TPTRP - The Transition Board, The Transition Fund, and the Transition Plan
By Will Campbell · July 22, 2026 · Texas Property Tax Replacement Plan
The Transition Board, the Transition Fund, and the Transition Plan
How Texas moves from a property-tax-based revenue system to a tiered sales-and-use tax system across 6,148 taxing entities — without a single missed bond payment, a single failed school district, or a single service cut — through a six-year, sunset-bound transition governed by a dedicated fund, a three-officer executive board, and a bright-line eligibility test.
Why a Transition Board and Fund Are Necessary
The core problem the Board solves, the Total Replacement Obligation, and the three-part eligibility test
The Core Problem the Board Solves
Texas has approximately 6,148 active taxing entities. (Texas Comptroller of Public Accounts, 2025) When property taxes are abolished, every one of them must cover its Total Replacement Obligation (TRO) — its final-year property tax revenue plus final-year sales tax revenue plus a 10% structural buffer — from its share of the new tiered sales and use tax collections at its tier’s Starting Cap Rate (SCR). (Campbell, 2026a)
TRO = (Entity Property Tax Revenue [Final Year] + Entity Sales Tax Revenue [Final Year] [State only: + All Other Final Year Tax Revenue]) × 1.10
Learn more about this aspect of the TPTRP Here: The Sales Tax Tier Structure of the TPTRP. →
The “Final Year” is the last fiscal or calendar year in which each entity collected property taxes before the constitutional amendment’s prohibition takes effect, as certified by the Texas Comptroller of Public Accounts based on actual revenues reported by each entity and verified by supporting evidence. (Campbell, 2026a) This is a deliberate citizen protection: every entity’s obligations and entitlements are tied to what it actually collected, never to budget projections or planning estimates. The 2025 data used throughout this article and the underlying models reflects the most current complete dataset available at drafting time — the certified figures will govern at implementation.
The 1.10 multiplier embeds a 10% structural buffer directly into every entity’s TRO, sitting above the Final Year Baseline (each entity’s actual final-year combined revenue). Applied system-wide, this buffer totals approximately $18.5 billion. (Campbell, 2026a) The system-wide SCR of 3.25% generates approximately $231.6 billion in annual revenue against an aggregate 2025-modeled Baseline of approximately $185.1 billion — well above the system-wide TRO of roughly $203.6 billion (baseline × 1.10). The resulting $46.55 billion difference, comprising the $18.5 billion TRO buffer plus a further $28.05 billion above-TRO surplus, flows to the Transition Fund in Year 1 through full-baseline capture. From Year 3 forward, every entity retains its full TRO — including its buffer — and all surplus above it, as a permanent operational cushion. Part 2 details exactly how this capture-and-retention mechanism works.
A Further Cushion: The Final Year of Property Tax Collections
For every taxing entity currently operating on property taxes, one final levy and collection will occur before the constitutional prohibition takes effect. The implementing sales tax laws may take effect before the constitutional amendment’s effective date, but the amendment’s prohibition on property tax collection does not activate until its specified implementation date. That final year’s property tax revenue provides a direct, immediate cushion as every entity enters Year 1 of the new system:
- M&O obligations: the final year’s M&O property tax collections seed each entity’s Rainy Day Fund, providing the buffer needed before the 6-month minimum balance requirement fully phases in.
- I&S obligations: the final year’s I&S levy collections flow directly into each entity’s bond service fund and remain available to service debt while the new sales tax revenue stream ramps up.
Every entity begins Year 1 holding its final property tax collections — a known, certain amount — alongside its new quarterly sales tax distributions. This is cash on hand, already collected and already appropriated, not a projection. For the large majority of entities, the final year’s property tax collections plus the first quarterly sales tax distribution will collectively exceed the entity’s first-quarter operational need.
Because the aggregate math strongly favors sufficiency — 6,015 of 6,148 entities are projected to be fully covered at SCR rates — the pre-launch analytical picture gives the Board a head start on which entities to prioritize and what structural tools to prepare before Day 1. But the actual quarterly distributions are the governing fact once collections begin; the pre-launch confidence tiers are a compass, not a contract.
The combined estimated annual shortfall for the 133 possible BOTHSHORT entities is approximately $6.81 billion per year at SCR launch rates. (Campbell, 2026a) Against the roughly $46.55 billion Year-1 Transition Fund, coverage is 6.8 times the possible annual shortfall — more than adequate even under a fully passive disbursement scenario. The Transition Board’s mandate is therefore not to find money; the money already exists. Its mandate is to determine the right permanent structural solution for each shortfall entity so it becomes self-sustaining and no longer requires Transition Fund support.
Defining an Eligible Entity
Before describing the Fund’s authorized uses, the eligibility standard must be established, because it governs every disbursement category. An entity is eligible for Transition Fund assistance if and only if:
- The entity’s governing body has put a rate increase to its citizens in a voter election.
- The voters within the entity’s jurisdiction approved a rate increase, up to and including the entity’s tier-level Constitutional Cap Rate (CCR).
- Even at the voter-approved CCR, the entity’s quarterly sales and use tax distributions remain below what the entity collected in combined property and sales taxes in the Final Year (the Comptroller-certified Final Year Baseline).
This is the three-part eligibility test. An entity that has not yet sought a voter election is not eligible. An entity whose voters denied a rate increase is not eligible — the voters have directed the entity to reduce its budget to fit its revenue, and it must implement its Mandatory Expenditure Reduction Plan accordingly. This is an intentional citizen protection: no entity gets Transition Fund help simply by asking. It must first take the question to its own voters, and if the voters say no, the entity’s obligation is to shrink its budget to match its actual revenue — not to seek a state bailout instead of respecting that vote. An entity collecting more at its voter-approved rate or at the SCR than its Final Year Baseline is not eligible, because it is already whole.
If City A collected $1,000,000 in combined property and sales taxes in the Final Year, and the new sales and use tax at the CCR generates $1,050,000 for City A’s jurisdiction, City A has no shortfall and receives no Transition Fund assistance. If City B’s CCR generates only $800,000 and its voters approved the CCR, City B is eligible for assistance to cover the $200,000 annual gap while it builds its permanent tax base.
The Constitutional Cap Rate is an absolute ceiling for every tier under the TPTRP — not merely a threshold that triggers a voter election. No entity, no Board action, and no future statute can authorize a rate above the CCR applicable to that entity’s tier under any circumstance. Voters may approve any rate up to the CCR; they may never be asked to approve, and no governing body may ever request, a rate beyond it.
Two-Phase Determination: Separating Development Assistance from a Reduction Plan
Passing the three-part test only establishes that an entity may seek Transition Fund help — it does not by itself determine what kind of help the entity receives. The law draws a second, sharper line based on the size of the entity’s certified shortfall, because a modest gap and a severe one call for very different responses.
- Preliminary Eligibility (Year 1, in progress). At any quarterly distribution during an eligible entity’s first full fiscal year collecting at its voter-approved CCR, if that quarter’s actual distribution — annualized — projects a shortfall of 10% or more against the entity’s Final Year Baseline, the entity and the Board begin joint planning for an economic development pathway immediately. This is preparation only; no development capital is disbursed at this stage. The Board and entity are getting ready, so that if the shortfall is possible, they can move without delay.
- Final Determination (after a full certified fiscal year). Once the Comptroller
certifies the entity’s actual distributions for a complete fiscal year at the CCR, the
real shortfall percentage is known — and it, not any projection or budget figure, governs
what happens next:
- If the certified full-year shortfall is 10% or greater, the prepared development plan activates, and the Board may deploy Transition Fund capital toward building the entity’s permanent commercial tax base.
- If the certified full-year shortfall is less than 10%, the development plan is set aside. The entity must implement its Mandatory Expenditure Reduction Plan — reducing its budget to match its actual revenue at the voter-approved CCR. That entity may still apply for and receive Transition Fund bridge loans, but only to help meet payment obligations on existing, previously committed infrastructure projects and similar committed obligations while it right-sizes its budget — not for new development spending.
This threshold exists so that no budget figure — only the entity’s actual, Comptroller-certified revenue — determines whether a community receives development investment or must instead reduce its own spending. It is a second layer of the same citizen protection at the heart of the three-part test: assistance is calibrated strictly to the severity of a verified shortfall, never to a request or a projection.
Voter Approval and Board Action
The eligibility framework above governs access to Transition Fund bridge loans and structural investment assistance. The Board’s day-to-day work with eligible entities — deploying bridge loans, executing development contracts, coordinating federal program stacking, issuing orders for special district rerouting — does not require additional voter elections. Voter elections are required only for decisions that directly alter the structure or territory of a taxing entity: dissolution or absorption of a special district, ISD consolidation, and voluntary annexation. For all other Board activities in support of eligible entities, the entity’s initial voter approval of the CCR is the democratic mandate on which the Board acts.
All voter-approved bond obligations are guaranteed regardless of M&O shortfall. Every entity’s I&S sub-rate is calculated and collected separately from its M&O rate, and bond debt is always paid first from collections before any M&O distribution is made — an unconditional priority built into the Bond Management Bill’s waterfall. Transition Fund assistance addresses operating budget (M&O) shortfalls only. No bond obligation goes unserviced as a result of the TPTRP transition, regardless of any entity’s eligibility status. See Section 7 for the full bond guarantee framework.
The Transition Fund: Structure, Capitalization, and Use
How the Fund is capitalized, the two-year capture window, the three-layer buffer stack, authorized uses, and the sunset
How the Fund Is Capitalized
The Transition Fund is capitalized entirely from the natural surplus the TPTRP system generates above each entity’s Final Year Baseline in its first two years — not from any new tax, not from bonded debt, and not from any general appropriation beyond the initial enabling statute. (Campbell, 2026a)
The Final Year Baseline for each entity is the sum of its actual final-year property tax collections plus final-year sales tax collections (plus all other final-year tax collections for the State of Texas), as certified by the Comptroller. This is what the entity was actually collecting — not a budget figure. The TRO is the baseline multiplied by 1.10. Collections above the baseline in Years 1 and 2, including the 10% TRO buffer and any surplus above the TRO, are what flow to the Transition Fund.
Before the Implementation Date, the Comptroller issues a formal Final Year Baseline Certification to every taxing entity in the state, establishing each entity’s certified final-year revenue figures and the resulting Final Year Baseline and TRO. Certification is based on actual reported revenues with supporting evidence, not budgets or projections, and governs all TRO calculations, Shortfall Percentage calculations, and eligibility determinations under the TPTRP. Entities may contest their certification through a formal Comptroller review process established by the enabling legislation.
The Two-Year Capture Window
Year 1 — Full Baseline-Surplus Capture. In Year 1, the Comptroller captures every dollar each entity collects above its Final Year Baseline and deposits it into the Transition Fund. The entity’s Final Year Baseline flows back to it through quarterly distributions; everything above that baseline — the 10% TRO buffer (~$18.5B system-wide) and the above-TRO structural surplus (~$28.05B system-wide) — flows 100% to the Fund, for a total estimated Year-1 capture of approximately $46.55 billion. Entities are fully protected during this capture period by their final year’s property tax collections (see the buffer-stack discussion below), which provide a complete prior-period revenue stream covering both M&O operations and I&S debt service while the Fund is being capitalized.
City A collected $1,000,000 in combined property and sales taxes in the Final Year. Its TRO is $1,100,000 (baseline × 1.10). In Year 1, if City A collects $1,200,000 under the new system, the full $200,000 above its $1,000,000 baseline — including the $100,000 that makes up its TRO buffer — goes to the Transition Fund. City A is protected during this period by its final year’s property tax collections.
Year 2 — Board-Discretionary Capture, Up to 50%. The Year-2 collection is conditional. The Board, in coordination with the Comptroller, assesses the financial stability of all taxing entities based on certified quarterly distribution data from the first three quarters of Year 1, and must make its Year-2 capture determination not later than 90 days before the end of Year 1 — giving the Comptroller and all entities a clear projection before the second year begins.
If the Board determines the Fund is adequately capitalized and all entities are on track, it may waive Year-2 collection entirely, in which case every entity retains its full above-baseline surplus through its waterfall, including the minimum 5% citizen dividend. If the Board determines additional capitalization is needed, it may activate a Year-2 collection of up to 50% of each entity’s above-baseline surplus — the full 50%, a lower percentage, or a tier-selective partial activation targeting only unstable tiers. Any above-baseline surplus not captured flows to the entity’s waterfall. The Year-2 collection, when activated, flows to the Fund at each quarterly distribution as it is collected, giving all parties a continuously updated, Comptroller-certified view of Fund balance throughout the year.
In Year 2, City A has a surplus of $150,000 above its Final Year Baseline. If the Board activates a 50% capture, $75,000 goes to the Transition Fund and $75,000 goes through City A’s waterfall. If the Board activates a 30% capture, $45,000 goes to the Fund and $105,000 goes through the waterfall. If the Board waives Year-2 collection, the full $150,000 goes through City A’s waterfall.
The citizen dividend. Whether in Year 2 (the entity’s waterfall portion) or from Year 3 forward (the full above-baseline surplus), the waterfall includes a minimum 5% citizen dividend — a constitutionally required direct return of surplus tax collections to the taxpaying residents of each district.
The final year’s property taxes in the waterfall. Any unused balance from each entity’s final year’s property tax collections at fiscal year-end flows through the entity’s Year 1 waterfall: (1) Rainy Day Fund top-up to the required 6-month minimum balance; (2) the Infrastructure Improvement Fund; (3) the First Responders Fund; and (4) the minimum 5% citizen dividend. By the end of Year 1, most entities will have their Rainy Day Fund fully capitalized from the final year’s property taxes, their Infrastructure Improvement and First Responders Funds seeded, and a dividend paid directly to residents.
From Year 3 forward — and in Year 2 if the Board waives collection — all collections flow entirely to each entity and through its full waterfall. The Fund is then deployed from its accumulated balance over the remaining transition years.
Early Board dissolution. At any point during the 6-year period, if the Board determines — based on Comptroller-certified evidence — that all taxing entities are self-sufficient, all projects are underway or complete, and the Fund holds sufficient balance to cover remaining obligations, the Board may vote unanimously to dissolve early. Upon early dissolution: all remaining Fund balances transfer to the state-level waterfall (including the minimum 5% citizen dividend); all pending obligations, active contracts, and monitoring responsibilities transfer immediately to the Comptroller’s Transition Monitoring Division; and the Division continues assisting any taxing entity going forward through successor administration. Early dissolution requires a unanimous vote of all three appointed Board members on record.
