Untitled Texas Attorney General Opinion ( 1987 )

October 2, 1987
Mr. 0. P. (Bob) Bobbitt Opinion No. JM-804
Executive Director
Texas Department on Aging Re: Whether amendments to the
P. 0. Box 12786 Texas Housing Agency Act and
Austin, Texas 78711 the Texas Finance Corporations
Act concerning housing for the
elderly apply to refunding
bonds
Dear Mr. Bobbitt:
you inquire about the scape of the 1985 amendments to
the Texas Housing Agency Act, article 12691-6, V.T.C.S.,
and the Texas Finance Corporations Act, Local Government
Code, chapter 394 (formerly codified as article 12,691-7,
V.T.C.S.). Senate Bill No. 969 of the.69th Legislature
added orovisions to each act reouirina the reservation of
space for elderly persons in specified-housing developments
financed by bond issuances under either act. Acts 1985,
69th Leg., ch. 650, at 2399. You wish to know whether this
requirement applies to refunding bonds issued under these
statutes.
The Texas Housing Agency is authorized to make
mortgage loans to private entities to help finance low and
moderate income housing developments. V.T.C.S. art.
12691-6, 559, 10. The board of directors has authority to
issue revenue bonds to finance mortgage loans. Id. 521(b);
see also 5921(a); 48 (authority to issue general obligation
bonds contingent on adoption of constitutional amendment).
Any bonds issued by the agency may be refunded, or
otherwise refinanced, by the issuance of refunding bonds.
Id. 534. The following provision was added by Senate Bill
No. 696 in 1985:
Sec. 10A. (a) The agency shall adopt
rules to achieve occupancy of at least five
percent of the units in a multifamily
housing development by elderly individuals
of low income or by families of low or
moderate income in which an elderly
individual is head of the household. This
provision annlies onlv to a multifamilv
housina develooment that contains at least
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Mr. 0. P. (Bob) Bobbitt - Page 2 (JM-804)
20 units and is financed bv bonds issued
under this Act. (Emphasis added.)
V.T.C.S. art. 12691-6, §lOA(a).
A similar provision appears in the "Texas Housing Fin-
ance Corporations Act." Local Gov*t Code 0394.902. The
act is also directed at increasing the amount of housing
available to persons of low and moderate income. Local
Gov't Code 5394.002. It authorizes local governments to
approve the formation of public nonprofit housing finance
corporations with power to issue bonds to assist fin
financing residential ownership and development for persons
-of low and moderate income. & §§394.011; 394.012;
394.032(a) (4); 394.037. Section 394.902 provides in part:
(a) The housing finance corporation
shall require that at least five percent of
the units in a multifamily residential
development be built or renovated and be
reserved for the lifetime of the development
for occupancy by elderly persons of low
income or by families of low or moderate
income in which an elderly person is the
head of a household if the development:
(1) contains at least 20 units: and
(2) is financed by bonds issued under
this chapter as a result of an official
decision to issue bonds that occurs on or
after January 1, 1986.
Instead of requiring a reservation of units for the
elderly, a housing finance corporation may collect a fee
from the person who receives a loan for residential
development and remit the fee to the Texas Department on
Aging. Local Gov't Code 0394.902(b). Housing Finance
Corporations, like the Texas Housing Agency, have authority
to issue refunding bonds. & 5394.037(b).
You ask whether the required reservation of space for
the elderly applies to a housing development financed under
either act by the issuance of bonds prior to the effective
date of the requirement and refinanced after the effective
date through the issuance of refunding bonds. Under the
Housing Finance Corporation Act, this requirement applies
only if a development contains at least 20 units and it
iS financed by bonds issued . . . as a
result of an official decision to issue
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Mr. 0. P. (Bob) Bobbitt - Page 3 (JM-804)
bonds that occurs on or after January 1,
1986. (Emphasis added.)
Local Gov't Code 5394.902(a)(2). The development is
"financed" by the original bond issuance, which provides a
fund to pay development costs. This is the appropriate
time to apply design requirements, when funds are first
made available for a project.
The issuance of refunding bonds extends the time for
paying an existing debt previously funded by a bond issu-
ante. m Citvof Lona Beach v. Lisenby, 179 P. 198 (Cal.
1919); Lee v. Hancock County 178 So. 790 (Miss. 1938).
Refunding bonds do not create Aew debt, but merely continue
existing debt. Dallas Countv v. Lockhart, 96 S.W.Zd 60
(Tex. 1936). Refinancing a debt by issuance of refunding
bonds continues the original financing, but does not
provide the developer with more funds to perform the work.
See aenerallv Du Ouesnav v. Henderson, 74 P.2d 294 (Cal.
APP. 1937): Collector of Revenue v. Mossler~Accentance Co.,
139 So. 2d 263 (La. App. 1962) (defining "refinancing").
Since the issuance of refunding bonds under chapter
394 of the Local Government Code merely extends an existing
obligation and existing financing, we believe the reserva-
tion of space for elderly persons under section 394.902
does not become applicable when a development is refinanced
by the issuance of refunding bonds. The requirement is
applicable to the provision of original financing by the
issuance of bonds on or after January 1, 1986. Where the
original bonds were issued prior to that date, the
development is not subject to the reservation requirement,
even if refunding bonds are issued after that date. This
reasoning and conclusion also apply to the issuance of
refunding bonds under the Texas Housing Agency Act.1
1. As amended in 1985, article 12671-6, V.T.C.S., was
also subject to the elderly reservation requirement only
with respect to housing developments financed by bonds
issued as a result of an official decision to issue bonds
that occurred on or after January 1, 1986. m Acts 1985,
69th Leg., ch. 650, 510, at 2403. The limitation was re-
pealed by the Local Government Code adopted in 1987. Acts
1987, 70th Leg., ch. 149, §49(3), at 2397. This limitation
was a transitional provision applicable to transactions
occurring while it was in effect. See Lanaever v. Miller,
76 S.W.2d 1025 (Tex. 1934): State v. Steck Co., 236 S.W.Zd
866 (Tex. Civ. App. - Austin 1951, writ ref'd). Since the
time for pre-1986 transactions has elapsed, the limitation
no longer needs to be included in the statute.
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Mr. 0. P. (Bob) Bobbitt - Page 4 (JH-804)
Article 12691-6, V.T.C.S., also includes the following
provision:
Bonds issued by the agency also may be
refunded in the manner provided by any other
applicable statute, including . . .
(Articles 717k and 717k-3, Vernon's Texas
Civil Statutes).
V.T.C.S. art. 12691-6, §34 (4. Articles 717k and 717k-3,
V.T.C.S., provide full authority to refund bonds. Re-
funding of bonds under these statutes would not be subject
to the requirement in section 10A of article 12691-6,
V.T.C.S., of reserving space for the elderly. It is
therefore apparent that the legislature did not intend the
issuance of refunding bonds to subject the development to
the section 10A requirement.
SU M M A R Y
The refinancing of a housing development
by issuance of refunding bonds under article
12691-6, V.T.C.S., the Texas Housing Agency
Act, or chapter 394 of the Local Government
Code, the Texas Finance Corporation Act,
does not impose upon the housing development
the requirement that space be reserved in
the development for elderly occupants.
MARY KELLER
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
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