HOUSE BILL NO. 479
INTRODUCED BY S. GALLUS
AN ACT AUTHORIZING SPECIAL IMPROVEMENT DISTRICT BONDS AND RURAL SPECIAL IMPROVEMENT DISTRICT BONDS TO BEAR INTEREST AT A VARIABLE RATE; PROVIDING ADJUSTMENTS IN THE INTEREST RATES ON SPECIAL ASSESSMENTS SECURING VARIABLE RATE BONDS; PROVIDING THAT VARIABLE RATE BONDS MAY BE SOLD AT A PRIVATE NEGOTIATED SALE IF THE PRINCIPAL AMOUNT IS LESS THAN $500,000 AND THE BOARD OF COUNTY COMMISSIONERS OR THE GOVERNING BODY OF A MUNICIPALITY OBTAINS A MARKETABILITY OPINION; PROVIDING THAT THE BOARD OF INVESTMENTS REVIEW ITS PARTICIPATION IN VARIABLE RATE BONDS AND RECOMMEND ACTION TO THE 58TH LEGISLATURE; AMENDING SECTIONS 7-12-2171, 7-12-2176, 7-12-2183, 7-12-2184, 7-12-2193, 7-12-4189, 7-12-4194, 7-12-4203, 7-12-4223, AND 7-12-4224, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 7-12-2171, MCA, is amended to read:
"7-12-2171. Details relating to rural improvement district bonds and warrants -- definitions of bond forms. (1) (a) The bonds and warrants must be drawn against either the construction or maintenance fund created for the special improvement district and must bear interest from the date of registration until called for redemption or paid in full. Bonds or warrants sold at a private, negotiated sale may bear interest at a rate varying periodically at the time or times and on the terms determined by the board of county commissioners. The terms determined by the board of county commissioners may include the establishment of a maximum rate of interest or the convertibility to a fixed rate of interest.
(b) Variable rate bonds may be sold at a private negotiated sale if the principal amount of the bonds is $500,000 or less and the board of county commissioners obtains separate written opinions from underwriters of Montana rural improvement district bonds stating the bonds are not marketable through a competitive bond sale. Bonds sold in principal amounts below $250,000 do not require a marketability opinion.
(c) The interest must be payable annually or semiannually, at the discretion of the board of county commissioners, on
the dates that the board prescribes. The warrants or bonds must bear the signatures of the presiding officer of the board and
the county clerk and must may bear the corporate seal of the county. They The warrants or bonds must be registered in the
office of the county clerk and the county treasurer, and if interest coupons are attached to the warrants or bonds, they must
also be registered and shall bear the signatures of the chairman presiding officer of the board and the county clerk. The
coupons may bear the facsimile signatures of the officers in the discretion of the board.
(2) The bonds must be in denominations of $100 or fractions or multiples of $100, may be issued in installments, and may extend over a period not to exceed 30 years. However, if federal loans are available for improvements, repayment may extend over a period not to exceed 40 years. For the purposes of this subsection, the term of a bond issue commences on July 1 of the fiscal year in which the county first levies to pay principal and interest on the bonds.
(3) As used in this part, unless the context clearly indicates otherwise, the following definitions apply:
(a) "Amortization bonds" means the form of bonds that bear interest at a fixed rate and on which:
(i) a part of the principal must be paid each time that interest becomes payable;
(ii) the part payment of principal increases at each installment in the same amount that the interest decreases;
(iii) the combined interest and principal due on each due date remains the same until the bonds are paid;
(iv) the final payment may vary from prior payments in the amount resulting from disregarding fractional costs in prior payments; and
(v) the initial payment may be larger than subsequent payments if the increase represents interest accrued over an additional period not greater than 6 months.
(b) "Serial bonds" means a bond issue payable in semiannual or annual installments commencing not more than 2 years from the date of issue, any one installment consisting of one or more bonds, with the principal amount of bonds maturing in each installment not exceeding five times the principal amount of the bonds maturing in the immediately preceding installment."
Section 2. Section 7-12-2176, MCA, is amended to read:
"7-12-2176. Interest rate on unpaid assessments. (1) The Except as provided in subsection (3), the installments of
assessments remaining unpaid bear simple interest at an annual rate equal to the sum of:
(a) 1/2 of 1% a year; plus
(b) the average interest rate payable on the outstanding bonds or warrants of the rural special improvement district at the time the assessment is levied each fiscal year; plus
(c) at the option of the board of county commissioners, up to an additional 1/2 of 1% a year.
