HOUSE BILL NO. 320

INTRODUCED BY D. EWER

A BILL FOR AN ACT ENTITLED: "AN ACT REVISING BOND LAWS TO CLARIFY THE NATURE OF REVENUE BONDS; PROVIDING A MECHANISM FOR VOTING ON REVENUE BONDS; PROVIDING FOR GROSS REVENUE BONDS AND NET REVENUE BONDS; PROVIDING FOR THE ISSUANCE OF BONDS FOR WATER AND SEWER PROJECTS; CLARIFYING THE NATURE OF REFUNDING BONDS; PROVIDING A REMEDIAL PURPOSE; AMENDING SECTIONS 7-7-4423, 7-7-4426, 7-7-4427, AND 7-7-4428, MCA; PROVIDING A CONTINGENT VOIDNESS PROVISION; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE."

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

Section 1. Section 7-7-4423, MCA, is amended to read:

"7-7-4423. Nature of revenue bonds. (1) A holder or holders of any bonds issued under this part may not compel any exercise of taxing power of the municipality to pay bonds or the interest on the bonds.

(2) Each bond issued under this part must recite in substance that:

(a) the bond, including interest on the bond, is payable from the revenue pledged to the payment of the bond; and

(b) the bond does not constitute a debt of the municipality within the meaning of any constitutional or statutory limitation on the amount of indebtedness that may be incurred."

Section 2. Section 7-7-4426, MCA, is amended to read:

"7-7-4426. Authorization for undertaking and issuance of bonds. (1) The acquisition, purchase, construction, reconstruction, improvement, betterment, or extension of any undertaking may be authorized under this part.

(2) Bonds may be authorized to be issued under this part by resolution or resolutions of the governing body of the municipality:

(a) without an election; or

(b) when authorized by a majority of the qualified electors voting upon the question at a special election that is conducted by mail ballot, as provided in Title 13, chapter 19, or that is held in conjunction with a regular or primary election, if:

(i) the governing body in its sole discretion chooses to submit the question to the electorate; or

(ii) the election is required or considered desirable by the governing body to authorize the issuance of the bonds."

Section 3. Section 7-7-4427, MCA, is amended to read:

"7-7-4427. Special election on question of issuing bonds. (1) When the governing body has chosen or is required to submit the question of issuing bonds to the electorate, the special election must be conducted by mail ballot, as provided in Title 13, chapter 19, or must be held in conjunction with a regular or primary election and must be noticed and conducted as provided for municipal general obligation bonds in chapter 7, part 42. If the election is held to authorize the issuance of revenue bonds, the provisions of [section 6] also apply to the election.

(2) The special election must be held not later than the next municipal election that is held after the council or governing body of the municipality has by resolution or resolutions approved the acquisition, purchase, construction, reconstruction, improvement, betterment, or extension of any undertaking, as provided in this part, and has ordered the special election."

NEW SECTION. Section 4. Types of revenue bonds -- gross revenue bonds -- net revenue bonds. (1) The governing body in the resolution authorizing the issuance of bonds pursuant to this part may specify, as permitted by 7-7-4421, all or a portion of the revenue of the undertaking to be pledged to the payment of or security for the bonds.

(2) As used in this part:

(a) "gross revenue bonds" means revenue bonds secured by a pledge of all revenue of an undertaking; and

(b) "net revenue bonds" means revenue bonds secured by a pledge of the revenue of an undertaking after payment of the operating and maintenance expenses of the undertaking and, if desired, the establishment of reasonable reserves for the bonds and the payment of other specified costs of the undertaking.

NEW SECTION. Section 5. Taxes dedicated to payment of bonds. The legislature finds, determines, and declares that if the rates and charges for an undertaking constitute "taxes" within the meaning of Article VIII, section 17, of the constitution, any of the rates and charges constitute specific taxes dedicated to payment of public debt within the meaning of Article VIII, section 17(3)(b), of the constitution if the rates and charges are:

(1) pledged to payment of principal of, premium, if any, and interest on revenue bonds issued pursuant to this part, whether the revenue bonds are net revenue bonds or gross revenue bonds;

(2) pledged to restore a reserve for the revenue bonds or to pay operating, maintenance, and replacement costs of the undertaking; or

(3) the subject of a covenant to increase rates and charges payable on the revenue bonds and the governing body determines that the covenant is required to market the bonds on favorable terms.

