Texas Local Government Code - LOC GOV'T § 361.054. Limitations on Obligations and Lease Obligations

(a) Obligations issued or lease obligations incurred hereunder shall be within the interest rate limitations of Chapter 1204, Government Code.

(b) From the proceeds from the sale of obligations an entity may set aside amounts for payments into the interest and sinking fund and reserve funds, and for interest and operating expenses during construction and development, as may be specified in the authorizing proceedings. Proceeds of obligations and amounts on deposit in interest and sinking funds and reserve funds may be invested pending their use for the purpose for which issued, in the manner described in Chapter 1371, Government Code.

(c) All obligations, lease obligations, and the records and contracts relating thereto shall be submitted prior to their delivery to the attorney general of Texas for examination and, if he finds that they have been issued or incurred in accordance with the constitution and this Act and that they will be binding special obligations of the entity issuing same, he shall approve them, and thereupon they shall be registered by the comptroller of public accounts of the State of Texas, and after such approval and registration they shall be valid and incontestable.

(d) Obligations may not be issued under this subchapter or any other law for eligible projects that include a lease obligation as both terms are defined by this subchapter without the prior approval of the Bond Review Board.

(e) Before an entity as defined by this subchapter may issue and sell obligations under this subchapter or any other law for eligible projects that include a lease obligation as both terms are defined by this subchapter, the legislature must have authorized the specific projects and method of financing by special act or in the general appropriations act, however this section does not apply to a 400-bed intermediate sanction facility located in a county with a population of 2.8 million or above.

(f) Refunding bonds may be issued to refund obligations in the manner now or hereafter provided by general law, including, without limitation, Chapter 1207, Government Code.

(g) The provisions of Chapter 1201, Government Code, apply to obligations issued or lease obligations incurred hereunder, and such obligations shall constitute a “security” within the meaning of Chapter 8, Business & Commerce Code.

(h) An entity may not use proceeds from the sale of obligations under this subchapter to acquire, construct, equip, or enlarge a correctional facility unless the facility complies with federal constitutional standards and applicable court orders.