Municipalities may issue tax increment bonds, with limits on how they are paid, sold, authorized, and used.
Sec. 374.035. TAX INCREMENT BONDS. (a) A municipality may issue tax increment bonds, the proceeds of which may be used to pay redevelopment costs relating to the urban renewal project for which the bonds were issued or to satisfy claims of holders of those bonds. On the approval of two-thirds of the qualified voters of the municipality, the municipality may also issue refunding bonds for the payment or retirement of tax increment bonds previously issued by the municipality. The tax increment bonds may be made payable, both as to principal and interest, only from: (1) tax increments allocated to and paid into the tax increment fund established by the municipality under Section 374.032; (2) private sources; (3) contributions or other financial assistance from this state or the United States; or (4) a combination of those methods. (b) A tax increment bond issued under this section, with the interest and income from the bond, is exempt from taxation. The period of maturity of a tax increment bond is limited to a maximum of 20 years from the date of issuance. Bonds issued under this section must be authorized by a resolution or ordinance of the governing body of the municipality and may be issued in one or more series. The bond must have the characteristics prescribed by Section 374.026(e) as provided by the resolution, trust indenture, or mortgage issued in relation to the bond. (c) A bond issued under this section may be sold at not less than par at a public sale after notice published in a newspaper of general circulation in the municipality and in any other medium of publication determined by the governing body or may be exchanged for other bonds on a par basis. A bond issued under this section is fully negotiable. (d) In an action or proceeding involving the validity or enforceability of a bond issued under this section or the security for such a bond, a bond that recites in substance that it is issued by the municipality in connection with an urban renewal project is conclusively considered to have been issued for those purposes, and the urban renewal project is conclusively considered to have been planned, located, and carried out in accordance with this chapter. (e) A bank, trust company, banker, savings bank and institution, savings and loan association, investment company, and other person conducting a banking or investment business, an insurance company, insurance association, and other person conducting an insurance business, and an executor, administrator, curator, trustee, and other fiduciary may invest a sinking fund, money, or other fund belonging to it or in its control in any tax increment bonds issued by a municipality under this section. The bond is an authorized security for a public deposit. Any person may use funds owned or controlled by the person to purchase those bonds. This subsection does not relieve a person of a duty to exercise reasonable care in selecting securities. (f) Tax increment bonds may be paid only out of the tax increment fund established under Section 374.032. The governing body of the municipality may irrevocably pledge all or part of the fund to the payment of those bonds or notes. The fund or the designated part of the fund may only be used for the payment of those bonds and interest on those bonds until they have been fully paid. A holder of those bonds or coupons relating to the bonds has a lien against the fund for the payment of the bonds or notes and the interest on them and may protect and enforce that lien by an action at law or in equity. (g) To increase the security and marketability of tax increment bonds, the municipality, according to its best judgment, may: (1) create a lien for the benefit of the bondholders on a public improvement or public work financed by the bonds or on the revenue from the public improvement or public work; or (2) make covenants and take other action as necessary, convenient, or desirable to additionally secure the bonds or make the bonds more marketable. (h) A tax increment bond issued under this section is not a general obligation of the municipality, is not a charge against its general credit or taxing powers, and is not payable other than as provided by this chapter. The tax increment bond must state those limitations on its face. (i) A tax increment bond issued under this section may not be included in computing the debt of the issuing municipality. (j) Tax increment bonds may not be issued in an amount exceeding the aggregate costs of implementing the urban renewal plan for the project for which they were issued. Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.