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PAG LIN 1 1 Section 1. Section 8.46, Code Supplement 1995, is amended 1 2 to read as follows: 1 3 8.46 LEASE-PURCHASE – REPORTING – APPROVAL. 1 4 1. For the purposes of this section, unless the context 1 5 otherwise requires: 1 6 a. "Installment acquisition" includes, but is not limited 1 7 to, an arrangement in which title of ownership passes when the 1 8 first installment payment is made. 1 9 b. "Lease-purchase arrangement" includes, but is not 1 10 limited to, an arrangement in which title of ownership passes 1 11 when the final installment payment is made. 1 12 c. "State agency" means any executive, judicial, or 1 13 legislative department, commission, board, institution, 1 14 division, bureau, office, agency, or other entity of state 1 15 government. 1 16 2. At least thirty days prior to entering into a contract 1 17 involving a lease-purchase or installment acquisition 1 18 arrangement in which any part or the total amount of the 1 19 contract is at least fifty thousand dollars, a state agency 1 20 shall notify the legislative fiscal bureau concerning the 1 21 contract. The legislative fiscal bureau shall compile the 1 22 notifications for submission to the legislative fiscal 1 23 committee of the legislative council. The notification is 1 24 required regardless of the source of payment for the lease- 1 25 purchase or installment acquisition arrangement. The 1 26 notification shall include all of the following information: 1 27 a. A description of the object of the lease-purchase or 1 28 installment acquisition arrangement. 1 29 b. The proposed terms of the contract. 1 30 c. The cost of the contract, including principal and 1 31 interest costs. If the actual cost of a contract is not known 1 32 at least thirty days prior to entering into the contract, the 1 33 state agency shall estimate the principal and interest costs 1 34 for the contract. 1 35 d. An identification of the means and source of payment of 2 1 the contract. 2 2 e. An analysis of consequences of delaying or abandoning 2 3 the commencement of the contract. 2 4 2A. If the legislative fiscal committee recommends 2 5 rejection of a contract for a lease-purchase arrangement or 2 6 installment acquisition within thirty days of the receipt by 2 7 the legislative fiscal bureau of the notification required by 2 8 this section, a contract shall not be entered into unless a 2 9 constitutional majority of each house of the general assembly, 2 10 or the legislative council if the general assembly is not in 2 11 session, and the governor, approve the contract. 2 12 3. The legislative fiscal committee shall report to the 2 13 legislative council concerning the notifications it receives 2 14 pursuant to this section. 2 15 Sec. 2. Section 8D.11, subsection 1, Code 1995, is amended 2 16 to read as follows: 2 17 1. The commission may purchase,lease-purchase,lease, and 2 18 improve property, equipment, and services for 2 19 telecommunications for public and private agencies and may 2 20 dispose of property and equipment when not necessary for its 2 21 purposes. However, the commission shall not enter into a 2 22 contract for the purchase,lease-purchase,lease, or 2 23 improvement of property, equipment, or services for 2 24 telecommunications pursuant to this subsection in an amount 2 25 greater than five hundred thousand dollars without prior 2 26 authorization by a constitutional majority of each house of 2 27 the general assembly, or approval by the legislative council 2 28 if the general assembly is not in session. The commission 2 29 shall not issue any bonding or other long-term financing 2 30 arrangements as defined in section 12.30, subsection 1, 2 31 paragraph "b". Real or personal property to be purchased by 2 32 the commission or a state agency through the use of a 2 33 financing agreement shall be done in accordance with the 2 34 provisions of section 12.28, provided, however, that the 2 35 commission or state agency shall not purchase property, 3 1 equipment, or services for telecommunications pursuant to this 3 2 subsection in an amount greater than five hundred thousand 3 3 dollars without prior authorization by a constitutional 3 4 majority of each house of the general assembly, or approval by 3 5 the legislative council if the general assembly is not in 3 6 session. 3 7 1A. The commission also shall not provide or resell 3 8 communications services to entities other than public and 3 9 private agencies. The public or private agency shall not 3 10 provide communication services of the network to another 3 11 entity unless otherwise authorized pursuant to this chapter. 