Senate File 404
SENATE FILE
BY COMMITTEE ON COMMERCE
(SUCCESSOR TO SSB 1037)
Passed Senate, Date Passed House, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to provision of telecommunications services by
2 municipal utilities, including discovery of competitive
3 information, permitted loans, and making related changes.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
5 TLSB 1757SV 80
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PAG LIN
1 1 Section 1. Section 388.9, Code 2003, is amended by adding
1 2 the following new subsection:
1 3 NEW SUBSECTION. 3. The restrictions and limitations
1 4 applicable under subsections 1 and 2 to public disclosure,
1 5 examination, and copying of competitive information of a city
1 6 utility, a combined utility system, a city enterprise, or
1 7 combined city enterprise shall not apply when discovery of
1 8 such information is sought by a person during civil
1 9 litigation. A person seeking to protect the material from
1 10 disclosure shall not succeed on the grounds that the
1 11 information constitutes a trade secret or other confidential
1 12 research, development, or commercial information not to be
1 13 disclosed or to be disclosed only in a designated way, or that
1 14 the information otherwise falls within the general category of
1 15 protection for proprietary information.
1 16 Sec. 2. Section 388.10, Code 2003, is amended to read as
1 17 follows:
1 18 388.10 CITY OR MUNICIPAL UTILITY PROVIDING LOCAL EXCHANGE
1 19 TELECOMMUNICATIONS SERVICES.
1 20 1. a. A city providing or that owns or operates a
1 21 municipal utility providing local exchange services pursuant
1 22 to chapter 476 any telecommunications service or the municipal
1 23 utility shall not do, directly or indirectly, any of the
1 24 following:
1 25 (1) Use Except for a permitted loan, use general fund
1 26 moneys for the ongoing support or subsidy or other moneys
1 27 derived from tax revenues, directly or indirectly, to finance
1 28 or in any way to otherwise support either of the following:
1 29 (a) The establishment, construction, reconstruction,
1 30 upgrade, maintenance, or operation of a telecommunications
1 31 system.
1 32 (b) The provision of any telecommunications service.
1 33 (2) Provide any city or utility facilities, equipment, or
1 34 services to provide a telecommunications systems system or
1 35 services any telecommunications service at a cost for such
2 1 facilities, equipment, or services which that is less than the
2 2 reasonable cost of providing such city facilities, equipment,
2 3 or services.
2 4 (3) Provide any other city service, other than a
2 5 communications service, to a telecommunications customer at a
2 6 cost which is less than would be paid by the same person
2 7 receiving such other city service if the person was not a
2 8 telecommunications customer.
2 9 (4) Use Except for a permitted loan, use funds or revenue
2 10 generated from electric, gas, water, sewage, or garbage
2 11 services provided by the city for the ongoing support of that
2 12 portion of a system or service used to provide local exchange
2 13 services or the utility, directly or indirectly, to finance or
2 14 in any way to otherwise support either of the following:
2 15 (a) The establishment, construction, reconstruction,
2 16 upgrade, maintenance, or operation of any telecommunications
2 17 system.
2 18 (b) The provision of any telecommunications service.
2 19 b. For purposes of this section, "telecommunications
2 20 unless the context otherwise requires:
2 21 (1) "Combined utility system" means the same as defined in
2 22 section 384.80.
2 23 (2) "Cost" of any facilities, equipment, services, or
2 24 other goods or services shall include all attributable cost
2 25 and expenses, whether direct or indirect, fixed or variable,
2 26 including without limitation, a fair and equitable allocation
2 27 of all of the following:
2 28 (a) Taxes.
2 29 (b) The costs of any necessary capital for the
2 30 construction or acquisition of the item or the facilities by
2 31 which the service is provided.
2 32 (c) Amortization of any capital that is required to be
2 33 repaid.
2 34 (d) Depreciation.
2 35 (e) Amortization of capitalized costs.
3 1 (3) "Permitted loan" means any borrowing or transfer of
3 2 moneys or funds from a municipality or a nontelecommunications
3 3 municipal utility to a separate telecommunications utility of
3 4 the municipality that meets the requirements of paragraphs "c"
3 5 through "e".
3 6 (4) "Support" means to provide financial support in any
3 7 form, whether temporary or permanent, including but not
3 8 limited to transfers of money or other assets, purchases of
3 9 securities, capital contributions or other investments, loans
3 10 or other extensions of credit, leases, payment of money,
3 11 guarantees, pledges, or hypothecations or property or
3 12 indemnities or other arrangements by which there is recourse
3 13 to the revenues or other assets of the city or municipal
3 14 utility other than any revenues derived solely from the
3 15 operations of a telecommunications service or assets of the
3 16 related telecommunications system.
3 17 (5) "Telecommunications system" means only that portion of
3 18 a system or facilities which is used to provide local exchange
3 19 services a system that provides any telecommunications
3 20 service.
3 21 (6) "Telecommunications service" means the provision of
3 22 any of the following services:
3 23 (a) Cable television service.
3 24 (b) Internet service.