The Year-1 Buffer Stack: Three Layers of Protection
The transition period is designed so that no single funding source bears the full weight of protecting essential services. Three layers of protection apply in sequence, from most immediate to most systemic:
| Layer | Source | Amount / Mechanism | Role |
|---|---|---|---|
| 1 — Final Year’s Property Taxes | Each entity’s own final property tax levy | I&S portion seeds the bond service fund; M&O portion seeds the Rainy Day Fund | First line of defense — the entity’s own cash, not a loan |
| 2 — 10% TRO Structural Buffer | Built into the TRO formula (baseline × 1.10) | ~$18.5B system-wide; captured to the Fund in Years 1–2, retained by entities from Year 3 forward | Permanent operational cushion once retained |
| 3 — Transition Fund | Captured above-baseline surplus (buffer + additional surplus above TRO, ~$28.05B) | ~$46.55B total Year-1 pool; deployed as bridge loans and development capital | Outermost layer — bridge capital, not first-dollar protection |
Layer 1 is a complete year’s worth of each entity’s own prior revenue stream, fully accessible to fill M&O and I&S gaps during the transition — it is not Transition Fund money. Layer 2 is the buffer embedded in every entity’s TRO; while captured system-wide during Years 1–2, it becomes each entity’s permanent reserve against quarterly shortfalls from Year 3 forward, ahead of any need to draw on the Rainy Day Fund or request Board assistance. Layer 3, the Fund itself — combining the $18.5 billion TRO buffer with the further $28.05 billion in additional surplus collected above the TRO — is deployed only once an entity’s actual sales tax receipts are insufficient to cover its Final Year Baseline and it has exhausted Layer 1.
The published TPTRP tax-base model establishes a Final Taxable Base of $7,126,243,896,502, producing a Year-1 Transition Fund of approximately $46.553 billion as reflected in the figures above. (Campbell, 2026b) The system-wide Starting Cap Rate (3.25%) and the tier-level Constitutional Cap Rate ceiling (6.00%) are the rates the plan carries into the implementing legislation. All “2025 Baseline” references throughout this article refer to the Final Year Baseline as it will be certified by the Comptroller at implementation, with 2025 actual revenue figures serving as the current best estimate until certification.
What the Fund Can Be Used For
The Transition Fund is a restricted, purpose-specific fund with three authorized uses.
1. Board Operations — Legislative Appropriation. The Legislature appropriates an operating budget to the Board for its 6-year term from the Transition Fund at the time of the enabling statute. This covers compensation and direct support costs for the three formally appointed Board members (Chair, Vice Chair, and Secretary), who serve as full-time state officers for the duration of the transition period; a modest personal-staff budget for each appointed member; and incidental Board administrative expenses not covered by departmental budgets. The bulk of Board support — analytical, administrative, technical, and coordination work — is provided by the Comptroller’s Transition Monitoring Division and by working members drawn from departments already budgeted for the relevant functions, so that Board activities draw primarily on existing state personnel and infrastructure rather than new Fund expenditures. The Legislature sets the Board’s personal-staff appropriation cap at the time of the enabling statute and may approve or deny subsequent budget-increase requests at its discretion.
2. Supplemental Distributions to Shortfall Entities. Upon application and Board approval, the Fund provides supplemental coverage payments to eligible entities, structured as low-interest loans at 1% to 3% per annum set by Board order — consistent with comparable Texas state financing programs such as the State Infrastructure Bank. (Texas Water Development Board, 2025) Repayment terms are set by the Board in coordination with each entity based on its projected path to self-sufficiency. Eligibility requires the three-part test described in Section 1; an entity whose voters denied a rate increase is not eligible and must instead implement its Mandatory Expenditure Reduction Plan.
3. Structural Self-Sufficiency Investments. The Fund’s primary investment purpose is deploying capital to help eligible entities build the permanent revenue base needed to become self-sustaining at or above their Comptroller-certified Final Year Baseline — through commercial development programs, special district restructuring, ISD consolidation support, and leveraging of all available federal and state economic development programs. All disbursements under this use are low-interest loans at 1%–3% per annum, with repayment terms agreed between the Board, the entity, and any development participants. The Board may deploy this capital without requiring additional voter elections beyond the CCR approval that established eligibility; elections are required only for decisions that alter an entity’s structure or territory. Loan repayments flow back to the Transition Fund and, upon Fund termination, are administered as provided by the transition law and ultimately closed out through the statutory sunset process. All structural investments channel capital primarily through existing Texas legal frameworks: Local Government Code Chapters 380 and 381, Government Code Chapter 489 (Texas Economic Development Bank), and Government Code Chapter 2303 (Texas Enterprise Zone Act). (Tex. Local Gov’t Code chs. 380–381; Tex. Gov’t Code chs. 489, 2303) In practice, the Board’s role is to coordinate, accelerate, and co-finance eligible projects through those existing authorities, not to create a freestanding new state procurement regime.
The Board prioritizes structural investments that produce the fastest path to Final Year Baseline revenue sufficiency at the lowest cost to the Fund, using every available tool — federal program stacking, special zone leveraging, and targeted development financing — to maximize outcomes per dollar deployed.
Fund Duration and Sunset
The Transition Fund and the Board terminate not later than the sixth anniversary of the Implementation Date. This 6-year term is firm; neither the Fund nor the Board may be continued beyond that date. If one or more individual assistance actions, loan agreements, or development obligations remain active at dissolution, general law may provide for their successor administration by the Comptroller’s Transition Monitoring Division, but that does not continue the Fund or the Board themselves.
At the end of the transition period, any remaining Fund balance is disposed of through the governing constitutional and statutory sunset provisions, with unobligated balances ultimately transferred to the Economic Stabilization Fund as provided by law. The Board is dissolved, and all pending obligations, records, and monitoring responsibilities transfer to the TPTRP Transition Monitoring Division — a permanent division of the Comptroller’s office.
The Transition Board: Composition, Authority, and Operating Structure
A temporary three-officer executive body with a fixed 6-year life — grounded in Tex. Const. Art. XVI, Sec. 30a
The Transition Board is established by its own dedicated piece of legislation — the TPTRP Transition Board, Fund, and Transition Plan Act — separate from the Bond Management Bill filed as part of the broader TPTRP package.
Governance Structure
Board composition. The Board consists of three formally appointed officers of state government and a set of department working members:
- 1 Chair, appointed by the Governor — a full-time appointed state officer for the 6-year transition period.
- 1 Vice Chair, appointed by the Speaker of the Texas House of Representatives — a full-time appointed state officer for the 6-year transition period.
- 1 Secretary, appointed by the Texas Comptroller of Public Accounts — a full-time appointed state officer for the 6-year transition period.
- Department Working Members, selected by and from the relevant operating divisions of each state department required to coordinate on transition plans, ensuring the personnel who actually execute each plan are seated at the table where those plans are made. Working members participate fully in deliberations but are non-voting and hold full authority within their own departments to act on Board-coordinated plans.
Constitutional basis. Texas Constitution Article XVI, Section 30a, provides that boards established by statute — as opposed to those required by the constitution itself — may be composed of members serving terms up to six years, with composition and appointment procedures set by the Legislature. (Tex. Const. art. XVI, § 30a) This provision is permissive: the Legislature has full discretion to constitute a temporary statutory board with any composition it chooses, and no constitutional provision imposes a minimum member count for a temporarily constituted executive body of this kind. The 3-appointment model fully satisfies all applicable constitutional requirements.
Quorum. A quorum for Board action is 2 of the 3 appointed officers. All formal Board votes require a quorum; working members do not count toward quorum and do not vote.
Legislative oversight (observer seats). Each political party represented in the Texas House and Senate may designate one member of its caucus as a non-voting observer to the Board, entirely through the party’s own internal procedures. Observers may attend all open Board meetings and speak on any agenda item, but do not vote and are not Board members; they may be removed at any time by the designating caucus. A maximum of four observers may sit at any time — one per party per chamber — and observer seats are governed by the Texas Open Meetings Act, Government Code Chapter 551. (Tex. Gov’t Code, ch. 551)
Terms and continuity. The Chair, Vice Chair, and Secretary serve the full 6-year transition period unless removed by the Legislature upon a finding of cause — failure of duty, malfeasance, incapacity, or comparable grounds. The Board does not rotate membership during the transition; the same leadership team runs the operation from constitution through sunset, preserving the institutional knowledge of each entity’s situation and each resolution pathway’s progress as the Board’s most valuable operating asset.
Staff. The Board does not maintain an independent permanent staff. The Comptroller’s Transition Monitoring Division provides administrative and analytical support, and each participating state department assigns working members as needed — a structure that keeps the Board lean and prevents institutional entrenchment inconsistent with its temporary mandate.
Public transparency platform. The Board is responsible for establishing and maintaining, through the Transition Monitoring Division, a public-facing website and digital dashboard integrated with the Comptroller’s financial systems. The platform displays each entity’s status and resolution pathway, all Fund disbursements and loan repayments, Board votes on the record by member, Fund balance and deployment schedule, and a complete public financial ledger of all Board transactions in standard reporting format, alongside formal announcements of significant Board actions and entity status changes. The platform is operational from the Board’s first day and remains publicly accessible beyond the Board’s sunset.
Post-Sunset: Conversion to the Comptroller’s Department
When the 6-year transition period ends and the Board is dissolved, the transition function does not end — it converts. The Transition Monitoring Division, which operates in parallel with the Board throughout the transition period, assumes all of the Board’s pending obligations, active loan agreements, development contracts, and monitoring responsibilities. At that point it is no longer a Board; it is a permanent division of the Comptroller’s office, operating under the Comptroller’s direction and continuing to: administer remaining loan repayments and successor obligations; close out active projects and transfer completed projects to the relevant entities; report quarterly to the Legislature and Governor for at least two full years post-sunset; and maintain the public transparency dashboard and entity monitoring on an ongoing basis.
The Comptroller has full discretion over the Division’s internal structure, staffing, and operational procedures, and appoints the Division Director directly — a standard Comptroller office appointment requiring no Senate confirmation. Each state department that served as a working member of the Board must maintain at minimum one designated liaison to the Division for the duration of its active operations, so that any entity requiring post-transition assistance can access the full range of state resources through a single coordinated channel.
Board Powers and Duties
The Board exercises both advisory and full direct administrative and executive authority. It is not a purely advisory body — it holds executive power to act directly on structural issues requiring resolution within the 6-year window, in collaboration with eligible entities and their citizens. It can execute plans, issue orders, deploy funds, and hold parties accountable, but plan development for structural changes (dissolution, consolidation, annexation, rate increases) requires voter approval before execution. Once voter approval is obtained for a given course of action, the Board proceeds without needing further voter elections.
Core powers:
- Review applications for supplemental distributions from shortfall entities and certify approved amounts to the Comptroller.
- Provide rate analysis and voter-facing support. The Board holds no rate-setting authority over any entity at any tier. Rate changes require action by the entity’s own governing body and, for any increase, approval by its own voters. The Board’s role is analytical and advisory: it models what rate adjustment an entity would need and helps make that case to voters, but the decision remains entirely between the entity and its citizens. No state body may direct any county, city, school district, or special district to set a specific rate.
- Provide operational restructuring assistance and technical support to taxing entities.
- Report annually to the Legislature and the Governor, not later than December 1 of each year.
- Identify entities that may require assistance before shortfall conditions become acute.
ISD priority provision. The Board gives priority to ISD applications over other entity types and develops a multi-year financial plan for each assisted ISD, projecting its path to full self-funding under the Tier 4 mechanism.
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, so long as the entity has timely applied for and is receiving Transition Fund assistance and is cooperating with restructuring recommendations.
Additional Board Powers Required in the Standalone Bill
A. Special District Rerouting Authority. The Board has full direct administrative authority to review and confirm all special district tier absorption assignments and to issue administrative rerouting orders reassigning an absorbed special district from one tier to another. A rerouting order is effective upon Board certification to the Comptroller — it is not a legislative restructuring and requires no additional act of the Legislature. The Comptroller updates the tier assignment and TRO calculations for all affected entities, based on actual certified distributions, within 30 days of certification. Target: all rerouting decisions completed within Days 90–180 of Board operation.
B. Special District Dissolution and Absorption — Voter-Discretionary. The Board may identify special districts whose structural situation makes dissolution or absorption into the overlying entity the most appropriate long-term resolution, and may advise and facilitate conversations between the affected entities and their voters. No dissolution or absorption may be executed without voter consent, as required by applicable Texas law. The Board reserves Transition Fund bridge capital for affected entities while that voter-driven process proceeds. Upon voter-approved dissolution, all I&S bond obligations carry forward as obligations of the absorbing entity, and bondholders are fully protected without impairment.
C. Development Program Execution Authority. The Board is authorized to coordinate and support commercial development agreements and project financing backed by the Transition Fund, channeling capital through Local Government Code Chapters 380 and 381, Government Code Chapter 489 (Texas Economic Development Bank), and Government Code Chapter 2303 (Texas Enterprise Zone Act). (Tex. Local Gov’t Code chs. 380–381; Tex. Gov’t Code chs. 489, 2303) In practice, eligible local entities execute the underlying development agreements under those existing authorities, while the Board accelerates the work by supplying Fund capital, coordinating state participation, and directly executing the associated loan agreements that govern disbursement and repayment.
D. De Minimis Entity Track — Expedited Voter-Approved Resolution. The Board establishes by order a de minimis TRO threshold (not to exceed $25,000) for entities whose actual, Comptroller-certified sales and use tax distributions at the CCR are zero or negligible relative to their Final Year Baseline, publishing that threshold not later than 30 days after the Board’s constitution. No entity on the de minimis track is ever administratively dissolved or consolidated — the Texas Constitution flatly forbids using a modeled or estimated revenue figure as grounds for dissolving or consolidating any taxing entity without a vote. Instead, a de minimis entity receives enhanced priority for Transition Fund bridge loans, and the Board proactively prepares and presents to the entity’s governing body — within 60 days of designation — a proposed dissolution, consolidation, or annexation plan, complete with a transition budget and successor-entity assumption plan, for the governing body to bring to its own voters if it chooses. If the voters decline the plan, the entity remains on the de minimis track with its enhanced bridge-loan priority intact, and nothing about its structure or territory changes without its citizens’ consent.