NEW SECTION. Section 6. Form of ballot proposition. If an election is conducted on the issuance of revenue bonds, the ballot proposition may be prepared in substantially the following form, with changes that the governing body may consider appropriate:

Shall the (governing body) of the (municipality) be authorized to issue and sell revenue bonds, pledging the revenue of the municipality's (undertaking), in an aggregate principal amount not to exceed .... DOLLARS ($....), payable over a period not to exceed .... (....) years, for the purpose of ..............., pledging to the payment of the bonds the revenue of the (undertaking)? The revenue bonds are (gross revenue bonds, secured by a covenant that rates and charges of the (undertaking) must be increased, if necessary, to pay operating, maintenance, and replacement costs of the (undertaking)) (net revenue bonds, secured by the revenue of the (undertaking) after payment of operating and maintenance costs of the (undertaking) and the establishment of necessary reserves for the bonds) (and by a covenant to increase rates and charges to the extent necessary so that net revenue is not less than ....% of the debt service payable on the bonds and other outstanding revenue bonds).

NEW SECTION. Section 7. Elections on rates and charges. When the rates and charges of an undertaking are to be increased or new rates and charges are to be imposed and when the rates and charges are not dedicated to the payment of bonds authorized by the voters as provided in 7-7-4427 and [section 6] and are otherwise required to be approved by the voters pursuant to Article VIII, section 17, of the Montana constitution, then the governing body may submit the question of increasing or imposing the rates and charges to the electors.

Section 8. Section 7-7-4428, MCA, is amended to read:

"7-7-4428. Covenants in resolution authorizing issuance of bonds. Any resolution or resolutions authorizing the issuance of bonds under this part may contain covenants as to:

(1) the purpose or purposes to which the proceeds of sale of the bonds may be applied and the disposition of the proceeds;

(2) the use and disposition of the revenue of the undertaking for which the bonds are to be issued, including the creation and maintenance of reserves and including the pledge or appropriation of all or a portion of the property and resort tax revenue referred to in 7-7-4424;

(3) the transfer, from the general fund of the municipality to the account or accounts of the undertaking, of an amount equal to the cost of furnishing the municipality or any of its departments, boards, or agencies with the services, facilities, or commodities of the undertaking;

(4) the issuance of other or additional bonds payable from the revenue of the undertaking;

(5) the operation and maintenance of the undertaking;

(6) the insurance to be carried on the undertaking and the use and disposition of insurance money;

(7) the books of account and the inspection and audit of the books;

(8) the terms and conditions upon which the holders or trustees of the bonds or any proportion of the bonds are entitled to the appointment of a receiver by the district court having jurisdiction. The receiver may:

(a) enter and take possession of the undertaking;

(b) operate and maintain the undertaking;

(c) prescribe rates, fees, or charges, subject to the approval of the public service commission, if approval is required under applicable law; and

(d) collect, receive, and apply all revenue arising from the undertaking in the same manner as the municipality itself might do.

(9) the establishment and maintenance of reasonable rate and charges for the use and availability of the undertaking as required, in the judgment of the governing body, for the favorable sale of bonds issued pursuant to this part, including without limitation a covenant to:

(a) establish and maintain rates and charges sufficient to pay debt service and operating, maintenance, and replacement costs of the undertaking and to fund necessary reserves; or

(b) establish and maintain rates and charges sufficient to pay debt service and operating, maintenance, and replacement costs of the undertaking, to fund necessary reserves, and to provide additional funds necessary to the purposes of the undertaking or to provide assurance to the holders of the bonds as to the sufficiency of the revenue."

NEW SECTION. Section 9. Types of revenue bonds -- gross revenue bonds -- net revenue bonds. (1) The governing body in the resolution authorizing the issuance of bonds pursuant to this part, other than general obligation bonds issued pursuant to 7-13-2331, may pledge all or a portion of the revenue of a water or sewer system or improvement to the payment of or security for the bonds.