(2) The board of county commissioners may subsequently reduce or eliminate the additional interest rate allowed under subsection (1)(c). If the additional interest rate is reduced or eliminated, it may not be subsequently increased or reimposed.
(3) If and so long as the bonds or warrants secured by the assessments bear interest at a variable rate, the installments of assessments remaining unpaid must bear simple interest at an annual rate equal to the sum of:
(a) 1% a year; plus
(b) the interest rate payable on the outstanding bonds or warrants of the rural special improvement district at the time the assessment is levied each fiscal year; plus
(c) to the extent that the interest rate on the bonds or warrants is then less than the maximum rate prescribed for the bonds or warrants or if there is no prescribed maximum rate, up to an additional 1% a year, as may be prescribed by the board of county commissioners in the resolution authorizing the issuance or sale of the bonds or warrants."
Section 3. Section 7-12-2183, MCA, is amended to read:
"7-12-2183. Loan from revolving fund to meet payments on bonds and warrants or to make emergency repairs. (1) During the period described in 7-12-2185(2), when any rural special improvement district bond or warrant secured by the revolving fund or any interest on the bond or warrant becomes due and payable and there is either no money or insufficient money in the appropriate district fund after a transfer from the appropriate district reserve account, if established, with which to pay the bond, warrant, or interest, an amount sufficient to make up the deficiency must be loaned by the revolving fund to the district fund. The bond, warrant, or interest must be paid from the money loaned and money available in the district fund. The loan must be made even if, in the case of bonds or warrants bearing interest at a variable rate, the interest rate on the special assessments at the time the loan is made is less than or later becomes less than the interest rate on the bonds or warrants.
(2) If there is insufficient money in the rural special improvement district maintenance fund to pay the cost of emergency repairs, the board of county commissioners, by order or resolution, may loan money from the revolving fund to the district maintenance fund. The loan must be repaid in annual installments in not more than 3 years. The loans may not cause a default in the payments of the principal of the bonds or warrants or the interest on the bonds or warrants. The loan must be repaid by an assessment as provided by 7-12-2120 if other funds are not available. If there are insufficient funds in the revolving fund to make the loans without causing a default in the payment of the principal of the bonds or warrants or the interest on the bonds or warrants secured by the revolving fund, then the loans may not be made."
Section 4. Section 7-12-2184, MCA, is amended to read:
"7-12-2184. Lien arising due to loan from revolving fund. (1) Whenever any a loan is made to any rural special
improvement district fund from the revolving fund, the revolving fund shall have has a lien therefor for the amount of the
loan on the land within the district which is delinquent in the payment of its for which payments of assessments are
delinquent and on all unpaid assessments and installments of assessments on such the district, (whether delinquent or not).
and on The lien also applies to all money thereafter coming into such the district fund, up to the amount of such the loan,
together with interest thereon on the loan from the time it was made, at the interest rate or percentage that is borne by the
bond or warrant for payment of which, or of interest thereon, such which the loan was made and that was determined at the
time the loan was made, even if the interest rate on the bond or warrant subsequently changes.
(2) If, after all the bonds and warrants issued on any rural special improvement district have been fully paid and all
moneys money remaining in such the district fund have has been transferred to the revolving fund, there still remains a debt
from the district to the revolving fund, the board of county commissioners may foreclose the lien upon property within the
district owing for which unpaid assessments are owed to the district for the purpose of paying off said the loan to the
revolving fund."
Section 5. Section 7-12-2193, MCA, is amended to read:
"7-12-2193. Refunding bonds. (1) A county may issue special improvement district bonds for the purpose of providing the money needed to pay principal of and interest on outstanding special improvement district bonds. To issue bonds for that purpose, the board of county commissioners, at a regular meeting or a duly called special meeting, shall adopt a resolution setting forth:
(a) the facts regarding the outstanding bonds that are to be refunded;
(b) the reasons for issuing refunding bonds; and
(c) the term and details of the refunding bonds.
(2) If the refunding bonds are proposed to be issued in an amount greater than the amount of outstanding bonds to be refunded, the board may not authorize the issuance of the bonds until it has conducted a public hearing on the desirability of issuing the bonds, after published and mailed notice as provided in 7-12-2105(2), and found by resolution that the issuance of refunding bonds is in the best interest of the special improvement district.