3 12 The commission may arrange for joint use of available services 3 13 and facilities, and may enter into leases and agreements with 3 14 private and public agencies with respect to the Iowa 3 15 communications network, and public agencies are authorized to 3 16 enter into leases and agreements with respect to the network 3 17 for their use and operation. Rentals and other amounts due 3 18 under the agreements or leases entered into pursuant to this 3 19 section by a state agency are payable from funds annually 3 20 appropriated by the general assembly or from other funds 3 21 legally available. Other public agencies may pay the rental 3 22 costs and other amounts due under an agreement or lease from 3 23 their annual budgeted funds or other funds legally available 3 24 or to become available. 3 25 1B. This section comprises a complete and independent 3 26 authorization and procedure for a public agency, with the 3 27 approval of the commission, to enter into a lease or agreement 3 28and related security enhancement arrangementsand this section 3 29 is not a qualification of any other powers which a public 3 30 agency may possess and the authorizations and powers granted 3 31 under this section are not subject to the terms, requirements, 3 32 or limitations of any other provisions of law, except that 3 33 state agencies must comply with the provisions of section 3 34 12.28 when entering into financing agreements for the purchase 3 35 of real or personal property. All moneys received by the 4 1 commission from agreements and leases entered into pursuant to 4 2 this section with private and public agencies shall be 4 3 deposited in the Iowa communications network fund. 4 4 Sec. 3. NEW SECTION. 12.28 CENTRALIZED FINANCING FOR 4 5 STATE AGENCY PURCHASE OF REAL AND PERSONAL PROPERTY. 4 6 1. As used in this section, unless the context otherwise 4 7 requires: 4 8 a. "Financing agreement" means any lease, lease-purchase 4 9 agreement, or installment acquisition contract in which the 4 10 lessee may purchase the leased property at a price which is 4 11 less than the fair market value of the property at the end of 4 12 the lease term, or any lease, agreement, or transaction which 4 13 would be considered under criteria established by the Internal 4 14 Revenue Service to be a conditional sale agreement for tax 4 15 purposes. 4 16 b. "State agency" means a board, commission, bureau, 4 17 division, office, department, or branch of state government. 4 18 However, state agency does not mean the state board of 4 19 regents, institutions governed by the board of regents, or 4 20 authorities created under chapter 16, 16A, 175, 257C, 261A, or 4 21 327I. 4 22 2. The treasurer of state shall have sole authority to 4 23 enter into financing agreements on behalf of state agencies. 4 24 The treasurer of state may enter into financing agreements, 4 25 including master lease-purchase agreements, for the purpose of 4 26 funding state agency requests for the financing of real or 4 27 personal property, wherever located within the state, 4 28 including equipment, buildings, facilities, and structures, or 4 29 additions or improvements to existing buildings, facilities, 4 30 and structures. Subject to the selection procedures of 4 31 section 12.30, the treasurer may employ financial consultants, 4 32 banks, trustees, insurers, underwriters, accountants, 4 33 attorneys, and other advisors or consultants as necessary to 4 34 implement the provisions of this section. The costs of 4 35 professional services and any other costs of entering into the 5 1 financing agreements may be included in the financing 5 2 agreement as a cost of the property being financed. 5 3 3. The financing agreement may provide for ultimate 5 4 ownership of the property by the state. Title to all property 5 5 acquired in this manner shall be taken and held in the name of 5 6 the state. The state shall be the lessee or contracting party 5 7 under all financing agreements entered into pursuant to this 5 8 section. The financing agreements may contain provisions 5 9 pertaining, but not limited to, interest, term, prepayment, 5 10 and the state's obligation to make payments on the financing 5 11 agreement beyond the current budget year subject to 5 12 availability of appropriations. All projects financed under 5 13 this section shall be deemed to be for an essential 5 14 governmental purpose. 