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 madeif itfor 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. Ifa majoritythe 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