H.F. _____ Section 1. Section 384.4, subsection 1, Code 2014, is 1 amended by adding the following new paragraph: 2 NEW PARAGRAPH . f. Payments of principal and interest on 3 loans entered into pursuant to section 384.24B and authorized 4 for repayment by the council from the debt service fund. 5 Sec. 2. NEW SECTION . 384.24B General obligation loans 6 funded by the city. 7 1. A city may authorize a loan, as defined in this section, 8 to borrow money for any general corporate purpose or essential 9 corporate purpose in accordance with and subject to the 10 provisions of this section. 11 2. a. For purposes of this section, “loan” means the 12 sum of the transfers from the surplus of one or more reserve 13 accounts or funds of the city which transfers are authorized 14 for the purpose specified in the loan authorization document. 15 A transfer from a reserve account or fund for the purposes of 16 this section shall not cause the balance of reserves in such 17 account or fund at the close of the fiscal year following the 18 fiscal year in which the transfer is made to fall below any 19 minimum balance prescribed by law for such account or fund. 20 For the purposes of this section, “reserve account or fund” 21 means moneys held by a city that are not operating funds, as 22 defined in section 12B.10A, and which is authorized by law to 23 receive interest pursuant to section 12C.7. 24 b. A loan to finance a general obligation bond project 25 under this section shall not result in a user fee, rate, or 26 property tax increase to support the annual operations of the 27 account or fund from which the loan is made, as a result of 28 the unavailability of the surplus funds. For the purposes of 29 this section, “surplus” means the cash balance available in 30 any account or fund from which a loan will be made under this 31 section which exceeds the amount of expenses or disbursements 32 made from the account or fund in the previous three months, 33 plus the amount of transfers, payments, or disbursements 34 required in the following three months. 35 -1- LSB 6186YC (1) 85 aw/sc 1/ 8

H.F. _____ 3. a. A loan entered into by a city pursuant to this 1 section may contain provisions similar to those found in loan 2 agreements between private parties, including but not limited 3 to the issuance of notes to evidence its obligations. The 4 terms of each loan shall require repayment of the loan within 5 ninety days to the extent necessary to prevent a user fee, 6 rate, or property tax increase which raises the user fees, 7 rates, or property taxes payable into the account or fund from 8 which the loan is made above the level in effect at the time a 9 loan under this section is authorized. 10 b. A loan authorized pursuant to this section shall 11 constitute an indebtedness within the meaning of any 12 constitutional debt limitation and shall be reported by the 13 city to the state treasurer in the same manner as required 14 for bonding activities pursuant to section 12.1. The full 15 or partial refunding of any loan under this section shall 16 be authorized as an essential corporate purpose pursuant to 17 section 384.24, subsection 3, paragraph “f” . 18 4. A loan made pursuant to this section is payable from the 19 debt service fund of the city. The governing body shall follow 20 the same authorization procedures required for the issuance 21 of general obligation bonds issued for the same purpose to 22 authorize a loan made payable from the debt service fund. 23 Upon approval of a loan, the loan shall be accounted for in 24 accordance with section 384.20. 25 5. A loan made pursuant to this section shall include 26 provisions establishing an interest rate on the loan that shall 27 be set at a rate that is between the interest rate established 28 pursuant to section 12C.6, subsection 2, paragraph “a” , and the 29 interest rate established pursuant to section 74A.6, subsection 30 2. 31 6. Repayments of principal and interest shall be paid to 32 the reserve fund or account from which all or a portion of the 33 funds were advanced for the loan in the proportion that the 34 amount of the advance from the fund or account bears to the 35 -2- LSB 6186YC (1) 85 aw/sc 2/ 8

H.F. _____ entire amount of the loan. 1 7. a. The limitation in section 346.24 does not apply to a 2 transfer made pursuant to this section or to a loan authorized 3 pursuant to this section. 4 b. A city shall not become indebted under this section to an 5 amount exceeding six million dollars. 6 8. A loan made pursuant to this section shall not include 7 any transfers or obligations from the reserve fund or account 8 of a city utility or of a combined city utility. 9 9. The powers granted under this section shall not be 10 construed as a limitation of the existing powers of a city. 11 Sec. 3. Section 384.25, Code 2014, is amended to read as 12 follows: 13 384.25 General obligation bonds or loans for essential 14 purposes. 15 1. A city which proposes to carry out any essential 16 corporate purpose within or without its corporate limits, and 17 to contract indebtedness and issue general obligation bonds or 18 authorize a loan described in section 384.24B, to provide funds 19 to pay all or any part of the cost of a project must do so in 20 accordance with the provisions of this division . 21 2. Before the council may institute proceedings for the 22 issuance of bonds or authorization of a loan for an essential 23 corporate purpose, a notice of the proposed action, including 24 a statement of the amount and purposes of the bonds or loan , 25 and the time and place of the meeting at which the council 26 proposes to take action for the issuance of the bonds or 27 authorization of the loan , must be published as provided in 28 section 362.3 . At the meeting, the council shall receive oral 29 or written objections from any resident or property owner 30 of the city. After all objections have been received and 31 considered, the council may, at that meeting or any adjournment 32 thereof, take additional action for the issuance of the bonds 33 or authorization of the loan or abandon the proposal to issue 34 the bonds or authorize the loan . Any resident or property 35 -3- LSB 6186YC (1) 85 aw/sc 3/ 8

