Senate Bill No. 310

Introduced By grosfield, anderson



A Bill for an Act entitled: An Act providing an alternative fair market security assurance for renewable resource loans to water users' associations; increasing the dollar amount for certain loans; authorizing the department of natural resources and conservation to attach additional property to secure loans; providing that loan funds may not be used for project operation and maintenance; amending sections 85-1-603, 85-1-613, and 85-1-615, MCA; and providing an immediate effective date and applicability dates.



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



Section 1.  Section 85-1-603, MCA, is amended to read:

"85-1-603.  Renewable resource loan debt service fund created -- coal severance tax allocated -- renewable resource loan loss reserve fund created. (1)  (a) There is created a renewable resource loan debt service fund within the debt service fund type established in 17-2-102.

(b)  The state pledges and allocates and directs to be credited to the renewable resource loan debt service fund, as received:

(i)  0.95% of all money from time to time received from the coal severance tax collected under Title 15, chapter 35;

(ii) any principal and accrued interest under 85-1-613(4)(a)(5)(a) received in repayment of a loan made from the proceeds of bonds issued under 85-1-617;

(iii) all interest income earned on proceeds of renewable resource grant and loan program bonds;

(iv) revenue or money otherwise required to be paid into the renewable resource grant and loan program state special revenue account pursuant to 85-1-604, as determined by the board of examiners in connection with the issuance of bonds pursuant to 85-1-617; and

(v)  money received from the renewable resource loan loss reserve fund as the result of a loan loss.

(2)  (a) There is a renewable resource loan loss reserve fund within the debt service fund type established in 17-2-102.

(b)  The state pledges and allocates and directs to be credited to the renewable resource loan loss reserve fund all accrued interest under 85-1-613(4)(b)(5)(b) received in repayment of a loan made from the proceeds of bonds issued under 85-1-617.

(c)  If the department determines that a loan loss has occurred on a loan made pursuant to this part, funds from the renewable resource loan loss reserve fund must be transferred to the renewable resource loan debt service fund in an amount equal to the amount that would otherwise be available for debt service under subsection (1)(b) as a result of the loan loss."



Section 2.  Section 85-1-613, MCA, is amended to read:

"85-1-613.  Limits on loans. (1) A A loan to a private person that is not a water users' association or ditch company organized and incorporated pursuant to Title 85, chapter 6, part 1, or Title 35, chapter 1, part 2, for a renewable resource grant and loan program project may not be made from the renewable resource grant and loan program state special revenue account or the renewable resource loan proceeds account if the loan exceeds the lesser of $200,000 $200,000 or 80% of the fair market value of the security given for the project. In determining the fair market value for the security given for a loan, the department shall consider appraisals made by qualified appraisers and other factors that it considers important.

(2) A loan to a private person that is a water users' association or ditch company organized and incorporated pursuant to Title 85, chapter 6, part 1, or Title 35, chapter 1, part 2, may not be made from the renewable resource grant and loan program state special revenue account or the renewable resource loan proceeds account if the loan would exceed the lesser of $300,000 or an amount representing the annual debt service on the loan that would exceed 80% of the annual net revenue of the system that would be pledged for payment of the loan. In determining the amount of annual net revenue that may be pledged for payment of the loan, annual expenses for operation and maintenance must be subtracted from the gross revenue of the system.

(2)(3)  A loan to the state or a local government for a renewable resource grant and loan program project may not be made by the department from the renewable resource grant and loan program state special revenue account or renewable resource loan proceeds account if the loan exceeds the lesser of $200,000 $200,000 or the project sponsor's remaining debt capacity.

(3)(4)  The period for repayment of loans may not exceed 30 years.

(4)(5)  The interest rate at which loans may be made under this part must be sufficient to:

(a)  cover the bond debt service for a loan; and

(b)  establish and maintain a loan loss reserve fund to be used for bond debt service if a loan loss occurs.

(6) A loan made under this part may not be used for the cost of operation and maintenance of a project."



Section 3.  Section 85-1-615, MCA, is amended to read:

"85-1-615.  Security interests -- purchase, operation, and resale of encumbered property. (1) The state has a lien upon a project constructed with money from the renewable resource grant and loan state special revenue account or the renewable resource loan proceeds account for the amount of the loan and interest due the state. This lien may attach to any project facilities, equipment, easements, real property, shares of stock in a water users' association, revenue of a water users' association, accounts receivable of a water users' association, water purchase agreements, and property of any kind or nature owned by the debtor, including all water rights. The department shall file with the county clerk and recorder of each county in which a part of the project is located either a financing statement or a real estate mortgage covering the loan, its amount, terms, and a description of the security. The county clerk and recorder shall record and index the lien as other liens are required by law to be recorded and indexed. The lien is valid until paid in full or otherwise discharged. The lien must be foreclosed in accordance with applicable state law governing foreclosure of mortgages and liens.

(2)  From the funds available under 85-1-604(3)(d) or 85-1-617, the state may:

(a)  purchase a lien that is prior to the state's lien if:

(i)  the director of the department determines that the loan is in default and the prospects for collecting the loan may be materially increased by purchasing the prior lien; and

(ii) the amount to be paid for the prior lien does not exceed the appraised value of the property;

(b)  operate property that is subject to the state's lien if the director of the department determines that the loan is in default and that the prospects for collecting the loan may be materially increased by operating the property that is subject to the state's lien; or

(c)  purchase a prior lien as provided in subsection (2)(a) and operate property as provided in subsection (2)(b).

(3)  Any property acquired under the provisions of this section must be resold as expeditiously as possible to recover funds used under this section and funds loaned to the borrower."



Section 4.  Applicability. (1) [This act] applies retroactively, within the meaning of 1-2-109, to loans made by the department of natural resources and conservation from the renewable resource grant and loan program to water users' associations for existing projects that were initiated after July 1, 1995.

(2) [This act] applies to loans made by the department of natural resources and conservation from the renewable resource grant and loan program to water users' associations for new projects initiated after [the effective date of this act].



Section 5.  Effective date. [This act] is effective on passage and approval.

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