable exclusively from the Bond

Service Levy certified for the issuing county under Section 321.603, Tax Code, in accordance

with Article VIII, Section 1-o, Texas Constitution. Any bonds issued under this chapter on

or after the Implementation Date are subject to the universal voter approval requirement of

Section 1251.001(b), Government Code, and the CCR pre-certification requirement of Section

321.603, Tax Code.

SECTION 13.02.&ensp;Section 1472.007, Government Code, is amended to read as follows:

Sec. 1472.007. BOND SERVICE — CONTINUED OBLIGATION; SOURCE SUBSTITUTION.

(a) Before the Implementation Date, a county issuing bonds under this chapter shall continue

to impose ad valorem taxes to pay the interest on those bonds and to provide a sinking fund

for the redemption of those bonds even if the facilities constructed with the proceeds of the

bonds being refunded become a part of the state highway system.

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(b) On and after the Implementation Date, the county's obligation to pay the interest on and

provide a sinking fund for the redemption of bonds under this chapter continues without

interruption; however, that obligation is satisfied exclusively through the Bond Service Levy

certified for the county under Section 321.603, Tax Code. The county may not impose ad

valorem taxes for bond debt service on or after the Implementation Date regardless of whether

the causeway facility has become part of the state highway system.

*[Research Note: §1472.007 uniquely requires continuation of the county's obligation even after

a causeway becomes state property. The amendment preserves the continuity-of-payment obligation

while substituting the Bond Service Levy as the source — consistent with the Art. VIII §1-o

savings and substitution clause.]*

Subchapter B. Chapter 1473 — County Buildings: Ad Valorem Pledge Sections

SECTION 13.03.&ensp;Section 1473.022, Government Code, is amended by adding Subsection (a-1)

to read as follows:

Sec. 1473.022. AUDITORIUMS, COLISEUMS, EXHIBIT BUILDINGS — POST-IMPLEMENTATION.

(a-1) On and after the Implementation Date as defined by Section 1.0052, Government Code,

a county may not impose a tax for the payment of bonds issued under this subchapter. Bonds

issued on or after the Implementation Date for purposes under Section 1473.021 must be

payable from the Bond Service Levy under Article VIII, Section 1-o, Texas Constitution,

subject to prior voter approval under Section 1251.001(b), Government Code, and the CCR

pre-certification requirement of Section 321.603, Tax Code.

SECTION 13.04.&ensp;Section 1473.101, Government Code, is amended by adding Subsection (d)

to read as follows:

Sec. 1473.101. JAILS, COURTHOUSES, AND BRANCH OFFICES — POST-IMPLEMENTATION.

(d) On and after the Implementation Date as defined by Section 1.0052, Government Code:

>

(1) A county may not impose a tax under Section 9, Article VIII, Texas Constitution, or any

other ad valorem tax provision, to pay for bonds issued under this section. The constitutional

provision authorizing the tax (Art. VIII §9) is superseded on the Implementation Date by the

ad valorem prohibition of Article VIII, Section 1-e, Texas Constitution, as amended.

>

(2) Bonds issued under this section on or after the Implementation Date must be payable from

the Bond Service Levy under Article VIII, Section 1-o, Texas Constitution, subject to prior

voter approval under Section 1251.001(b), Government Code, and CCR pre-certification under

Section 321.603, Tax Code.

>

(3) All outstanding Pre-Abolition Bonds issued under this section before the Implementation

Date with a pledge of ad valorem taxes remain governed by Article VIII, Section 1-o, Texas

Constitution, which substitutes the Bond Service Levy as the pledged revenue source while

preserving all bondholder rights.

