House Bill No. 136

Introduced By wiseman

By Request of the Department of Corrections

A Bill for an Act entitled: An Act providing for the issuance of revenue bonds to provide funding for state correctional services being contracted to a private entity; authorizing the montana health facility authority to administer the program; AMENDING SECTIONS 90-7-102, 90-7-103, 90-7-104, 90-7-111, 90-7-202, 90-7-204, 90-7-211, 90-7-213, 90-7-214, 90-7-303, 90-7-304, 90-7-305, 90-7-307, AND 90-7-317, MCA; and providing an effective date.

Be it enacted by the Legislature of the State of Montana:

Section 1.  Section 90-7-102, MCA, is amended to read:

"90-7-102.   Definitions. As used in this chapter, unless the context requires otherwise, the following definitions apply:

(1)  "Authority" means the Montana health facility authority created in 2-15-1815.

(2)  "Capital reserve account" means the account established in 90-7-317.

(3)  "Costs" means costs allowed under 90-7-103.

(4)  "Health facility" "Facility" means any health care facility or prerelease center provided for in 90-7-104.

(5)  "Health institution" "Institution" means any public or private,:

(a) nonprofit hospital, corporation, or other organization authorized to provide or operate a health facility in this state; or

(b) nonprofit prerelease center, corporation, or other organization authorized to operate a prerelease center in this state.

(6)  "Participating health institution" means a health institution or prerelease center that undertakes the financing, refunding, or refinancing of obligations on the construction or acquisition of a health facility pursuant to the provisions of this chapter.

(7)  "Revenues" means, with respect to facilities, the rents, fees, charges, interest, principal repayments, and other income received or to be received by the authority from any source on account of such the facilities."

Section 2.  Section 90-7-103, MCA, is amended to read:

"90-7-103.   Allowable costs. Costs eligible for financing or refinancing under this chapter include:

(1)  the total of all reasonable or necessary costs incidental to the acquisition, construction, reconstruction, repair, alteration, equipment, enlargement, and improvement of an eligible health facility and the acquisition of all real and personal property interests necessary or useful in connection with the facility and all other undertakings which that the authority considers reasonable or necessary for the development of the facility;

(2)  the cost of demolishing or removing any building or structure on land so acquired, the cost of acquiring any land to which such the building or structure may be moved, the cost of all machinery and equipment, financing charges, interest prior to and during construction and, if judged advisable by the authority, for a period after completion of such construction, and the cost of financing the facility, including interest on bonds and notes issued by the authority to finance the facility;

(3)  reserves for principal and interest and for extensions, enlargements, additions, and improvements, including without limitation the cost of studies and surveys;

(4)  the costs for land title and mortgage guaranty policies;

(5)  the costs of plans, specifications, and architectural and engineering services;

(6)  the costs of legal, organization, marketing, or other special services;

(7)  the costs of financing, acquisition, demolition, construction, equipment, and site development of new and rehabilitated buildings;

(8)  the costs of rehabilitation, reconstruction, repair, or remodeling of existing buildings; and

(9)  all other expenses necessary and incidental to the construction and acquisition of the facility, the financing of such construction, and the acquisition and placing of the facility into operation."

Section 3.  Section 90-7-104, MCA, is amended to read:

"90-7-104.   Eligible health facility. (1) Eligible health facility means any structure or building used as a hospital, clinic, nursing home, or other health care facility as defined in 50-5-101; center for persons with developmental disabilities; center for the handicapped; chemical dependency treatment center; nursing school; medical teaching facility; laboratory; dental care facility; prerelease center; or other structure or facility related to any of the foregoing or required or useful for the operation of a health facility. These related facilities include supporting service structures and all necessary, useful, and related equipment, furnishings, and appurtenances and include without limitation the acquisition, preparation, and development of all lands and real and personal property necessary or convenient as a site for any of the foregoing.

(2)  An eligible health facility does not include such items as food, fuel, supplies, or other items that are customarily considered as current operating expenses;, and an eligible health facility does not include a structure used or to be used primarily for sectarian instruction or study or as a place for devotional activities or religious worship."

