Bill Text: IA HF89 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act granting cities the power to borrow surplus moneys from the city's reserves. (See Cmte. Bill HF 341)
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2015-02-02 - Subcommittee, Rogers, Carlson, and Kressig. H.J. 184. [HF89 Detail]
Download: Iowa-2015-HF89-Introduced.html
House File 89 - Introduced HOUSE FILE BY ROGERS A BILL FOR 1 An Act granting cities the power to borrow surplus moneys from 2 the city's reserves. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 1663YH (4) 86 aw/sc PAG LIN 1 1 Section 1. Section 384.4, subsection 1, Code 2015, is 1 2 amended by adding the following new paragraph: 1 3 NEW PARAGRAPH. f. Payments of principal and interest on 1 4 loans entered into pursuant to section 384.24B and authorized 1 5 for repayment by the council from the debt service fund. 1 6 Sec. 2. NEW SECTION. 384.24B General obligation loans 1 7 funded by the city. 1 8 1. For the purposes of this section, the following 1 9 definitions shall apply: 1 10 a. "Loan" means the sum of the transfers from the surplus 1 11 of one or more reserve accounts or funds of the city which 1 12 transfers are authorized for the purpose specified in the loan 1 13 authorization document. 1 14 b. "Reserve account or fund" means moneys held by a city 1 15 that are not operating funds, as defined in section 12B.10A, 1 16 and which account or fund is authorized by law to receive 1 17 interest pursuant to section 12C.7. 1 18 c. "Surplus" means the cash balance available in any account 1 19 or fund from which a loan will be made under this section which 1 20 exceeds the amount of expenses or disbursements made from 1 21 the account or fund in the previous three months, plus the 1 22 amount of transfers, payments, or disbursements required in the 1 23 following three months. 1 24 2. A city may authorize a loan to borrow money for any 1 25 general corporate purpose or essential corporate purpose in 1 26 accordance with and subject to the provisions of this section. 1 27 3. a. A transfer from a reserve account or fund for 1 28 the purposes of this section shall not cause the balance of 1 29 reserves in such account or fund at the close of the fiscal 1 30 year following the fiscal year in which the transfer is made 1 31 to fall below any minimum balance prescribed by law for such 1 32 account or fund. 1 33 b. A loan to finance a project under this section shall not 1 34 result in a user fee, rate, or property tax increase to support 1 35 the annual operations of the reserve account or fund from which 2 1 the loan is made, as a result of the unavailability of the 2 2 surplus funds. 2 3 4. a. A loan entered into by a city pursuant to this 2 4 section may contain provisions similar to those found in loan 2 5 agreements between private parties, including but not limited 2 6 to the issuance of notes to evidence its obligations. The 2 7 terms of each loan shall require repayment of the loan within 2 8 ninety days to the extent necessary to prevent a user fee, 2 9 rate, or property tax increase which raises the user fees, 2 10 rates, or property taxes payable into the account or fund from 2 11 which the loan is made above the level in effect at the time a 2 12 loan under this section is authorized. 2 13 b. A loan authorized pursuant to this section shall 2 14 constitute an indebtedness within the meaning of any 2 15 constitutional debt limitation and shall be reported by the 2 16 city to the state treasurer in the same manner as required 2 17 for bonding activities pursuant to section 12.1. The full 2 18 or partial refunding of any loan under this section shall 2 19 be authorized as an essential corporate purpose pursuant to 2 20 section 384.24, subsection 3, paragraph "f". 2 21 5. A loan made pursuant to this section is payable from the 2 22 debt service fund of the city. The governing body shall follow 2 23 the same authorization procedures required for the issuance 2 24 of general obligation bonds issued for the same purpose to 2 25 authorize a loan made payable from the debt service fund. 2 26 Upon approval of a loan, the loan shall be accounted for in 2 27 accordance with section 384.20. 