Senate File 37 - Introduced SENATE FILE 37 BY WILHELM A BILL FOR An Act authorizing establishment of certain entities to 1 undertake projects relating to the storage, transportation, 2 transmission, and delivery of natural gas, to establish 3 replacement tax districts, and to use certain replacement 4 tax and property tax revenue to pay revenue bonds, and 5 including effective date provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 1348XS (5) 86 md/sc

S.F. 37 Section 1. Section 28F.1, subsection 1, Code 2015, is 1 amended to read as follows: 2 1. This chapter provides a means for the joint financing 3 by public agencies of works or facilities useful and necessary 4 for the collection, treatment, purification, and disposal 5 in a sanitary manner of liquid and solid waste, sewage, and 6 industrial waste, facilities and works used for the storage, 7 transportation, transmission, and delivery of natural gas, 8 facilities used for the conversion of solid waste to energy, 9 and also electric power facilities constructed within the state 10 of Iowa, except that hydroelectric power facilities may also 11 be located in the waters and on the dams of or on land adjacent 12 to either side of the Mississippi or Missouri river bordering 13 the state of Iowa, water supply systems, swimming pools 14 or golf courses. This chapter applies to the acquisition, 15 construction, reconstruction, ownership, operation, repair, 16 extension, or improvement of such works or facilities, by a 17 separate administrative or legal entity created pursuant to 18 chapter 28E or chapter 389 . When the legal entity created 19 under this chapter is comprised solely of cities, counties, 20 and sanitary districts established under chapter 358 , or any 21 combination thereof or any combination of the foregoing with 22 other public agencies, the entity shall be both a corporation 23 and a political subdivision with the name under which it was 24 organized. The legal entity may sue and be sued, contract, 25 acquire and hold real and personal property necessary for 26 corporate purposes, adopt a corporate seal and alter the seal 27 at pleasure, and execute all the powers conferred in this 28 chapter . 29 Sec. 2. Section 28F.2, Code 2015, is amended by adding the 30 following new subsection: 31 NEW SUBSECTION . 1A. “Natural gas distribution agency” means 32 an entity created pursuant to chapter 28E for the purpose of 33 acquiring, constructing, reconstructing, operating, repairing, 34 extending, or improving natural gas facilities and works used 35 -1- LSB 1348XS (5) 86 md/sc 1/ 10

S.F. 37 for the storage, transportation, transmission, and delivery of 1 natural gas. 2 Sec. 3. Section 28F.5, unnumbered paragraph 2, Code 2015, 3 is amended to read as follows: 4 Such an entity shall have the power to fix, establish and 5 maintain such rates, tolls, fees, rentals , or other charges 6 and collect the same from the public agencies participating 7 in the agreement or from private agencies or persons for 8 the payment of the services and facilities provided by said 9 project or projects. Such rates, tolls, fees, rentals or other 10 charges shall be so fixed, established and maintained and 11 revised from time to time whenever necessary as will always 12 provide revenues sufficient to pay the cost of maintaining, 13 repairing and operating the project or projects, to pay the 14 principal of and interest on the bonds then outstanding which 15 are payable therefrom as the same become due and payable, to 16 provide adequate and sufficient reserves therefor, to provide 17 for replacements, depreciations and necessary extensions and 18 enlargements and to provide a margin of safety for the making 19 of such payments and providing such reserves. Notwithstanding 20 the foregoing such an entity shall have the further right to 21 pledge to the payment of the bonds issued pursuant to this 22 chapter , in addition to the net revenues of the project or 23 projects pledged therefor, such other moneys that it may have 24 and which are lawfully available therefor , including but not 25 limited to replacement tax revenue received by a natural 26 gas distribution agency under section 28F.5A and designated 27 by resolution of the governing body of the agency for such 28 purposes . 29 Sec. 4. NEW SECTION . 28F.5A Use of replacement taxes —— 30 natural gas distribution agencies —— district. 31 1. A natural gas distribution agency that is undertaking a 32 project to acquire, construct, reconstruct, operate, repair, 33 extend, or improve natural gas facilities and works used for 34 the storage, transportation, transmission, and delivery of 35 -2- LSB 1348XS (5) 86 md/sc 2/ 10

