HF 289 (LSB 1761YH (1) 85)

HOUSE FILE 289

BY  ROGERS

A BILL FOR

An Act authorizing a city to use city reserve funds as a loan for certain projects.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 384.4, subsection 1, Code 2013, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  f.  Payments of principal and interest on loans entered into pursuant to section 384.24B and authorized for repayment by the council from the fund.
    Sec. 2.  NEW SECTION.  384.24B  General obligation loans funded by the city.
   1.  A city may authorize a loan, as defined in this section, to borrow money for any public project in accordance with and subject to the provisions of this section. 
   2.  For purposes of this section, “loan” means the sum of the transfers from one or more reserve accounts or funds of the city which transfers are authorized for the purpose specified in the loan authorization document. A transfer from a reserve account or fund for the purposes of this section shall not cause the balance of reserves in such account or fund at the close of the fiscal year following the fiscal year in which the transfer is made to fall below any minimum balance prescribed by law for such account or fund.
   3.  A loan entered into by a city pursuant to this section may contain provisions similar to those found in loan agreements between private parties, including but not limited to the issuance of notes to evidence its obligations.
   4.  A loan made pursuant to this section is payable from the debt service fund of the city. The governing body shall follow the same authorization procedures required for the issuance of general obligation bonds issued for the same purpose to authorize a loan made payable from the debt service fund. 
   5.  A loan made pursuant to this section shall provide that a portion of the payments be applied as interest at a rate set by the council in the authorization for the loan. The council may determine a rate of interest that shall not be below that set for a certificate of deposit at a financial institution defined in chapter 12C and that shall not exceed the lowest rate of interest payable on a bond issuance, such rate being determined at the time the loan is authorized. Other laws relating to interest rates do not apply.
   6.  Repayments of principal and interest shall be applied to the reserve fund or account from which all or a portion of the funds were advanced for the loan in the proportion that the amount of the advance from the fund or account bears to the entire amount of the loan. 
   7.  The limitation in section 346.24 does not apply to a transfer made pursuant to this section or to a loan authorized pursuant to this section.
    Sec. 3.  Section 384.25, Code 2013, is amended to read as follows:
   384.25  General obligation bonds
 
or loans for essential purposes.
   1.  A city which proposes to carry out any essential corporate purpose within or without its corporate limits, and to contract indebtedness and issue general obligation bonds
 
or authorize a loan described in section 384.24B, to provide funds to pay all or any part of the cost of a project must do so in accordance with the provisions of this division.
   2.  Before the council may institute proceedings for the issuance of bonds
 
or authorization of a loan for an essential corporate purpose, a notice of the proposed action, including a statement of the amount and purposes of the bonds
 
or loan, and the time and place of the meeting at which the council proposes to take action for the issuance of the bonds
 
or authorization of the loan, must be published as provided in section 362.3. At the meeting, the council shall receive oral or written objections from any resident or property owner of the city. After all objections have been received and considered, the council may, at that meeting or any adjournment thereof, take additional action for the issuance of the bonds
 
or authorization of the loan or abandon the proposal to issue the bonds
 
or authorize the loan. Any resident or property owner of the city may appeal the decision of the council to take additional action to the district court of the county in which any part of the city is located, within fifteen days after the additional action is taken, but the additional action of the council is final and conclusive unless the court finds that the council exceeded its authority. The provisions of this subsection with respect to notice, hearing, and appeal, are in lieu of the provisions contained in chapter 73A, or any other law.
   3.
  a.  Notwithstanding subsection 2, a council may institute proceedings for the issuance of bonds
 
or the authorization of a loan for an essential corporate purpose specified in section 384.24, subsection 3, paragraph “w” or “x”, in an amount equal to or greater than three million dollars by causing a notice of the proposal to issue the bonds
 
or authorize the loan, including a statement of the amount and purpose of the bonds
 
or loan, together with the maximum rate of interest which the bonds are to bear
 
or which will be charged to the principal balance of the loan, and the right to petition for an election, to be published at least once in a newspaper of general circulation within the city at least ten days prior to the meeting at which it is proposed to take action for the issuance of the bonds
 
or the authorization of the loan.
   b.  If at any time before the date fixed for taking action for the issuance of the bonds
 
or the authorization of the loan, a petition is filed with the clerk of the city signed by eligible electors of the city equal in number to twenty percent of the persons in the city who voted for the office of president of the United States at the last preceding general election that had such office on the ballot, asking that the question of issuing the bonds
 