5 15 4. The treasurer of state may contract for additional 5 16 security or liquidity for a financing agreement and may enter 5 17 into agreements for letters of credit, lines of credit, 5 18 insurance, or other forms of security with respect to rental 5 19 and other payments due under a financing agreement. Fees for 5 20 the costs of additional security or liquidity are a cost of 5 21 entering into the financing agreement and may be paid from 5 22 funds annually appropriated by the general assembly to the 5 23 state agency for which the property is being obtained, from 5 24 other funds legally available, or from proceeds of the 5 25 financing agreement. The provision of a financing agreement 5 26 which provides that a portion of the periodic rental or lease 5 27 payment be applied as interest is subject to chapter 74A. 5 28 Other laws relating to interest rates do not apply. Chapter 5 29 75 does not apply to financing agreements entered into 5 30 pursuant to this section. 5 31 5. Payments and other costs due under financing agreements 5 32 entered into pursuant to this section shall be payable from 5 33 funds annually appropriated by the general assembly to the 5 34 state agency for which the property is being obtained or from 5 35 other funds legally available. Funds to meet payments due 6 1 under financing agreements shall be transferred to the 6 2 treasurer of state at least three days prior to the date the 6 3 payment is due to be deposited into a financing agreement 6 4 payment fund hereby created in the office of the treasurer of 6 5 state. The treasurer of state shall make the payment owing 6 6 under the financing agreements according to the payment 6 7 schedule included in the financing agreements. 6 8 6. The maximum principal amount of financing agreements 6 9 which the treasurer of state can enter into shall be one 6 10 million dollars per state agency in a fiscal year, subject to 6 11 the requirements of section 8.46. For the fiscal year, the 6 12 treasurer of state shall not enter into more than one million 6 13 dollars of financing agreements per state agency, not 6 14 considering interest expense. However, the treasurer of state 6 15 may enter into financing agreements in excess of the one 6 16 million dollar per agency per fiscal year limit if a 6 17 constitutional majority of each house of the general assembly, 6 18 or the legislative council if the general assembly is not in 6 19 session, and the governor, authorize the treasurer of state to 6 20 enter into additional financing agreements above the one 6 21 million dollar authorization contained in this section. The 6 22 treasurer of state shall not enter into a financing agreement 6 23 for real or personal property which is to be constructed for 6 24 use as a prison or prison-related facility without prior 6 25 authorization by a constitutional majority of each house of 6 26 the general assembly and approval by the governor of the use, 6 27 location, and maximum cost, not including interest expense, of 6 28 the real or personal property to be financed. 6 29 7. The treasurer of state shall decide upon the most 6 30 economical method of financing a state agency's request for 6 31 funds. The treasurer of state may utilize master lease- 6 32 purchase agreements, issue certificates of participation in 6 33 lease-purchase agreements, or use any other financing method 6 34 or method of sale which the treasurer believes will provide 6 35 savings to the state in issuance or interest costs. 7 1 8. A financing agreement to which the state is a party is 7 2 an obligation of a state for purposes of chapters 502 and 636, 7 3 and is a lawful investment for banks, trust companies, 7 4 building and loan associations, savings and loan associations, 7 5 investments companies, insurance companies, insurance 7 6 associations, executors, guardians, trustees, and other 7 7 fiduciaries responsible for the investment of funds. 7 8 9. Publication of any notice, whether under section 73A.12 7 9 or otherwise, and other or further proceedings with respect to 7 10 the financing agreements referred to in this section are not 7 11 required except as set forth in this section, notwithstanding 7 12 any provisions of other statutes of the state to the contrary. 