*[Research Note: §1473.101(a)(2) expressly authorizes imposition of "a tax under Section 9,

Article VIII, Texas Constitution" — the primary county courthouse and jail bond pledge. This is

the county-level equivalent of TEC §45.001(a)(2) for ISDs.]*

SECTION 13.05.&ensp;Section 271.062, Local Government Code, is amended by adding Subsection

(d) to read as follows:

**Sec. 271.062. COUNTY CERTIFICATES OF OBLIGATION — VOTER APPROVAL REQUIRED

POST-IMPLEMENTATION.**

(d) On and after the Implementation Date as defined by Section 1.0052, Government Code, no

certificate of obligation may be issued by a county under this subchapter without prior voter

approval as required by Section 1251.001(b), Government Code, as amended by this Act,

regardless of whether a sufficient petition of registered voters has been filed. The existing

petition-triggered election mechanism of Section 271.065 does not satisfy the universal voter

approval requirement of Section 1251.001(b). No certificate of obligation issued by a county

on or after the Implementation Date may be secured by a pledge of ad valorem taxes; all county

certificates of obligation issued on or after the Implementation Date are secured by the Bond

Service Levy or by non-ad-valorem revenues as provided by this chapter and Article VIII,

Section 1-o, Texas Constitution.

*[Research Note: LGC §271.062 is the county CO authority — analytically identical in structure

to §271.041 (city COs) but applies specifically to counties. Counties used COs for jails, roads,

and equipment without voter approval via the petition non-response mechanism. The amendment

requires universal voter approval and removes the ad valorem pledge post-implementation.]*

SECTION 13.06.&ensp;Section 1473.136(b), Government Code, is amended to read as follows:

Sec. 1473.136(b). PARKING FACILITIES — AD VALOREM OPTION REMOVED POST-IMPLEMENTATION.

(b) Before the Implementation Date as defined by Section 1.0052, Government Code, the

commissioners court may also provide for the bonds to be payable from and secured by the

imposition of an ad valorem tax not to exceed two and one-half cents on each $100 valuation

of taxable property in the county. On and after the Implementation Date, no ad valorem tax

may be imposed for parking facility bonds under this section. Bonds issued on or after the

Implementation Date under this subchapter may be payable from the Bond Service Levy under

Article VIII, Section 1-o, Texas Constitution, subject to prior voter approval, or from

parking facility net revenues as provided by Subsection (a).

SECTION 13.07.&ensp;Section 1473.137, Government Code, is amended to read as follows:

Sec. 1473.137. PARKING BONDS — LEGEND UPDATED POST-IMPLEMENTATION.

(a) [Unchanged — pre-Implementation Date "not entitled to demand payment from money raised by

taxation" statement.]

>

(b) On and after the Implementation Date as defined by Section 1.0052, Government Code, every

bond issued under this subchapter must include the following provision: "The holder of this

obligation is not entitled to demand payment of this obligation from money raised by ad

valorem taxation. Payment is secured by the Bond Service Levy and/or parking facility

revenues as provided by law."

SECTION 13.08.&ensp;Section 1473.192, Government Code, is amended by adding Subsection (d)

to read as follows:

Sec. 1473.192. COUNTY WORKHOUSES AND FARMS — POST-IMPLEMENTATION.

(d) On and after the Implementation Date as defined by Section 1.0052, Government Code, a

county may not impose a tax to pay bonds issued under this section. Bonds issued under this

section on or after the Implementation Date must be payable from the Bond Service Levy under

Article VIII, Section 1-o, Texas Constitution, subject to prior voter approval under Section

1251.001(b), Government Code, and CCR pre-certification under Section 321.603, Tax Code.

SECTION 13.09.&ensp;Section 1473.233, Government Code, is amended by adding Subsection (a-1)

to read as follows:

Sec. 1473.233. CRIME DETECTION FACILITY CERTIFICATES OF INDEBTEDNESS — POST-IMPLEMENTATION.

(a-1) On and after the Implementation Date as defined by Section 1.0052, Government Code:

>

(1) The commissioners court may not impose or pledge an ad valorem tax to pay certificates of

indebtedness under this section. All obligations issued under this section on or after the

Implementation Date must be payable from the Bond Service Levy under Article VIII, Section

1-o, Texas Constitution.

>

(2) The pre-existing exemption from voter approval under this section does not apply to

obligations issued on or after the Implementation Date. All obligations issued on or after the

Implementation Date under this section require prior voter approval under Section 1251.001(b),

Government Code.