3 25 (c) Local exchange telephone service.
3 26 (d) Long distance telephone service.
3 27 (e) Retail data transmission.
3 28 c. (1) A permitted loan may not be made to or within a
3 29 combined utility system that provides any telecommunications
3 30 service.
3 31 (2) The amount of a permitted loan shall not exceed the
3 32 lesser of any amount approved in a public referendum or the
3 33 cost of initial construction of the physical
3 34 telecommunications system plus an allowance for working
3 35 capital not to exceed the highest three months of revenue from
4 1 recurring monthly customer charges reasonably forecast to
4 2 occur during the first twelve months of operation of the
4 3 telecommunications system.
4 4 (3) The annual rate of interest charges on a permitted
4 5 loan shall not be less than the rate established by the
4 6 federal communications commission, from time to time, as the
4 7 presumptively reasonable cost of capital rate used to compute
4 8 regulated service rates for the provision of cable television
4 9 services or, if no such rate exists, then the interest rate
4 10 shall be no less than the prevailing prime interest rate plus
4 11 five hundred basis points. Interest payments shall be
4 12 remitted in full to the lender no less frequently than
4 13 annually. The principal of a permitted loan shall be repaid
4 14 no less frequently than in annual installments, beginning not
4 15 later than three years after the first draw of loan proceeds
4 16 and the principal shall be fully repaid within fifteen years
4 17 of the date of the first draw of loan proceeds. Annual
4 18 principal payments shall be in amounts not less than the
4 19 outstanding principal amount divided by the number of annual
4 20 payments to be made. The lending agreement for a permitted
4 21 loan shall contain loan covenants and nonfinancial terms and
4 22 conditions no more favorable than those typically found in a
4 23 comparable senior loan financing made in the cable or
4 24 telecommunications industries.
4 25 (4) In the event that a municipality or its utility should
4 26 default on any payment, material covenant, or other term or
4 27 condition of a permitted loan, the municipality or its utility
4 28 shall promptly publish a public notice of the default and have
4 29 sixty days to cure the default. A repeated default of the
4 30 same requirement, covenant, or other term or condition shall
4 31 not be subject to cure. The municipality or municipal utility
4 32 shall not waive a default or noncompliance. If the default is
4 33 not cured within the prescribed time, the municipality or its
4 34 utility shall sell or cease operation of the
4 35 telecommunications systems no later than twelve months
5 1 following the default.
5 2 d. This section shall not apply to a municipality or its
5 3 utility with respect to the provision of cable television
5 4 services within municipal boundaries if either of the
5 5 following circumstances exist within the municipality:
5 6 (1) A private provider of cable television services does
5 7 not offer cable television service in the municipality.
5 8 (2) A private provider of cable television services offers
5 9 cable television service within the municipality, but the
5 10 provider has not begun offering internet access within the
5 11 municipality by October 1, 2004, at a speed equal to the
5 12 minimum requirements for advanced telecommunications services
5 13 as determined by the federal communications commission.
5 14 e. This section shall not restrict any of the following
5 15 actions:
5 16 (1) The procurement of telecommunications service by a
5 17 municipality or its utility to the extent the
5 18 telecommunications services are to be used solely for the
5 19 internal operations of the municipality or its utility and
5 20 such services will not be made available for resale or to the
5 21 general public.
5 22 (2) The procurement of feasibility studies related to the
5 23 provision of telecommunications services by a municipality or
5 24 its utility.
5 25 (3) Funding from any source the costs of litigation when a
5 26 competing utility is a party to the litigation.
5 27 f. (1) This section shall not affect the validity of
5 28 borrowings or loans outstanding as of December 31, 2002, that
5 29 complied with and continue to comply with the provisions of
5 30 this section that were in effect on December 31, 2002, which
5 31 loans shall also be known as "grandfathered loans".
5 32 (2) In the event a grandfathered loan is extended in term,
5 33 increased in amount, or modified in any substantive manner,
5 34 all of the terms and conditions of the grandfathered loan
5 35 shall comply fully with the requirements of a permitted loan.
6 1 (3) A municipality or municipal utility shall not waive
6 2 compliance with any requirement of a grandfathered loan.
6 3 2. A city providing or that owns or operates a municipal
6 4 utility providing local exchange services pursuant to chapter
6 5 476 telecommunications service, whether or not pursuant to
6 6 chapter 476, or the municipal utility shall do the following:
6 7 a. Prepare and maintain records which record the full cost
6 8 accounting of providing local exchange telecommunications
6 9 service. The records shall show the amount, and source, and
6 10 cost of capital for initial construction or acquisition of the
6 11 local exchange telecommunications system or facilities. This
6 12 section shall not prohibit a municipal utility from utilizing
6 13 capital from any lawful source, provided that the reasonable
6 14 cost of such capital is accounted for as a cost of providing
6 15 the service and no violation of subsection 1, paragraph "a",
6 16 subparagraph (1) or (4), would result.