E. Federal and State Development Program Leverage Authority. The Board is authorized and directed to identify, coordinate, and leverage all available federal and state economic development programs, special zone designations, and financing tools applicable to eligible shortfall entity jurisdictions, to accelerate construction of commercial economic centers and build a permanent sales tax base. The guiding standard is the fastest path to Final Year Baseline revenue sufficiency at the lowest cost to the Fund with the best long-term economic outcomes for the entity’s residents. Illustrative examples at the time of drafting include federal opportunity zone programs, federal and state tax credit programs targeting low-income and blighted community development, USDA and SBA rural development programs, Texas state enterprise zone programs, federal contracting set-aside programs, and CDBG-style infrastructure grants. (U.S. federal development programs) Only entities meeting the three-part eligibility test qualify. The Board maintains a public Special Zone Leverage Register identifying applicable programs in each shortfall entity’s jurisdiction and coordination status; formal MOUs are authorized but not required.
F. Legislative Oversight and Transparency. Quarterly interim reports to the House Appropriations Committee and Senate Finance Committee, not later than 45 days after each calendar quarter; the public transparency platform described above; and legislative notification 30 days prior to any single Fund deployment exceeding $500 million, with the Legislature able to delay by concurrent resolution for not more than 60 additional days.
Multi-Department Coordination
The Board’s effectiveness depends on written coordination agreements with each major state department serving Tier 2–5 entities, executed within 90 days of the Board’s constitution:
| Department | Role in Transition |
|---|---|
| Texas Comptroller of Public Accounts | Issues Final Year Baseline Certifications; distributes quarterly collections; certifies TRO, Shortfall Percentage, and ISD multi-year plans; operates the public transparency platform and Special Zone Leverage Register; houses the Transition Monitoring Division |
| Texas Education Agency (TEA) | Partners on ISD consolidation conversations (Ed. Code §13.054, §41.001); provides enrollment and budget data for Tier 4 revenue reallocation reviews |
| Texas Economic Development and Tourism Office / Governor’s Office | Coordinates Texas Enterprise Fund awards (Gov. Code Ch. 489) and Enterprise Zone designations (Gov. Code Ch. 2303); co-deploys development capital; identifies applicable federal program opportunities |
| Texas Bond Review Board | Provides bond registry data; coordinates I&S Reserve Fund compliance and bond-payoff acceleration tracking |
| Texas Water Development Board / TCEQ | Provides technical support for special district dissolution and absorption involving water-related districts |
| Texas Department of Housing and Community Affairs | Coordinates rural development programs, CDBG applications, and housing-adjacent commercial development in CCR-persistent rural entities |
| Federal and State Development Program Partners (Board discretion) | Informal coordination with any applicable federal agency (USDA Rural Development, SBA, HUD, Treasury/CDFI Fund) or state entity; no formal MOU required |
The Transition Plan: Six-Year Timeline
Year-by-year milestones, the 90-day first-action sequence, and the resolution toolkit available to the Board
| Year | Phase | Key Milestones |
|---|---|---|
| Year 1 | Compliance, Setup & First-Quarter Analysis | 90-day business compliance period; Board constituted; Comptroller issues Final Year Baseline Certifications; first quarterly collections distributed and analyzed; voter-election guidance issued; SD rerouting orders completed; Transition Monitoring Division operational |
| Year 2 | Eligibility Finalization & Development Launch | First-round eligible entities confirmed after voter elections; Ch. 380/381 development programs launched; ISD consolidation elections underway; Board makes Year-2 capture determination |
| Year 3 | Build Phase 1 | Major metro commercial corridors under construction; first ISD consolidations completed; rural bridge resolutions finalized; full above-baseline surplus flows to entities from this year forward |
| Year 4 | Build Phase 2 | Development programs accelerate; suburban ISD programs near completion; Fund repayments begin from Year 2–3 projects |
| Year 5 | Stabilization | 90%+ of eligible entities at or above SCR; loan repayments exceed new disbursements; Board may assess early dissolution eligibility |
| Year 6 | Sunset & Handoff | Board dissolved on the 6th anniversary of the Implementation Date (or earlier by unanimous vote); remaining Fund balance transfers to state waterfall/ESF; all obligations transfer to the Transition Monitoring Division |
The 90-Day First-Action Sequence
Before any entity’s actual shortfall can be measured — and therefore before any eligibility can be determined — the new system must be implemented and the first full quarter of collections distributed. The sequence runs in three phases: a 90-day business compliance window beginning at enactment, during which the Comptroller publishes baseline certifications for all ~6,148 entities and businesses update their sales tax permits; the first quarterly distribution, which produces the first actual revenue data for every entity and is the governing fact against which eligibility is measured; and a 30–60 day post-distribution analysis period, during which the Comptroller reports actual collections versus certified baseline, forward projections, and likely CCR revenue for shortfall entities — the dataset that governs the Board’s eligibility determinations.
Pre-distribution priorities (Days 1–~120 from enactment): constitute the Board and execute inter-agency coordination agreements within 90 days; the Comptroller issues Final Year Baseline Certifications; the Board pre-reserves estimated bridge capacity based on pre-launch confidence-tier analysis (no disbursements before eligibility confirmation); compile the Special Zone Leverage Register; and conduct the special district rerouting audit.
Post-first-distribution priorities (Days 30–180): receive and analyze the first Comptroller report by Day 30; issue voter-election guidance to all entities with a projected CCR shortfall by Day 45 (starting the 12–18 month voter-approval clock); begin prioritizing entities for individualized planning by Day 60; initiate TEA consolidation conversations for ISDs with certified shortfalls near or at the maximum by Day 60; issue first eligible-entity determinations by Day 90; and issue development RFPs and begin Fund disbursements to confirmed eligible entities by Day 120.
Year-2 capture determination (not later than 90 days before end of Year 1): the Board votes to activate (up to 50%, per tier or in full), reduce, or waive Year-2 capture, publishing the determination on the public transparency platform immediately.
Resolution Tools Available to the Board
| Tool | Cost | Timeline | Best For |
|---|---|---|---|
| Special District Rerouting | Zero | Days 30–180 post-distribution | Absorbed special districts needing tier reassignment |
| Federal/State Development Program Leverage | Near zero | Pre-distribution through Year 2+ | Blighted, food-desert, low-income, or rural jurisdictions |
| Voluntary Annexation | Low | 12–24 months | Small cities with adjacent ETJ commercial zones |
| Special District Dissolution/Absorption | Low-medium | 12–36 months (voter process) | Rural counties/cities with special district fragmentation |
| ISD Consolidation | Medium | 12–36 months | Small rural ISDs with minimal local commercial tax base |
| Commercial Development Program | High (developer-carried) | 24–60 months | High-growth suburban cities; large urban ISDs; rural counties |
| Transition Fund Bridge Loan | Ongoing capital (recoverable) | From first eligible-entity determination | All eligible entities pending structural resolution |
How the Board Approaches Each Entity’s Situation
No fixed formulas — each eligible entity receives its own individualized plan built from its own certified revenue data
No two shortfall entities look alike. A fast-growing suburban city with rapid residential growth outpacing its commercial base faces a fundamentally different problem than a small rural town with almost no existing commercial activity, an oil-and-gas county where production revenue is attributed to corporate structures headquartered elsewhere, or a school district whose enrollment and tax base can no longer support independent operation. Rather than prescribing a single resolution method in statute, the law gives the Board the discretion to classify each eligible entity by the general character of its shortfall and to select whichever combination of tools — commercial development agreements, special district rerouting, annexation, ISD consolidation, or federal and state program leverage — fits that entity’s actual circumstances.
“This categorization is a working tool the Board uses internally to prioritize its efforts and match resources efficiently; it is not a fixed legal designation, and the law does not lock the Board into predetermined categories or outcomes.”— TPTRP Transition Board, Fund, and Plan Act, Explainer
Every eligible entity ultimately receives its own individualized plan, built from its own certified revenue data and its own community’s needs, reviewed and refined as actual conditions develop over the six-year transition period. The full toolkit available to the Board for building these plans is described above in Section 4.
What the Transition Board Means for Constituents
Five plain-language assurances every Texan in a shortfall jurisdiction should understand from Day 1
Every Texan in a shortfall jurisdiction should understand five things:
The Transition Fund is funded and in place before the property tax is eliminated. The Board confirms eligible entities after the first quarter of collections and issues bridge letters of credit so that police, fire, schools, and county services continue without interruption.
The I&S sub-rate ring-fences bond debt service from all other collections, and it is always paid first. No entity’s shortfall status or Transition Board interaction affects bond repayment in any way — if voters approved a bond, it is paid.
Each taxing entity’s final year of property tax collections remains in its accounts on Day 1 of the new system — a full year’s prior-period revenue that seeds the Rainy Day Fund and covers debt service while sales tax collections ramp up. It is not a loan; it is the entity’s own cash, already collected.
The roughly $46.55 billion Transition Fund, fully capitalized in Year 1, is approximately 6.8 times the total annual shortfall of all 133 possible shortfall entities. The money exists; the Board’s task is the structural question of what permanent commercial base each shortfall community needs so it no longer depends on Fund support — and building that base returns local jobs, wages, and economic activity well beyond the tax revenue itself, all funded through a repayable development loan rather than a tax subsidy.
After six years, the Board is dissolved, but the work converts to a permanent department of the Comptroller’s office, which continues monitoring every entity’s collection performance, maintaining public dashboards, and reporting to the Legislature.
Learn more about the Texas Property Tax Replacement Plan See the impact on HD 109
Bond Management and the Transition Board’s Role in Debt Servicing
The unconditional bond guarantee, the Bond Management Bill, and the narrow cases where the Board becomes involved
Bond Obligations Are Unconditionally Guaranteed
Every voter-approved bond obligation in Texas carries forward under the TPTRP without modification or impairment. The funding source shifts from property tax to sales tax, but the payment schedule does not change by a single dollar or a single day. Bond debt service takes absolute priority over M&O distributions in every entity’s waterfall, and no entity’s eligibility status for Transition Fund M&O assistance affects the guarantee of its bond obligations.
How the Bond Management Bill Guides the Transition Board
The Bond Management Bill (H.B. ___, 90th Legislature) is the primary legal instrument governing Texas bond obligations under the TPTRP. The I&S sub-rate is calculated annually by the Comptroller as the certified annual debt service requirement for each entity divided by that entity’s certified local tax base share, and collections sufficient to service the I&S obligation are distributed before any M&O distribution is made. The Bond Management Bill establishes the I&S Rate framework, the Citizens First Bond Portal, the bond backstop cascade, and the statewide bond registry, and will be amended to cross-reference the standalone Transition Board Act, so that each bill governs its own domain while recognizing the other’s role.
When the Transition Board Gets Involved in Bond Service
For most entities, bond service is automatic and requires no Board involvement. The Board becomes involved when an entity faces a combined shortfall — where its total tier rate cannot cover both bond obligations and operational needs. In that case, the Board:
- Issues Transition Fund bridge loans to cover the M&O shortfall while the entity’s I&S Rate fully covers bond debt service, so bond service is never the item that gets cut;
- Coordinates with the Comptroller on I&S Reserve Fund backstop draws when collections fall short in a given quarter;
- Prioritizes development programs that grow the entity’s local commercial tax base fastest for high-bond-load entities, since a growing local tax base reduces the I&S Rate automatically as the bond obligation amortizes;
- Because it cannot change the I&S Rate itself, focuses on growing that local tax base as the only lever available to relieve CCR pressure on bond-heavy entities.
Civil penalties collected under the Bond Management Bill’s Article 6 (Citizens First Bond Portal violations) flow directly into the Transition Fund as an enumerated capitalization source. The Bond Management Bill governs the penalty structure and the portal; the Transition Board governs how those penalty inflows are used once they arrive in the Fund.
Identifying Possible Eligible Entities for Transition Assistance
How pre-launch modeling classifies entities into planning categories — and why those categories are not legislative designations
The system is designed with a built-in aggregate surplus, but averages don’t protect every city and county. The statewide tax base generating that surplus is not evenly distributed across all 6,148 entities. (Campbell, 2026b) A fast-growing suburban city may have a large residential population but relatively little mature commercial development; a rural border county may have almost no attributable local economic activity; a small ISD serving a sparsely populated oil-field area may generate almost no local commercial tax base under the new system at all.
Pre-launch modeling identifies approximately 133 entities as possible, structural shortfall cases under current projections, with several hundred more requiring further review as actual data becomes available. (Campbell, 2026a) These entities will possibly face a Day-1 revenue shortfall relative to their TRO. Without a structured bridge, government services would fail before a structural fix could be deployed. The Fund provides the bridge money; the Board provides the structural solution.
| Planning Category | Approx. Count | Definition | Anticipated Day-1 Response |
|---|---|---|---|
| possible structural shortfall | 133 | Modeling under multiple methodologies confirms a shortfall — structural and certain | Mandatory pre-funded bridge |
| Likely shortfall, method-dependent | 244–256 | One allocation method flags a shortfall; an alternate method does not | Board review; many likely resolved by SD rerouting |
| Absorption-driven shortfall | 208 | Entity clears its rate alone; fails only once absorbed special district obligations are added | Special district rerouting — administrative, no capital needed |
| Shortfall persists at the CCR | 166 | Shortfall persists even at the 6.00% constitutional cap ceiling | Structural reorganization required — no rate solution exists |
What the legislation does is simpler and more objective: after the first quarterly distribution, every entity will know exactly what it received versus its Comptroller-certified Final Year Baseline, and any entity whose quarterly receipts are insufficient can immediately approach the Transition Board.
Learn about the tax base and Texas Living Essentials Subtraction
Legislative Architecture: Two Bills, One Plan
The Transition Board Bill (H.J.R. + H.B.) and the Bond Management Bill operate in coordination, each governing its own domain
The Transition Board, Transition Fund, and Transition Plan will be established by their own standalone piece of legislation, separate from the Bond Management Bill. The Bond Management Bill covers how bond obligations are managed, restructured, and serviced under the TPTRP; the Transition Board Bill is categorically different — a temporary executive body with a fixed 6-year life and a dedicated fund — and the two bills operate in coordination. The Bond Management Bill’s Article 9 (Gov. Code Ch. 490, Sec. 490.001–490.013) is the seed text from which the standalone Transition Board legislation is built; when the standalone bill is filed, Article 9 of the Bond Management Bill will be amended to cross-reference the standalone act.