7 13 Sec. 4. Section 18.12, subsection 10, Code Supplement 7 14 1995, is amended to read as follows: 7 15 10.On behalf of the department, enter into lease-purchase7 16contracts for real or personal property, wherever located7 17within the state, to be used for buildings, facilities, and7 18structures, or for additions or improvements to existing7 19buildings, facilities, and structures, to carry out the7 20provisions of this section or for the proper use and benefit7 21of the state and its state agencies on the following terms and7 22conditions:7 23a. TheUnless otherwise provided by law, the director 7 24 shall coordinate the location, design, plans and 7 25 specifications, construction, and ultimate use of the real or 7 26 personal propertylease-purchased with theto be purchased by 7 27 a state agency for whose benefit and use the property is being 7 28 obtainedand the terms and conditions of the lease-purchase7 29contract with both the state agency for whose benefit and use7 30the property is being obtained and the treasurer of state. If 7 31 the purchase of real or personal property is to be financed 7 32 pursuant to section 12.28, the department shall cooperate with 7 33 the treasurer of state in providing the information necessary 7 34 to complete the financing of the property. Upon awarding the 7 35 contract for construction of a building or for site 8 1 development, the director shall have sole authority to 8 2 administer the contract. 8 3b. The lease-purchase contract may provide for ultimate8 4ownership of the property by the state. Title to all property8 5acquired in this manner shall be taken and held in the name of8 6the state. The state shall be the lessee or contracting party8 7under all lease-purchase contracts entered into pursuant to8 8this section. The lease-purchase contract may contain8 9provisions similar to provisions customarily found in lease-8 10purchase contracts between private persons, including, but not8 11limited to, provisions prohibiting the acquisition or use by8 12the lessee of competing property or property in substitution8 13for the lease-purchased property, obligating the lessee to pay8 14costs of operation, maintenance, insurance, and taxes relating8 15to the property, and permitting the lessor to retain a8 16security interest in the property lease-purchased, until title8 17passes to the state, which may be assigned or pledged by the8 18lessor. The director may contract for additional security or8 19liquidity for a lease-purchase contract and may enter into8 20agreements for letters of credit, lines of credit, insurance,8 21or other forms of security with respect to rental and other8 22payments due under a lease-purchase contract. Fees for the8 23costs of additional security or liquidity are a cost of8 24entering into the lease-purchase contract and may be paid from8 25funds annually appropriated by the general assembly to the8 26state agency for which the property is being obtained or from8 27other funds legally available. The lease-purchase contract8 28may include the costs of entering into the lease-purchase8 29contract as a cost of the lease-purchased property. The8 30provision of a lease-purchase contract which provides that a8 31portion of the periodic rental payment be applied as interest8 32is subject to chapter 74A. Other laws relating to interest8 33rates do not apply. Chapter 75 does not apply to lease-8 34purchase contracts entered into pursuant to this section.8 35Rental and other costs due under lease-purchase contracts9 1entered into pursuant to this section shall be payable from9 2funds annually appropriated by the general assembly to the9 3state agency for which the property is being obtained or from9 4other funds legally available.9 5c. A lease-purchase contract to which the state is a party9 6is an obligation of a state for purposes of chapters 502 and9 7636, and is a lawful investment for banks, trust companies,9 8building and loan associations, savings and loan associations,9 9investment companies, insurance companies, insurance9 10associations, executors, guardians, trustees, and other9 11fiduciaries responsible for the investment of funds.9 12d. The director shall not enter into lease-purchase9 13contracts pursuant to this section without prior authorization9 14by a constitutional majority of each house of the general9 15assembly and approval by the governor of the use, location,9 16and maximum cost, not including interest expense, of the real9 17or personal property to be lease-purchased. However, the9 18director shall not enter into a lease-purchase contract for9 19real or personal property which is to be constructed for use9 20as a prison or prison-related facility without prior9 21authorization by a constitutional majority of each house of9 22the general assembly and approval by the governor of the use,9 23location, and maximum cost, not including interest expense, of9 24the real or personal property to be lease-purchased and with9 25the construction in accordance with space needs as established9 26by an independent study of space needs authorized by the9 27general assembly.9 28e.A contract for acquisition, construction, erection, 9 29 demolition, alteration, or repair by a private person of real 9 30 or personal property to be lease-purchased by thedirector9 31 treasurer of state pursuant tothissection 12.28 is exempt 9 32 from section 18.6, subsections 1 and 9, unless the lease- 9 33 purchase contract is funded in advance by a deposit of the 9 34 lessor's moneys to be administered by thedirectortreasurer 9 35 of state under a lease-purchase contract which requires rent 10 1 payments to commence upon delivery of the lessor's moneys to 10 2 the lessee. 