SENATE BILL NO. 194

INTRODUCED BY M. HALLIGAN, B. CRIPPEN, B. GLASER, L. GROSFIELD, J. HARP, B. KASTEN, S. STANG, B. STORY

BY REQUEST OF THE JOINT SELECT COMMITTEE ON CI-75

A BILL FOR AN ACT ENTITLED: "AN ACT REVISING GENERAL OBLIGATION BOND LAWS TO REMOVE THE PLEDGE OF THE TAXING POWER; PROVIDING FOR A FIRST LIEN ON GENERAL FUND REVENUE FOR THE PAYMENTS OF GENERAL OBLIGATION BONDS AND RELATED CHARGES; ALLOWING THE BOARD OF EXAMINERS TO CREATE NECESSARY FUNDS AND ACCOUNTS FOR THE ISSUANCE OF GENERAL OBLIGATION BONDS; AMENDING SECTIONS 17-1-204, 17-5-402, 17-5-415, 17-5-501, 17-5-802, 17-5-803, 75-5-1121, 75-6-225, 75-10-623, 85-1-617, 85-1-619, 85-1-620, AND 90-4-611, 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 17-1-204, MCA, is amended to read:

"17-1-204. Payment -- pledge of taxes and revenue -- costs of issuance. (1) The notes and interest on the notes must be paid from taxes and revenue not later than the end of the fiscal year in which issued.

(2) The full faith and credit and taxing power of the state is pledged for the payment of all notes issued under this part. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution. In furtherance of this pledge, if there are insufficient funds in the general fund to pay the notes and interest on the notes when due, the department shall transfer available funds from any fund of the state, except pension trust funds, to the general fund to pay the notes and interest. The transfer is considered a loan to the general fund subject to the provisions of 17-2-105.

(3) The department may pay all costs of issuance of notes issued under this part, including without limitation interest, rating agency fees, printing costs, legal fees, bank or trust company fees, costs to employ persons or firms to assist in the sale of the notes, line of credit fees and charges, and all other amounts related to the costs of issuing the notes. Payment of costs must be made from amounts available from the proceeds of the notes upon deposit in the general fund."

Section 2. Section 17-5-402, MCA, is amended to read:

"17-5-402. Authority to issue long-range building program bonds. (1) When authorized by the vote of two-thirds of the members of each house of the legislature or of a majority of the electors voting on the issue, if so provided by law, and when within the limits of the authorization and the further limitations in 17-5-403 and this section, the board may issue and sell bonds of the state in the manner that it considers necessary and proper to provide funds to finance the long-range building program. Bonds may be issued to provide funds for the payment or redemption of long-range building program bonds issued under this section.

(2) The full faith and credit and taxing powers of the state are pledged for the payment of all bonds issued pursuant to this part after January 1, 1973, with all interest on the bonds and premiums payable upon the redemption of the bonds. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution."

Section 3. Section 17-5-415, MCA, is amended to read:

"17-5-415. Authorization for refunding bonds. The board of examiners is authorized to issue and sell refunding bonds in an amount necessary to refund any or all long-range building program bonds issued under Title 17, chapter 5, part 8. The refunding bonds are to be issued in accordance with the terms and in the manner required by Title 17, chapter 5, part 3. The refunding bonds must be general obligations secured by a pledge of the full faith and credit and taxing powers of the state. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution. Any money that may be released from the debt service account provided for in 17-5-405 as a result of the issuance of refunding bonds must revert to the fund of origin to the extent not required to provide for the debt service on the refunded bonds. Money required for payment of debt service on the refunded bonds may be held in trust in a special escrow account at a bank or trust company for the benefit of the refunded bonds."

Section 4. Section 17-5-501, MCA, is amended to read:

"17-5-501. Authority for general obligation highway bonds. The board of examiners is authorized to issue and sell general obligation highway bonds of the state for the purpose of acquiring a suitable site for and erecting and equipping a department of transportation headquarters building and complex at or near Helena, Montana, to replace the present laboratory and administration buildings that are declared to be inadequate for that purpose. The full faith and credit and taxing powers of the state must be pledged for the payment of all bonds issued pursuant to this part. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution."

Section 5. Section 17-5-802, MCA, is amended to read:

"17-5-802. Authority to issue general obligation bonds and notes. (1) When authorized by and when within the limits of a bond act and as provided in this part, the board may issue and sell bonds of the state in the manner that it considers necessary and proper to provide funds for the purpose set forth in the bond act.

