HOUSE BILL NO. 476

INTRODUCED BY R. JOHNSON, C. HIBBARD, M. HALLIGAN

A BILL FOR AN ACT ENTITLED: "AN ACT PROVIDING FOR THE ISSUANCE OF MUNICIPAL GENERAL OBLIGATIONS; EXPANDING THE PERMISSIBLE PURPOSES OF MUNICIPAL GENERAL OBLIGATION FINANCING; AUTHORIZING MUNICIPALITIES TO INCUR LIMITED AMOUNTS OF GENERAL OBLIGATIONS WITHOUT SUBMITTING THE QUESTION TO THE ELECTORS; AUTHORIZING A FIRST LIEN ON GENERAL FUND REVENUE FOR THE PAYMENT OF THE OBLIGATIONS AND RELATED CHARGES; ALLOWING THE GOVERNING BODY OF A MUNICIPALITY TO CREATE NECESSARY FUNDS AND ACCOUNTS; AMENDING SECTIONS 7-5-4304, 7-5-4306, AND 7-7-4101, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE."

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

Section 1. Section 7-5-4304, MCA, is amended to read:

"7-5-4304. Certain contracts to be submitted to voters. A contract may not be let pursuant to 7-5-4302 that extends over a period of 5 years or more, except contracts for solid waste management systems as defined in 75-10-103, which may not exceed 10 years, or obligations issued pursuant to [section 4], without first submitting the question to a vote of the electors of the city or town."

Section 2. Section 7-5-4306, MCA, is amended to read:

"7-5-4306. Use of installment purchase contract. When the amount to be paid under an installment purchase contract exceeds $4,000, the council may provide for the payment of the amount in installments extending over a period of not more than 10 years if at the time of entering into the contract, there is an unexpended balance of appropriation in the budget for the then-current fiscal year available and sufficient to pay for the portion of the contract price payable during the then-current fiscal year. The budget for each following year in which any portion of the purchase price is to be paid must contain an appropriation for the purpose of paying that portion. The limitations contained in this section do not apply to installment purchase contracts entered into pursuant to [section 4]."

Section 3. Section 7-7-4101, MCA, is amended to read:

"7-7-4101. Purposes for which indebtedness may be incurred. The city or town council has power to contract an indebtedness on behalf of a city or town, upon the credit of the city or town, by borrowing money, issuing bonds, issuing notes, entering into leases, entering into lease-purchase agreements, or entering into installment purchase contracts for the following purposes:

(1) acquiring land for and designing and erecting public buildings;

(2) acquiring land for and designing and constructing sewers, sewage treatment and disposal plants, waterworks, reservoirs, reservoir sites, and lighting plants;

(3) supplying the city or town with water by contract and the construction or purchase of canals or ditches and water rights for supplying the city or town with water;

(4) designing and constructing bridges, docks, wharves, breakwaters, piers, jetties, and moles;

(5) acquiring, opening, or widening any street and improving the street by constructing, reconstructing, and repairing pavement, gutters, curbs, and vehicle parking strips and to pay all or any portion of the cost relating to the project;

(6) purchasing or leasing fire apparatus, street and other equipment, and personal property, including without limitation, vehicles, telephone systems, and photocopy and office equipment, including computer hardware and software;

(7) building, purchasing, designing, constructing, and maintaining devices intended to protect the safety of the public from open ditches carrying irrigation or other water;

(8) funding outstanding warrants and maturing bonds; and

(9) repaying tax protests lost by the city, town, or other municipal corporation."

NEW SECTION. Section 4. Incurrence of certain general obligations. (1) A municipality may enter into or incur an obligation for any purpose authorized by law, including the purposes set forth in 7-7-4101. An obligation may be in the form of bonded indebtedness, note indebtedness, a lease, a lease-purchase agreement, an installment purchase contract, or other legal form. An obligation constitutes a general obligation of the municipality but is not secured by a pledge of the taxing power of the municipality.

(2) The obligation provided for in subsection (1) may be authorized by a resolution adopted by the governing body of the municipality. The resolution must establish the terms, covenants, and conditions of the obligation. It is not necessary to submit the question of incurring the obligation to the electors of the municipality. The obligation may be incurred or sold at public or private sale, on terms and at prices that the governing body determines to be advantageous. The obligation does not constitute indebtedness for the purpose of statutory debt limitations.

(3) An obligation may be issued only if:

(a) the principal amount of the obligation does not exceed 10% of the general fund budget of the municipality in each of the 2 immediately preceding fiscal years;

(b) at the time the obligation is to be incurred, the debt services in the current or in any future fiscal year on the obligation and any other outstanding obligation issued pursuant to this section do not exceed 2% of the revenue deposited in the general fund of the municipality in each of the 2 immediately preceding fiscal years; and

(c) the term of the obligation does not exceed 20 years.

(4) The obligation must clearly state that it is not secured by a pledge of the municipality's taxing power but that it is payable solely from revenue in the general fund in any fiscal year that is pledged to the payment of the obligation.

(5) In order to secure the payment of principal of or interest on an obligation and related charges, the municipality may grant a first lien on all revenue collected and deposited in the general fund subject to or on a parity with any prior pledges. The municipality may establish other funds and accounts for obligations issued under this section that may be necessary to provide for the priority and segregation of revenue deposited in the general fund and pledged to the payment of obligations. For purposes of this section, related charges include the fees and expenses of registrars and paying agents and the amounts, if any, that must be rebated to the federal government under 26 U.S.C. 148.

(6) All obligations incurred under this section are legal and valid obligations of the municipality issuing the obligations, and the general credit of the municipality is irrevocably pledged for the prompt payment of both the principal of and interest on the obligations as they become due. However, the municipality may not be obligated to levy taxes for the payment of any obligation or interest on the obligation.

(7) The powers conferred on a municipality by this section are in addition to and are supplemental to the powers conferred by any other general, special, or local law. To the extent that the provisions of this section are inconsistent with provisions of any other general, special, or local law, the provisions of this section are controlling.

NEW SECTION. Section 5. Codification instruction. [Section 4] is intended to be codified as an integral part of Title 7, chapter 7, part 41, and the provisions of Title 7, chapter 7, part 41, apply to [section 4].

NEW SECTION. Section 6. Effective date. [This act] is effective on passage and approval.

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