                           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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          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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