House Study Bill 182



                                       HOUSE FILE       
                                       BY  (PROPOSED COMMITTEE ON
                                            WAYS AND MEANS BILL BY
                                            CHAIRPERSON VAN FOSSEN)


    Passed House,  Date               Passed Senate, Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act relating to the financing by cities of telecommunications
  2    projects and facilities, including requirements regarding
  3    feasibility studies and reports, requiring sealed bids and
  4    city voter approval, prohibiting financing for an amount above
  5    projected costs, and increasing the minimum voter approval
  6    rate for such projects, and providing effective and
  7    retroactive applicability dates.
  8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  9 TLSB 2410HC 81
 10 kk/pj/5

PAG LIN



  1  1    Section 1.  Section 68B.3, Code 2005, is amended by adding
  1  2 the following new subsection:
  1  3    NEW SUBSECTION.  3.  A person providing services to an
  1  4 agency or political subdivision of the state regarding a
  1  5 feasibility study for or assisting in the establishment of
  1  6 terms of procurement or contract specifications for a
  1  7 telecommunications project as defined in section 384.80 shall
  1  8 not be awarded the resulting procurement or contract for the
  1  9 telecommunications project, regardless of whether the award is
  1 10 made through competitive bidding.  This subsection shall apply
  1 11 to officers, directors, agents, and employees of the person,
  1 12 and to any entity in which such persons are officers or
  1 13 directors or have an ownership or controlling interest in the
  1 14 entity.
  1 15    Sec. 2.  Section 384.80, Code 2005, is amended by adding
  1 16 the following new subsections:
  1 17    NEW SUBSECTION.  15.  "Telecommunications facility" means a
  1 18 system or network of cable, optical fiber, radio, or other
  1 19 wireless equipment or technology or any combination thereof,
  1 20 or other equipment, items, system, infrastructure, or
  1 21 facilities that are used or capable of being used by a city,
  1 22 city utility, combined utility system, city enterprise,
  1 23 combined city enterprise, or nongovernmental entity or person
  1 24 providing telecommunications services.
  1 25    NEW SUBSECTION.  16.  "Telecommunications project" means a
  1 26 project, plan, or proposal for a city, city utility, combined
  1 27 utility system, city enterprise, or combined city enterprise
  1 28 to directly or indirectly build, lease, or otherwise acquire,
  1 29 invest in, maintain, improve, expand, finance, or refinance a
  1 30 telecommunications facility not owned or operated by the city,
  1 31 city utility, combined utility system, city enterprise, or
  1 32 combined city enterprise on or after January 1, 2005.
  1 33    NEW SUBSECTION.  17.  "Telecommunications services" means
  1 34 the same as defined in section 388.10.
  1 35    Sec. 3.  Section 384.82, subsection 1, Code 2005, is
  2  1 amended to read as follows:
  2  2    1.  a.  A city may carry out projects, borrow money, and
  2  3 issue revenue bonds and pledge orders to pay all or part of
  2  4 the cost of projects, such revenue bonds and pledge orders to
  2  5 be payable solely and only out of the net revenues of the city
  2  6 utility, combined utility system, city enterprise, or combined
  2  7 city enterprise involved in the project.  The cost of a
  2  8 project includes the construction contracts, interest upon the
  2  9 revenue bonds and pledge orders during the period or estimated
  2 10 period of construction and for twelve months thereafter, or
  2 11 for twelve months after the acquisition date, such reserve
  2 12 funds as the governing body may deem advisable in connection
  2 13 with the project and the issuance of revenue bonds and pledge
  2 14 orders, and the costs of engineering, architectural, technical
  2 15 and legal services, preliminary reports, surveys, property
  2 16 valuations, estimates, plans, specifications, notices,
  2 17 acquisition of real and personal property, consequential
  2 18 damages or costs, easements, rights of way, supervision,
  2 19 inspection, testing, publications, printing and sale of bonds
  2 20 and provisions for contingencies.  A city may sell revenue
  2 21 bonds or pledge orders at public or private sale in the manner
  2 22 prescribed by chapter 75 and may deliver revenue bonds and
  2 23 pledge orders to the contractors, sellers, and other persons
  2 24 furnishing materials and services constituting a part of the
  2 25 cost of the project in payment therefor.