H.F. _____ owner of the city may appeal the decision of the council to 1 take additional action to the district court of the county in 2 which any part of the city is located, within fifteen days 3 after the additional action is taken, but the additional action 4 of the council is final and conclusive unless the court finds 5 that the council exceeded its authority. The provisions of 6 this subsection with respect to notice, hearing, and appeal, 7 are in lieu of the provisions contained in chapter 73A , or any 8 other law. 9 3. a. Notwithstanding subsection 2 , a council may institute 10 proceedings for the issuance of bonds or the authorization of a 11 loan for an essential corporate purpose specified in section 12 384.24, subsection 3 , paragraph “w” or “x” , in an amount equal 13 to or greater than three million dollars by causing a notice 14 of the proposal to issue the bonds or authorize the loan , 15 including a statement of the amount and purpose of the bonds 16 or loan , together with the maximum rate of interest which the 17 bonds are to bear or which will be charged to the principal 18 balance of the loan , and the right to petition for an election, 19 to be published at least once in a newspaper of general 20 circulation within the city at least ten days prior to the 21 meeting at which it is proposed to take action for the issuance 22 of the bonds or the authorization of the loan . 23 b. If at any time before the date fixed for taking action 24 for the issuance of the bonds or the authorization of the 25 loan , a petition is filed with the clerk of the city signed 26 by eligible electors of the city equal in number to twenty 27 percent of the persons in the city who voted for the office of 28 president of the United States at the last preceding general 29 election that had such office on the ballot, asking that the 30 question of issuing the bonds or authorizing the loan be 31 submitted to the registered voters of the city, the council 32 shall either by resolution declare the proposal to issue the 33 bonds or authorize the loan to have been abandoned or shall 34 direct the county commissioner of elections to call a special 35 -4- LSB 6186YC (1) 85 aw/sc 4/ 8

H.F. _____ election upon the question of issuing the bonds or authorizing 1 the loan . Notice of the election and its conduct shall be in 2 the manner provided in section 384.26 . 3 c. If a petition is not filed, or if a petition is filed and 4 the proposition of issuing the bonds or authorizing the loan 5 is approved at an election, the council may proceed with the 6 authorization and issuance of the bonds or authorization of the 7 loan . 8 Sec. 4. Section 384.26, subsections 1, 2, 4, and 5, Code 9 2014, are amended to read as follows: 10 1. A city which proposes to carry out any general corporate 11 purpose within or without its corporate limits, and to contract 12 indebtedness and issue general obligation bonds or authorize a 13 loan described in section 384.24B, to provide funds to pay all 14 or any part of the costs of a project, must do so in accordance 15 with the provisions of this division . 16 2. Before the council may institute proceedings for the 17 issuance of bonds or authorization of a loan for a general 18 corporate purpose, it shall call a special city election to 19 vote upon the question of issuing the bonds or authorizing the 20 loan . At the election the proposition must be submitted in one 21 of the following form forms, as applicable : 22 Shall the ............ (insert the name of the city) issue 23 its bonds in an amount not exceeding the amount of $ .... for 24 the purpose of .......... ? 25 Shall the .......... (insert the name of the city) authorize 26 a loan from its surplus funds in an amount not exceeding the 27 amount of $ .... for the purpose of ..........? 28 4. The proposition of issuing general corporate purpose 29 bonds or authorizing a loan for a general corporate purpose 30 is not carried or adopted unless the vote in favor of the 31 proposition is equal to at least sixty percent of the total 32 vote cast for and against the proposition at the election. 33 If the proposition of issuing the general corporate purpose 34 bonds or authorizing a loan for a general corporate purpose is 35 -5- LSB 6186YC (1) 85 aw/sc 5/ 8