*[Research Note: §1473.233 authorizes COs for crime detection facilities in counties with

1.5M+ population (Harris, Dallas, Tarrant, Bexar, Travis, Collin, Denton). These COs require

no voter approval, carry a mandatory ad valorem pledge, and have no voter petition mechanism —

the most aggressive non-voter-approved, ad valorem-backed county debt mechanism in Texas law.

The amendment closes this channel entirely post-implementation.]*

Subchapter C. Chapter 1474 — County Water Improvement Bonds

SECTION 13.10.&ensp;Section 1474.052, Government Code, is amended by adding Subsection (c) to

read as follows:

Sec. 1474.052. BOND ELECTION — POST-IMPLEMENTATION BALLOT.

(c) On and after the Implementation Date, the election ordered under this section shall not

include a question about imposing a tax on property in the county. The ballot proposition for

a bond election held on or after the Implementation Date shall be modified to state that

principal and interest on the bonds will be paid from the Bond Service Levy under Article VIII,

Section 1-o, Texas Constitution, and not from ad valorem taxes.

SECTION 13.11.&ensp;Section 1474.055, Government Code, is amended by adding Subsection (c) to

read as follows:

Sec. 1474.055. ORDER ISSUING BONDS — POST-IMPLEMENTATION SOURCE SUBSTITUTION.

(c) On and after the Implementation Date, the commissioners court may not annually impose a

tax under Subsection (b) to pay interest on bonds or provide a sinking fund. All bond debt

service obligations for bonds issued under this chapter are satisfied from the Bond Service

Levy certified for the county under Section 321.603, Tax Code.

SECTION 13.12.&ensp;Section 1474.058, Government Code, is amended by adding Subsection (c) to

read as follows:

Sec. 1474.058. APPROVAL AND ISSUANCE OF NOTES — POST-IMPLEMENTATION.

(c) On and after the Implementation Date, the commissioners court may not provide for an

annual ad valorem tax levy to pay notes issued under this section. All note debt service

obligations for notes issued on or after the Implementation Date are satisfied from the Bond

Service Levy or other non-ad-valorem revenues as certified by the Comptroller.

SECTION 13.13.&ensp;Section 1474.106, Government Code, is amended by adding Subsection (c) to

read as follows:

Sec. 1474.106. IMPOSITION OF TAX; SEPARATE FUND — POST-IMPLEMENTATION.

(c) On and after the Implementation Date, a county may not impose the tax described by

Subsection (a) for bonds issued on or after the Implementation Date. The separate fund

required by Subsection (b) for pre-Implementation Date bonds is replaced by the entity's I&S

Reserve Fund under Section 404.0053, Government Code.

ARTICLE 14.&ensp;&ensp;TRANSIT AUTHORITY CARVE-OUT — CONFIRMATION AND NOTATION

*(Resolves Open Issue 2 from v1.1)*

SECTION 14.01.&ensp;This Act does not amend Tax Code §321.101(b)-(e) (transit authority

disqualification provisions). Research confirms that those subsections apply exclusively to

the "additional municipal sales and use tax" authorized by §321.101(b) — they have no

application to the Bond Service Levy added by Subchapter G of Chapter 321, Tax Code, as enacted

by Section 5.01 of this Act. The Bond Service Levy is a constitutionally mandated, law-set levy

and is not the "additional municipal sales and use tax" subject to §321.101(b)-(e).

SECTION 14.02.&ensp;Transit authority funding under Transportation Code Chapters 451, 452, and

453 is addressed in a companion transportation funding bill. Nothing in this Act reduces or

impairs the funding obligation of any municipality or county to any transit authority as of the

Implementation Date.

ARTICLE 15.&ensp;&ensp;TAX CODE CHAPTER 151 — TLC CROSS-REFERENCE SWEEP INSTRUCTION

*(Handles Open Issue 3 from v1.1 as standard TLC practice)*

SECTION 15.01. INSTRUCTION TO TLC — CHAPTER 151 CROSS-REFERENCE UPDATE.