Section 4.  Section 90-7-111, MCA, is amended to read:

"90-7-111.   Credit of state not pledged -- statement on obligation required. (1) Obligations issued under the provisions of this chapter do not constitute a debt, liability, obligation, or pledge of the faith and credit of the state but are payable solely from the revenues or assets of the health institution being financed.

(2)  An obligation issued under this chapter must contain on the face thereof of the obligation a statement to the effect that the state of Montana is not liable on the obligation, the obligation is not a debt of the state, and neither the faith and credit nor the taxing power of the state is pledged to the payment of the principal of or the interest on the obligation."

Section 5.  Section 90-7-202, MCA, is amended to read:

"90-7-202.   Powers of authority. The authority may:

(1)  sue and be sued;

(2)  have a seal;

(3)  adopt all procedural and substantive rules necessary for the administration of this chapter;

(4)  issue bonds or incur other debt as described in this chapter, including the issuance of notes or refunding bonds;

(5)  invest any funds obtained from the issuance of bonds and notes which that are not required for immediate use, subject to any agreements with its bondholders and noteholders, as provided in Title 17, chapter 6, except that all investment income from funds invested by the authority, less the cost for investment, must be deposited in an enterprise fund to the credit of the authority;

(6)  contract in its own name for the investment of funds, borrowing of funds, or any other purposes it considers appropriate to carry out the purposes of this chapter;

(7)  participate with any financial institution in the purchase or guarantee of any loan or obligation;

(8)  issue bond anticipation notes or any other anticipatory financial obligations to secure funding of eligible facilities;

(9)  enter into agreements or make advance commitments to insure repayments required by loan agreements made by a lender. Such The agreements are subject to terms and conditions established by the authority.

(10) sell, purchase, or insure loans to finance the costs of eligible facilities;

(11) accept gifts, grants, or loans from a federal agency, an agency or instrumentality of the state, a municipality, or any other source;

(12) enter into contracts or other transactions with a federal agency, an agency or instrumentality of the state, a municipality, a private organization, or any other entity consistent with the exercise of any power under this chapter;

(13) with regard to property:

(a)  acquire real or personal property or any right, interest, or easement therein in the property by gift, purchase, transfer, foreclosure, lease, or otherwise;

(b)  hold, sell, assign, lease, encumber, mortgage, or otherwise dispose thereof of property;

(c)  hold, sell, assign, or otherwise dispose of any mortgage or loan owned by it or in its control or custody;

(d)  release or relinquish any right, title, claim, interest, easement, or demand, however acquired, including any equity or right of redemption;

(e)  make any disposition by public or private sale, with or without public bidding;

(f)  commence any action to protect or enforce any right conferred upon it by any law, mortgage, contract, or other agreement;

(g)  bid for and purchase property at any foreclosure or other sale or acquire or take possession of it in lieu of foreclosure; and

(h)  operate, manage, lease, dispose of, and otherwise deal with such property in any manner necessary or desirable to protect its interests or the holders of its bonds or notes if such the action is consistent with any agreement with such the holders;

(14) service, contract, and pay for the servicing of loans;

(15) provide general technical services in the analysis, planning, design, processing, construction, rehabilitation, and management of eligible health facilities whenever considered appropriate;

(16) consent, whenever it considers necessary or desirable in fulfilling its purposes, to the modification of the rate of interest, time, or payment of any installment of principal, interest, or security or any other term of any contract, lease agreement, loan agreement, mortgage, mortgage loan, mortgage loan commitment, construction loan, advance contract, or agreement of any kind, subject to any agreement with bondholders and noteholders;

(17) collect reasonable interest, fees, and charges from participating institutions in connection with making and servicing its lease agreements, loan agreements, mortgage loans, notes, bonds, commitments, and other evidences of indebtedness. The interest, fees, and charges shall must be deposited to an enterprise fund to the credit of the authority. Interest, fees, and charges are limited to the amounts required to pay the costs of the authority, including operating and administrative expenses and reasonable allowances for losses that may be incurred.