(2) The full faith and credit and taxing powers of the state must be pledged for the payment of all bonds and notes issued pursuant to this part, with all interest on the bonds and notes and premiums payable upon the redemption of the bonds and notes. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution. All principal, interest, and redemption premium, if any, becoming due during a fiscal year must be included in the state budget for that year, and sufficient revenue must be appropriated for payment of the amounts due from the general fund and, if the general fund is not sufficient, from any other funds of the state legally available for payment of the amounts due. The payment of principal, interest, and redemption premium, if any, on bonds or notes issued pursuant to this part have a first lien on all revenue collected and deposited in the general fund and, subject to prior pledges of the funds, other funds of the state legally available for the payment of principal, interest, and redemption premium. Bonds may not be issued to cover deficits incurred because appropriations exceeded anticipated revenue. Money transferred for the payment of bonds and notes must be deposited in the debt service account.

(3) No additional long-range building bonds may be issued under Title 17, chapter 5, part 4.

(4) Bonds of the state previously authorized by and within the limits of a bond act, but not issued prior to [the effective date of this act], must be issued pursuant to this part, as amended."

Section 6. Section 17-5-803, MCA, is amended to read:

"17-5-803. Form -- principal and interest -- fiscal agent -- bond registrar and transfer agent -- deposit of proceeds. (1) In furtherance of each bond act, bonds may be issued by the board upon request of the department in the denominations and form, whether payable to bearer or registered as to principal or both principal and interest, with the provisions for conversion or exchange, and for the issuance of temporary bonds bearing interest at the rate or rates, maturing at the times not exceeding 30 years from date of issue, subject to redemption at earlier times and prices and on notice, and payable at the office of the fiscal agency of the state as the board shall determine, subject to the limitations contained in this part and in the bond act.

(2) In all other respects, the board is authorized to prescribe the form and terms of the bonds and do whatever is lawful and necessary for their issuance and payment. Bonds and any interest coupons appurtenant to the bonds must be signed by the members of the board, and the bonds must be issued under the great seal of the state of Montana. The bonds and coupons may be executed with facsimile signatures and seal in the manner and subject to the limitations prescribed by law. Action taken by the board under this part must be by a majority vote of its members. The state treasurer shall keep a record of all bonds issued and sold.

(3) The board is authorized to employ a fiscal agent and a bond registrar and transfer agent to assist in the performance of its duties under this part.

(4) The board is authorized to pay all costs of issuance of bonds, including without limitation rating agency fees, printing costs, legal fees, bank or trust company fees, costs to employ persons or firms to assist in the sale of the bonds, line of credit fees and charges, and all other amounts related to the costs of issuing the bonds from amounts available for payment in the general fund or from the proceeds of the bonds, in the discretion of the board.

(5) All proceeds of bonds and notes issued under this part must be deposited in the capital projects account, except that any premiums and accrued interest received and the proceeds of refunding bonds or notes must be deposited in the debt service account.

(6) The board may establish other funds and accounts for bonds and notes issued under this part as may be necessary to provide for the priority and segregation of revenue deposited in the general fund and pledged to the payment of bonds."

Section 7. Section 75-5-1121, MCA, is amended to read:

"75-5-1121. Authorization of bonds -- appropriation of proceeds. (1) Upon request of the department of natural resources and conservation and upon certification by the department that the state has entered into a capitalization grant agreement or other agreement with the United States government pursuant to 75-6-204 and that federal capitalization grants have been made to the state for the program, the board of examiners is authorized to issue and sell bonds of the state as authorized by the legislature to provide money for the program. The bonds are general obligations on which the full faith, credit, and taxing powers of the state are pledged for payment of the principal and interest. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution. The bonds must be issued as provided by Title 17, chapter 5, part 8.

(2) The proceeds of the bonds, other than any premium and accrued interest received or amounts to be used to pay interest on the bonds or the costs of issuing the bonds, are appropriated to the state allocation account of the revolving fund. Any premium and accrued interest and bond proceeds to be used to pay interest must be deposited in the debt service account. Proceeds of bonds to be used to pay the costs of issuing the bonds must be deposited in a cost of issuance account established outside of the revolving fund by the board of examiners in the resolution or trust indenture authorizing the issuance of the bonds. For purposes of 17-5-803 and 17-5-804, the state allocation account and the cost of issuance account constitute a capital projects account. The proceeds must be available to the department and the department of natural resources and conservation and may be used for the purposes authorized in this part without further budgetary authorization.