The Texas Legislative Council is instructed to:

(1) identify all provisions of the Tax Code, and all provisions of other Texas codes that

cross-reference the Tax Code, in which the phrase "6.25 percent" refers to the state sales

and use tax rate imposed by former Section 151.051(b), Tax Code;

>

(2) prepare conforming amendments for each such provision, substituting "the Tier 1 rate

certified annually by the Texas Comptroller of Public Accounts under Article VIII, Section

1-n(a), Texas Constitution" for "6.25 percent" where the reference is to the operative

current state rate;

>

(3) identify provisions in which "6.25 percent" appears in a historical, comparative, or

transition-period context and flag those for non-amendment; and

>

(4) include all confirmed conforming amendments from the TLC sweep as additional sections of

this Act in the engrossed version, numbered consecutively after Section 15.01.

SECTION 15.02. TRANSITION — RATE CALCULATIONS DURING TLC SWEEP.&ensp;Until all

conforming amendments are effective, any Tax Code provision that calculates a refund, credit,

audit recovery, penalty, or other amount as a function of "the rate imposed under Section

151.051(b)" shall be interpreted by the Comptroller to mean "the Tier 1 rate in effect for the

relevant transaction period as certified under Article VIII, Section 1-n(a), Texas Constitution."

The Comptroller shall adopt an interim rule implementing this section not later than 90 days

after this Act's effective date.

ARTICLE 16.&ensp;&ensp;SPECIAL DISTRICT LOCAL LAWS CODE — OMNIBUS AD VALOREM BOND AUTHORITY CONFORMING

*(Resolves Open Issue 4 from v1.1)*

Subchapter A. Water Code Confirmation — Scope of §49.108 Amendment

SECTION 16.01.&ensp;The amendment to Water Code §49.108 in Section 8.01 of this Act is

confirmed to apply to all districts that incorporate Chapter 49, Water Code, by reference —

whether that incorporation is express or implied by operation of Water Code §49.001 and

§49.002. The Comptroller shall treat all such districts as governed by amended §49.108 for bond

debt service purposes on and after the Implementation Date.

Subchapter B. Omnibus Special District Conforming — Standalone Ad Valorem Authority

SECTION 16.02.&ensp;Notwithstanding any other provision of the Special District Local Laws Code,

Government Code, or other statute, on and after the Implementation Date as defined by Section

1.0052, Government Code:

(a) Any provision of the Special District Local Laws Code, or of any enabling legislation

enacted before or after the effective date of this Act, that authorizes a special district to:

>

(1) impose, levy, assess, or collect an ad valorem tax for the payment of bonds, notes,

certificates of obligation, or other indebtedness; or

>

(2) pledge ad valorem taxes as security for any public security;

>

is superseded by Article VIII, Section 1-e, Texas Constitution, as amended, and is of no

further force or effect with respect to any indebtedness issued on or after the Implementation

Date.

>

(b) Any provision described by Subsection (a) that would otherwise govern Pre-Abolition Bonds

of a special district issued before the Implementation Date is not repealed by this section.

For Pre-Abolition Bonds, the ad valorem pledge in the enabling act is substituted by the Bond

Service Levy under Article VIII, Section 1-o, Texas Constitution, preserving all bondholder

rights.

>

(c) All special districts must register outstanding bonds with the Comptroller under Section

321.601, Tax Code, regardless of whether the district's enabling act is listed in Chapter 49,

Water Code, or in any other code.

>

(d) Any special district that believes its enabling act contains standalone ad valorem bond

authority not reached by the Water Code §49.108 amendment may petition the Comptroller for

a ruling confirming that Subsections (a) and (b) of this section govern its obligations. The

Comptroller shall issue a ruling within 60 days of receiving such a petition. A ruling under

this subsection is binding on the district and is subject to judicial review in the Travis

County district court of competent jurisdiction.

*[Research Note: The omnibus approach is constitutionally sound because the Implementation Date

constitutional amendment (Art. VIII §1-e, as amended) directly supersedes all statutory ad

valorem bond authority on the Implementation Date as a matter of constitutional hierarchy.

