1. (a) Instruments needed for closing. The documents which shall be required at the time of closing shall include the following:

   1. (1) evidence that requirements and regulations of all local, state and federal agencies having jurisdiction have been met prior to release of building funds, including but not limited to permits and authorizations;

   2. (2) certified copy of the ordinances or resolutions adopted by the governing body authorizing issuance of debt sold to the board which has received prior approval by the executive administrator and which shall have sections providing for the following, or alternatively, for a water supply corporation, eligible NPNC, or eligible private applicant, an executed promissory note and loan agreement and related documents which contain the following:

      1. (A) that an escrow account, if applicable, shall be created which shall be separate from all other funds and that:

         1. (i) the account shall be maintained at an escrow agent bank or maintained with the trust agent;
         2. (ii) funds shall not be released from the escrow account without written approval by the executive administrator;
         3. (iii) if requested, the escrow account bank statements or trust account statement will be provided on a monthly basis to the executive administrator's office; and
         4. (iv) the escrow account will be adequately collateralized as determined by the executive administrator sufficient to protect the board's interest.
      2. (B) that a construction fund shall be created which shall be separate from all other funds of the applicant;
      3. (C) that a final accounting be made to the board of the total sources and authorized use of project funds and that any surplus loan funds be used in a manner as approved by the executive administrator;
      4. (D) that an annual audit of the applicant, prepared in accordance with generally accepted auditing standards by a certified public accountant or licensed public accountant be provided annually for the life of the loan to the executive administrator;
      5. (E) that the applicant shall fix and maintain rates, in accordance with state law, and collect charges to provide adequate operation, maintenance and insurance coverage on the project in an amount sufficient to protect the board's interest;
      6. (F) that the applicant will implement any water conservation program required by the board until all financial obligations to the state have been discharged;
      7. (G) that the applicant shall maintain current, accurate and complete records and accounts necessary to demonstrate compliance with financial assistance related legal and contractual provisions;
      8. (H) that the applicant covenants to abide by the board's rules and relevant statutes, including the Texas Water Code, Chapter 15, Subchapter J; and
      9. (I) that the applicant, or an obligated person for whom financial or operating data is presented, will undertake, either individually or in combination with other issuers of the applicant's obligations or obligated persons, in a written agreement or contract to comply with requirements for continuing disclosure on an ongoing basis substantially in the manner required by Securities and Exchange Commission (SEC) rule 15c2-12 and determined as if the board were a Participating Underwriter within the meaning of such rule, such continuing disclosure undertaking being for the benefit of the board and the beneficial owner of the political subdivision's obligations, if the board sells or otherwise transfers such obligations, and the beneficial owners of the board's bonds if the political subdivision is an obligated person with respect to such bonds under rule 15c2-12.
   3. (3) two copies of the applicant's water conservation program, including documentation of local adoption;
   4. (4) unqualified approving opinions of the attorney general of Texas and if bonds are issued, a certification from the comptroller of public accounts that such debt has been registered in that office;
   5. (5) if bonds are issued, an unqualified approving opinion by a recognized bond attorney acceptable to the executive administrator, or if a promissory note and loan agreement is used, an opinion from the corporation's attorney which is acceptable to the executive administrator;
   6. (6) executed escrow agreement entered into by the entity and an escrow agent bank or an executed trust agreement entered into by the entity and the trust agent satisfactory to the executive administrator, in the event that construction funds are escrowed;
   7. (7) assurances that the applicant will comply with any special conditions specified by the board's environmental determination until all financial obligations to the state have been discharged;
   8. (8) other or additional data and information, if deemed necessary by the executive administrator; and

   9. (9) for financial assistance provided to corporations, eligible private applicants, or eligible NPNC applicants that are not also eligible public applicants:

      1. (A) a first mortgage lien evidenced by a deed of trust on all the real and personal property of the water system;
      2. (B) an owner's title insurance policy for the benefit of the board covering all the real property identified in the deed of trust;
      3. (C) an agreement executed by the applicant securing a first lien on all the revenues of the water system for the benefit of the board;
      4. (D) evidence that the rates on which the applicant intends to rely for repayment of the financial assistance have received final, binding, and unappealable approval from the commission and, for applicants required to utilize a surcharge account pursuant to §371.33 of this title (relating to Surcharge), evidence that the approval of the commission was conditioned on the creation of a surcharge account.
2. (b) Certified bond transcript. At such time as available following the final release of funds the applicant shall submit a transcript of proceedings relating to the debt purchased by the board which shall contain those instruments normally furnished a purchaser of debt.
3. (c) Refinancing construction loans. If the project includes the refinancing of a loan for a constructed project, the applicant shall submit any information deemed necessary by the executive administrator concerning the construction of the project. Additionally, the project must pass the executive administrator's inspection of the project.
4. (d) Loan closing prior to completion of design. In the event financial assistance is needed by the applicant to complete design of a project without escrow of funds for building under §371.38 of this title (relating to Pre-Design Funding Option), the executive administrator will so advise the board. The board at its option may authorize the executive administrator to close the loan for planning and design without requiring the submittals in subsection (a)(1) and (6) of this section. However, the submittals in subsection (a)(1) of this section will be required prior to delivery of funds for building purposes. Applicants wishing to close prior to obtaining required commission permits will be required to present documentation that the required permits are expected to be issued.
5. (e) Loan closing for phased construction. The executive administrator may determine it appropriate to close only a portion of a loan for a phased construction project unless the applicant can demonstrate the need for phased construction and that closing the portion of the loan desired by the applicant is necessary to expedite construction.

6. (f) Closing requirements for bonds. An applicant shall be required to comply with the following closing requirements if the applicant issues bonds that are purchased by the Board:

   1. (1) all loans shall be closed in book-entry-only form;
   2. (2) the applicant shall use a paying agent/registrar that is a Depository Trust Company (DTC) participant;
   3. (3) the applicant shall be responsible for paying all DTC closing fees assessed to the applicant by the Board's custodian bank directly to the Board's custodian bank; and
   4. (4) the applicant shall provide evidence to the Board that one fully registered bond has been sent to the DTC or to the applicant's paying agent/registrar prior to closing.

Source Note:The provisions of this §371.71 adopted to be effective March 18, 1997, 22 TexReg 2502; amended to be effective October 13, 1997, 22 TexReg 9893; amended to be effective June 10, 1998, 23 TexReg 5980; amended to be effective October 8, 1998, 23 TexReg 10042; amended to be effective December 4, 2001, 26 TexReg 9911; amended to be effective May 6, 2003, 28 TexReg 3733.