  2 26    b.  A city may deliver its revenue bonds to the federal
  2 27 government or any agency thereof which has loaned the city
  2 28 money for sanitary or solid waste projects, water projects or
  2 29 other projects for which the government has a loan program.
  2 30    c.  Notwithstanding any other provision of law, a city,
  2 31 city utility, combined city utility, city enterprise, or
  2 32 combined city enterprise shall not, in whole or in part,
  2 33 finance, refinance, pay the costs or expenses of, or otherwise
  2 34 fund a telecommunications project or the operation of a
  2 35 telecommunications facility established through a
  3  1 telecommunications project, directly or indirectly, through
  3  2 issuance or assumption of debt, liability, or obligation, or
  3  3 secure or otherwise become contingently liable for a
  3  4 telecommunications project or facility except through use of
  3  5 the revenues directly earned or to be earned by the
  3  6 telecommunications project or facility.  This paragraph shall
  3  7 not prevent any of the following:
  3  8    (1)  The use of otherwise available funds to pay the
  3  9 reasonable costs of studying the feasibility of a
  3 10 telecommunications project or conducting an election on a
  3 11 proposal for a telecommunications project.
  3 12    (2)  The sale to nongovernmental investors of revenue bonds
  3 13 to fund a telecommunications project if principal, interest,
  3 14 and premium are payable upon maturity or default and are
  3 15 actually paid solely from, and all obligations under the bonds
  3 16 are secured solely by, the net revenues earned or to be earned
  3 17 by the telecommunications project.
  3 18    Sec. 4.  Section 384.89, Code 2005, is amended to read as
  3 19 follows:
  3 20    384.89  TRANSFER OF SURPLUS.
  3 21    The governing body of a city utility, combined utility
  3 22 system, city enterprise, or combined city enterprise which has
  3 23 on hand surplus funds, after making all deposits into all
  3 24 funds required by the terms, covenants, conditions, and
  3 25 provisions of outstanding revenue bonds, pledge orders, and
  3 26 other obligations which are payable from the revenues of the
  3 27 city utility, combined utility system, city enterprise, or
  3 28 combined city enterprise and after complying with all of the
  3 29 requirements, terms, covenants, conditions and provisions of
  3 30 the proceedings and resolutions pursuant to which revenue
  3 31 bonds, pledge orders, and other obligations are issued, may
  3 32 transfer such surplus funds to any other fund of the city in
  3 33 accordance with any rules promulgated by the city finance
  3 34 committee created in section 384.13 if the transfer is also
  3 35 approved by the city council, provided that no transfer may be
  4  1 made if it for use by a city utility to finance, in whole or
  4  2 in part, telecommunications services or if such transfer
  4  3 violates section 384.82, subsection 1, paragraph "c", or
  4  4 conflicts with any of the requirements, terms, covenants,
  4  5 conditions or provisions of any resolution authorizing the
  4  6 issuance of revenue bonds, pledge orders, or other obligations
  4  7 which are payable from the revenues of the city utility,
  4  8 combined utility system, city enterprise, or combined city
  4  9 enterprise which are then outstanding.
  4 10    Sec. 5.  Section 384.90, Code 2005, is amended to read as
  4 11 follows:
  4 12    384.90  PART PAYMENT FROM OTHER BONDS AND OTHER SOURCES.
  4 13    This division does not prohibit or prevent a city from
  4 14 using funds derived from the issuance of general obligation
  4 15 bonds, the levy of special assessments and the issuance of
  4 16 special assessment bonds, and any other source which may be
  4 17 properly used for such purpose, to pay a part of the cost of a
  4 18 project, except as limited in section 384.82, subsection 1,
  4 19 paragraph "c".