2 28 6. A loan made pursuant to this section shall include 2 29 provisions establishing an interest rate on the loan that shall 2 30 be set at a rate that is between the interest rate established 2 31 pursuant to section 12C.6, subsection 2, paragraph "a", and the 2 32 interest rate established pursuant to section 74A.6, subsection 2 33 2. 2 34 7. Repayments of principal and interest shall be paid to 2 35 the reserve fund or account from which all or a portion of the 3 1 funds were advanced for the loan in the proportion that the 3 2 amount of the advance from the fund or account bears to the 3 3 entire amount of the loan. 3 4 8. a. The limitation in section 346.24 does not apply to a 3 5 transfer made pursuant to this section or to a loan authorized 3 6 pursuant to this section. 3 7 b. Except as otherwise provided by law, a city shall not 3 8 become indebted under this section to an amount exceeding six 3 9 million dollars. 3 10 9. A loan made pursuant to this section shall not include 3 11 any transfers or obligations from the reserve fund or account 3 12 of a city utility or of a combined city utility. 3 13 10. The powers granted under this section shall not be 3 14 construed as a limitation of the existing powers of a city. 3 15 Sec. 3. Section 384.25, Code 2015, is amended to read as 3 16 follows: 3 17 384.25 General obligation bonds or loans for essential 3 18 purposes. 3 19 1. A city which proposes to carry out any essential 3 20 corporate purpose within or without its corporate limits, and 3 21 to contract indebtedness and issue general obligation bonds or 3 22 authorize a loan described in section 384.24B, to provide funds 3 23 to pay all or any part of the cost of a project must do so in 3 24 accordance with the provisions of this division. 3 25 2. Before the council may institute proceedings for the 3 26 issuance of bonds or authorization of a loan for an essential 3 27 corporate purpose, a notice of the proposed action, including 3 28 a statement of the amount and purposes of the bonds or loan, 3 29 and the time and place of the meeting at which the council 3 30 proposes to take action for the issuance of the bonds or 3 31 authorization of the loan, must be published as provided in 3 32 section 362.3. At the meeting, the council shall receive oral 3 33 or written objections from any resident or property owner 3 34 of the city. After all objections have been received and 3 35 considered, the council may, at that meeting or any adjournment 4 1 thereof, take additional action for the issuance of the bonds 4 2 or authorization of the loan or abandon the proposal to issue 4 3 the bonds or authorize the loan. Any resident or property 4 4 owner of the city may appeal the decision of the council to 4 5 take additional action to the district court of the county in 4 6 which any part of the city is located, within fifteen days 4 7 after the additional action is taken, but the additional action 4 8 of the council is final and conclusive unless the court finds 4 9 that the council exceeded its authority. The provisions of 4 10 this subsection with respect to notice, hearing, and appeal, 4 11 are in lieu of the provisions contained in chapter 73A, or any 4 12 other law. 4 13 3. a. Notwithstanding subsection 2, a council may institute 4 14 proceedings for the issuance of bonds or the authorization of a 4 15 loan described in section 384.24B for an essential corporate 4 16 purpose specified in section 384.24, subsection 3, paragraph 4 17 "w" or "x", in an amount equal to or greater than three million 4 18 dollars by causing a notice of the proposal to issue the bonds 4 19 or authorize the loan, including a statement of the amount and 4 20 purpose of the bonds or loan, together with the maximum rate of 4 21 interest which the bonds are to bear or which will be charged 4 22 to the principal balance of the loan, and the right to petition 4 23 for an election, to be published at least once in a newspaper 4 24 of general circulation within the city at least ten days prior 4 25 to the meeting at which it is proposed to take action for the 4 26 issuance of the bonds or the authorization of the loan. 4 27 b. If at any time before the date fixed for taking action 4 28 for the issuance of the bonds or the authorization of the 4 29 loan, a petition is filed with the clerk of the city signed 4 30 by eligible electors of the city equal in number to twenty 4 31 