(18) perform any other acts necessary and convenient to carry out the purposes of this chapter."

Section 6.  Section 90-7-204, MCA, is amended to read:

"90-7-204.   Agent of the authority. The authority may designate a participating health institution as its agent for determining the location and character of an eligible health facility undertaken by that institution under the provisions of this chapter. As agent, the institution may acquire, construct, reconstruct, renovate, replace, improve, maintain, repair, operate, lease, as lessee or lessor, and enter into contracts for any and all such purposes, including contracts for the management and operation of the facility."

Section 7.  Section 90-7-211, MCA, is amended to read:

"90-7-211.   Necessary expenses -- fees. (1) All expenses of the authority incurred in carrying out the provisions of this chapter are payable solely from funds provided under the authority of this chapter, and no liability may not be incurred by the authority beyond the extent to which money has been provided under this chapter, except for the purposes of meeting the necessary expenses of initial organization and operation and until such the date as that the authority derives money from funds provided under this chapter. The authority may borrow money for necessary expenses of organization and operation. Such The borrowed money must be repaid within a reasonable time after the authority receives funds provided for under this chapter.

(2)  When an application is made to the authority by any participating health institution for financial assistance to provide for its facilities, the application may be accompanied by an initial planning service fee in an amount determined by the authority. Such The initial planning service fee may be included in the cost of the facilities to be financed and is not refundable by the authority, whether or not any application is approved. In addition to the initial fee, an annual planning service fee may be paid to the authority by each participating health institution in an amount determined by the authority. The annual planning service fee may be paid on such dates or in installments as may be satisfactory to the authority. The fees must be used for:

(a)  necessary expenses to determine the need for facilities in the area concerned, and to that end the authority may utilize recognized voluntary and official health planning organizations and agencies at local, regional, and state levels;

(b)  necessary administrative expenses; and

(c)  reserves for anticipated future expenses.

(3)  The authority may, for a negotiated fee, retain the services of any other public or private person, firm, partnership, association, or corporation for the furnishing of services and data for use by the authority in determining the need for and location of any eligible health facility for which application is being made or for such other services or surveys as that the authority considers necessary to carry out the purposes of this chapter."

Section 8.  Section 90-7-213, MCA, is amended to read:

"90-7-213.   Loan limitation. No A loan made by the authority may not exceed the total cost of the eligible health facility being financed as such cost is determined by the participating institution and approved by the authority."

Section 9.  Section 90-7-214, MCA, is amended to read:

"90-7-214.   Restriction on operating facility -- leases. (1) The authority may not operate an eligible health facility as a business other than as a lessee or lessor. The lease must provide for rentals adequate to pay the principal and interest due on bonds and to create and maintain such reserves and accounts for depreciation as the authority determines necessary.

(2)  The lease may contain terms and conditions that the authority considers proper. The lease may be terminated upon failure of the participating health institution to comply with any obligation under the lease. The lease may include a renewal or an option to purchase provision upon such terms or conditions as the authority considers desirable.

(3)  Upon payment of all indebtedness incurred by the authority for financing a facility, the authority may convey any or all of the facility to the lessee, with or without consideration."

Section 10.  Section 90-7-303, MCA, is amended to read:

"90-7-303.   Procedure for issuance of bonds. (1) The authority may not undertake to finance any eligible health facility unless, prior to the issuance of any bonds or notes, the members find that such the facility will be operated by a health institution for the purpose of fulfilling its obligation to provide health care facilities or by a prerelease center for purpose of preparing persons to reenter society.

(2)  The authority may not allow the proceeds of any bonds or notes to be expended for any health care facility unless such the facility has been reviewed and approved by the appropriate regional and state health planning boards and has received any approval required by Title 50, chapter 5, part 3.

(3)  The authority may not allow the proceeds of any bonds or notes to be expended for any facility until it has been shown that such the facility is financially feasible and that there will be sufficient revenues to assure ensure that principal and interest payments are made when they become due.