S.F. 37 natural gas may by resolution of the agency’s governing body 1 authorize the use of certain replacement tax revenue collected 2 under chapter 437A for the payment of bonds issued pursuant to 3 this chapter. 4 2. a. A resolution authorizing the use of replacement tax 5 revenue by a natural gas distribution agency shall be adopted 6 by the agency’s governing body prior to the issuance of bonds 7 under this chapter. The resolution shall include all of the 8 following: 9 (1) A description of the project. 10 (2) A designation of a replacement tax district. 11 (3) A description of the boundaries of the replacement tax 12 district. 13 (4) A map of the location of the project and the boundaries 14 of the district. 15 (5) The amount of bonds proposed to be issued under this 16 chapter for the project. 17 (6) A list of each natural gas competitive service area 18 under chapter 437A that serves property located in the 19 replacement tax district. 20 b. A replacement tax district designated by a natural gas 21 distribution agency shall comprise only property that will be 22 directly served by the project following its completion. 23 c. Following adoption, a copy of the resolution and all 24 items required under paragraph “a” shall be filed by the natural 25 gas distribution agency’s governing body with the director of 26 revenue, the director of the department of management, and with 27 the county auditor of each county in which the replacement tax 28 district is located. 29 3. a. For each tax year after the base year, the natural 30 gas distribution agency shall receive from the department of 31 management an amount of replacement tax paid by the agency 32 under chapter 437A in an amount not to exceed the amount 33 determined in paragraph “b” . 34 b. (1) The maximum amount of replacement tax that may be 35 -3- LSB 1348XS (5) 86 md/sc 3/ 10

S.F. 37 paid to a natural gas distribution agency under this section 1 for a tax year is the total amount of replacement taxes paid 2 by the natural gas distribution agency in the tax year minus 3 the total amount of replacement taxes paid by the natural gas 4 distribution agency in the base year. 5 (2) The total amount of replacement taxes paid by the 6 natural gas distribution agency in the base year is the sum of 7 the following: 8 (a) The amount of replacement tax paid in the base year by 9 the natural gas distribution agency under section 437A.5 that 10 is the result of natural gas delivered to a consumer located in 11 the area that comprises the replacement tax district. 12 (b) The amount of property tax paid in the base year by the 13 natural gas distribution agency as the result of the statewide 14 property tax imposed under section 437A.18 on property located 15 in the area that comprises the replacement tax district. 16 (3) The total amount of replacement taxes paid by the 17 natural gas distribution agency in a tax year is the sum of the 18 following: 19 (a) The amount of replacement tax paid in the tax year by 20 the natural gas distribution agency under section 437A.5 that 21 is the result of natural gas delivered to a consumer located in 22 the area that comprises the replacement tax district. 23 (b) The amount of property tax paid in the tax year by the 24 natural gas distribution agency as the result of the statewide 25 property tax imposed under section 437A.18 on property located 26 in the area that comprises the replacement tax district. 27 (4) For purposes of this section, “base year” means the tax 28 year, as defined in section 437A.3, that precedes the year in 29 which the resolution establishing the replacement tax district 30 is filed with the director of the department of management 31 under subsection 2, paragraph “c” . 32 4. a. A natural gas distribution agency which has 33 authorized the use of replacement tax revenue shall by December 34 1 certify to the department of management and the county 35 -4- LSB 1348XS (5) 86 md/sc 4/ 10