(3) In the resolution authorizing the sale and issuance of the bonds, the board of examiners, upon the request of the department of natural resources and conservation, may create separate accounts or subaccounts to provide for the payment security of the bonds and may pledge the interest component of the loan repayments credited to the revolving fund and the revolving fund as security for the bonds.

(4) (a) The board of examiners may allow bonds issued under this section to be secured by a trust indenture between the board of examiners and a trustee. The trustee may be a trust company or bank having the powers of a trustee inside or outside the state.

(b) If the board of examiners elects to issue bonds pursuant to a trust indenture, the trustee may, as determined by the board of examiners, hold one or more of the funds and accounts created pursuant to this chapter.

(c) In addition to provisions that the board of examiners determines to be necessary and appropriate to secure the bonds, provide for the rights of the bondholders, and ensure compliance with all applicable law, the trust indenture must contain provisions that:

(i) govern the custody, safeguarding, and disbursement of all money held by the trustee under the trust indenture; and

(ii) permit representatives of the state treasurer, department, or department of natural resources and conservation, upon reasonable notice and at reasonable times, to inspect the trustee's books and records concerning the trust indenture.

(d) A trust indenture or an executed counterpart of a trust indenture developed pursuant to this chapter must be filed with the secretary of state."

Section 8. Section 75-6-225, MCA, is amended to read:

"75-6-225. Authorization of bonds -- appropriation of proceeds. (1) The board of examiners is authorized, upon request of the department of natural resources and conservation, to issue and sell bonds of the state as authorized by the legislature to provide money for the program. The bonds are general obligations on which the full faith, credit, and taxing powers of the state are pledged for payment of the principal and interest. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution. The bonds must be issued as provided by Title 17, chapter 5, part 8.

(2) The proceeds of the bonds, other than any premium and accrued interest received, the amounts to be used to pay interest on the bonds, or the costs of issuing the bonds, are appropriated to the state allocation account of the revolving fund. Any premium and accrued interest and bond proceeds to be used to pay interest must be deposited in the debt service account of the revolving fund. Proceeds of bonds to be used to pay the costs of issuing the bonds must be deposited in a cost of issuance account established outside of the revolving fund by the board of examiners in the resolution or trust indenture authorizing the issuance of the bonds. For purposes of 17-5-803 and 17-5-804, the state allocation account and the cost of issuance account constitute a capital projects account. The proceeds must be available to the department and the department of natural resources and conservation and may be used for the purposes authorized in this part without further budgetary authorization.

(3) In the resolution authorizing the sale and issuance of the bonds, the board of examiners, upon the request of the department of natural resources and conservation, may create separate accounts or subaccounts to provide for the payment security of the bonds and may pledge the revolving fund and the interest component of the loan repayments credited to the revolving fund as security for the bonds.

(4) (a) The board of examiners may allow bonds issued under this section to be secured by a trust indenture between the board of examiners and a trustee. The trustee may be a trust company or bank having the power of a trustee inside or outside the state.

(b) If the board of examiners elects to issue bonds pursuant to a trust indenture, the trustee may, as determined by the board of examiners, hold one or more of the funds and accounts created pursuant to this chapter.

(c) In addition to provisions that the board of examiners determines to be necessary and appropriate to secure the bonds, to provide for the rights of the bondholders, and to ensure compliance with all applicable law, the trust indenture must contain provisions that:

(i) govern the custody, safeguarding, and disbursement of all money held by the trustee under the trust indenture; and

(ii) permit representatives of the state treasurer, department, or department of natural resources and conservation, upon reasonable notice and at reasonable times, to inspect the trustee's books and records concerning the trust indenture.

(d) A trust indenture or an executed counterpart of a trust indenture developed pursuant to this chapter must be filed with the secretary of state."

Section 9. Section 75-10-623, MCA, is amended to read:

"75-10-623. CERCLA bonds. (1) When authorized by the legislature and when within limits of the authorization and the further limitations established in this section, the board of examiners may issue and sell CERCLA bonds of the state in the amount and manner it considers necessary and proper to finance the match requirements under section 104 of CERCLA and to finance the match requirements for federal money for underground storage tank corrective action. The full faith and credit and taxing powers of the state are pledged for the prompt and full payment of all bonds issued and interest and redemption premiums payable on the bonds according to their terms. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution.