percent of the persons in the city who voted for the office of 4 32 president of the United States at the last preceding general 4 33 election that had such office on the ballot, asking that the 4 34 question of issuing the bonds or authorizing the loan be 4 35 submitted to the registered voters of the city, the council 5 1 shall either by resolution declare the proposal to issue the 5 2 bonds or authorize the loan to have been abandoned or shall 5 3 direct the county commissioner of elections to call a special 5 4 election upon the question of issuing the bonds or authorizing 5 5 the loan. Notice of the election and its conduct shall be in 5 6 the manner provided in section 384.26. 5 7 c. If a petition is not filed, or if a petition is filed and 5 8 the proposition of issuing the bonds or authorizing the loan 5 9 is approved at an election, the council may proceed with the 5 10 authorization and issuance of the bonds or authorization of the 5 11 loan. 5 12 Sec. 4. Section 384.26, subsections 1, 2, 4, and 5, Code 5 13 2015, are amended to read as follows: 5 14 1. A city which proposes to carry out any general corporate 5 15 purpose within or without its corporate limits, and to contract 5 16 indebtedness and issue general obligation bonds or authorize a 5 17 loan described in section 384.24B, to provide funds to pay all 5 18 or any part of the costs of a project, must do so in accordance 5 19 with the provisions of this division. 5 20 2. Before the council may institute proceedings for the 5 21 issuance of bonds or authorization of a loan for a general 5 22 corporate purpose, it shall call a special city election to 5 23 vote upon the question of issuing the bonds or authorizing the 5 24 loan. At the election, the proposition must be submitted in 5 25 one of the followingformforms, as applicable: 5 26 Shall the ............ (insert the name of the city) issue 5 27 its bonds in an amount not exceeding the amount of $.... for 5 28 the purpose of ..........? 5 29 Shall the ............ (insert the name of the city) 5 30 authorize a loan from its surplus funds in an amount not 5 31 exceeding the amount of $.... for the purpose of ..........? 5 32 4. The proposition of issuing general corporate purpose 5 33 bonds or authorizing a loan for a general corporate purpose 5 34 is not carried or adopted unless the vote in favor of the 5 35 proposition is equal to at least sixty percent of the total 6 1 vote cast for and against the proposition at the election. 6 2 If the proposition of issuing the general corporate purpose 6 3 bonds or authorizing a loan for a general corporate purpose is 6 4 approved by the voters, the city may proceed with the issuance 6 5 of the bonds or authorization of the loan. 6 6 5. a. Notwithstanding the provisions of subsection 2, 6 7 a council may, in lieu of calling an election, institute 6 8 proceedings for the issuance of bonds or authorization of a 6 9 loan for a general corporate purpose by causing a notice of the 6 10 proposal to issue the bonds or authorize the loan, including 6 11 a statement of the amount and purpose of the bonds or loan, 6 12 together with the maximum rate of interest which the bonds are 6 13 to bear or which the loan is to bear, and the right to petition 6 14 for an election, to be published at least once in a newspaper 6 15 of general circulation within the city at least ten days prior 6 16 to the meeting at which it is proposed to take action for the 6 17 issuance of the bonds or authorization of the loan subject to 6 18 the following limitations: 6 19 (1) In cities having a population of five thousand or less, 6 20 in an amount of not more than four hundred thousand dollars. 6 21 (2) In cities having a population of more than five thousand 6 22 and not more than seventy=five thousand, in an amount of not 6 23 more than seven hundred thousand dollars. 6 24 (3) In cities having a population in excess of seventy=five 6 25 thousand, in an amount of not more than one million dollars. 