Section 16.02 codifies this supersession and provides an orderly Comptroller ruling process

for edge cases. Three categories of SD enabling acts were identified: (A) express Ch. 49

incorporation — covered by §49.108 amendment; (B) hybrid incorporating — covered by §49.108 as

derivative authority; (C) rare standalone pre-1999 authority — covered by this omnibus.]*

Subchapter C. Comptroller — SDLLC Survey and Ruling Database

SECTION 16.03.&ensp;The Comptroller shall:

(1) within 12 months of the Implementation Date, publish on the Local Government Transparency

Portal a complete list of all special districts that have registered bonds under Section

321.601, Tax Code, identifying for each district: (A) the enabling act citation; (B) whether

the district's bond authority derives from Water Code Ch. 49 by reference or from standalone

enabling act authority; and (C) the district's current outstanding bond balance and annual

debt service;

>

(2) maintain a public database of all Comptroller rulings issued under Section 16.02(d); and

>

(3) report to the Legislature annually on any district that has not complied with the bond

registration requirement of Section 321.601, Tax Code.

ARTICLE 17.&ensp;&ensp;HEALTH AND SAFETY CODE — HOSPITAL DISTRICT BOND AUTHORITY CONFORMING

*(Resolves Open Issue 6 from v1.1)*

Subchapter A. Chapter 281 — Primary General Law Hospital District (Counties 190,000+)

SECTION 17.01.&ensp;Chapter 281, Health and Safety Code, is amended by adding Section 281.1025

to read as follows:

Sec. 281.1025. BOND ELECTIONS — POST-IMPLEMENTATION DATE REQUIREMENTS.

(a) On and after the Implementation Date as defined by Section 1.0052, Government Code, a

bond election held under Section 281.102 shall not include a question about imposing or

continuing an ad valorem tax. The ballot proposition for a bond election held under this

chapter on or after the Implementation Date must state:

>

(1) the principal amount of the bonds to be authorized;

(2) the specific purpose or purposes for which the bonds are to be issued;

(3) that principal and interest on the bonds will be paid from the Bond Service Levy under

Article VIII, Section 1-o, Texas Constitution, and not from ad valorem taxes; and

(4) that the Texas Comptroller of Public Accounts has pre-certified that the proposed bonds'

required I&S Rate does not cause the district's total rate to exceed its Constitutional Cap

Rate under Article VIII, Section 1-n.

>

(b) No bond election may be called, and no bonds may be issued, under this chapter on or

after the Implementation Date without a current CCR pre-certification from the Comptroller

under Section 321.603, Tax Code.

*[Research Note: §281.102 requires voter approval for all bonds other than refunding bonds.

§281.004 ballot proposition references the ad valorem tax rate — that language is superseded

post-implementation by the new §281.1025 ballot requirements.]*

SECTION 17.02.&ensp;Section 281.121, Health and Safety Code, is amended by adding Subsection

(a-1) to read as follows:

Sec. 281.121. IMPOSITION OF TAX FOR BONDS — POST-IMPLEMENTATION SOURCE SUBSTITUTION.

(a-1) On and after the Implementation Date as defined by Section 1.0052, Government Code,

the commissioners court may not impose an ad valorem tax for the district under this section

for bond debt service. All bond debt service for outstanding bonds of the district — including

Pre-Abolition Bonds assumed by the district under Section 281.044 — is satisfied exclusively

from the Bond Service Levy certified for the district under Section 321.603, Tax Code, in

accordance with Article VIII, Section 1-o, Texas Constitution. The district remains the

primary obligor on all outstanding bonds.

*[Research Note: §281.121 is the operative levy provision for hospital district bonds payable

from taxes — the direct equivalent of TEC §45.001(a)(2) for ISDs. This is the key conforming

amendment for Ch. 281 hospital districts. The $3.27B in outstanding Ch. 281 GO bonds (FY2025,

BRB) and all bonds assumed under §281.044 from counties and municipalities are covered.]*

SECTION 17.03.&ensp;Section 281.107, Health and Safety Code, is amended by adding Subsection

(k) to read as follows:

**Sec. 281.107. COMBINATION TAX AND REVENUE BONDS — POST-IMPLEMENTATION AD VALOREM

PROHIBITION.**

(k) On and after the Implementation Date as defined by Section 1.0052, Government Code, the

district may not issue combination tax and revenue bonds under this section that include an ad

valorem tax pledge. All bonds or other obligations authorized under this section on or after

the Implementation Date must be payable from Bond Service Levy (for the I&S component) or

from hospital system revenues (for the operational revenue component) or a combination of

the two, without any pledge of ad valorem taxes. Pre-Abolition Bonds issued under this section

before the Implementation Date continue to be governed by Article VIII, Section 1-o, Texas

Constitution, which substitutes the Bond Service Levy for the ad valorem I&S pledge while

preserving the hospital revenue pledge component without change.