(2) Each series of CERCLA bonds may be issued by the board of examiners upon request of the department of environmental quality, at public or private sale, in the denominations and forms, whether payable to bearer with attached interest coupons or registered as to principal or as to both principal and interest, with provisions for conversion or exchange and for the issuance of notes in anticipation of the issuance of definitive bonds, bearing interest at a rate or rates, maturing at a rate or rates, maturing at the time or times not exceeding 30 years from date of issue, subject to optional or mandatory redemption at earlier times and prices and upon notice, with provisions for payment and discharge by the deposit of funds or securities in escrow for that purpose, and payable at the office of the banking institution or institutions within or outside the state, as the board of examiners determines, subject to the limitations contained in 17-5-731 and this section.

(3) In the issuance of each series of CERCLA bonds, the interest rates, maturities, and any mandatory redemption provisions of the bonds must be established in a manner that the funds then specifically pledged and appropriated by law to the CERCLA match debt service fund will, in the judgment of the board of examiners, be received in an amount sufficient in each year to pay all principal, redemption premiums, and interest due and payable in that year with respect to that and all prior series of the bonds, except outstanding bonds as to which the obligation of the state has been discharged by the deposit of funds or securities sufficient for their payment in accordance with the terms of the resolutions by which they are authorized to be issued.

(4) In all other respects, the board of examiners is authorized to prescribe the form and terms of the bonds and notes and shall do whatever is lawful and necessary for their issuance and payment. The bonds, notes, and any interest coupons appurtenant to the bonds and notes must be signed by the members of the board of examiners, and the bonds and notes must be issued under the great seal of the state of Montana. The bonds, notes, and coupons may be executed with facsimile signatures and seal in the manner and subject to the limitations prescribed by law. The state treasurer shall keep a record of all the bonds and notes issued and sold.

(5) All proceeds of bonds or notes issued under this section must be deposited in the hazardous waste/CERCLA special revenue account established in 75-10-621.

(6) All actions taken by the board of examiners under this section must be authorized by a vote of a majority of the members."

Section 10. Section 85-1-617, MCA, is amended to read:

"85-1-617. Issuing renewable resource bonds -- renewable resource loan proceeds account. (1) When authorized by the legislature and when within the limits of the authorization and within the further limitations established in this section, the board of examiners may issue and sell renewable resource bonds of the state in the amount and manner it considers necessary and proper to finance the renewable resource grant and loan program. The full faith and credit and taxing powers of the state are pledged for the prompt and full payment of all bonds issued and interest and redemption premiums payable on the bonds according to their terms. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution.

(2) Each series of renewable resource bonds may be issued by the board of examiners, upon request of the department, at public or private sale, in denominations and forms, whether payable to bearer with attached interest coupons or registered as to principal or as to both principal and interest, with provisions for conversion or exchange and for the issuance of notes in anticipation of the issuance of definitive bonds, bearing interest at a rate or rates, maturing at a rate or rates, maturing at a time or times not exceeding 30 years from date of issue, subject to optional or mandatory redemption at earlier times and prices and upon notice, with provisions for payment and discharge by the deposit of funds or securities in escrow for that purpose, and payable at the office of a banking institution or institutions within or outside the state that the board of examiners shall determine subject to the limitations contained in 17-5-731 and this section.

(3) In the issuance of each series of renewable resource bonds, the interest rates and the maturities and mandatory redemption provisions contained in the bonds must be established in a manner that the funds then specifically pledged and appropriated by law to the renewable resource loan debt service fund will, in the judgment of the board of examiners, be received in an amount sufficient in each year to pay all principal, redemption premiums, and interest due and payable in that year with respect to that and all prior series of bonds, except outstanding bonds as to which the obligation of the state has been discharged by the deposit of funds or securities sufficient for their payment in accordance with the terms of the resolutions by which they are authorized to be issued.

(4) In all other respects, the board of examiners is authorized to prescribe the form and terms of the bonds and notes and shall do whatever is lawful and necessary for their issuance and payment. The bonds, notes, and interest coupons appurtenant to the bonds or notes must be signed by the members of the board of examiners, and the bonds and notes must be issued under the great seal of the state of Montana. The bonds, notes, and coupons may be executed with facsimile signatures and seal in the manner and subject to the limitations prescribed by law. The state treasurer shall keep a record of all bonds and notes issued and sold.

(5) There is created a renewable resource loan proceeds account within the state special revenue fund established in 17-2-102.

(6) All proceeds of bonds or notes issued under this section, other than refunding bonds, must be deposited in the renewable resource loan proceeds account established in subsection (5), except that any principal and accrued interest received in repayment of a loan made from the proceeds of bonds issued under this section must be deposited in the renewable resource loan debt service fund and the renewable resource loan loss reserve fund pursuant to 85-1-603. All proceeds of refunding bonds must be deposited in the renewable resource loan debt service fund and applied to the payment and redemption of outstanding bonds issued under this section as directed by the board of examiners, whether at maturity or on any earlier date on which they may be prepaid according to their terms.

