CHAPTER 1204. INTEREST RATE
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.
(c) The net interest cost of an issue or series of floating rate
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.
(c) For purposes of this chapter, interest compounded under
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.