or authorizing the loan be submitted to the registered voters of the city, the council shall either by resolution declare the proposal to issue the bonds
 
or authorize the loan to have been abandoned or shall direct the county commissioner of elections to call a special election upon the question of issuing the bonds
 
or authorizing the loan. Notice of the election and its conduct shall be in the manner provided in section 384.26.
   c.  If a petition is not filed, or if a petition is filed and the proposition of issuing the bonds
 
or authorizing the loan is approved at an election, the council may proceed with the authorization and issuance of the bonds
 
or authorization of the loan.
    Sec. 4.  Section 384.26, subsections 1, 2, 4, and 5, Code 2013, are amended to read as follows:
   1.  A city which proposes to carry out any general corporate purpose within or without its corporate limits, and to contract indebtedness and issue general obligation bonds
 
or authorize a loan described in section 384.24B, to provide funds to pay all or any part of the costs of a project, must do so in accordance with the provisions of this division.
   2.  Before the council may institute proceedings for the issuance of bonds
 
or authorization of a loan for a general corporate purpose, it shall call a special city election to vote upon the question of issuing the bonds
 
or authorizing the loan. At the election the proposition must be submitted in
 
one of the following form
 
forms, as applicable:
   Shall the ............ (insert the name of the city) issue its bonds in an amount not exceeding the amount of $.... for the purpose of ..........?
   Shall the .......... (insert the name of the city) authorize a loan from its reserve funds in an amount not exceeding the amount of $.... for the purpose of ..........?
   4.  The proposition of issuing general corporate purpose bonds
 
or authorizing a loan for a general corporate purpose is not carried or adopted unless the vote in favor of the proposition is equal to at least sixty percent of the total vote cast for and against the proposition at the election. If the proposition of issuing the general corporate purpose bonds
 
or authorizing a loan for a general corporate purpose is approved by the voters, the city may proceed with the issuance of the bonds
 
or authorization of the loan.
   5.
  a.  Notwithstanding the provisions of subsection 2, a council may, in lieu of calling an election, institute proceedings for the issuance of bonds
 
or authorization of a loan for a general corporate purpose by causing a notice of the proposal to issue the bonds
 
or authorize the loan, including a statement of the amount and purpose of the bonds
 
or loan, together with the maximum rate of interest which the bonds are to bear
 
or which the loan is to bear, and the right to petition for an election, to be published at least once in a newspaper of general circulation within the city at least ten days prior to the meeting at which it is proposed to take action for the issuance of the bonds
 
or authorization of the loan subject to the following limitations:
   (1)  In cities having a population of five thousand or less, in an amount of not more than four hundred thousand dollars.
   (2)  In cities having a population of more than five thousand and not more than seventy-five thousand, in an amount of not more than seven hundred thousand dollars.
   (3)  In cities having a population in excess of seventy-five thousand, in an amount of not more than one million dollars.
   b.  If at any time before the date fixed for taking action for the issuance of the bonds
 
or the authorization of the loan, a petition is filed with the clerk of the city in the manner provided by section 362.4, asking that the question of issuing the bonds
 
or authorizing the loan be submitted to the registered voters of the city, the council shall either by resolution declare the proposal to issue the bonds
 
or authorize the loan to have been abandoned or shall direct the county commissioner of elections to call a special election upon the question of issuing the bonds
 
or authorizing the loan. Notice of the election and its conduct shall be in the manner provided in the preceding subsections of this section.
   c.  If no petition is filed, or if a petition is filed and the proposition of issuing the bonds
 
or authorizing the loan is approved at an election, the council may proceed with the authorization and issuance of the bonds
 
or the authorization of the loan.
EXPLANATION
   This bill allows a city to borrow money from its reserve accounts or funds to pay for certain public projects. The bill requires that a city certify taxes to be levied for deposit in the debt service fund in the amount necessary to pay principal and interest on loans authorized under the bill.
   The bill requires that such loans not cause the balances of such reserve accounts or funds to fall below any minimum balance prescribed by law. Such a loan shall be payable from the city debt service fund, and shall provide for interest payments at a rate set by the city council, as limited in the bill.
   The bill requires that such authorization by a city council follow substantially the same procedures for the issuance of general obligation bonds for essential corporate purposes, pursuant to Code section 384.25, or for general corporate purposes, pursuant to Code section 384.26.