(7) All actions taken by the board of examiners under 85-1-619 or this section must be authorized by a vote of a majority of the members of the board of examiners."

Section 11. Section 85-1-619, MCA, is amended to read:

"85-1-619. Debt service fund -- pledge and administration of sufficient balance. (1) The legislature may levy, impose, assess, and pledge and appropriate to the renewable resource loan debt service fund any tax, charge, fee, rental, or other income from any designated source. The state reserves the right to modify from time to time the nature and amount of special taxes and other revenue pledged and appropriated to the renewable resource loan debt service fund, provided that the aggregate resources pledged and appropriated are determined by the legislature to be sufficient for the prompt and full payment of the principal of and interest and redemption premiums when due on all bonds payable from that fund and provided that the pledge of the full faith and credit and taxing powers of the state for the security of all bonds are and remain irrevocable until they are fully paid.

(2) Money in the renewable resource loan debt service fund must be used to pay interest, principal, and redemption premiums when due and payable with respect to renewable resource bonds, and for bonds issued prior to 1985, to accumulate a reserve for the further security of the payments. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution.

(3) After the reserve provided for in subsection (2) for bonds issued prior to 1985 has been accumulated in the renewable resource loan debt service fund, money at any time received in the renewable resource loan debt service fund in excess of that amount must be transferred by the treasurer to the renewable resource grant and loan program state special revenue account."

Section 12. Section 85-1-620, MCA, is amended to read:

"85-1-620. Renewable resource refunding bonds. (1) The board of examiners may issue refunding bonds at times and in amounts, if any, as may be necessary to pay principal or interest due that cannot be paid from funds then on hand in the renewable resource loan debt service fund. The board of examiners may also issue refunding bonds to refund outstanding bonds before maturity for the purpose of extending the maturities of the outstanding bonds determined by the board of examiners to be necessary to ensure that the funds then pledged to the renewable resource loan debt service fund will be sufficient for payment of principal and interest due in subsequent years. The board of examiners may also issue refunding bonds to refund outstanding bonds before maturity for the purpose of reducing the interest cost or the total amount of principal and interest payable on the outstanding bonds.

(2) Refunding bonds may not be issued and sold more than 3 months before all of the bonds refunded mature or are called for redemption unless the proceeds of the refunded bonds, with any other funds in the renewable resource loan debt service fund that are needed and available for the purpose or securities purchased from proceeds and other funds, are deposited with a suitable banking institution within or outside the state, in escrow, for the retirement of the refunded bonds at maturity or at a prior date or dates on which they have been called for redemption in accordance with their terms, in an amount and in a manner sufficient under the provisions securing the refunded bonds, so that the state's obligation to pay the same, from sources other than the escrow fund, is discharged.

(3) New debt may not be created by the issuance of refunding bonds in accordance with this section, but the refunding bonds must evidence the debt previously created and must be secured by the pledge of the full faith and credit and taxing powers of the state and secured in the same manner as the bonds refunded by other provisions of this part. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution."

Section 13. Section 90-4-611, MCA, is amended to read:

"90-4-611. Authority to issue energy conservation program bonds. (1) When authorized by the vote of two-thirds of the members of each house of the legislature, at the request of the department, and pursuant to this part, the board may issue and sell bonds or bond anticipation notes of the state in a manner it considers necessary and proper to finance the energy conservation program and to pay costs associated with the sale and issuance of the bonds. Bonds may be issued to provide funds for the payment or redemption of energy conservation building program bonds issued under this section.

(2) The full faith and credit and taxing powers of the state are pledged for the prompt and full payment of all bonds issued and interest and redemption premiums payable on the bonds according to their terms. However, the state may not be required to exercise its taxing power except to the extent and in the manner permitted by the constitution."

NEW SECTION. Section 14. Pledge of state. In accordance with the constitutions of the United States and the state of Montana, the state pledges that it will not in any way impair the obligations of any agreement between the state and the holders of notes and bonds issued by the state.

NEW SECTION. Section 15. Codification instruction. [Section 14] is intended to be codified as an integral part of Title 17, chapter 5, and the provisions of Title 17, chapter 5, apply to [section 14].

NEW SECTION. Section 16. 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 17. Effective date. [This act] is effective on passage and approval.

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