Constitutional Amendment (H.J.R.) — Establishes the Transition Fund as a constitutionally dedicated special fund in Article III, authorizes the Transition Board and permanent Comptroller Transition Monitoring Division under Article VIII (grounded in Article XVI, Section 30a), and locks in the six-year sunset with anti-diversion protections.
Implementing Legislation (H.B., Gov. Code Ch. 490) — Provides the full statutory text: Board composition, Comptroller Transition Monitoring Division, three-part eligibility test, two-phase 10% Shortfall Percentage determination, capture windows, authorized Fund uses, and sunset mechanics. Both bill texts are attached in the tabs below.
The two-tab legislation module below presents both drafts side by side in placeholder form; the finalized bill text will be inserted when the drafts move to filing.
How This Model Compares to Other Transition Structures
California, Colorado TABOR, New Zealand GST, and Australia’s 2026 reform — where the TPTRP borrows and where it improves
No other U.S. state or comparable jurisdiction has attempted a full statewide abolition of property taxes replaced by a sales-and-use tax base, which makes the TPTRP Transition Board a novel institution. But several precedents inform its design, and comparing against them shows both the grounding of the approach in established public-finance practice and the specific improvements built in to protect Texans beyond what those precedents achieved.
California’s Redevelopment Agency Dissolution (2011–2012)
When California eliminated roughly 400 local redevelopment agencies and redirected their captured property tax increment back to cities, counties, and schools, the state created “successor agencies” and county-level Redevelopment Property Tax Trust Funds to manage the wind-down of existing obligations. (California Legislative Analyst’s Office, 2012) (Strauss, 2012) The successor-agency model demonstrates the core mechanic the Transition Board also relies on — a temporary, purpose-built administrative body managing a defined asset pool during a multi-year unwind, with an oversight board reviewing disbursements. California’s wind-down, however, ran for well over a decade with recurring litigation over enforceable obligations and disputed asset transfers, because the legislation did not establish clear, objective, data-driven eligibility criteria up front. (San Diego Independent Budget Analyst, 2016) The TPTRP’s three-part eligibility test and Comptroller-certified Final Year Baseline are designed to avoid that ambiguity: eligibility is a bright-line, auditable test applied to actual certified revenue, not a negotiated determination subject to years of dispute.
Colorado’s TABOR Framework
Colorado’s Taxpayer’s Bill of Rights constitutionally caps government revenue growth and mandates refunds of revenue collected above the cap, a structure frequently cited nationally as the strongest citizen-protection precedent for constitutionally limiting government’s claim on surplus collections. (Ballotpedia, n.d.) (Jefferson County, CO, n.d.) TABOR’s refund mechanic is the closest existing analogue to the TPTRP’s minimum 5% citizen dividend, but TABOR operates as a blunt, uniform cap with no companion mechanism for managing a one-time systemic transition or for capitalizing a bridge fund — it simply returns money once a threshold is crossed. The Transition Board’s structure borrows TABOR’s citizen-first refund principle while adding a purpose-built, time-limited capture-and-deploy mechanism that TABOR was never designed to provide, because Colorado never had to fund a wholesale replacement of one entire tax base with another.
New Zealand’s 2010 GST Rate Transition
New Zealand’s increase of its Goods and Services Tax rate from 12.5% to 15% in 2010 included statutory transition provisions to smooth business compliance and adjust benefit payments and thresholds concurrently with the rate change, administered centrally by Inland Revenue with a defined compliance runway before the new rate took effect. (New Zealand Government, 2010) That transition offers a useful comparison point for the TPTRP’s 90-day business compliance window, but it was a single-rate adjustment within an already-existing GST system serving one national government — not a full replacement of a separate tax base (property tax) with a fundamentally different one (sales tax) spread across more than 6,000 independent local taxing entities. The scale and structural complexity the Transition Board must manage — multi-tier rates, thousands of independent budgets, bond obligations layered across entities, and voter-approval gates for structural changes — has no equivalent in the New Zealand precedent.
Australia’s 2026 Property and Housing Tax Overhaul
Australia’s federal government secured passage of legislation restructuring property market taxation and capital gains treatment in mid-2026, an active, ongoing reform effort most comparable in ambition to TPTRP among current global tax-reform initiatives. (Bloomberg Tax, 2026) That reform, however, operates within Australia’s existing federal-state revenue-sharing architecture and does not attempt to eliminate an entire class of subnational government’s primary funding source; state and local governments in Australia retain their own revenue tools throughout. The TPTRP Transition Board’s distinguishing feature — a dedicated, sunset-bound executive body with direct authority to certify eligibility, deploy capital, and execute development agreements, answerable to the Legislature on a fixed calendar — is not required in a reform of that scope, because no Australian government experiences a Day 1 funding cliff.
Every comparable transition effort examined shares two features the TPTRP explicitly builds on and improves: a temporary, purpose-specific administrative body (as in California), and a citizen-first refund or rebate principle (as in Colorado). None of them, however, had to solve the specific problem TPTRP creates — a hard, dated elimination of a primary local government revenue source across thousands of independent entities simultaneously, with bond obligations that must be guaranteed without interruption.
The Transition Board’s design choices that go beyond any single precedent are: (1) a bright-line, Comptroller-certified eligibility test rather than a negotiated or litigated one; (2) an unconditional, ring-fenced bond guarantee that never depends on an entity’s transition status; (3) a fixed, non-extendable 6-year sunset with automatic conversion to a permanent monitoring function rather than an indefinite wind-down; and (4) direct executive authority to deploy capital and execute development contracts without requiring a separate legislative act for each entity’s resolution, while still requiring voter approval for any structural change to a taxing entity itself. Taken together, these features are calibrated specifically to avoid the extended ambiguity that prolonged California’s redevelopment wind-down for over a decade, while preserving the citizen-protection principle at the heart of Colorado’s TABOR.
TPTRP Transition Board, Fund, and Plan Act
The full text of both bills — the constitutional amendment (H.J.R.) and the implementing legislation (H.B., Government Code new Chapter 490) — is available below in each tab. Scroll within each panel to read the entire bill, or download either as a Microsoft Word document or plain-text file for offline review.
By: ___________________
H.J.R. No. _____
A JOINT RESOLUTION
proposing a constitutional amendment relating to the establishment of the TPTRP Transition Fund, the TPTRP Transition Board, and the TPTRP Transition Monitoring Division of the Texas Comptroller of Public Accounts to ensure fiscal continuity for all taxing entities during the transition from ad valorem taxation to the sales and use tax system established by this constitution.
BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. ARTICLE III — TPTRP TRANSITION FUND
SECTION 1.01. Article III, Texas Constitution, is amended by adding Section 49-___ to read as follows:
Sec. 49-___. TPTRP TRANSITION FUND.
(a) The TPTRP Transition Fund is created as a special fund in the state treasury outside the general revenue fund. The Fund is established to ensure fiscal continuity for taxing entities during the transition from ad valorem taxation to the sales and use tax system established by this constitution. For purposes of Section 22, Article VIII, of this constitution, money in the Fund is dedicated by this constitution.
(b) The Fund consists of:
(1) appropriations made by the Legislature for transition purposes authorized by this section, including appropriations for the operating budgets of the three appointed Board members and their support staffs, as established by general law;
(2) surplus collections during the transition period, as determined by general law and subject to the limits of this section:
(A) in the first fiscal year after the Implementation Date, all collections above each taxing entity's Comptroller-certified final-year combined property tax and sales tax revenue, and all other Comptroller-certified final-year tax revenue for the State of Texas, shall be transferred to the Fund at each quarterly distribution;
(B) in the second fiscal year after the Implementation Date, the Transition Board shall determine, not later than the 90th day before the end of the first fiscal year and based on Comptroller-certified quarterly distribution data from the first three quarters of that year, whether to activate a capture of up to 50 percent of each entity's above-baseline surplus, to waive that capture in whole or in part, or to activate the capture on a tier-selective basis; and
(C) beginning with the third fiscal year after the Implementation Date, no collections shall be transferred to the Fund under this subdivision;
(3) civil penalties collected under the general laws implementing this section and the related transition-board provisions of this constitution;
(4) interest, investment earnings, loan repayments, and all other returns on Fund balances or Fund-authorized assistance; and
(5) money transferred or deposited to the credit of the Fund as authorized by general law consistent with this section.
(c) Money in the Fund may be used only for:
(1) Board operating expenses authorized by general law;
(2) supplemental assistance, including low-interest loans and similar financial assistance authorized by general law, to eligible taxing entities whose voter-approved rate at the Constitutional Cap Rate applicable to the entity's tier remains insufficient to produce the entity's Comptroller-certified Final Year Baseline or other constitutionally authorized operating threshold during the transition period;
(3) structural self-sufficiency investments, including development financing and related transition assistance authorized by general law, for eligible taxing entities; and
(4) repayment, administration, monitoring, and closeout activities authorized by general law and directly related to the purposes of this section.
(d) The Legislature may not appropriate, transfer, lend, sweep, temporarily borrow, or otherwise divert money in the Fund for any purpose other than a purpose expressly authorized by this section. No money in the Fund may be transferred to the general revenue fund or used for cash-flow management, budget execution, certification support, emergency deficit coverage, or any other governmental purpose not expressly authorized by this section. This subsection controls over any contrary general law.
(e) Assistance and investments made from the Fund must serve a public purpose, provide a clear public benefit consisting of continuity of essential governmental services and transition to permanent revenue self-sufficiency, and be subject to conditions, limitations, reporting, and repayment controls provided by general law sufficient to ensure that the public purpose is accomplished and the public benefit is protected.
(f) Nothing in this section impairs, supersedes, or diminishes any constitutional or contractual protection applicable to bond obligations. The Legislature shall provide by general law for coordination between the Fund and the bond-protection provisions of this constitution. The Transition Board may coordinate assistance to ensure that bond service is properly supported during the transition period, but money in the Fund may not be construed to replace, narrow, or weaken any separate constitutional bond guarantee.
(g) The Fund terminates not later than the sixth anniversary of the Implementation Date. On termination of the Fund, any unexpended and unobligated balance remaining in the Fund shall be transferred to the economic stabilization fund under Section 49-g of this article. The Legislature may by general law provide for the administration after that date of specific obligations lawfully incurred before termination, but the Fund itself may not be continued beyond that date.
(h) This section expires on the sixth anniversary of the Implementation Date, except that:
(1) Subsection (g) of this section continues in effect for the limited purpose of completing the transfer required by that subsection and administering specific obligations lawfully incurred before termination as authorized by general law; and
(2) the expiration of this section does not affect rights or duties fixed before expiration.
ARTICLE 2. ARTICLE VIII — TPTRP TRANSITION BOARD
SECTION 2.01. Article VIII, Texas Constitution, is amended by adding Section 1-___ to read as follows:
Sec. 1-___. TPTRP TRANSITION BOARD AND TRANSITION MONITORING DIVISION.
(a) The Legislature shall establish by general law a TPTRP Transition Board as a temporary independent body of state government to administer the transition assistance framework established by this constitution and by general law during the period ending on the sixth anniversary of the Implementation Date.
(b) The Board has full administrative and executive authority, subject to general law, to:
(1) review and approve supplemental assistance from the TPTRP Transition Fund to eligible taxing entities whose tier allocation is insufficient to fund their certified operations during the transition period, subject to the eligibility conditions established by general law, including the requirement that the entity's voters have approved a rate increase up to the Constitutional Cap Rate applicable to that entity's tier and the entity remains below its Comptroller-certified Final Year Baseline or other constitutionally authorized operating threshold at that rate;
(2) provide analysis and advisory support to taxing entities and to the Legislature regarding the rates needed for fiscal sufficiency, subject to the principle that no rate change at any tier may be made without action by the governing body of the affected entity and no rate increase may take effect without approval by the voters of that entity's jurisdiction when voter approval is otherwise required by this constitution;
(3) identify, coordinate, and leverage available federal and state economic development programs, special-zone designations, and financing tools in eligible shortfall jurisdictions to accelerate commercial economic development and build a permanent sales and use tax base;
(4) execute development agreements and deploy transition assistance as authorized by general law and consistent with the public-purpose requirements of this constitution;
(5) issue administrative orders for special district tier-rerouting assignments as authorized by general law;
(6) coordinate transition assistance with the comptroller, the Bond Review Board, the Texas Education Agency, the Texas Water Development Board, the Texas Commission on Environmental Quality, the governor's economic development office, and other state agencies or programs specified by general law; and
(7) take additional actions provided by general law that are necessary to ensure every eligible taxing entity achieves revenue self-sufficiency under the sales and use tax system established by this constitution.
(c) General law must provide procedures for Comptroller certification of the Final Year Baseline and related transition determinations and for administrative review of those certifications and determinations.
(d) No taxing entity in this state may be placed in financial exigency solely as a result of the transition from ad valorem taxation to the sales and use tax system established by this constitution if the entity has timely applied for available transition assistance and is cooperating with lawful restructuring recommendations issued under general law.
(e) General law may not authorize the Board or any other officer or agency to dissolve, consolidate, annex, absorb, or otherwise alter the governmental structure, territory, or separate legal existence of a taxing entity without the voter approvals otherwise required by this constitution and by general law. No estimated or modeled tax-base determination alone constitutes constitutional grounds for administrative dissolution or consolidation.
(f) The Board shall issue at least one public report each year to the Legislature and the governor regarding Fund activity, entity status, outstanding obligations, and recommendations for statutory adjustments, and shall provide additional public reporting as required by general law.
(g) The Board terminates not later than the sixth anniversary of the Implementation Date and may dissolve before that date only by unanimous vote of all appointed Board members on a finding that all eligible taxing entities are self-sufficient and all lawfully incurred obligations are under active management by a designated successor. The Board's term may not be extended. The Legislature may by general law provide for continued administration of specific obligations lawfully incurred before the Board's termination, but may not continue the Board itself beyond that date.
(h) The comptroller shall establish by general law a permanent TPTRP Transition Monitoring Division within the comptroller's office. The Division shall assume all monitoring, reporting, record-keeping, and successor-administration responsibilities assigned by general law on the Board's termination. The Division director shall be appointed by the comptroller. The Division shall continue to report to the Legislature and the governor for not less than two years following the Board's termination and shall maintain ongoing monitoring of taxing entity sales and use tax collections and successor obligations under this constitution thereafter. This subsection does not expire.