  4 20    Sec. 6.  Section 384.96, Code 2005, is amended by adding
  4 21 the following new unnumbered paragraph:
  4 22    NEW UNNUMBERED PARAGRAPH.  The requirements of this section
  4 23 shall apply to a contract for the operation, management, or
  4 24 control of a telecommunications facility, as defined in
  4 25 section 384.80.
  4 26    Sec. 7.  Section 388.1, Code 2005, is amended by adding the
  4 27 following new subsections:
  4 28    NEW SUBSECTION.  1A.  "Telecommunications facility" means
  4 29 the same as defined in section 384.80.
  4 30    NEW SUBSECTION.  1B.  "Telecommunications project" means
  4 31 the same as defined in section 384.80.
  4 32    Sec. 8.  Section 388.2, Code 2005, is amended to read as
  4 33 follows:
  4 34    388.2  SUBMISSION TO VOTERS.
  4 35    1.  The proposal of a city to establish, acquire, lease, or
  5  1 dispose of a city utility, except a sanitary sewage or storm
  5  2 water drainage system, in order to undertake or to discontinue
  5  3 the operation of the city utility, or the proposal to
  5  4 establish or dissolve a combined utility system, or the
  5  5 proposal to establish or discontinue a utility board, is
  5  6 subject to the approval of the voters of the city, except that
  5  7 a board may be discontinued by resolution of the council when
  5  8 the city utility, city utilities, or combined utility system
  5  9 it administers is disposed of or leased for a period of over
  5 10 five years.
  5 11    2.  The proposal may be submitted to the voters at any city
  5 12 election by the council on its own motion.  Upon receipt of a
  5 13 valid petition as defined in section 362.4, requesting that a
  5 14 proposal be submitted to the voters, the council shall submit
  5 15 the proposal at the next regular city election.
  5 16    3.  A city, city utility, combined city utility, city
  5 17 enterprise, or combined city enterprise may not establish,
  5 18 acquire, or lease the facilities of a telecommunications
  5 19 project, in whole or in part, without the approval of the
  5 20 voters of the city.
  5 21    a.  Prior to the city election to obtain voter approval,
  5 22 the city shall prepare a report on the feasibility of the
  5 23 telecommunications project which shall, at a minimum, address
  5 24 and disclose all of the following:
  5 25    (1)  The costs of establishing, acquiring, or leasing the
  5 26 facilities of the telecommunications project and an
  5 27 explanation of how those costs will be paid.
  5 28    (2)  Projected operating costs, including losses, for each
  5 29 of the first five years of operation of the telecommunications
  5 30 facilities, including costs of necessary upgrades to maintain
  5 31 continuing technological viability.
  5 32    (3)  Projected revenues of the telecommunications project
  5 33 for each of the first five years of operation.
  5 34    (4)  Assumptions used in developing the cost and revenue
  5 35 projections.
  6  1    (5)  Risks associated with the fiscal viability of the
  6  2 telecommunications project and its operations, including
  6  3 technological, financial, and market risks.
  6  4    (6)  The fiscal impact on the city of the capital and other
  6  5 investment required for the telecommunications project,
  6  6 including but not limited to the investment required to
  6  7 construct, maintain, and operate the facilities and to avoid
  6  8 their technical obsolescence.
  6  9    (7)  The impact on the city, utility ratepayers, and
  6 10 taxpayers if the telecommunications project is not a financial
  6 11 success, including the impact on the creditworthiness of the
  6 12 city and the alternatives available to the city if the
  6 13 telecommunications project is unsuccessful.
  6 14    b.  The feasibility report shall be reviewed by an
  6 15 independent investment banking firm experienced in public
  6 16 finance in the telecommunications industry, which shall
  6 17 provide a written opinion regarding the reasonableness of
  6 18 projections and conclusions in the report.  The investment
  6 19 banking firm's opinion and the report shall be available as
  6 20 public records for public inspection and copying.