Subchapter B. Chapter 285 — General Hospital District Provisions

SECTION 17.04.&ensp;Section 285.064, Health and Safety Code, is amended by adding Subsection

(c) to read as follows:

Sec. 285.064. TAX LEVY FOR BONDS — POST-IMPLEMENTATION SOURCE SUBSTITUTION.

(c) On and after the Implementation Date as defined by Section 1.0052, Government Code, a

district may not impose an ad valorem tax under this section. All bond debt service on

outstanding bonds of the district is satisfied from the Bond Service Levy certified for the

district under Section 321.603, Tax Code.

*[Research Note: Health & Safety Code §285.064 is the Ch. 285 equivalent of §281.121 —

the operative ad valorem levy provision for general law hospital districts in smaller counties

and districts not covered by Ch. 281 or 282.]*

SECTION 17.05.&ensp;Section 285.043, Health and Safety Code, is amended by adding Subsection

(a-1) to read as follows:

Sec. 285.043. BOND ELECTIONS UNDER CH. 285 — POST-IMPLEMENTATION REQUIREMENTS.

(a-1) On and after the Implementation Date, a bond election under this section shall not

include a question about imposing an ad valorem tax. The ballot proposition must conform to

Section 281.1025(a), Health and Safety Code, as added by this Act, substituting references

to Chapter 281 with references to this chapter.

Subchapter C. Chapter 282 — Hospital Districts in Counties of 75,000–190,000

SECTION 17.06.&ensp;Chapter 282, Health and Safety Code, is amended by adding Section 282.1025

to read as follows:

Sec. 282.1025. POST-IMPLEMENTATION DATE BOND REQUIREMENTS.

On and after the Implementation Date as defined by Section 1.0052, Government Code, the bond

authority, tax pledge, and combination bond provisions of Chapter 281, as amended by Sections

17.01 through 17.03 of the Act adding this section, apply to hospital districts governed by

this chapter to the same extent they apply to Chapter 281 districts. All references in this

chapter to ad valorem taxes for bond debt service are superseded by the Bond Service Levy

under Article VIII, Section 1-o, Texas Constitution, on the Implementation Date.

*[Research Note: Chapter 282 (counties 75,000–190,000) is substantively parallel to Ch. 281.

Rather than amending each parallel bond provision individually, this section imports the Ch. 281

amendments by reference — standard TLC practice for parallel-structured chapters.]*

Subchapter D. Omnibus Health and Safety Code Conforming — Hospital Districts Chs. 283–289

SECTION 17.07.&ensp;Notwithstanding any other provision of Chapters 283, 284, 286, 287, 288,

and 289, Health and Safety Code, on and after the Implementation Date as defined by Section

1.0052, Government Code:

(a) Any provision of those chapters — including any enabling act-specific provisions — that

authorizes a hospital district to:

>

(1) impose, levy, assess, or collect an ad valorem tax for bond debt service; or

>

(2) pledge ad valorem taxes as security for any bond or other public security;

>

is superseded by Article VIII, Section 1-e, Texas Constitution, as amended, and is of no

further force or effect with respect to any obligation issued on or after the Implementation

Date.

>

(b) All outstanding Pre-Abolition Bonds of hospital districts governed by those chapters are

covered by Article VIII, Section 1-o, Texas Constitution, which substitutes the Bond Service

Levy as the pledged revenue source while preserving all bondholder rights.

>

(c) Each hospital district governed by Chapters 283 through 289 must register all outstanding

bonds with the Comptroller under Section 321.603, Tax Code, not later than 90 days after the

Implementation Date.