(i) Subsections (a) through (g) of this section expire on the sixth anniversary of the Implementation Date, except that the expiration of those subsections does not affect rights or duties fixed before expiration. Subsection (h) of this section does not expire.
ARTICLE 3. TEMPORARY PROVISION AND SUBMISSION TO VOTERS
SECTION 3.01. TEMPORARY PROVISION.
(a) This constitutional amendment takes effect on the Implementation Date provided by the general law implementing the TPTRP transition framework.
(b) The Legislature shall enact the general laws necessary to implement this amendment, including laws governing Board composition, appointment, quorum, transparency, assistance standards, certification review, interagency coordination, and Fund administration.
(c) The second-year capture determination required by Section 49-___(b)(2)(B), Article III, of this constitution must be published immediately on the public transparency platform required by general law.
(d) This temporary provision expires on the sixth anniversary of the Implementation Date.
SECTION 3.02. SUBMISSION TO VOTERS. This proposed constitutional amendment shall be submitted to the voters at an election to be held November [__], 20[__]. The ballot shall be printed to permit voting for or against the proposition:
"The constitutional amendment creating a temporary TPTRP Transition Board and a constitutionally dedicated TPTRP Transition Fund, prohibiting diversion of Fund money to other governmental purposes, providing for the six-year sunset of the Board and Fund with transfer of the remaining balance to the economic stabilization fund, and establishing a permanent TPTRP Transition Monitoring Division in the comptroller's office."
By: ___________________
H.B. No. _____
A BILL TO BE ENTITLED
AN ACT
relating to the establishment of the TPTRP Transition Board, the TPTRP Transition Fund, and the TPTRP Transition Monitoring Division of the Texas Comptroller of Public Accounts to ensure fiscal continuity for all taxing entities of this state during the transition from ad valorem property taxation to the sales and use tax system; superseding Government Code Chapter 490 as enacted by the TPTRP Bond Management Act; making an appropriation.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. GOVERNMENT CODE CHAPTER 490 — TPTRP TRANSITION BOARD, FUND, AND TRANSITION PLAN
SECTION 1.01.
Subtitle D, Title 4, Government Code, is amended by adding Chapter 490 to read as follows, superseding all prior enactments of Chapter 490:
CHAPTER 490. TPTRP TRANSITION BOARD, TRANSITION FUND, AND TRANSITION PLAN
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 490.001. DEFINITIONS.
In this chapter:
(1) "Board" means the TPTRP Transition Board established under Subchapter C, as authorized by Article VIII, Section 1-___, of the Texas Constitution.
(2) "CCR" means the Constitutional Cap Rate — the maximum sales and use tax rate permitted by the Texas Constitution for each tier — which is six percent for Tiers 2 through 5 and as otherwise specified by the TPTRP implementing legislation for Tier 1. No taxing entity may impose, and no election may authorize, a rate in excess of the CCR applicable to that entity's tier. The CCR is an absolute constitutional ceiling and not merely a threshold triggering a voter election.
(3) "Comptroller" means the Texas Comptroller of Public Accounts.
(4) "Division" means the TPTRP Transition Monitoring Division established under Subchapter F.
(5) "Eligible entity" means a taxing entity that meets the eligibility conditions established under Section 490.032.
(6) "Final Year Baseline" means the Comptroller-certified sum of an entity's actual final-year property tax collections plus final-year sales and use tax collections, plus all other final-year state tax collections for the State of Texas, as established under Section 490.015.
(7) "Shortfall Percentage" means, for an eligible entity, the percentage calculated as: (the entity's Final Year Baseline minus the entity's actual Comptroller-certified sales and use tax distributions at the entity's voter-approved CCR rate) divided by the entity's Final Year Baseline. The Shortfall Percentage is calculated exclusively from Comptroller-certified actual revenue figures. No budget, appropriation, projection, or modeled estimate of any kind may be used in place of actual certified distributions in this calculation.
(8) "Fund" means the TPTRP Transition Fund established under Subchapter B, as authorized by Article III, Section 49-___, of the Texas Constitution.
(9) "Implementation Date" means the date on which the constitutional amendment proposed by H.J.R. No. ____, 90th Legislature, takes effect and the prohibition on ad valorem property taxation becomes operative.
(10) "SCR" means the Starting Cap Rate — the initial sales and use tax rate applicable to each tier as established by the TPTRP implementing legislation, which is 3.25 percent system-wide as established by the TPTRP rate legislation.
(11) "Taxing entity" means any entity authorized to levy taxes under Texas law, including municipalities, counties, independent school districts, and special purpose districts.
(12) "TRO" means Total Replacement Obligation — each entity's Final Year Baseline multiplied by 1.10, representing the entity's required annual revenue target inclusive of a 10 percent structural buffer.
(13) "Board is constituted" means the date on which all three appointed officers under Section 490.031(b) have taken their oath of office and the Board has held its first meeting with a quorum present. All deadlines in this chapter measured from the Board's constitution run from that date.
Sec. 490.002. PURPOSE.
The purpose of this chapter is to:
(1) establish the TPTRP Transition Fund to provide bridge financing and structural self-sufficiency capital to taxing entities with a revenue shortfall during the transition from ad valorem property taxation to the sales and use tax system;
(2) establish the TPTRP Transition Board as an independent body of state government with full administrative and executive authority to manage the transition, resolve entity shortfalls, and deploy the Fund; and
(3) establish the TPTRP Transition Monitoring Division as a permanent division of the Comptroller's office to monitor, report, and continue the work of the Board after the Board's termination.
SUBCHAPTER B. TPTRP TRANSITION FUND
Sec. 490.011. FUND ESTABLISHED.
The TPTRP Transition Fund is a special fund in the State Treasury, outside the General Revenue Fund, as authorized by Article III, Section 49-___, of the Texas Constitution. The Fund is established to ensure fiscal continuity for every taxing entity in this State during the transition from ad valorem taxation to the sales and use tax system. The Fund is administered by the Board during the Board's active term and by the Division upon the Board's termination.
Sec. 490.012. FUND SOURCES.
(a) The Fund consists of:
(1) surplus collections transferred to the Fund under Subsection (b);
(2) civil penalties collected under the TPTRP Bond Management Act, Government Code Chapter [__], relating to the Citizens First Bond Portal;
(3) interest, investment earnings, and other returns on Fund balances as provided by Section 490.019;
(4) legislative appropriations made to the Fund, including appropriations for the operating budgets of the three appointed Board members and their authorized support staffs, as established by the enabling statute;
(5) loan repayments and other returns on Fund-authorized assistance; and
(6) any other money transferred or deposited to the credit of the Fund as authorized by general law consistent with this chapter and with Article III, Section 49-___, of the Texas Constitution.
(b) Surplus collections are transferred to the Fund as follows:
(1) In the first fiscal year after the Implementation Date, the Comptroller shall transfer to the Fund, at each quarterly distribution, all amounts collected above each taxing entity's Final Year Baseline, including amounts attributable to the State of Texas. The entity's Final Year Baseline flows to the entity through its quarterly distribution; all collections above the Final Year Baseline flow to the Fund.
(2) In the second fiscal year, the Board shall determine, not later than 90 days before the end of the first fiscal year and based on Comptroller-certified quarterly distribution data from the first three quarters of that year, whether to:
(A) activate a transfer of up to 50 percent of each entity's above-baseline collections to the Fund, effective at each quarterly distribution in the second fiscal year;
(B) waive the transfer in whole or in part; or
(C) activate the transfer on a tier-selective basis, activating for specific tiers experiencing aggregate instability while waiving for tiers that are stable.
(3) The Board's Year-2 determination shall be made by formal vote, published on the public transparency platform required under Section 490.073 immediately upon the vote, and certified to the Comptroller not later than 90 days before the end of the first fiscal year.
(4) From the third fiscal year forward, no collections shall be transferred to the Fund under this subsection. All above-baseline surplus flows to each entity's waterfall as provided by the TPTRP implementing legislation.
Sec. 490.013. FUND USES AND RESTRICTIONS.
(a) Money in the Fund may be used only for the following purposes:
(1) Board operations, as appropriated by the Legislature in the enabling statute, covering:
(A) compensation and direct support costs for the three formally appointed Board members, who serve as full-time state officers during the Board's active term; and
(B) authorized budgets for personal support staff for each appointed member, as established by the Legislature in the enabling statute;
(2) supplemental distributions to eligible entities as low-interest loans under Sections 490.032 and 490.033;
(3) structural self-sufficiency investments in eligible entities as low-interest loans under Section 490.060, subject to the eligibility gate in Section 490.032A; and
(4) repayment administration, monitoring, and closeout activities directly related to Subdivisions (1) through (3).
(b) The Comptroller's office and each participating state department are authorized to apply their respective operating budgets to transition support work to ensure that Board activities draw primarily on existing state personnel and infrastructure rather than Fund expenditures. Working members of the Board draw on their respective departmental budgets and do not receive separate compensation from the Fund.
(c) The Board may submit requests for operating budget increases to the Legislature. The Legislature may approve or deny such requests at its discretion.
(d) Money in the Fund may not be appropriated, transferred, lent, swept, temporarily borrowed, or otherwise diverted for any purpose other than a purpose expressly authorized by Subsection (a). Without limiting the foregoing, no money in the Fund may be:
(1) transferred to the General Revenue Fund;
(2) used for general state cash-flow management or budget execution purposes; or
(3) loaned to any fund or account other than as an authorized disbursement to an eligible entity under Sections 490.033 or 490.060.
(e) This section controls over any contrary provision of general law, including the Government Code provisions governing budget execution and treasury cash management.
(f) Loan repayments received by the Fund flow first to the Fund balance and, upon the Fund's termination, to the Division for management; any remaining Fund balance upon termination transfers to the state-level surplus waterfall and ultimately to the Economic Stabilization Fund as provided by Section 490.094.
Sec. 490.014. FUND DURATION.
The Fund terminates not later than the sixth anniversary of the Implementation Date, concurrent with the termination of the Board under Subchapter G. The Legislature may not extend the Fund's term. Upon termination, all Fund balances and pending obligations are disposed of as provided by Section 490.094.
Sec. 490.015. FINAL YEAR BASELINE CERTIFICATION.
(a) Not later than the Implementation Date, the Comptroller shall issue a Final Year Baseline Certification to every taxing entity in this State. The Certification shall establish each entity's:
(1) Comptroller-certified actual final-year property tax collections;
(2) Comptroller-certified actual final-year sales and use tax collections, and all other actual final-year tax collections for the State of Texas; and
(3) resulting Final Year Baseline and TRO.
(b) Certifications shall be based on actual revenues reported by each entity with supporting documentation — not budgets or projections. Actual revenues govern. This is a citizen protection.
(c) Certification Dispute Process. An entity may contest its Certification through the following two-step process:
(1) Step One — Board-Facilitated Arbitration. The entity shall first submit its contest to the Board. The Board shall facilitate arbitration between the contesting entity and the Comptroller, with the goal of reaching a mutually agreeable resolution not later than 90 days after the contest is filed. The Board shall issue a written recommendation at the conclusion of this process.
(2) Step Two — Judicial Review. If the contesting entity and the Comptroller do not reach a resolution through Step One, the entity may seek direct judicial review of its Certification in a district court of Travis County. Judicial review under this subdivision is unavailable until the entity has completed Step One.
(d) The Comptroller shall establish administrative procedures for filing a contest not later than six months before the Implementation Date. A contest, arbitration, or judicial review under this section does not stay the Implementation Date or any other provision of this chapter.
(e) The Final Year Baseline Certification is the governing document for all TRO calculations, Shortfall Percentage calculations, and eligibility determinations under this chapter, subject to modification upon resolution of a contest under Subsection (c).
(f) The final year's property tax collections for each entity — collected before the Implementation Date — are expressly authorized for use during the transition period as follows:
(1) the I&S portion is deposited into the entity's bond service fund and applied to voter-approved bond debt service obligations;
(2) the M&O portion is deposited into the entity's Rainy Day Fund; and
(3) each entity may access either portion to fill documented gaps in M&O funding or I&S debt service coverage during the transition period.
(g) No Board approval or Fund disbursement is required for an entity to access its final year's property tax collections under Subsection (f). Any unused balance at fiscal year-end flows through the entity's waterfall as provided by the TPTRP implementing legislation.
Sec. 490.016. COMPTROLLER NOTIFICATION AND ENTITY MONITORING.
(a) Not later than 30 days after each quarterly distribution, the Comptroller shall notify the Board of any entity whose actual quarterly distribution fell below its Comptroller-certified Final Year Baseline.
(b) The notification shall include:
(1) the entity's actual quarterly distribution;
(2) the entity's Final Year Baseline quarterly equivalent;
(3) the shortfall amount;
(4) a forward projection of annualized revenue at the entity's current rate and at the CCR; and
(5) where applicable, the entity's preliminary Shortfall Percentage calculated under Section 490.032A(b).
(c) The Board shall review each notification and determine the appropriate response. A shortfall notification does not create an entitlement to Fund assistance.
(d) No Fund disbursement may be made to an entity that has not met the eligibility conditions under Section 490.032.
Sec. 490.017. PUBLIC-PURPOSE FINDINGS.
(a) Before approving any supplemental distribution under Section 490.033 or any structural self-sufficiency investment under Section 490.060, the Board shall make a written finding that the assistance:
(1) serves a public purpose;
(2) provides a clear public benefit consisting of continuity of essential governmental services, revenue self-sufficiency, or both; and
(3) is subject to repayment terms, reporting requirements, and other controls reasonably calculated to ensure the public purpose is accomplished.
(b) A finding under this section shall be recorded in the Board's minutes and published on the public transparency platform required under Section 490.073 not later than 10 days after the Board's vote.
(c) This section implements Article III, Section 49-___(e), of the Texas Constitution.
Sec. 490.018. BOND SERVICE COORDINATION.
(a) The Board and the Division shall monitor each eligible entity's compliance with the Interest and Sinking Reserve Fund and Bond Reserve Fund requirements established by the TPTRP Bond Management Act, Government Code Chapter [__] (Article VIII, Section 1-o, Texas Constitution).
(b) Where an eligible entity's bond debt service is at risk due to a transition-related revenue shortfall, the Board may coordinate bridge assistance under Section 490.033 to support the entity's timely bond debt service, in coordination with the Texas Bond Review Board and consistent with the backstop cascade established by the Bond Management Act.