(3) After the adoption of the required resolution or resolutions, the board may:
(a) sell the refunding bonds at a private negotiated sale; or
(b) at its option, give notice of the sale and sell the refunding bonds in the same manner that other special improvement district bonds are sold.
(4) Bonds may not be refunded by the issuance of refunding bonds unless:
(a) the rate of interest offered on the refunding bonds is at least 1/2 of 1% a year less than the rate of interest on the bonds to be refunded or, if the bonds to be refunded bear interest at a variable rate, the board determines that the issuance of fixed rate refunding bonds is in the best interest of the owners of property in the district and the county or the board determines that the issuance of variable rate refunding bonds based on a different index or formula than that of the refunded bonds is reasonably expected to result over the remaining term of the bonds to be refunded in an interest rate at least 1/2 of 1% a year less than the rate of interest on the refunded bonds;
(b) there is, or will be on the next payment date, default in the payment of bond principal or interest; or
(c) 50% or more of the installments of special assessments levied in the special improvement district and payable in a single fiscal year have been delinquent for at least 1 year.
(5) (a) Refunding bonds issued pursuant to this section may be issued to refund outstanding bonds in advance of the date on which the bonds mature or are subject to redemption, but the proceeds of the refunding bonds, less any accrued interest or premium received from their sale, must be deposited with other funds appropriated for the payment of the outstanding bonds in escrow with a suitable banking institution or trust company, which may be located either in or out of the state.
(b) Deposited funds must be invested in securities that are general obligations of the United States or securities the principal of and interest on which are guaranteed by the United States. The securities must mature or be callable at the option of the holder on the dates and bear interest at the rates and be payable on the dates as may be required to provide funds sufficient, with any cash deposited in the escrow account, to pay when due:
(i) the interest to accrue on each refunded bond to its maturity or redemption date, if called for redemption;
(ii) the principal on each refunded bond at maturity or upon the redemption date; and
(iii) any redemption premium.
(c) The escrow account must be irrevocably appropriated to the payment of the principal of an interest and redemption premium, if any, on the refunded bonds.
(d) Funds to the credit of the debt service fund for the payment of the refunded bonds and not required for the payment of principal or interest due prior to issuance of the refunding bonds may be appropriated by the board to the escrow account.
(e) The county may pay the reasonable costs and expenses of issuing the refunding bonds and of establishing and maintaining the escrow account.
(6) Refunding bonds may be issued under this section to pay principal of or interest on special improvement district bonds outstanding on April 30, 1985, only if:
(a) the proceeds of the refunding bonds do not redeem the outstanding bonds until one-third or more of the term for which the bonds were issued has expired;
(b) there is a deficiency in the bond account or interest account of the special improvement district fund from which the bonds are payable; or
(c) 50% or more of the installments of special assessments levied in the special improvement district and payable in a single fiscal year have been delinquent for at least 1 year."
Section 6. Section 7-12-4189, MCA, is amended to read:
"7-12-4189. Simple interest on assessments. (1) Upon Except as provided in subsection (3), simple interest must be
charged on all special assessments and taxes levied and assessed in accordance with any of the provisions of this part,. The
simple interest must be charged at an annual rate equal to the sum of:
(a) 1/2 of 1% a year; plus
(b) the average interest rate payable on the outstanding bonds or warrants of the special improvement district at the time the assessment is levied each fiscal year; plus
(c) at the option of the city or town council, up to an additional 1/2 of 1% a year.
(2) The city or town council may subsequently reduce or eliminate the additional interest rate allowed under subsection (1)(c). If the additional interest rate is reduced or eliminated, it may not be subsequently increased or reimposed.
(3) If and so long as the bonds or warrants secured by the assessments bear interest at a variable rate, the installments of assessments remaining unpaid must bear simple interest at an annual rate equal to the sum of:
(a) 1% a year; plus
(b) the interest rate payable on the outstanding bonds or warrants of the rural special improvement district at the time the assessment is levied each fiscal year; plus
(c) to the extent that the interest rate on the bonds or warrants is then less than the maximum rate prescribed for the bonds or warrants or if there is no prescribed maximum rate, up to an additional 1% a year, as may be prescribed by the board of county commissioners in the resolution authorizing the issuance or sale of the bonds or warrants.
