On January 27, 2010, the Governor of Texas and Texas Bond Review Board (BRB) completed steps necessary to facilitate the issuance of tax-exempt bonds to enable eligible businesses to finance capital improvements in any of 34 counties located in the Hurricane Ike disaster area.

Hurricane Ike Bonds. Under the Heartland Disaster Tax Relief Act of 2008 (the “Act”), Texas political subdivisions and their instrumentalities may issue tax-exempt bonds prior to January 1, 2013, to finance eligible facilities for qualified businesses in the Hurricane Ike disaster area if the issuer receives from the Governor of Texas a sufficient allocation of the $1.86 billion cap on the amount of such bonds. (The Hurricane Ike bond cap is independent of and in addition to the statewide annual cap on other private activity bonds.) For more information about eligibility, please refer to the Fulbright Briefing issued on December 15, 2008.

Allocation Authority. Legislation enacted by the Texas legislature in 2009 confirmed the authority of the Governor to make allocations with assistance from the BRB. On December 7, 2009, the Governor issued a proclamation that established a process and parameters for administration and allocation of the Hurricane Ike bond cap. To give effect to the requirements of the Act that allocations be provided to areas in the order in which assistance is most needed, the proclamation reserves $1,434,717,900 for projects located in Brazoria, Chambers, Galveston, Harris, Jefferson, Liberty, Montgomery, and Orange Counties, $242,225,100 for projects located in Fort Bend, Grimes, Hardin, Jasper, Newton, Polk, San Jacinto, Tyler, and Walker Counties, and $186,327,000 for projects located in Angelina, Austin, Cherokee, Gregg, Harrison, Houston, Madison, Matagorda, Nacogdoches, Rusk, Sabine, San Augustine, Shelby, Smith, Trinity, Waller, and Washington Counties, unless otherwise provided by the Governor. Under the proclamation, eligible issuers are to submit applications for an allocation through the BRB on a form approved by the Governor and the BRB, and the Governor will make allocations on a case-by-case basis to ensure that each project is an appropriate use of funds under the Act.

Application Procedure. On January 27, 2010, the BRB posted forms for applying for Hurricane Ike bond cap on its internet site at www.brb.state.tx.us/ike/IkeBonds.aspx. To apply for an allocation, eligible issuers must complete and submit the posted application form to the BRB and pay a $1,000 application fee to the Comptroller of Public Accounts. The principal amount of the application may not be less than $10 million. Unlike applications for an allocation of the general state-wide private activity bond cap, there is no limit on the amount of Hurricane Ike bond cap that may be requested. The application must include a letter from bond counsel stating that (i) the bonds would not be tax-exempt without the requested designation and (ii) bond counsel expects to be able to render an opinion that the bonds and the project comply with the requirements of the Act and applicable state law if the requested designation is made. After receipt of applications, the BRB will forward relevant information to the Governor, who will then determine whether to accept or deny the application.

After receiving a Hurricane Ike bond allocation, an issuer must issue the bonds within 120 days after the allocation, unless a longer period is approved by the Governor. If the bonds are not issued within the permitted period, the allocation is deemed waived, and the allocated portion of the Hurricane Ike bond cap becomes eligible for allocation to others.

Unlike the lottery procedure for allocating the state’s general cap on private activity bonds, there are no restraints on when applications or allocations may be made, so issuers considering this financing alternative should submit applications for Hurricane Ike bond cap as soon as they are in a position to meet the 120-day deadline for using an allocation, if received.

Fulbright & Jaworski helped prepare the legislation confirming the Governor’s authority to allocate Hurricane Ike bond cap, as well as the resulting proclamation and application form. For further information, please contact Fredric A. Weber (fweber@fulbright.com or 713 651 3628), Jana B. Cogburn (jcogburn@fulbright.com or 713 651 3751) or Dimitri Millas (dmillas@fulbright.com or 713 651 5259) from Fulbright's Public Finance Practice Group.

Fulbright & Jaworski’s Public Finance Practice Group
Fulbright & Jaworski’s Public Finance Practice Group collaborates with clients to help them achieve their objectives in the municipal securities marketplace. Our municipal securities practice annually ranks as one of the most active in the nation. In 2009, Fulbright & Jaworski ranked 6th in the nation as bond counsel helping to raise more than $10.4 billion in capital in more than 265 municipal securities offerings.

Our attorneys have extensive experience as counsel to issuers of tax-exempt obligations and as counsel to their underwriters, credit enhancers, derivatives dealers and liquidity providers.

Issuers of tax-exempt obligations look to the Public Finance attorneys at Fulbright & Jaworski as bond, underwriter, disclosure, swap and general counsel for: 

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