(c) Nothing in this chapter replaces, narrows, diminishes, or substitutes for the state guarantee, backstop cascade, or any other bond protection established by the Bond Management Act. This section is coordinative only and does not create an independent bond guarantee under this chapter.
(d) This section implements Article III, Section 49-___(f), of the Texas Constitution.
Sec. 490.019. COMPTROLLER INVESTMENT OF FUND BALANCES.
The Comptroller may invest money in the Fund under the Comptroller's general investment authority for state treasury funds under Chapter 404. Investment earnings on Fund balances are credited to the Fund as provided by Section 490.012(a)(3). Investments shall be made in a manner consistent with the Fund's need for liquidity to meet its authorized disbursement obligations.
Sec. 490.020. AUDIT AUTHORITY.
The Board, the Fund, and the Division are subject to audit by the State Auditor's Office under Chapter 321. The Board shall provide the State Auditor's Office with access to all records necessary to conduct an audit under this section.
SUBCHAPTER C. TPTRP TRANSITION BOARD
Sec. 490.031. BOARD ESTABLISHED.
(a) The TPTRP Transition Board is established as an independent body of state government, as authorized by Article VIII, Section 1-___, of the Texas Constitution.
(b) The Board consists of:
(1) a Chair, appointed by the Governor;
(2) a Vice Chair, appointed by the Speaker of the House of Representatives; and
(3) a Secretary, appointed by the Comptroller of Public Accounts.
(c) Each appointed member serves as a full-time state officer for the full six-year term of the Board. Appointed members may not hold other state offices or engage in outside employment that conflicts with their Board duties during the term.
(d) Each appointed member is authorized a budget for personal support staff, as established by the Legislature in the enabling statute. These budgets shall be modest and appropriate to the office.
(e) Department working members shall be assigned by each participating state department from within their existing personnel. Department working members:
(1) participate fully in Board deliberations;
(2) do not vote on Board matters;
(3) do not count toward a quorum; and
(4) hold full authority within their respective departments to act on Board-coordinated plans.
(f) A quorum for Board action consists of two of the three appointed officers. All formal Board votes require a quorum.
(g) Each appointed member serves for the full six-year term of the Board unless removed. The Legislature may initiate removal upon a finding of cause, including failure of duty, malfeasance, incapacity, or comparable grounds. The Board does not rotate membership during the transition period.
(h) The Board does not maintain an independent permanent staff. Administrative and analytical support is provided by the Division and by assigned department working members.
Sec. 490.032. ELIGIBILITY FOR FUND ASSISTANCE.
(a) A taxing entity is eligible for Fund assistance only if all of the following conditions are met:
(1) the entity's governing body has put a rate increase to its citizens in a voter election;
(2) the voters within the entity's jurisdiction approved a rate increase of up to and including the CCR applicable to that entity's tier; and
(3) even at the voter-approved CCR, the entity's quarterly sales and use tax distributions remain below the entity's Comptroller-certified Final Year Baseline.
(b) An entity that has not held a voter election under Subsection (a)(1) is not eligible.
(c) An entity whose voters denied a rate increase is not eligible. An entity whose voters denied a rate increase must implement its Mandatory Expenditure Reduction Plan as required by the TPTRP implementing legislation.
(d) An entity whose actual quarterly distributions equal or exceed its Final Year Baseline is not eligible.
(e) Eligibility under this section is a threshold determination only. Eligibility for structural self-sufficiency investment and development assistance under Subchapter E is further governed by the Shortfall Percentage determination in Section 490.032A.
(f) Eligibility is determined by the Board based on Comptroller-certified data. Determination of eligibility does not guarantee a specific disbursement amount or timeline.
Sec. 490.032A. SHORTFALL PERCENTAGE; PRELIMINARY AND FINAL DETERMINATION.
(a) This section governs whether an eligible entity's shortfall is resolved through structural self-sufficiency investment and development assistance under Subchapter E, or through the entity's Mandatory Expenditure Reduction Plan supplemented by bridge-loan assistance under Section 490.033.
(b) Preliminary Eligibility. At any quarterly distribution occurring during an eligible entity's first full fiscal year of collections at its voter-approved CCR, if the entity's actual quarterly distribution, annualized, projects a Shortfall Percentage of 10 percent or greater, the entity attains Preliminary Eligibility for development assistance. Upon Preliminary Eligibility:
(1) the Board and the entity shall jointly begin planning and preparing a proposed development pathway under Subchapter E, including entity archetype classification under Section 490.062 and identification of applicable programs under Section 490.064;
(2) the Board may not disburse development capital under Section 490.060 or 490.061 on the basis of Preliminary Eligibility alone; and
(3) Preliminary Eligibility does not affect the entity's obligations, if any, under its Mandatory Expenditure Reduction Plan pending Final Determination under Subsection (c).
(c) Final Determination. Not later than 45 days after the Comptroller certifies an eligible entity's actual sales and use tax distributions for the entity's first full fiscal year at its voter-approved CCR, the Comptroller shall certify the entity's full-year Shortfall Percentage. Based on that certified figure:
(1) if the certified full-year Shortfall Percentage is 10 percent or greater, the entity's Preliminary Eligibility under Subsection (b) converts to Final Eligibility, and the Board may proceed to execute and fund the development pathway prepared under Subsection (b)(1); or
(2) if the certified full-year Shortfall Percentage is less than 10 percent, any development pathway prepared under Subsection (b)(1) is set aside, the entity does not qualify for development assistance under Subchapter E, and the entity must implement its Mandatory Expenditure Reduction Plan as required by the TPTRP implementing legislation.
(d) An entity subject to Subsection (c)(2) may still apply for and receive Fund bridge-loan assistance under Section 490.033, including supplemental funding to meet payment obligations on existing, previously committed infrastructure projects and similar committed obligations, while implementing its Mandatory Expenditure Reduction Plan. Bridge-loan assistance under this subsection is not development assistance under Subchapter E and is not subject to the 10 percent threshold in this section.
(e) The Shortfall Percentage is calculated solely from Comptroller-certified actual revenue figures under Section 490.001(7). No entity budget, appropriation, or projected figure may be substituted for actual certified distributions in any calculation under this section.
(f) A Final Determination under Subsection (c) may be revisited by the Board only upon a subsequent full-fiscal-year Comptroller certification showing a materially changed Shortfall Percentage, and only prospectively.
Sec. 490.033. SUPPLEMENTAL DISTRIBUTIONS — BRIDGE LOANS.
(a) Upon application and Board approval, the Fund shall provide supplemental coverage to eligible entities structured as low-interest loans.
(b) The interest rate for supplemental distribution loans shall be set by Board order in the range of one percent to three percent per annum, consistent with comparable Texas state financing programs.
(c) The Board shall set repayment terms for each loan in coordination with the eligible entity, based on the entity's projected path to self-sufficiency at or above its Final Year Baseline.
(d) Bridge loans under this section do not require additional voter elections beyond the voter approval that established the entity's eligibility under Section 490.032. Voter elections are required only for decisions that directly alter the structure or territory of a taxing entity — including dissolution or absorption of a special district, ISD consolidation, and voluntary annexation.
(e) The Board shall certify approved bridge loan amounts to the Comptroller. The Comptroller shall issue letters of credit or direct distributions as directed by the Board.
(f) A de minimis entity designated under Section 490.063 receives enhanced priority in the review and approval of applications under this section, as provided by that section.
(g) An entity described by Section 490.032A(d) is eligible for bridge loans under this section to meet payment obligations on existing, previously committed infrastructure projects and similar committed obligations while implementing its Mandatory Expenditure Reduction Plan.
Sec. 490.034. BOARD POWERS AND DUTIES.
(a) The Board has full administrative and executive authority to carry out the purposes of this chapter, including authority to:
(1) review and approve applications for supplemental distributions from the Fund;
(2) certify approved amounts to the Comptroller;
(3) provide analysis and advisory support to taxing entities and to the Legislature regarding the rates needed for fiscal sufficiency, provided that:
(A) the Board may not set rates for any taxing entity;
(B) rate changes require action by the entity's governing body and, for any increase up to the applicable CCR, voter approval within the entity's jurisdiction; no rate may ever exceed the CCR applicable to that entity's tier; and
(C) the Board's role in rate matters is analytical and advisory only — the decision lies between each entity's governing body and its citizens, within the constitutional ceiling of the CCR;
(4) provide operational restructuring assistance and technical support to taxing entities;
(5) identify entities that may require assistance before shortfall conditions become acute, including monitoring for Preliminary Eligibility under Section 490.032A(b);
(6) report annually to the Legislature and the Governor, not later than December 1 of each year;
(7) issue administrative rerouting orders under Section 490.051;
(8) advise and facilitate special district dissolution and absorption proceedings under Section 490.052;
(9) execute commercial development agreements and deploy Fund capital under Sections 490.060 through 490.062, subject to the eligibility gate in Section 490.032A;
(10) administer the de minimis entity track under Section 490.063;
(11) identify and leverage federal and state development programs under Section 490.064;
(12) submit quarterly interim reports under Section 490.072;
(13) maintain the public transparency platform through the Division under Section 490.073; and
(14) execute multi-department coordination agreements under Section 490.074.
(b) The Board shall give priority to ISD applications over other entity types. For each assisted ISD, the Board shall develop a multi-year financial plan projecting the district's path to full self-funding under the Tier 4 mechanism of the TPTRP implementing legislation.
(c) No school district, county, municipality, or special district may be placed in financial exigency solely as a result of the transition from the ad valorem system to the sales and use tax system, so long as the entity has timely applied for and is receiving Fund assistance and cooperating with the Board's restructuring recommendations. For an independent school district, "financial exigency" has the meaning assigned by the Education Code. For a county, municipality, or special district, "financial exigency" means a fiscal condition in which the entity's governing body has formally determined, based on Comptroller-certified data, that the entity cannot meet its certified budgeted obligations for essential governmental services without immediate structural relief.
Sec. 490.035. LEGISLATIVE OBSERVER SEATS.
(a) Each political party represented in the Texas House of Representatives and each political party represented in the Texas Senate may designate one member as a non-voting observer to the Board.
(b) Designations shall be made by each party's own internal procedures. No committee assignment or leadership role is required. A maximum of four observers may be designated at any time — one per party per chamber.
(c) Observers:
(1) may attend all open Board meetings;
(2) may speak on any agenda item during deliberations;
(3) do not vote on Board matters; and
(4) are not members of the Board and do not count toward a quorum.
(d) An observer may be removed at any time by the designating party, including for misconduct.
(e) The Board is a governmental body for purposes of, and is subject to, Chapter 551 (Texas Open Meetings Act) in its entirety, including notice, agenda posting, and minutes requirements, and not merely with respect to observer seats.
(f) The Board's records, including all records generated or received in connection with Fund administration, are subject to Chapter 552 (Texas Public Information Act).
Sec. 490.036. STATE OFFICER STATUS; ETHICS AND NEPOTISM COMPLIANCE.
(a) The Chair, Vice Chair, and Secretary are state officers for all purposes of Chapter 572, including the personal financial disclosure, standards of conduct, and conflict-of-interest requirements of that chapter. Each shall file a personal financial statement with the Texas Ethics Commission as required by Chapter 572.
(b) A Board member shall recuse from any Board vote or decision in which the member has a substantial interest, as that term is defined by Chapter 171, Local Government Code, applied by analogy, or in which a conflict exists under Chapter 572.
(c) Chapter 573 (nepotism) applies to all Board hiring, contracting, and procurement decisions. A Board member with a disqualifying relationship under Chapter 573 to a prospective employee, contractor, or applicant for Fund assistance shall recuse from the applicable decision and the recusal shall be recorded in the Board's minutes.
(d) Department working members remain subject to the ethics and conduct requirements applicable to their home departments and are not, by virtue of Board service, subject to additional disclosure obligations under this section beyond those applicable to their home department positions.
Sec. 490.037. SUNSET ACT STANDARDS; CONSTITUTIONAL SUNSET CONTROLS.
(a) The Board and the Fund shall operate consistent with the across-the-board standards for state agencies developed by the Sunset Advisory Commission under Chapter 325, including standards addressing public board member conduct, conflict-of-interest prohibitions, public testimony opportunities, and complaint-handling procedures, to the extent those standards are not inconsistent with this chapter.
(b) Notwithstanding Subsection (a), the Board is not subject to scheduled review under Chapter 325, and the Sunset Advisory Commission's standard 12-year review cycle and continuation process do not apply to the Board. The Board's six-year term is fixed by Article VIII, Section 1-___, of the Texas Constitution, and that constitutional sunset controls over any Chapter 325 review, continuation, or abolishment mechanism that might otherwise apply. The Board may not be continued beyond its constitutional sunset date by any Chapter 325 process.
SUBCHAPTER D. BOARD RESOLUTION POWERS
Sec. 490.051. SPECIAL DISTRICT REROUTING AUTHORITY.
(a) The Board has full direct administrative authority to review and confirm all special district tier absorption assignments and to issue administrative rerouting orders reassigning any absorbed special district from one tier to another.
(b) A rerouting order is effective upon Board certification to the Comptroller. No additional legislative action is required.
(c) Not later than 30 days after receiving a rerouting order, the Comptroller shall update the tier assignment and TRO calculation for all affected entities, based on Comptroller-certified actual distributions, and reflect the updated figures in the next quarterly distribution.
(d) The Board shall target completion of all rerouting decisions within the first 180 days of Board operation.
Sec. 490.052. SPECIAL DISTRICT DISSOLUTION AND ABSORPTION — VOTER DISCRETIONARY.
(a) The Board may identify special districts whose structural situation makes dissolution or absorption into the overlying entity the most appropriate long-term resolution.
(b) The Board may advise and facilitate conversations between affected entities and their voters. No dissolution or absorption may be executed without voter approval from the impacted entities as required by applicable Texas law.
(c) The Board shall reserve Fund bridge capital for affected entities while the voter-approval process proceeds.
(d) Upon voter-approved dissolution:
(1) all outstanding voter-approved bond obligations of the dissolved district are assumed by the overlying entity by operation of law;
(2) the Comptroller shall add the dissolved district's certified annual bond debt service to the host entity's I&S Rate calculation;
(3) all assets and liabilities of the dissolved district transfer to the host entity by operation of law; and
(4) bondholders are fully protected — dissolution does not impair or modify any bond obligation.