(3)(4) The treasurer, in collecting the special assessment taxes if the taxes are payable in one installment, shall collect
the interest as may be shown to be due on the taxes by the resolution levying the assessment. If the assessment is payable in
installments, the treasurer shall, at the time of collecting the first installment, collect the interest as may be shown to be due
on the assessment by the resolution levying the assessment, and the treasurer shall collect with each subsequent installment
interest on the amount remaining unpaid."
Section 7. Section 7-12-4194, MCA, is amended to read:
"7-12-4194. Refunding bonds. (1) A city may issue special improvement district bonds for the purpose of providing the money needed to pay principal of and interest on outstanding special improvement district bonds. To issue bonds for that purpose, the city council, at a regular meeting or a duly called special meeting, shall adopt a resolution setting forth:
(a) the facts regarding the outstanding bonds that are to be refunded;
(b) the reasons for issuing refunding bonds; and
(c) the term and details of the refunding bonds.
(2) If the refunding bonds are proposed to be issued in an amount greater than the amount of outstanding bonds to be refunded, the city council may not authorize the issuance of the bonds until it has conducted a public hearing on the desirability of issuing the bonds, after published and mailed notice as provided in 7-12-4106(2), and found by resolution that the issuance of refunding bonds is in the best interest of the special improvement district.
(3) After the adoption of the required resolution or resolutions, the council may:
(a) sell the refunding bonds at a private negotiated sale; or
(b) at its option, give notice of the sale and sell the refunding bonds in the same manner that other special improvement district bonds are sold.
(4) Bonds may not be refunded by the issuance of refunding bonds unless:
(a) the rate of interest offered on the refunding bonds is at least 1/2 of 1% a year less than the rate of interest on the bonds to be refunded or, if the bonds to be refunded bear interest at a variable rate, the council determines that the issuance of fixed rate refunding bonds is in the best interest of the owners of property in the district and the city or the council determines that the issuance of variable rate refunding bonds based on a different index or formula than that of the refunded bonds is reasonably expected to result over the remaining term of the bonds to be refunded in an interest rate at least 1/2 of 1% a year less than the rate of interest on the refunded bonds;
(b) there is, or will be on the next payment date, default in the payment of bond principal or interest; or
(c) 50% or more of the installments of special assessments levied in the special improvement district and payable in a single fiscal year have been delinquent for at least 1 year.
(5) (a) Refunding bonds issued pursuant to this section may be issued to refund outstanding bonds in advance of the date on which the bonds mature or are subject to redemption, but the proceeds of the refunding bonds, less any accrued interest or premium received from their sale, must be deposited with other funds appropriated for the payment of the outstanding bonds in escrow with a suitable banking institution or trust company, which may be located either in or out of the state.
(b) Deposited funds must be invested in securities that are general obligations of the United States or securities the principal of and interest on which are guaranteed by the United States. The securities must mature or be callable at the option of the holder on the dates and bear interest at the rates and be payable on the dates as may be required to provide funds sufficient, with any cash deposited in the escrow account, to pay when due:
(i) the interest to accrue on each refunded bond to its maturity or redemption date, if called for redemption;
(ii) the principal on each refunded bond at maturity or upon the redemption date; and
(iii) any redemption premium.
(c) The escrow account must be irrevocably appropriated to the payment of the principal of an interest and redemption premium, if any, on the refunded bonds.
(d) Funds to the credit of the debt service fund for the payment of the refunded bonds and not required for the payment of principal or interest due prior to issuance of the refunding bonds may be appropriated by the council to the escrow account.
(e) The city may pay the reasonable costs and expenses of printing the refunding bonds and of establishing and maintaining the escrow account.
(6) Refunding bonds may be issued under this section to pay principal of or interest on special improvement district bonds outstanding on April 30, 1985, only if:
(a) the proceeds of the refunding bonds do not redeem the outstanding bonds until one-third or more of the term for which the bonds were issued has expired;
(b) there is a deficiency in the bond account or interest account of the special improvement district fund from which the bonds are payable that will not be satisfied by a loan from the revolving fund; or
(c) 50% or more of the installments of special assessments levied in the special improvement district and payable in a single fiscal year have been delinquent for at least 1 year."
