Committee adopts substitute to limit long-term debt for short-lived property; final vote held

The Senate Committee on Local Government on Tuesday adopted a committee substitute to Senate Bill 393 that would bar political subdivisions from issuing bonds, certificates of obligation or anticipation notes to purchase personal property when the expected useful life of the property ends before the debt maturity, but committee members left the bill pending for a later final vote.

Senator Sparks, explaining the substitute, said, "This bill restricts political subdivisions from issuing bonds to purchase personal property if the expected useful life of the property ends before the maturity date of the bond. The committee substitute expands this restriction to include certificates of obligation and anticipation notes." He added, "So, you know, for the same reason you don't put, a vehicle on a 30 year note because it's not likely to last that long."

The substitute broadens an existing limitation that applied to general obligation bonds to also cover certificates of obligation (COs) and anticipation notes, instruments that committee members noted can sometimes be issued without voter approval. The change is intended to prevent local governments from using alternative debt instruments to finance short-lived assets on long maturities.

Members pressed staff on how the bill’s statutory test — the “weighted average maturity” compared with the “reasonably expected weighted average economic life” of financed improvements — is calculated. Senator West asked for detail on the calculation language referencing "section 1253.002" in existing law and questioned how jurisdictions would compute the weighted average maturity. Chairman Bettencourt noted the language originated with staff member Jonathan Frels and said the committee could call a banking board or other experts for technical explanation. A staff speaker said the calculation is set out in statute but did not provide a step-by-step example during the meeting.

Senator Paxton arrived during the discussion. After questions and clarifications, the chair called for adoption of the committee substitute. "Senator Milton moves to adopt the committee substitute. Is there objection? Hearing none, so ordered," the chair said; the committee adopted the substitute by unanimous consent but explicitly left SB 393 pending subject to call of the chair so members could obtain the calculation details before a final committee vote.

Next steps: committee staff indicated they would provide additional statutory detail before the measure is scheduled for a full committee vote. The bill remains pending on the committee roster.