Sec. 490.053. ISD CONSOLIDATION.
(a) The Board shall initiate conversations with the Texas Education Agency regarding ISD consolidation under Education Code Section 13.054 for any independent school district whose Comptroller-certified actual sales and use tax distributions at the CCR are zero or negligible relative to its Final Year Baseline, not later than 60 days after the first quarterly distribution report under Section 490.016.
(b) Consolidation requires voter approval as provided by applicable Texas law. The Board shall reserve Fund bridge capital for affected ISDs pending voter action.
(c) For each ISD in consolidation proceedings, the Board shall develop a multi-year financial plan with the Texas Education Agency projecting the consolidating district's path to financial self-sufficiency.
Sec. 490.054. VOLUNTARY ANNEXATION FACILITATION.
(a) For eligible entities with a Total Replacement Obligation below $250,000 and Comptroller-certified actual sales and use tax distributions at the CCR that are zero or negligible relative to the entity's Final Year Baseline, the Board shall, in addition to other resolution pathways, offer facilitation of voluntary annexation by an adjacent municipality or absorption into the overlying county, subject to voter approval as required by applicable Texas law.
(b) The Board shall maintain Fund bridge capital for entities during annexation or absorption proceedings.
SUBCHAPTER E. STRUCTURAL INVESTMENT AND DEVELOPMENT
Sec. 490.060. STRUCTURAL SELF-SUFFICIENCY INVESTMENTS.
(a) The Board is authorized to deploy Fund capital to help eligible entities build the permanent revenue base needed to be self-sustaining at or above the entity's Final Year Baseline, subject to the Final Eligibility determination in Section 490.032A(c)(1).
(b) All deployments under this subchapter are structured as repayable loans at an interest rate set by Board order in the range of one percent to three percent per annum, consistent with comparable Texas state financing programs. The Board shall set repayment terms in coordination with the eligible entity and any participating development partners.
(c) The Board may deploy Fund capital for structural investments in eligible entities without requiring additional voter elections. Voter elections are required only for decisions that alter an entity's structure or territory — including dissolution, consolidation, and annexation.
Sec. 490.061. DEVELOPMENT PROGRAM EXECUTION.
(a) Development agreements, project agreements, and loan instruments funded under this subchapter are executed by and through the eligible local taxing entity, using the authority and procedures of:
(1) Local Government Code Chapter 380 (municipal economic development agreements);
(2) Local Government Code Chapter 381 (county economic development agreements);
(3) Government Code Chapter 489 (Texas Economic Development Bank); and
(4) Government Code Chapter 2303 (Texas Enterprise Zone Act).
(b) The Board's role is to coordinate, accelerate, and co-finance development agreements executed by eligible entities under Subsection (a), including by providing Fund capital, identifying applicable federal and state programs, and coordinating with other state departments under Section 490.074, rather than to directly contract as a state procurement authority under Chapters 2254, 2261, or 2262. The Board's principal value to an eligible entity is expediting and reducing the cost of development financing already available under existing local government economic development authority, not creating a new state contracting regime.
(c) Notwithstanding Subsection (b), the Board may directly execute a loan agreement with an eligible entity for the disbursement of Fund capital under this subchapter. Such a loan agreement is not a public works contract and is not subject to Chapters 2254, 2261, or 2262.
(d) Loan repayments under this section are credited to the Fund balance. Upon Fund termination, all remaining loan repayment obligations transfer to the Division.
Sec. 490.062. ENTITY ARCHETYPE PRIORITIZATION.
The Board shall classify each eligible shortfall entity into a resolution archetype before selecting a resolution pathway. The Board shall select the pathway that produces the fastest path to Final Year Baseline revenue sufficiency at the lowest cost to the Fund with the best long-term economic outcomes for the entity's residents. Resolution pathways include administrative rerouting under Section 490.051, ISD consolidation under Section 490.053, annexation or absorption under Section 490.054, commercial development programs under Section 490.061, and bridge loans under Section 490.033.
Sec. 490.063. DE MINIMIS ENTITY TRACK — EXPEDITED VOTER-APPROVED RESOLUTION.
(a) The Board shall establish by order a de minimis TRO threshold, not to exceed $25,000, for entities whose Comptroller-certified actual sales and use tax distributions at the CCR are zero or negligible relative to the entity's Final Year Baseline.
(b) An entity meeting the de minimis threshold under Subsection (a) is not administratively dissolved or consolidated. Instead, the entity is placed on the de minimis track, under which the Board shall:
(1) grant the entity's applications for bridge loans under Section 490.033 enhanced priority in review and approval over non-de minimis applications;
(2) proactively prepare and present to the entity's governing body, not later than 60 days after the entity's designation, a proposed dissolution, consolidation, or annexation plan for submission to the entity's voters, including a transition budget and successor-entity assumption plan for the governing body's consideration; and
(3) if the entity's governing body elects to call an election on the proposed plan, provide expedited administrative, legal drafting, and election-coordination support to the entity to bring the matter to the entity's voters at the earliest available uniform election date.
(c) No entity may be dissolved, consolidated, or annexed under this section without the voter approval otherwise required by this chapter and by other applicable Texas law. A Comptroller-certified figure of zero or negligible actual distributions, standing alone, does not itself effect a dissolution, consolidation, or annexation, and is not conclusive evidence that a dissolution, consolidation, or annexation election will succeed.
(d) If the entity's voters decline the proposed plan, the entity remains on the de minimis track and continues to receive enhanced bridge-loan priority under Subsection (b)(1) until the entity's certified actual distributions rise above the de minimis threshold or the entity's governing body proposes a different resolution.
(e) The Board shall publish the established threshold not later than 30 days after the Board is constituted.
Sec. 490.064. FEDERAL AND STATE DEVELOPMENT PROGRAM LEVERAGE.
(a) The Board is authorized and directed to identify and leverage all available federal and state economic development programs, special zone designations, and financing tools in eligible shortfall entity jurisdictions to accelerate commercial development and build permanent sales and use tax revenue.
(b) The Board shall select programs based on the standard of fastest path to Final Year Baseline revenue sufficiency at the lowest cost to the Fund with the best long-term economic outcomes for entity residents.
(c) The Board is not limited to any enumerated list of programs. The Board shall leverage any applicable program available at the time of implementation, including as illustrative examples:
(1) federal opportunity zone and investment incentive programs;
(2) federal and state tax credit programs targeting low-income, food-desert, and blighted community development;
(3) USDA and SBA rural development loan, grant, and guarantee programs;
(4) Texas state enterprise zone and economic development programs;
(5) federal contracting set-aside programs generating small business formation and commercial activity;
(6) community development block grant and similar federal programs; and
(7) any other federal, state, or local program that accelerates commercial construction, business formation, or economic activity in eligible shortfall entity jurisdictions.
(d) Only entities meeting the eligibility conditions under Section 490.032 and, for development assistance specifically, the Final Eligibility determination under Section 490.032A(c)(1), qualify for Board-assisted program leveraging.
(e) The Board shall maintain a Special Zone Leverage Register on the public transparency platform under Section 490.073 identifying applicable programs in each shortfall entity's jurisdiction and the status of coordination efforts.
(f) Federal and state program coordination is informal and at Board discretion. Formal memoranda of understanding are authorized but not required. The Board shall pursue the most direct and expeditious coordination channels available.
SUBCHAPTER F. TRANSPARENCY AND REPORTING
Sec. 490.071. ANNUAL REPORT.
Not later than December 1 of each year, the Board shall submit an annual report to the Governor, the Lieutenant Governor, and the Speaker of the House of Representatives. The report shall describe the status of each eligible entity on the Board's worklist, including preliminary and final Shortfall Percentage determinations under Section 490.032A, Fund balance and deployment summary, and a forecast of remaining transition obligations.
Sec. 490.072. QUARTERLY INTERIM REPORTS.
Not later than the 45th day after the end of each calendar quarter, the Board shall submit a quarterly interim report to the House Appropriations Committee and the Senate Finance Committee.
Sec. 490.073. PUBLIC TRANSPARENCY PLATFORM.
(a) The Board shall establish and maintain, through the Division, a public-facing website and digital dashboard integrated with the Comptroller's financial systems.
(b) The platform shall display, updated not less than monthly:
(1) each entity's status, resolution pathway, and current resolution phase, including de minimis track status under Section 490.063 and Preliminary or Final Eligibility status under Section 490.032A;
(2) all Fund disbursements and loan repayments by entity;
(3) all Board votes, by member, on the public record, including public-purpose findings under Section 490.017;
(4) Fund balance and monthly deployment schedule;
(5) all active commercial development loan agreements;
(6) the Special Zone Leverage Register required under Section 490.064; and
(7) a full public financial ledger of all Fund transactions in standard financial reporting format.
(c) The platform shall publish formal public announcements of significant Board actions, Fund deployments exceeding the threshold under Section 490.074(b), and entity status changes.
(d) All Board votes are public records subject to Chapter 552.
(e) The platform is operational from the first day of the Board's operation and remains publicly accessible beyond the Board's sunset through the Division.
Sec. 490.074. LEGISLATIVE NOTIFICATION THRESHOLD AND MULTI-DEPARTMENT COORDINATION.
(a) Not later than 90 days after the Board is constituted, the Board shall enter into written coordination agreements with:
(1) the Texas Comptroller of Public Accounts;
(2) the Texas Education Agency;
(3) the Texas Economic Development and Tourism Office;
(4) the Texas Bond Review Board;
(5) the Texas Water Development Board;
(6) the Texas Commission on Environmental Quality; and
(7) the Texas Department of Housing and Community Affairs.
Each agreement shall specify the department's data-sharing obligations, working-member assignments, coordination role, and responsibilities upon the Board's sunset.
(b) The Board shall notify the Governor, the Lieutenant Governor, and the Speaker of the House of Representatives at least 30 days before executing any single Fund deployment exceeding $500 million. The Legislature, by concurrent resolution, may require the Board to delay any such deployment for not more than 60 additional days for legislative review.
(c) The Board may establish informal coordination arrangements with any federal agency or state entity whose programs are applicable to eligible shortfall entities, at Board discretion and without a formal memorandum of understanding requirement.
SUBCHAPTER G. BOARD SUNSET AND DISSOLUTION
Sec. 490.091. BOARD SUNSET.
(a) The Board is dissolved by operation of law on the sixth anniversary of the Implementation Date, unless dissolved earlier under Section 490.092. This sunset is fixed by Article VIII, Section 1-___, of the Texas Constitution and is not subject to extension, continuation, or modification under Chapter 325 or any other general law.
(b) The Board's six-year term may not be extended.
(c) The Legislature may, by law and upon a specific legislative finding, extend any individual assistance obligation or development agreement beyond the Board's sunset date, to be administered by the Division. Such an extension applies only to the specified obligation or agreement — it does not extend the Board's existence or authority.
Sec. 490.092. EARLY DISSOLUTION.
(a) The Board may dissolve before the sixth anniversary of the Implementation Date by unanimous vote of all three appointed members, provided the Comptroller has certified that:
(1) all entities on the Board's worklist are self-sufficient at or above their Final Year Baseline; and
(2) all development projects are under active management with a designated successor.
(b) Upon early dissolution, all Fund balances transfer to the state-level waterfall, and all pending obligations and records transfer to the Division, as provided by Section 490.094.
Sec. 490.093. PRE-DISSOLUTION CERTIFICATION.
Not later than 90 days before the scheduled dissolution date, the Board shall:
(1) certify the status of all entities on its worklist to the Legislature and the Governor;
(2) transfer all active agreements, pending obligations, and records to the Division; and
(3) cause all records required by the State Records Retention Schedule to be transferred to the Texas State Library and Archives Commission.
Sec. 490.094. DISPOSITION OF FUND BALANCE ON DISSOLUTION.
On the date of the Board's dissolution, all remaining Fund balances transfer by operation of law through the state-level surplus waterfall and ultimately to the Economic Stabilization Fund. All remaining loan repayment obligations transfer to the Division.
SUBCHAPTER H. TPTRP TRANSITION MONITORING DIVISION
Sec. 490.101. DIVISION ESTABLISHED.
(a) The TPTRP Transition Monitoring Division is established within the Comptroller's office, effective on the effective date of this chapter, as authorized by Article VIII, Section 1-___(h), of the Texas Constitution.
(b) The Division Director is appointed by the Comptroller of Public Accounts. No Senate confirmation is required.
(c) The Division is a permanent organizational unit of the Comptroller's office. The Division does not sunset.
(d) The Comptroller has full authority over the Division's internal structure, staffing, and operational procedures, subject to the reporting, monitoring, and liaison obligations established by this chapter.
Sec. 490.102. DIVISION DUTIES DURING BOARD'S ACTIVE TERM.
During the Board's active term, the Division shall:
(1) provide administrative and analytical support to the Board;
(2) operate the public transparency platform required under Section 490.073;
(3) notify the Board not later than 30 days after any quarterly distribution in which any entity falls below its Final Year Baseline;
(4) certify TRO and Shortfall Percentage figures at Board direction; and
(5) issue Final Year Baseline Certifications to all entities before the Implementation Date under Section 490.015.
Sec. 490.103. DIVISION DUTIES UPON BOARD DISSOLUTION.
Upon the Board's dissolution, the Division shall:
(1) assume all pending obligations, active loan agreements, and development contracts transferred by the Board;
(2) continue quarterly reporting to the Legislature and the Governor for not less than two years after the dissolution date;
(3) monitor all taxing entity quarterly sales and use tax collections on an ongoing basis;
(4) maintain the public transparency platform indefinitely;
(5) coordinate with the Texas Education Agency on ISD Tier 4 funding status on an ongoing basis;
(6) close out active development projects and transfer completed projects to the relevant entities; and
(7) assist any taxing entity experiencing post-transition revenue shortfalls, using the State's Rainy Day Fund as a last resort after all other avenues have been exhausted.
Sec. 490.104. DEPARTMENTAL LIAISONS.
Each state department that served as a working member of the Board shall maintain at minimum one designated liaison to the Division for the duration of the Division's active operations. The Comptroller may adjust individual assignments but may not reduce the liaison requirement.
ARTICLE 2. CONFORMING AMENDMENT — BOND MANAGEMENT BILL
SECTION 2.01.
Government Code Chapter 490, Subchapter [__] (Sections 490.001 through 490.013), as enacted by the TPTRP Bond Management Act (H.B. ___, 90th Legislature), is repealed.