Section 8. Section 7-12-4203, MCA, is amended to read:
"7-12-4203. Details relating to special improvement district bonds and warrants -- definitions of bond forms. (1) (a) The bonds and warrants must be drawn against the special improvement district fund created for the district and must bear interest from the date of registration until called for redemption or paid in full. Bonds or warrants sold at a private, negotiated sale may bear interest at a rate varying periodically at the time or times and on the terms determined by the governing body of the municipality. The terms determined by the governing body of the municipality may include the establishment of a maximum rate of interest or the convertibility to a fixed rate of interest.
(b) Variable rate bonds may be sold at a private negotiated sale if the principal amount of the bonds is $500,000 or less and the governing body of the municipality obtains separate written opinions from underwriters of Montana special improvement district bonds stating the bonds are not marketable through a competitive bond sale. Bonds sold in principal amounts below $250,000 do not require a marketability opinion.
(c) The interest must be payable annually or semiannually, at the discretion of the governing body of the municipality,
on the dates that the governing body prescribes. The warrants or bonds must bear the signatures of the mayor and clerk and
must may bear the corporate seal of the city. The warrants or bonds must be registered in the office of the clerk and
treasurer, and if interest coupons are attached to the warrants or bonds, they must also be registered and bear the signatures
of the mayor and clerk.
(2) The bonds must be in denominations of $100 or fractions or multiples of $100, may be issued in installments, and may extend over a period not to exceed 20 years or, if refunding bonds are issued pursuant to 7-12-4194, over a period ending not later than 30 years after the date that the bonds to be refunded were issued. For the purposes of this subsection, the term of a bond issue commences on July 1 of the fiscal year in which the city first levies assessments to pay principal and interest on the bonds.
(3) As used in part 41 and this part, unless the context clearly indicates otherwise, the following definitions apply:
(a) "Amortization bonds" means the form of bonds that bear interest at a fixed rate and on which:
(i) a part of the principal must be paid each time that interest becomes payable;
(ii) the part payment of principal increases at each installment in the same amount that the interest decreases;
(iii) the combined interest and principal due on each due date remains the same until the bonds are paid;
(iv) the final payment may vary from prior payments in the amount resulting from disregarding fractional costs in prior payments; and
(v) the initial payment may be larger than subsequent payments if the increase represents interest accrued over an additional period not greater than 6 months.
(b) "Serial bonds" means a bond issue payable in semiannual or annual installments commencing not more than 2 years from the date of issue, any one installment consisting of one or more bonds, with the principal amount of bonds maturing in each installment not exceeding five times the principal amount of the bonds maturing in the immediately preceding installment."
Section 9. Section 7-12-4223, MCA, is amended to read:
"7-12-4223. Loans from revolving fund to meet payments on bonds and warrants. During the period described in 7-12-4225(2), when any special improvement district bond or sidewalk, curb, and alley approach warrants that are secured by the revolving fund or any interest on the bond or warrants becomes due and payable and there is either no money or insufficient money in the appropriate district fund after a transfer from the appropriate district reserve account, if established, with which to pay the bond, warrant, or interest, an amount sufficient to make up the deficiency must be loaned by the revolving fund to the district fund. The bond, warrant, or interest must be paid from the money loaned or from the money loaned and money available in the district fund. The loan must be made even if, in the case of bonds or warrants bearing interest at a variable rate, the interest rate on the special assessments at the time the loan is made is less than or later becomes less than the interest rate on the bonds or warrants."
Section 10. Section 7-12-4224, MCA, is amended to read:
"7-12-4224. Lien arising due to loan from revolving fund. Whenever any loan is made to any special improvement
district fund or sidewalk, curb, and alley approach warrants from the revolving fund, the revolving fund shall have has a
lien therefor for the amount of the loan on all unpaid assessments and installments of assessments on such the district,
(whether delinquent or not). and on The lien also applies to all money thereafter coming into such the district fund, up to
the amount of such the loan, together with interest thereon on the loan from the time it was made, at the interest rate or
percentage that is borne by the bond or warrant for payment of which the loan was made, or of interest thereon, such loan
was made and that was determined at the time the loan was made, even if the interest rate on the bond or warrant
subsequently changes."
Section 11. Board of investment participation in bonding -- review. The board of investments shall review their participation in issuing rural improvement district bonds and special improvement district bonds and provide a report to the 58th legislature with recommendations to increase or decrease the limit under which a marketability opinion is necessary as provided for in 7-12-2171 and 7-12-4203.
Section 12. Effective date. [This act] is effective on passage and approval.
- END -
Latest Version of HB 479 (HB0479.ENR)
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