6 26 b. If at any time before the date fixed for taking action 6 27 for the issuance of the bonds or the authorization of the 6 28 loan, a petition is filed with the clerk of the city in the 6 29 manner provided by section 362.4, asking that the question 6 30 of issuing the bonds or authorizing the loan be submitted to 6 31 the registered voters of the city, the council shall either by 6 32 resolution declare the proposal to issue the bonds or authorize 6 33 the loan to have been abandoned or shall direct the county 6 34 commissioner of elections to call a special election upon the 6 35 question of issuing the bonds or authorizing the loan. Notice 7 1 of the election and its conduct shall be in the manner provided 7 2 in the preceding subsections of this section. 7 3 c. Ifnoa petition is not filed, or if a petition is 7 4 filed and the proposition of issuing the bonds or authorizing 7 5 the loan is approved at an election, the council may proceed 7 6 with the authorization and issuance of the bonds or the 7 7 authorization of the loan. 7 8 Sec. 5. Section 384.33, Code 2015, is amended to read as 7 9 follows: 7 10 384.33 Action. 7 11NoAn action may not be brought which questions the legality 7 12 of general obligation bonds, notes, or loans under this 7 13 chapter or the power of the city to issue the bonds, notes, or 7 14 loans or the effectiveness of any proceedings relating to the 7 15 authorization and issuance of the bonds, notes, or loans from 7 16 and after sixty days from the time the bonds, notes, or loans 7 17 are ordered issued by the city. 7 18 EXPLANATION 7 19 The inclusion of this explanation does not constitute agreement with 7 20 the explanation's substance by the members of the general assembly. 7 21 This bill enacts new Code section 384.24B to allow a city to 7 22 borrow surplus moneys from its reserve accounts or funds for 7 23 any general corporate purpose or essential corporate purpose, 7 24 as those terms are defined in current law. The bill requires 7 25 that a city certify taxes to be levied for deposit in the debt 7 26 service fund in the amount necessary to pay principal and 7 27 interest on loans authorized under the bill. The bill defines 7 28 "loan", "surplus", and "reserve account or fund". 7 29 The bill requires that such loans not cause the balances 7 30 of such reserve accounts or funds to fall below any minimum 7 31 balance prescribed by law and requires that a city shall 7 32 not become indebted under such loans to an amount in excess 7 33 of $6 million unless otherwise provided by law. The bill 7 34 requires that loans from reserve funds be reported to the state 7 35 treasurer in the same manner as required for bonds issued 8 1 by a city. The bill requires that such loans not result in 8 2 a user fee, rate, or property tax increase as a result of 8 3 unavailability of surplus funds. The terms of each loan shall 8 4 require repayment of the loan within 90 days to the extent 8 5 necessary to prevent a user fee rate or property tax increase. 8 6 Such a loan shall be payable from the city debt service fund 8 7 and shall constitute an indebtedness within the meaning of any 8 8 statutory debt limitation. 8 9 The full or partial repayment of a loan entered into under 8 10 the bill shall constitute an essential corporate purpose 8 11 pursuant to Code section 384.24, subsection 3, paragraph "f". 8 12 The bill provides that upon approval of such a loan that the 8 13 loan shall be accounted for as a separate account pursuant 8 14 to current Code section 384.20. The bill further provides 8 15 that interest rates on such a loan be set between the interest 8 16 rate established for the deposit of public funds, established 8 17 in current Code section 12C.6 and the maximum interest rate 8 18 established for public obligations and assessments under 8 19 current Code section 74A.6, subsection 2. The bill provides 8 20 that such a loan not include any transfers or obligations from 8 21 a reserve fund or account of a city utility or combined city 8 22 utility. 8 23 The bill requires that a city council follow substantially 8 24 the same procedures for the issuance of general obligation 8 25 bonds for essential corporate purposes, pursuant to Code 8 26 section 384.25, or for general corporate purposes, pursuant to 8 27 Code section 384.26, when making a loan from reserve funds. 8 28 The bill further provides that an action may not be brought 8 29 against a city regarding the legality, power to issue, or power 8 30 to authorize notes or loans under Code chapter 384 at any time 8 31 after 60 days following authorization. LSB 1663YH (4) 86 aw/sc