SECTION 2.02.
The TPTRP Bond Management Act (H.B. ___, 90th Legislature) is amended by adding Article [__] to read as follows:
ARTICLE [__]. CROSS-REFERENCE TO TPTRP TRANSITION BOARD ACT. This Act is to be read in conjunction with the TPTRP Transition Board, Transition Fund, and Transition Plan Act (H.B. ___, 90th Legislature), which establishes the TPTRP Transition Board and the TPTRP Transition Fund. The Transition Board has authority under that Act, including Section 490.018 of that Act, to coordinate support for eligible entities' bond service obligations and M&O shortfalls as provided therein. That coordination does not replace, narrow, or substitute for the state guarantee and backstop cascade established by this Act. In the event of conflict between this Act and that Act on matters of Transition Board authority, the TPTRP Transition Board, Transition Fund, and Transition Plan Act governs.
ARTICLE 3. APPROPRIATION
SECTION 3.01.
There is appropriated from the TPTRP Transition Fund to the TPTRP Transition Board, for the fiscal biennium beginning September 1, 20[__], the sum of $_____ for the purposes of Sections 490.013(a)(1) and 490.013(a)(2) of the Government Code as added by this Act. This appropriation is subject to the condition that the constitutional amendment proposed by H.J.R. No. ____, 90th Legislature, is approved by the voters and takes effect.
SECTION 3.02.
Continued funding of Board operations for the second and third biennia of the Board's six-year term is subject to appropriation by the Legislature in each subsequent General Appropriations Act. The Fund itself remains available as provided by Section 490.013 regardless of the timing of biennial appropriations acts.
ARTICLE 4. SAVING AND TRANSITION PROVISIONS
SECTION 4.01.
Any action taken or obligation incurred under Government Code Chapter 490 as enacted by the TPTRP Bond Management Act (H.B. ___, 90th Legislature) before the effective date of this Act remains valid and is continued in effect under the provisions of this Act.
SECTION 4.02.
The TPTRP Transition Board established by this Act shall constitute itself and execute all required coordination agreements not later than 90 days after the Implementation Date.
ARTICLE 5. EFFECTIVE DATE
SECTION 5.01.
This Act takes effect September 1, 20[__], but only if the constitutional amendment proposed by H.J.R. No. ____, 90th Legislature, Regular Session, 20[__], is approved by the voters at an election held for that purpose. If that constitutional amendment is not approved by the voters, this Act has no effect.
Deep-Dive Data
Explore the primary datasets that underpin the Transition Board, Transition Fund, and Transition Plan design. Each tab exposes the modeling backing a specific claim in the article.
Composition of the $46.55B Year-1 Fund pool: the 10% TRO structural buffer above each entity’s baseline plus the additional above-TRO surplus generated by the SCR-vs-baseline gap.
| Component | Amount | Share of Fund | Notes |
|---|---|---|---|
| 10% TRO Structural Buffer (Baseline × 0.10) | $18.50B | 39.7% | Retained by entities from Year 3 forward |
| Above-TRO Structural Surplus (SCR − TRO) | $28.05B | 60.3% | Above-baseline surplus captured in Year 1 |
| Total Year-1 Transition Fund | $46.55B | 100% | ~6.8× the possible annual shortfall |
The Total Replacement Obligation formula, the three-layer buffer stack that protects entities during the capture window, and the year-by-year retention schedule.
| Year | Baseline (returned) | 10% TRO Buffer | Above-TRO Surplus | Fund Capture |
|---|---|---|---|---|
| Year 1 | 100% returned | Captured to Fund | Captured to Fund | ~$46.55B |
| Year 2 (max capture) | 100% returned | Up to 50% captured | Up to 50% captured | Board-set (0–~50% of above-baseline) |
| Year 2 (waived) | 100% returned | Retained | Retained (waterfall) | $0 |
| Year 3–6 | 100% returned | Retained (permanent cushion) | Retained (waterfall) | $0 |
Aggregate possible annual shortfall for the 133 BOTHSHORT entities compared to the Year-1 Transition Fund pool. Ratio demonstrates the Fund is 6.8× the annual shortfall coverage requirement.
| Metric | Amount | Basis |
|---|---|---|
| possible shortfall entities (BOTHSHORT) | 133 | Multi-methodology confirmation, TPTRP SCR shortfall analysis |
| Aggregate possible annual shortfall | $6.81B | Combined per-entity gap between SCR distribution and Final Year Baseline |
| Year-1 Transition Fund pool | $46.55B | Full-baseline capture in Year 1 |
| Coverage ratio | 6.8× | Fund / annual shortfall — comfortable margin even under passive disbursement |
Phase-by-phase transition milestones, from 90-day business compliance through Year-6 sunset and handoff to the Transition Monitoring Division. Identical to Section 4 timeline in tabular form for CSV export.
| Year | Phase | Key Milestones |
|---|---|---|
| Year 1 | Compliance & Setup | 90-day business compliance; Board constituted; Comptroller issues Final Year Baseline Certifications; first quarterly distributions analyzed; SD rerouting orders complete |
| Year 2 | Eligibility Finalization & Launch | First-round eligible entities confirmed; Ch. 380/381 development programs launched; ISD consolidation elections underway; Year-2 capture determination |
| Year 3 | Build Phase 1 | Metro commercial corridors under construction; first ISD consolidations completed; rural bridge resolutions finalized; full above-baseline surplus flows to entities from this year forward |
| Year 4 | Build Phase 2 | Development programs accelerate; suburban ISD programs near completion; Fund repayments begin from Year 2–3 projects |
| Year 5 | Stabilization | 90%+ of eligible entities at or above SCR; loan repayments exceed new disbursements; Board may assess early dissolution |
| Year 6 | Sunset & Handoff | Board dissolved; remaining balance transfers to state waterfall/ESF; obligations transfer to the Transition Monitoring Division |
References
Sources organized by the sections of this article they principally inform. All sources are primary official government records, first-party project documentation, or recognized authoritative research institution publications. Every source is fully hyperlinked to its original URL for direct verification.
Entity Counts, TRO Formula & Final Year Baseline — Sections 1, 2, 8
Campbell, W. (2026a). Texas Property Tax Replacement Plan. Will Campbell for Texas. https://www.willcampbellfortexas.com/releases/we-can-end-property-taxes
This is the authoritative published overview of the Texas Property Tax Replacement Plan, produced by Rep. Will Campbell (HD-109). It establishes the plan’s core mechanics: the Total Replacement Obligation (TRO) formula, the Final Year Baseline concept, the 10% structural buffer multiplier, the Comptroller certification process, and the system-wide Starting Cap Rate (SCR) and Constitutional Cap Rate (CCR) rate architecture. The plan overview and its underlying rate and shortfall modeling are the controlling source for all rate, baseline, and shortfall figures referenced throughout this article.
Campbell, W. (2026b). Ending Texas Property Taxes — Tax Base and Texas Living Essentials Subtraction. Will Campbell for Texas. https://www.willcampbellfortexas.com/releases/tax-base-and-tles
Detailed companion publication documenting the full Texas taxable base calculation and the Texas Living Essentials Subtraction (TLES) carve-outs that produce the final taxable base used in the plan’s rate model. It establishes the corrected Final Taxable Base figure and the resulting Transition Fund pool of approximately $46.55 billion used in this article’s Section 2 and Section 8 tables.
Texas Comptroller of Public Accounts. (2025). Special Purpose District Directory and Local Government Entity Counts. Texas Comptroller of Public Accounts. https://comptroller.texas.gov/economy/local/spd/
Official state directory used to establish the approximately 6,148 active taxing entities figure that governs the scope of the TPTRP transition. It provides the entity-by-entity list of municipalities, counties, independent school districts, and special purpose districts referenced throughout this article’s calculations of transition scale and coverage.
Fund Loan Interest Rate Benchmark — Section 2
Texas Water Development Board. (2025). State Water Implementation Fund for Texas (SWIFT). Texas Water Development Board. https://www.twdb.texas.gov/financial/programs/SWIFT/index.asp
Comparable existing Texas state below-market financing program used as the benchmark for the 1%–3% per annum interest rate range applied to Transition Fund loans under the implementing legislation. The SWIFT program’s published loan rates and repayment terms provide the market comparability standard cited in Section 2.
Existing Development Authorities Leveraged by the Fund — Sections 2, 3
Tex. Local Gov’t Code chs. 380–381; Tex. Gov’t Code chs. 489, 2303. Texas Statutes. https://statutes.capitol.texas.gov/
The existing Texas statutory frameworks through which the Transition Board channels structural investment capital: Local Government Code Chapters 380 (municipal) and 381 (county) economic development agreements, and Government Code Chapter 489 (Texas Economic Development Bank) and Chapter 2303 (Texas Enterprise Zone Act). These are the authorities the Board leverages rather than creating a new state procurement regime.
Constitutional and Open Meetings Basis — Section 3
Tex. Const. art. XVI, § 30a. Texas Constitution. https://statutes.capitol.texas.gov/Docs/CN/htm/CN.16.htm
Constitutional provision authorizing statutorily created (non-constitutionally-mandated) boards to be composed of members serving terms up to six years, providing the constitutional basis for the Board’s 6-year, 3-member appointed structure described in Section 3 of this article.
Tex. Gov’t Code ch. 551. Texas Open Meetings Act, Texas Statutes. https://statutes.capitol.texas.gov/Docs/GV/htm/GV.551.htm
Governs the conduct of the Board’s public meetings and the legislative observer seat structure described in Section 3. The full Open Meetings Act applies to the Board in its entirety, not merely with respect to observer participation.
Federal & State Development Program Leverage — Section 3
U.S. Department of the Treasury, Community Development Financial Institutions Fund. (2025). Opportunity Zones program. U.S. Department of the Treasury. https://home.treasury.gov/policy-issues/community-programs/opportunity-zones
Federal development program cited as illustrative of the tools the Transition Board is authorized to identify, coordinate, and leverage in eligible shortfall entity jurisdictions under the Board’s Special Zone Leverage Register authority.
U.S. Department of Agriculture, Rural Development. (2025). Community & Economic Development Programs. U.S. Department of Agriculture. https://www.rd.usda.gov/
USDA rural development programs available to CCR-persistent rural shortfall entities. Cited as an illustrative federal program category the Board coordinates on behalf of eligible entities to accelerate commercial economic development in rural jurisdictions.
U.S. Small Business Administration. (2025). Lending and Loan Guarantee Programs. U.S. Small Business Administration. https://www.sba.gov/funding-programs
Federal small-business lending programs the Board is authorized to coordinate where applicable to shortfall-entity development plans, part of the broader federal program leverage framework in the implementing legislation.
U.S. Department of Housing and Urban Development. (2025). Community Development Block Grant (CDBG) Program. U.S. Department of Housing and Urban Development. https://www.hud.gov/program_offices/comm_planning/cdbg
CDBG-style infrastructure grants illustrated in the Board’s Special Zone Leverage Register authority. Cited as a representative federal infrastructure grant program applicable to eligible shortfall entity jurisdictions.
Comparative Transition Structures — Section 10
California Legislative Analyst’s Office. (2012, February 16). The 2012–13 Budget: Unwinding Redevelopment. California Legislative Analyst’s Office. https://lao.ca.gov/analysis/2012/general_govt/unwinding-redevelopment-021712.aspx
Describes the successor-agency and Redevelopment Property Tax Trust Fund model created to wind down California’s redevelopment agencies following AB 1X 26. As the closest existing U.S. analogue to a temporary, purpose-built fiscal transition authority, it informs the comparative analysis in Section 10 and specifically the case for the TPTRP’s bright-line eligibility test as a design improvement.
Strauss, B. (2012, January 15). Essential Elements of AB 1X 26 Successor Agencies. California City Finance. https://www.californiacityfinance.com/ABx1_26SuccessorAgencies.pdf
Details the mechanics of successor agency funding from property tax and transferred assets during California’s redevelopment dissolution. Informs the structural comparison in Section 10 between California’s asset-pool management approach and the TPTRP Transition Board’s dedicated-fund structure.
San Diego Independent Budget Analyst. (2016, October 19). Overview of Residual Redevelopment Property Tax Trust Fund. IBA Report 16-36. City of San Diego. https://www.sandiego.gov/sites/default/files/iba-16-36.pdf
Documents the extended, litigation-prone wind-down of California’s redevelopment dissolution over more than a decade. Cited in Section 10 to support the case for the TPTRP’s bright-line, Comptroller-certified eligibility test as a design improvement over California’s ambiguous, negotiated approach.
Ballotpedia. (n.d.). Colorado Taxpayer’s Bill of Rights (TABOR). Ballotpedia. https://ballotpedia.org/Colorado_Taxpayer%27s_Bill_of_Rights_(TABOR)
Overview of TABOR’s constitutional revenue cap and mandatory refund structure. Informs the comparative citizen-dividend analysis in Section 10 that positions the TPTRP’s minimum 5% citizen dividend as a mechanism inheriting TABOR’s citizen-first refund principle.
Jefferson County, Colorado. (n.d.). What is TABOR?. Jefferson County, Colorado. https://www.jeffco.us/3994/What-is-TABOR
Plain-language description of TABOR’s revenue limitation and refund mechanics from a county-government perspective. Used alongside Ballotpedia’s TABOR overview to confirm the refund-based comparison to the TPTRP’s minimum 5% citizen dividend cited in Section 10.
New Zealand Government. (2010, August 9). Govt smoothes way for GST rate transition. The Beehive. https://www.beehive.govt.nz/release/govt-smoothes-way-gst-rate-transition
Describes New Zealand’s transition provisions for its 2010 GST rate increase from 12.5% to 15%, including a defined business-compliance runway administered centrally by Inland Revenue. Used as an international comparison point for the TPTRP’s 90-day business compliance window in Section 10.
Bloomberg Tax. (2026, June 25). Australian Government Secures Passage of Housing Tax Overhaul. Bloomberg Tax. https://news.bloombergtax.com/daily-tax-report-international/australian-government-secures-passage-of-housing-tax-overhaul
Contemporaneous coverage of Australia’s mid-2026 property market taxation and capital gains restructuring. Used in Section 10 as the most comparable current global tax-reform effort, and to distinguish federal-state revenue-sharing contexts from the TPTRP’s elimination of a primary subnational revenue source.