*[Research Note: Chs. 283 (specific county districts), 284 (adjacent county districts), 286

(hospital service districts), 287 (hospital districts in smaller counties), 288 (limited-purpose

hospital districts), and 289 (specific population-based districts) each contain standalone bond

and tax provisions that follow the same structural pattern as Ch. 281 and 285 but for specific

counties or population ranges. The omnibus supersession is constitutionally grounded on the

same basis as the SDLLC omnibus in Article 16.]*

Subchapter E. Hospital District Bond Registry

SECTION 17.08.&ensp;The Comptroller shall include all hospital districts in the statewide bond

registry under Section 321.601, Tax Code, and shall calculate and certify an I&S Rate for each

hospital district under Section 321.603, Tax Code, in the same manner as for all other taxing

entities. The registry shall include a notation for any hospital district bonds guaranteed by

the Texas Public Finance Authority or any other state guarantee mechanism.

ARTICLE 18.&ensp;&ensp;UPDATED BILL ANALYSIS — v2.0 ADDITION

Articles 13–17 resolve the six open statutory issues identified in the v1.1 Bill Analysis

and close all identified ad valorem bond pledge channels in Texas law.

Article 13 (Open Issues 1 + 5): Directly amends ad valorem pledge sections in Gov. Code

Chs. 1472 (causeway refunding bonds), 1473 (Subchapters B, D, E, G, H — auditoriums, jails,

courthouses, parking, workhouses, crime detection COs), and 1474 (county water improvement

bonds). Adds LGC §271.062(d) requiring universal voter approval for county COs

post-implementation. Revenue-only pledge sections (§§1473.002/003, 1473.052/053) require no

action. The causeway bond obligation continuity issue (§1472.007) is resolved by amending the

source — not the obligation — while preserving TxDOT coordination obligations.

Article 14 (Open Issue 2): Research confirms §321.101(b)-(e) transit authority

disqualification provisions apply exclusively to the optional "additional municipal sales and

use tax" — not the Bond Service Levy. No amendment to §321.101(b)-(e) is required or

appropriate. Transit authority funding redesign is a companion transportation bill.

Article 15 (Open Issue 3): Handled procedurally as a TLC sweep instruction with a

Comptroller interim rule to bridge the gap. Standard TLC practice for major tax architecture

changes.

Article 16 (Open Issue 4): Water Code §49.108 amendment (§8.01) reaches all Category A

and B special districts. Omnibus SDLLC provision (§16.02) addresses Category C (rare standalone

authority districts) with a constitutionally grounded supersession clause and Comptroller ruling

process for edge cases. Three-category district classification confirmed by survey research.

Article 17 (Open Issue 6): H&S Code Chs. 281 and 285 amended individually at their

operative bond pledge sections (§§281.1025, 281.121, 281.107, 285.043, 285.064) — the ad

valorem bond authority chain for all Ch. 281 and 285 hospital districts. Ch. 282 conformed by

reference import in §282.1025. Chs. 283–289 addressed by omnibus supersession at §17.07,

same constitutional grounds as SDLLC omnibus. Hospital district GO bonds: $3.27B outstanding,

~$356M annual debt service — all covered by Bond Service Levy under Art. VIII §1-o.

## REMAINING OPEN ISSUES BEFORE FILING (v2.0 — 5 Items)

All six v1.1 open issues have been resolved. Five new narrower items are identified:

1. Causeway Bond — TxDOT Coordination. Section 1472.007 as amended addresses the

post-implementation obligation. Causeway bonds in counties where the causeway has been

incorporated into the state highway system may involve intergovernmental agreements in which

TxDOT contributes to bond debt service. TLC/TxDOT coordination is recommended before filing.

2. Transit Authority Funding Companion Bill. Transit authority funding redesign (METRO,

DART, VIA, etc.) requires a separate companion bill filed contemporaneously. No funding gap

for transit operations on the Implementation Date.