(4)  The authority may not allow the proceeds of any bonds or notes to be expended for any facility until it has considered the ability of the health institution to operate such a the facility based on the health institution's experience and expertise.

(5)  The authority must insure shall ensure that its financings consistently provide fair and realistic terms and covenants sufficient to protect the position of the lenders or bondholders."

Section 11.  Section 90-7-304, MCA, is amended to read:

"90-7-304.   Security of bondholders. (1) The payment of the principal of and interest on any bonds issued under this chapter must be secured by a pledge of the revenues out of which such the bonds are made payable.

(2)  The principal of and interest on any bonds issued under the authority of this part may be secured by:

(a)  a mortgage covering all or any part of the participating health institution;

(b)  a pledge of the lease or loan agreement relating to such the facility; or

(c)  such other another security device as may be that is considered most advantageous by the authority.

(3)  The proceedings under which the bonds are authorized to be issued under the provisions of this chapter and any mortgage given to secure the same bonds, including a mortgage given by the borrower or lessee, may contain any agreements and provisions customarily contained in instruments securing bonds, as the authority considers advisable. Such The provisions may not be in conflict with the provisions of this chapter, including without limitation provisions relating to:

(a)  fixing and collection of rents or payments under any lease or loan agreement concerning the facility covered by such the proceedings or mortgage;

(b)  terms to be incorporated in the lease or loan agreement;

(c)  maintenance and insurance of such the facility;

(d)  creation and maintenance of special funds from the revenues of such the facility; and

(e)  rights and remedies available in the event of a default to the bondholders or to the trustee under a mortgage.

(4)  The proceedings authorizing any bonds under the provisions of this chapter and any mortgage, including a mortgage given by the lessee or borrower, securing such bonds may provide that in the event of a default in the payment of the principal of or the interest on such the bonds or in the performance of any agreement contained in such the proceedings or mortgage, such the payment and performance may be enforced by mandamus or by the appointment of a receiver in equity with power to charge and collect rents and to apply the revenues from the project in accordance with such the proceedings or the provisions of such the mortgage.

(5)  Any mortgage made by the authority, lessee, or borrower to secure these bonds may provide that, in the event of a default in the payment thereof of the bonds or the violation of any agreement contained in the mortgage, the mortgage may be foreclosed and the project sold under proceedings in equity or in any other manner permitted by law. The mortgage may also provide that any trustee under the mortgage or the holder of any of the bonds secured thereby by the mortgage may become the purchaser at any foreclosure sale if he the trustee is the highest bidder therefor. No A breach of any such an agreement may not impose any pecuniary liability upon the authority."

Section 12.  Section 90-7-305, MCA, is amended to read:

"90-7-305.   Trust agreement to secure bonds. In the discretion of the authority, any bonds issued under this chapter may be secured by a trust agreement between the authority and a corporate trustee, which may be any trust company or bank having the powers of a trust company in Montana. The trust agreement or the resolution providing for the issuance of such bonds may pledge or assign the revenues to be received or proceeds of any contract or contracts pledged and may convey or mortgage the project or any portion thereof of the project. The trust agreement or resolution providing for the issuance of such bonds may contain such provisions for protecting and enforcing the rights and remedies of the bondholders as may be reasonable and proper and not in violation of law, including particularly such provisions as that have been specifically authorized to be included in any resolution of the authority authorizing bonds. Any bank or trust company incorporated under the laws of this state, which may act as depository of the proceeds of bonds or of revenues or other money, may furnish such indemnifying bonds or pledge such securities as may be required by the authority. Any such A trust agreement may set forth the rights and remedies of the bondholders and of the trustee or trustees and may restrict the individual right of action by bondholders. In addition, any such a trust agreement or resolution may contain such other provisions as that the authority may consider reasonable and proper for the security of the bondholders. All expenses incurred in carrying out such the trust agreement or resolution may be treated as a part of the cost of the operation of an eligible health facility."