6 17 b. Adopt rates for the provision of local exchange
6 18 services telecommunications service that reflect the actual
6 19 cost of providing the local exchange telecommunications
6 20 service. However, this paragraph shall not prohibit the
6 21 municipal utility from establishing market=based prices for
6 22 competitive local exchange services telecommunications
6 23 services, provided that no violation of subsection 1,
6 24 paragraph "a", subparagraph (1) or (4), would result.
6 25 c. Be subject to all requirements of the city which that
6 26 would apply to any other provider of local exchange
6 27 telecommunications services in the same manner as such
6 28 requirements would apply to such other provider.
6 29 3. This section shall not prohibit the marketing or
6 30 bundling of other products or services, in addition to local
6 31 exchange by the municipal utility as well as any
6 32 telecommunications services. However, a city shall include on
6 33 a billing statement sent to a person receiving services from
6 34 the city, a separate charge for each individual service
6 35 provided to the person, such as electricity, local exchange,
7 1 or internet access. This subsection does not prohibit the
7 2 city from also including on the billing statement a total
7 3 amount to be paid by the person.
7 4 Sec. 3. Section 427.1, subsection 2, Code 2003, is amended
7 5 to read as follows:
7 6 2. MUNICIPAL AND MILITARY PROPERTY. The property of a
7 7 county, township, city, school corporation, levee district,
7 8 drainage district, or the Iowa national guard, when devoted to
7 9 public use and not held for pecuniary profit, except property
7 10 of a municipally owned electric utility held under joint
7 11 ownership and property of an electric power facility financed
7 12 under chapter 28F or 476A that shall be subject to taxation
7 13 under chapter 437A and facilities of a municipal utility or a
7 14 city that are used for the provision of local exchange
7 15 services pursuant to chapter 476, but only to the extent such
7 16 facilities are used to provide such services,
7 17 telecommunications services as defined in section 388.10 which
7 18 shall be subject to taxation under chapter 433, except that
7 19 section 433.11 shall not apply, and subject to taxation under
7 20 chapter 441, as applicable. However, notwithstanding anything
7 21 in this subsection to the contrary, the electric lines of a
7 22 municipally owned electric utility are subject to property
7 23 taxation to the extent such electric lines are used to provide
7 24 telecommunications services. The exemption for property owned
7 25 by a city or county also applies to property which is operated
7 26 by a city or county as a library, art gallery or museum,
7 27 conservatory, botanical garden or display, observatory or
7 28 science museum, or as a location for holding athletic
7 29 contests, sports or entertainment events, expositions,
7 30 meetings or conventions, or leased from the city or county for
7 31 any such purposes, or leased from the city or county by the
7 32 Iowa national guard or by a federal agency for the benefit of
7 33 the Iowa national guard when devoted for public use and not
7 34 for pecuniary profit. Food and beverages may be served at the
7 35 events or locations without affecting the exemptions, provided
8 1 the city has approved the serving of food and beverages on the
8 2 property if the property is owned by the city or the county
8 3 has approved the serving of food and beverages on the property
8 4 if the property is owned by the county.
8 5 Sec. 4. APPLICABILITY. A municipal utility shall not be
8 6 subject to this Act if it engages exclusively in the provision
8 7 of wholesale services under an open=access tariff without
8 8 facility=based competition.
8 9 EXPLANATION
8 10 This bill pertains to municipal utility systems, primarily
8 11 under Code chapter 388.
8 12 The bill amends Code section 388.9 to provide that certain
8 13 competitive business information of a city utility or city
8 14 enterprise that otherwise may be withheld from public
8 15 disclosure may not be shielded from disclosure in litigation
8 16 on the basis of the provisions of Code section 388.9, or that
8 17 the information constitutes a trade secret or other
8 18 confidential research, development, or commercial information
8 19 not to be disclosed.
8 20 The bill also amends Code section 388.10 to provide that a
8 21 city utility is prohibited from using general fund tax
8 22 revenues, except for permitted loans, to maintain or operate
8 23 telecommunications systems or services, and from using
8 24 revenues generated from a utility service such as electric,
8 25 gas, or water to pay for the maintenance or operation of
8 26 telecommunications service. The bill details the use of
8 27 permitted loans, provides for grandfathering of loans in
8 28 effect prior to December 31, 2002, and includes exceptions for
8 29 municipal utilities where no cable television services are
8 30 offered by private providers, or private providers have not
8 31 begun offering broadband services by October 1, 2004. The
8 32 bill also defines "combined utility system", "cost",
8 33 "support", "permitted loan", "telecommunications service", and
8 34 "telecommunications system".
8 35 The bill also changes language that requires a city that
9 1 owns a municipal utility providing telecommunications services
9 2 to perform certain activities, consistent with other changes
9 3 in the bill.
9 4 The bill also amends Code section 427.1 to make similar
9 5 language changes and provide for a property tax on electric
9 6 lines of a municipal utility that are used to provide
9 7 telecommunications services, and adds a reference to
9 8 assessment and valuation of property pursuant to Code chapter
9 9 441.
9 10 LSB 1757SV 80
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