10 3This subsection provides an alternative and independent10 4method for carrying out projects under this chapter and for10 5entering into lease-purchase contracts in connection with the10 6projects, without reference to any other statute, and is not10 7an amendment of or subject to the provision of any other law.10 8No publication of any notice, whether under section 73A.12 or10 9otherwise, and no other or further proceedings with respect to10 10the lease-purchase contracts referred to in this section are10 11required except as set forth in this section, any provisions10 12of other statutes of the state to the contrary10 13notwithstanding.10 14 For purposes of this subsection and subsection 12, "state 10 15 agency" means a board, commission, bureau, division, office, 10 16 department, or branch of state government. 10 17 Sec. 5. REPEAL. Section 18.23, Code 1995, is repealed. 10 18 EXPLANATION 10 19 This bill creates new section 12.28 which provides sole 10 20 authority for the treasurer of state to enter into lease- 10 21 purchase agreements or financing agreements for the financing 10 22 of real or personal property to be purchased by a state 10 23 agency. The bill removes language from section 18.12, 10 24 subsection 10, which authorizes the director of the department 10 25 of general services to enter into lease-purchase agreements 10 26 for the financing of real or personal property on behalf of 10 27 state agencies, and reinserts similar language in chapter 12 10 28 authorizing the treasurer of state to serve as the sole state 10 29 official authorized to enter into financing agreements 10 30 allowing the purchase of real or personal property for state 10 31 agencies. The bill provides, however, that a state agency 10 32 does not include the state board of regents and its 10 33 institutions, the Iowa finance authority, the economic 10 34 protective and investment authority, the agricultural 10 35 development authority, the Iowa advance funding authority, the 11 1 higher education loan authority, and the railway finance 11 2 authority. 11 3 The bill provides for establishing a financing agreement 11 4 payment fund in the treasurer of state's office into which 11 5 state agencies would transfer the required payments. State 11 6 agencies would transfer moneys to the fund three days prior to 11 7 the due date so the treasurer can ensure that payments are 11 8 made on time. 11 9 The bill further provides that the treasurer of state would 11 10 be prohibited from entering into more than $1 million of 11 11 financing agreements per state agency per fiscal year. 11 12 However, the treasurer of state could enter into financing 11 13 agreements above the $1 million limit if the general assembly, 11 14 or the legislative council if the general assembly is not in 11 15 session, and the governor authorized the additional amount for 11 16 a state agency. 11 17 The treasurer of state would have the discretion to 11 18 determine the most economical method of financing a state 11 19 agency's request for funds, and would be permitted to use 11 20 master lease-purchase agreements, issue certificates of 11 21 participation, or use any other financing method or method of 11 22 sale which the treasurer believes will provide savings to the 11 23 state in issuance or interest costs. 11 24 Section 18.23 authorizing the lease-purchase of 11 25 improvements to the state capitol building is repealed. 11 26 The bill amends section 8D.11 to provide that financing 11 27 agreements for the purchase of real or personal property 11 28 associated with the Iowa communications network by the Iowa 11 29 technology and telecommunications commission or a state agency 11 30 would also be subject to the provisions of this bill. 11 31 The bill amends section 8.46 to provide for legislative 11 32 council or general assembly approval, in addition to approval 11 33 by the governor, for state agencies seeking financing in 11 34 excess of $50,000 if the legislative fiscal committee 11 35 recommends, within 30 days of receiving notice of the proposed 12 1 financing, that the financing be rejected. 12 2 LSB 3762SC 76 12 3 ec/jj/8
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