Section 13.  Section 90-7-307, MCA, is amended to read:

"90-7-307.   Conveyance of title to health institution. When the principal and interest on bonds issued by the authority to finance the cost of eligible health facilities or to refinance outstanding indebtedness of one or more participating health institutions, including any refunding bonds issued to refund and refinance such bonds, have been fully paid and retired or when adequate provision has been made to fully pay and retire the same bonds and all other conditions of the resolution, lease, trust indenture, and mortgage or deed of trust or any other form of security arrangement, if any, authorizing and securing the same bonds have been satisfied and the lien of the mortgage or deed of trust or any other form of security arrangement has been released in accordance with the provisions thereof of the security arrangement, the authority shall promptly convey its interest in the facilities and any other facilities mortgaged or subject to deed of trust or any other form of security arrangement to secure the bonds to the participating health institution or institutions."

Section 14.  Section 90-7-317, MCA, is amended to read:

"90-7-317.   Capital reserve account. (1) There is a capital reserve account in the enterprise fund provided for in 90-7-202(17).

(2)  The authority shall deposit into the capital reserve account:

(a)  funds from state appropriations received for deposit into the account, as provided in 90-7-319, for bonds issued to finance capital projects for community health facilities that contract with the state to provide health care services, or bonds issued to finance the facilities described in 90-7-220 and 90-7-221, or bonds used to finance prerelease centers that contract with the state;

(b)  proceeds from the sale of bonds or notes to the extent provided in the resolutions or indentures of the authority authorizing their issuance;

(c)  revenue from fees and charges imposed by the authority;

(d)  income from the investment of funds belonging to the authority; and

(e)  any other funds that may be available to the authority for the purpose of the account from any other source, including loans authorized under 90-7-320."

Section 15.  Procedure prior to financing projects. In addition to meeting the other requirements contained in this chapter or in state or federal law, the following requirements must be met before financing is finalized and provided for a prerelease center:

(1)  A contract must be approved by the authority and executed by the department of corrections and the institution.

(2)  The department of corrections, the institution, and any other third parties involved in the financing are required to execute, covenant, deliver, and assign as necessary all documents, representations, assignments, collateral, and any other conditions that the authority or its agents, underwriters, or attorneys may reasonably determine to be necessary to adequately protect the authority, the department of corrections, and the state from default, financial loss, or other harm and to provide an opportunity to lower borrowing costs.

(3)  The prerelease center project must be determined to be in the public interest and to be consistent with the legislative policies governing the provision of the services.

(4)  The applicant shall submit a statement indicating that contracts to construct the prerelease center project will require all contractors to comply with Title 18, chapter 2, part 4.

(5)  Adequate provision must be made in the loan agreement, lease, or other credit arrangement regarding a prerelease center project to provide for the payment of debt service on the bonds issued to finance the project, to create and maintain reserves for payment of the debt service, and to meet all costs and expenses of issuing and servicing the bonds.

Section 16.  Public hearing. The department of corrections, when seeking funding under this chapter, shall hold a public hearing to determine whether or not the proposed project is in the public interest. The decision regarding public interest is determined by the department of corrections, not the authority. Notice of the public hearing must be published in a newspaper of general circulation in the community where the prerelease center would be located. Notice must be given at least once a week for 2 weeks prior to the date of the public hearing. The notice must include the time and place of the hearing, the general nature of the prerelease center project, the name of the borrower or user of the project, the estimated cost of the project, and the maximum amount of financing assistance to be provided under this chapter. A determination by the department of corrections that a prerelease center project is in the public interest does not require that it be financed under this chapter.

Section 17.  Additional reserves, funds, and accounts. The authority may in its discretion establish additional reserves or other funds or accounts necessary, desirable, or convenient to further the accomplishment of the purposes of this chapter or to comply with the provisions of its resolution or agreements.

Section 18.  Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.

Section 19.  Codification instruction. [Sections 15 through 17] are intended to be codified as an integral part of Title 90, chapter 7, and the provisions of Title 90, chapter 7, apply to [sections 15 through 17].

Section 20.  Effective date. [This act] is effective July 1, 1997.