H.F. _____ approved by the voters, the city may proceed with the issuance 1 of the bonds or authorization of the loan . 2 5. a. Notwithstanding the provisions of subsection 2 , 3 a council may, in lieu of calling an election, institute 4 proceedings for the issuance of bonds or authorization of a 5 loan for a general corporate purpose by causing a notice of the 6 proposal to issue the bonds or authorize the loan , including 7 a statement of the amount and purpose of the bonds or loan , 8 together with the maximum rate of interest which the bonds are 9 to bear or which the loan is to bear , and the right to petition 10 for an election, to be published at least once in a newspaper 11 of general circulation within the city at least ten days prior 12 to the meeting at which it is proposed to take action for the 13 issuance of the bonds or authorization of the loan subject to 14 the following limitations: 15 (1) In cities having a population of five thousand or less, 16 in an amount of not more than four hundred thousand dollars. 17 (2) In cities having a population of more than five thousand 18 and not more than seventy-five thousand, in an amount of not 19 more than seven hundred thousand dollars. 20 (3) In cities having a population in excess of seventy-five 21 thousand, in an amount of not more than one million dollars. 22 b. If at any time before the date fixed for taking action 23 for the issuance of the bonds or the authorization of the 24 loan , a petition is filed with the clerk of the city in the 25 manner provided by section 362.4 , asking that the question 26 of issuing the bonds or authorizing the loan be submitted to 27 the registered voters of the city, the council shall either by 28 resolution declare the proposal to issue the bonds or authorize 29 the loan to have been abandoned or shall direct the county 30 commissioner of elections to call a special election upon the 31 question of issuing the bonds or authorizing the loan . Notice 32 of the election and its conduct shall be in the manner provided 33 in the preceding subsections of this section . 34 c. If no petition is filed, or if a petition is filed and 35 -6- LSB 6186YC (1) 85 aw/sc 6/ 8

H.F. _____ the proposition of issuing the bonds or authorizing the loan 1 is approved at an election, the council may proceed with the 2 authorization and issuance of the bonds or the authorization 3 of the loan . 4 Sec. 5. Section 384.33, Code 2014, is amended to read as 5 follows: 6 384.33 Action. 7 No action may be brought which questions the legality of 8 general obligation bonds , notes, or loans under this chapter or 9 the power of the city to issue the bonds , notes or loans or the 10 effectiveness of any proceedings relating to the authorization 11 and issuance of the bonds , notes, or loans from and after sixty 12 days from the time the bonds , notes or loans are ordered issued 13 by the city. 14 EXPLANATION 15 The inclusion of this explanation does not constitute agreement with 16 the explanation’s substance by the members of the general assembly. 17 This bill relates to state and local government powers and 18 limitations. 19 The bill enacts new Code section 384.24B to allow a city to 20 borrow surplus money from its reserve accounts or funds for 21 any general corporate purpose or essential corporate purpose. 22 The bill requires that a city certify taxes to be levied for 23 deposit in the debt service fund in the amount necessary to pay 24 principal and interest on loans authorized under the bill. The 25 bill defines “loan”, “surplus”, and “reserve account or fund”. 26 The bill requires that such loans not cause the balances 27 of such reserve accounts or funds to fall below any minimum 28 balance prescribed by law and requires that a city shall not 29 become indebted under such loans to an amount in excess of $6 30 million. The bill requires that loans from reserve funds be 31 reported to the state treasurer in the same manner as required 32 for bonds issued by a city. The bill requires that such loans 33 not result in a user fee, rate, or property tax increase as 34 a result of unavailability of surplus funds. The terms of 35 -7- LSB 6186YC (1) 85 aw/sc 7/ 8

H.F. _____ each loan shall require repayment of the loan within 90 days 1 to the extent necessary to prevent a user fee rate or property 2 tax increase. Such a loan shall be payable from the city debt 3 service fund and shall constitute an indebtedness within the 4 meaning of any statutory debt limitation. 5 The full or partial repayment of a loan entered into under 6 the bill shall constitute an essential corporate purpose 7 pursuant to Code section 384.24, subsection 3, paragraph “f”. 8 The bill provides that upon approval of such a loan that the 9 loan shall be accounted for as a separate account pursuant 10 to current Code section 384.20. The bill further provides 11 that interest rates on such a loan be set between the interest 12 rate established for the deposit of public funds, established 13 in current Code section 12C.6 and the maximum interest rate 14 established for public obligations and assessments under 15 current Code section 74A.6, subsection 2. The bill provides 16 that such a loan not include any transfers or obligations from 17 a reserve fund or account of a city utility or combined city 18 utility. 19 The bill requires that a city council follow substantially 20 the same procedures for the issuance of general obligation 21 bonds for essential corporate purposes, pursuant to Code 22 section 384.25, or for general corporate purposes, pursuant to 23 Code section 384.26 when making a loan from reserve funds. 24 The bill further provides that no action may be brought 25 against a city regarding the legality, power to issue, or power 26 to authorize notes or loans under Code chapter 384 at any time 27 after 60 days following issuance. 28 -8- LSB 6186YC (1) 85 aw/sc 8/ 8