3. Chapter 151 TLC Sweep. Retained from v1.1. TLC task as described in Article 15.

4. Health & Safety Code — Public Finance Authority Cross-Reference. The Texas Public Finance

Authority (Gov. Code Ch. 1232) may issue bonds on behalf of certain hospital districts. If

so, those bonds carry a state-level pledge separate from the district's own ad valorem pledge.

The TPFA bond registry should be cross-referenced with the hospital district registry under

§17.08 to confirm coverage. TLC/OAG coordination required.

5. Health & Safety Code Ch. 534 — Mental Health Authorities. Community mental health and

intellectual disability authorities may have bond authority under separate enabling legislation.

Not researched in this draft. TLC should confirm whether any such authority includes an ad

valorem bond pledge and whether an additional conforming amendment is required.

## STATUTORY CROSS-REFERENCE AND RESEARCH INDEX — COMPLETE (v2.0)

|---|---|---|---|---|

| Art. 2 | Educ. Code §45.001 | §2.01 | TEC §45.001 | ISD Bond Pledge Substitution |

| Art. 2 | Educ. Code §45.0011 | §2.02 | TEC §45.0011 | ISD I&S Rate to Comptroller |

| Art. 2 | Educ. Code §45.003 | §2.03 | TEC §45.003 | Bond Election — Tax Question Replaced |

| Art. 2 | Educ. Code §48.257 REPEAL | §2.04 | TEC §48.257 | Excess Local Revenue Trigger |

| Art. 3 | LGC §271.041 | §3.09 | LGC §271.041 | City Certificates of Obligation — Voter Approval |

| Art. 8 | LGC Ch. 400 (new) | §8.03 | LGC §§271.041, 271.062 | Special District Absorption Mechanics |

| Art. 13 | LGC §271.062 | §13.05 | LGC §271.062 | County CO — Universal Voter Approval Required |

## EFFECTIVE DATE

Subject to voter ratification of the companion constitutional amendment (H.J.R. No. ___), this

Act takes effect September 1, 2027. Articles 14 (transit notation), 15 (TLC instruction), and

18 (bill analysis supplement) take effect immediately upon the Governor's signature. Section

11.04 (Comptroller rule-making) takes effect 180 days after the Governor's signature.

*End of TPTRP_BondManagement_Leg_v2.md — Working Draft v2.0, July 4, 2026*

*Status: Draft — Not filed. For working session review and revision.*

*All six v1.1 Open Statutory Issues resolved in this version.*

*Five new narrower items identified for TLC/agency coordination before filing.*

*Companion constitutional amendment: TPTRP_BondManagement_Amendment_v3.md*

*90th Legislature filing target: January 14, 2027*

Formatted per Texas Legislative Council Drafting Manual, 89th Legislature • TPTRP Bond ManagementRep. Will Campbell, Texas House District 109 • willcampbellfortexas.com

How the Property Tax Replacement Plan Handles Bonds and Protects Texans

How the TPTRP Handles Texas Bond Debt

The Core Promise — No Bond Left Behind

The Scale of Existing Debt

How Bonds Are Paid Under the TPTRP

The I&S Component Is Law-Set and Self-Eliminating

Reserve Funds and the Backstop Cascade

School District Bonds and School Finance Reform

Citizens First Bond Sale Requirement

The Constitutional Amendment

The Implementing Legislation

TPTRP Bond Management Plan — Constitutional Amendment & Implementing Bill

References

Texas House of Representatives District 109

Will Campbell for Texas

How the Property Tax Replacement Plan Handles Bonds and Protects Texans

How the TPTRP Handles Texas Bond Debt

The Core Promise — No Bond Left Behind

The Scale of Existing Debt

How Bonds Are Paid Under the TPTRP

The I&S Component Is Law-Set and Self-Eliminating

Reserve Funds and the Backstop Cascade

School District Bonds and School Finance Reform

Citizens First Bond Sale Requirement

The Constitutional Amendment

The Implementing Legislation

TPTRP Bond Management Plan — Constitutional Amendment & Implementing Bill

References

Taxing the Invisible Transaction — TPTRP Foreign Entity Sales Tax Framework

What Ending Property Taxes Means for TX House District 109

Texas House of Representatives District 109

Will Campbell for Texas