CHAPTER 1204. INTEREST RATE

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GOVERNMENT CODE

TITLE 9. PUBLIC SECURITIES

SUBTITLE A. GENERAL PROVISIONS

CHAPTER 1204. INTEREST RATE

Sec. 1204.001. DEFINITIONS. In this chapter:

(1) "Floating rate public security" means a public security or a

portion of a public security that bears a rate of interest

determined in accordance with a clearly stated formula,

computation, or method, under which the net interest cost of the

security or portion at any future date cannot be determined on

the date of delivery of the security or portion.

(2) "Public agency" means:

(A) this state or a department, board, agency, district,

municipal corporation, political subdivision, body politic and

corporate, or instrumentality of this state; or

(B) a nonprofit corporation or not-for-profit entity that is an

instrumentality of or is acting on behalf of an entity described

by Paragraph (A).

(3) "Public security" means a bond, note, or other obligation

that a public agency is authorized to issue.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1204.002. APPLICABILITY. (a) A provision of this chapter

concerning the sale price of a public security or the maximum

rate of interest that a public security may bear applies to any

public security without regard to a contrary provision in another

law or a charter.

(b) A provision of this chapter concerning the sale price of a

public security does not apply to a public security whose maximum

rate of interest or maximum net effective interest rate is, at

the time the public security is issued, specifically set by the

constitution of this state.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1204.003. COMPUTATION OF PUBLIC SECURITY YEARS. (a)

Public security years are computed for each separate public

security that is part of an issue or series of public securities

by dividing the principal amount at par value of the public

security by 100 and multiplying the resulting quotient by:

(1) the number of years from the date interest begins to accrue

on the public security to the date the security is scheduled to

mature; or

(2) for a floating rate public security, the number of years

from the date net interest cost begins to accrue on the public

security to the earlier of:

(A) the date the security is scheduled to mature; or

(B) any date interest on the security is computed.

(b) If any portion of an issue or series of public securities is

subject to a mandatory redemption before the scheduled maturity

that at the time of delivery of the public securities is

scheduled to occur on a specific date or dates, the public

security years are computed as if the face amount of public

securities required to be redeemed on each earlier date were

scheduled to mature on that earlier date.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1204.004. COMPUTATION OF NET INTEREST COST. (a) In this

section:

(1) "Discount" means an amount equal to the principal amount at

par value of an issue or series of public securities plus any

accrued interest to the date of delivery minus the total sum of

money paid to the public agency.

(2) "Premium" means an amount equal to the total amount of money

paid to the public agency for an issue or series of public

securities minus:

(A) the principal amount at par value of the issue or series;

and

(B) any accrued interest to the date of delivery.

(b) The net interest cost of an issue or series of public

securities is the total of all interest to become payable on the

issue or series through the final scheduled maturity date of the

issue or series, plus any discount or minus any premium included

in the price paid for the issue or series.

public securities is the total of all interest to accrue from the

date of delivery and become payable on the issue or series

through any date net interest cost is computed on the issue or

series:

(1) plus, in the case of a discount, the figure obtained by

multiplying the dollar amount of the discount by a fraction, the

numerator of which is the aggregate number of public security

years to the date of the net interest cost computation and the

denominator of which is the aggregate number of public security

years to the scheduled final maturity date of the floating rate

public securities; or

(2) minus, in the case of a premium, the figure obtained by

multiplying the dollar amount of the premium by a fraction, the

numerator of which is the aggregate number of public security

years to the date of the net interest cost computation and the

denominator of which is the aggregate number of public security

years to the scheduled final maturity date of the floating rate

public securities.

(d) If any portion of an issue or series of public securities is

subject to a mandatory redemption before the scheduled maturity

that at the time of delivery of the public securities is

scheduled to occur on a specific date or dates:

(1) the net interest cost is computed as if the face amount of

public securities required to be redeemed on each earlier date

were scheduled to mature on that earlier date;

(2) the net interest cost includes any redemption premium

required to be paid on any mandatory redemption date; and

(3) any other form of compensation, whether due on an optional

or mandatory prepayment or redemption, may not be included in the

net interest cost.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1204.005. COMPUTATION OF NET EFFECTIVE INTEREST RATE. (a)

The net effective interest rate of an issue or series of public

securities is computed by dividing the net interest cost of the

issue or series by the aggregate total number of public security

years of all public securities that comprise the issue or series

and expressing the result as a rate of interest in percent per

year.

(b) In computing the net effective interest rate of an issue or

series of public securities that includes one or more public

securities on which interest accruing before the maturity of the

public security is compounded, the public security years with

reference to each separate compounding public security are

increased by an amount obtained by dividing the amount of

interest that is periodically compounded by 100 and multiplying

the resulting quotient by the number of years from the date on

which interest begins to accrue on the amount that is being

compounded to:

(1) the scheduled date for payment of the amount that is being

compounded; or

(2) with respect to a floating rate public security, the date

interest on the public security is next computed, if that date is

earlier than the scheduled date for payment of the amount that is

being compounded.

Subsection (b) is considered as principal.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1204.006. MAXIMUM INTEREST RATE. (a) The maximum rate of

interest for any issue or series of public securities, including

an issue or series that is issued in exchange for property,

labor, services, materials, or equipment under another law, is a

net effective interest rate of 15 percent.

(b) Except as provided by Section 1204.007, a public agency may

issue and sell any issue or series of its public securities at

any price and bearing interest at any rate or rates determined by

the agency's governing body that does not exceed the maximum rate

under Subsection (a).

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

Sec. 1204.007. MAXIMUM INTEREST RATE FOR CERTAIN PUBLIC

SECURITIES. (a) Public securities authorized by an election

held before April 15, 1981, may be issued, may be sold, and may

bear interest as provided by Section 1204.006, except that public

securities authorized by an election required by the constitution

of this state may not be issued at an interest rate greater than

the rate authorized at that election unless an additional

election is held at which the issuance of the public securities

at a price and at a rate authorized by Section 1204.006 is

approved.

(b) A public agency shall hold and give notice of an additional

election under Subsection (a) in the manner provided by law

applicable to the election that authorized the public securities.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,

1999.

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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