(2) As used in this part:

(a) "gross revenue bonds" means revenue bonds secured by a pledge of all revenue of a system or improvement; and

(b) "net revenue bonds" means revenue bonds secured by a pledge of the revenue of a system or improvement after payment of the operating and maintenance expenses of the system or improvement and, if desired, the establishment of reasonable reserves for the bonds and the payment of other specified costs of the system or improvement.

NEW SECTION. Section 10. Taxes dedicated to payment of bonds. The legislature finds, determines, and declares that if the rates and charges for a water or sewer system or improvement or if special assessments levied for the system or improvement constitute "taxes" within the meaning of Article VIII, section 17, of the constitution, any of the rates, charges, or assessments constitute specific taxes dedicated to payment of public debt within the meaning of Article VIII, section 17(3)(b), of the constitution if the rates, charges, or assessments are:

(1) pledged to payment of principal of, premium, if any, and interest on revenue bonds issued pursuant to this part, whether the revenue bonds are net revenue bonds or gross revenue bonds;

(2) pledged to restore a reserve for the revenue bonds or to pay operating, maintenance, and replacement costs of the system or improvement; or

(3) the subject of a covenant to increase rates and charges payable on the revenue bonds and the governing body determines that the covenant is required to market the bonds on favorable terms.

NEW SECTION. Section 11. Form of ballot proposition. If an election is conducted on the issuance of revenue bonds, the ballot proposition may be prepared in substantially the following form, with changes that the board of directors may consider appropriate:

Shall the board of directors of the (district) be authorized to issue and sell revenue bonds of the district in an aggregate principal amount not to exceed .... DOLLARS ($....), payable over a period not to exceed .... (....) years, for the purpose of .................., pledging to the payment of the bonds the revenue of the district's (system or improvement) (and) (special assessments to be levied against property located in the district and benefited by the (system or improvement) in an aggregate principal amount estimated not to exceed $....)? The revenue bonds are (gross revenue bonds, secured by a covenant that rates and charges of the (system or improvement) must be increased, if necessary, to pay operating, maintenance, and replacement costs of the (system or improvement)) (net revenue bonds, secured by the revenue of the (system or improvement) after payment of operating and maintenance costs of the (system or improvement) and the establishment of necessary reserves for the bonds) (and by a covenant to increase rates and charges to the extent necessary so that net revenue is not less than ....% of the debt service payable on the bonds and other outstanding bonds of the district).

NEW SECTION. Section 12. Elections on rates and charges. When the rates and charges of a district are to be increased or new rates and charges are to be imposed and when the rates and charges are not dedicated to the payment of bonds authorized by the voters as provided in [section 11] and are otherwise required to be approved by the voters pursuant to Article VIII, section 17, of the Montana constitution, then the board of directors may submit the question of increasing or imposing the rates and charges to the electors.

NEW SECTION. Section 13. Nature of refunding bonds. Bonds issued to refund bonds issued by a political subdivision may not be considered to create new debt, public debt, or indebtedness of the political subdivision.

NEW SECTION. Section 14. Remedial effect. [This act] is remedial and clarifying in character and is not intended to imply that the powers or results were lacking under prior law.

NEW SECTION. Section 15. Contingent voidness. If Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, is declared invalid, then [this act] is void.

NEW SECTION. Section 16. Codification instruction. (1) [Sections 4 through 7] are intended to be codified as an integral part of Title 7, chapter 7, part 44, and the provisions of Title 7, chapter 7, part 44, apply to [sections 4 through 7].

(2) [Sections 9 through 12] are intended to be codified as an integral part of Title 7, chapter 13, part 23, and the provisions of Title 7, chapter 13, part 23, apply to [sections 9 through 12].

(3) [Section 13] is intended to be codified as an integral part of Title 17, chapter 5, part 1, and the provisions of Title 17, chapter 5, part 1, apply to [section 13].

NEW SECTION. Section 17. Effective date. [This act] is effective on passage and approval.

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