  6 21    c.  Not less than sixty days prior to the date of the city
  6 22 election for voter approval, but before the issuance of the
  6 23 banking firm's opinion, the city shall hold a public hearing
  6 24 regarding the feasibility report.  Public notice of the
  6 25 hearing shall be given in the manner directed by section
  6 26 362.3.  Such notice shall inform the public of the
  6 27 availability of the feasibility report for inspection and
  6 28 copying.
  6 29    d.  The ballot issue for voter approval of the proposal
  6 30 shall include, in addition to any other information required
  6 31 by law, a statement of the maximum costs disclosed pursuant to
  6 32 paragraph "a", subparagraphs (1) and (2), to establish,
  6 33 acquire, lease, maintain, or operate the facilities of the
  6 34 telecommunications project as shown in the feasibility report,
  6 35 which shall not be exceeded without voter approval in another
  7  1 election.
  7  2    4.  A proposal for the establishment of a utility board
  7  3 must specify a board of either three or five members.
  7  4    5.  If a majority of those voting for and against the
  7  5 proposal approves the proposal, the city may proceed as
  7  6 proposed, except that a proposal for a telecommunications
  7  7 project shall require approval of sixty percent of those
  7  8 voting.
  7  9    6.  If a majority the required affirmative vote of those
  7 10 voting for and against the proposal does not approve the
  7 11 proposal, the same or a similar proposal may not be submitted
  7 12 to the voters of the city for at least four years from the
  7 13 date of the election at which the proposal was defeated.
  7 14    Sec. 9.  EFFECTIVE AND RETROACTIVE APPLICABILITY DATES.
  7 15 This Act, being deemed of immediate importance, takes effect
  7 16 upon enactment, and is retroactively applicable to January 1,
  7 17 2005, and is applicable on and after that date.
  7 18                           EXPLANATION
  7 19    This bill relates to the financing of telecommunications
  7 20 projects and facilities by a city, city utility, combined city
  7 21 utility, city enterprise, or combined city enterprise.
  7 22    The bill restricts persons providing services related to a
  7 23 feasibility study for a telecommunications project from being
  7 24 awarded a contract related to the telecommunications project.
  7 25 The bill provides definitions for the terms
  7 26 "telecommunications facility", "telecommunications project",
  7 27 and "telecommunications services".
  7 28    The bill prohibits a city, city utility, or city enterprise
  7 29 from financing or funding a telecommunications project or
  7 30 operation of a telecommunications facility established through
  7 31 a project except through use of the revenues directly earned
  7 32 or to be earned by the project.  The bill prohibits a city,
  7 33 city utility, or city enterprise from transferring surplus
  7 34 funds to finance telecommunications services or a
  7 35 telecommunications project.  The bill provides that the
  8  1 provision requiring sealed bids applies to contracts regarding
  8  2 a telecommunications facility.
  8  3    The bill provides that a city, city utility, or city
  8  4 enterprise shall not establish, acquire, or lease
  8  5 telecommunications facilities of a telecommunications project
  8  6 without voter approval.  A feasibility report must be prepared
  8  7 concerning the telecommunications project prior to the city
  8  8 election to obtain voter approval.  The feasibility report
  8  9 must contain certain provisions regarding costs, revenues,
  8 10 risks, and the fiscal impact on the city.  The feasibility
  8 11 report must be reviewed by an independent investment banking
  8 12 firm.  The city shall also hold a public hearing regarding the
  8 13 feasibility report prior to the city election to obtain voter
  8 14 approval.  The ballot issue shall include a statement of the
  8 15 maximum cost shown in the feasibility report to establish,
  8 16 acquire, or lease the facilities of telecommunications
  8 17 projects.  The bill prohibits the city from exceeding the
  8 18 feasibility report's projected cost without approval by
  8 19 another city election.  The bill provides that at least 60
  8 20 percent of voters must approve the proposal for a
  8 21 telecommunications project rather than a simple majority as
  8 22 required for other proposals needing city voter approval.
  8 23    The bill is retroactively applicable to January 1, 2005.
  8 24 LSB 2410HC 81
  8 25 kk:nh/pj/5