S.F. 37 auditor of each county in which the replacement tax district 1 is located the amount of bonds issued under this chapter, 2 including interest on the bonds, that qualify for payment 3 from the replacement tax revenue received under this section. 4 The filing of the certificate shall make it a duty of the 5 department of management and the county auditor to provide 6 for the allocation and payment of replacement tax revenue in 7 each subsequent year without further certification, except as 8 provided in paragraphs “b” and “c” , until the amount of the 9 bonds, including the interest on the bonds, is paid. If any 10 bonds are issued that qualify for payment from replacement 11 tax revenue under this section and are in addition to amounts 12 already certified, the agency shall certify the amount of the 13 additional bonds, including the interest on the bonds, on or 14 before December 1 of the year such bonds were issued. Any 15 subsequent certifications under this subsection shall not 16 include amounts previously certified. 17 b. If the amount certified in paragraph “a” is reduced by 18 payment from sources other than replacement taxes received 19 under this section, by a refunding or refinancing of the bonds 20 which results in lowered principal and interest on the amount 21 of the bonds, or for any other reason, the agency on or before 22 December 1 of the year the action was taken which resulted in 23 the reduction shall certify the amount of the reduction to the 24 department of management and each appropriate county auditor. 25 c. In any year, the department of management shall, upon 26 receipt of a certified request from an agency filed on or 27 before December 1, decrease the amount of replacement tax 28 revenue to be allocated under this section in order to reduce 29 the amount to be allocated to the agency under this section 30 in the next tax year to an amount that is less than the full 31 portion of taxes which could be allocated. Upon receipt of 32 a certificate from an agency, the department of management 33 shall mail a copy of the certificate to each affected taxing 34 district. 35 -5- LSB 1348XS (5) 86 md/sc 5/ 10

S.F. 37 5. The maximum period of years that a natural gas 1 distribution agency may receive replacement tax revenue under 2 this section shall be forty consecutive tax years following the 3 base year. 4 6. The resolution adopted by the natural gas distribution 5 agency may be amended or repealed. Any amendment to the 6 resolution or any amendment to any of the items required under 7 subsection 2, paragraph “a” , shall be filed with the director 8 of the department of management, the director of revenue, and 9 the county auditor of each county in which the replacement tax 10 district is located. If the resolution adopted under this 11 section is amended to include additional property, the base 12 year for such additional property shall be the tax year that 13 precedes the year in which the amendment to the resolution is 14 filed with the director of the department of management. 15 7. A natural gas distribution agency receiving replacement 16 tax revenue under this section shall on or before March 1 of 17 each year file a report with the department of management, the 18 department of revenue, and the county auditor of each county 19 in which the replacement tax district is located. The report 20 shall include all of the following: 21 a. The amount of bonds, including interest on the bonds, 22 issued under this chapter during the most recent tax year that 23 qualify for payment using replacement tax revenues received by 24 the agency under this section. 25 b. The amount of bonds, including interest on the bonds, 26 that remain unpaid at the close of the most recent tax year, 27 and that qualify for payment using replacement tax revenues 28 received by the agency under this section. 29 c. The amount of replacement tax revenue received by the 30 agency under this section and used in the most recent tax year 31 for the payment of bonds issued under this chapter, including 32 interest on the bonds. 33 d. The amount of replacement tax revenue received by the 34 agency under this section in the most recent tax year and 35 -6- LSB 1348XS (5) 86 md/sc 6/ 10

S.F. 37 deposited by the agency for the future payment of bonds issued 1 under this chapter, including interest on the bonds. 2 e. The amount of funds received by the agency and used in 3 the most recent tax year for the payment of bonds issued under 4 this chapter, including interest on the bonds, from sources 5 other than replacement tax revenue received under this section. 6 f. The amount of funds received by the agency in the most 7 recent tax year and deposited by the agency for the future 8 payment of bonds issued under this chapter, including interest 9 on the bonds, from sources other than replacement tax revenue 10 received under this section. 11 g. All other additional information or documentation 12 relating to an agency’s use of replacement tax revenue received 13 under this section deemed relevant by the department of 14 management in consultation with the department of revenue. 15 Sec. 5. Section 437A.8, subsection 1, Code 2015, is amended 16 by adding the following new paragraph: 17 NEW PARAGRAPH . g. All information determined by the 18 director to be necessary to implement the allocation and 19 payment of replacement taxes to a natural gas distribution 20 agency that has authorized the use of such revenue pursuant to 21 section 28F.5A. 22 Sec. 6. Section 437A.15, subsection 3, paragraph a, 23 subparagraph (1), Code 2015, is amended to read as follows: 24 (1) All replacement taxes owed by a taxpayer shall be 25 allocated among the local taxing districts in which such 26 taxpayer’s property is located in accordance with a general 27 allocation formula determined by the department of management 28 on the basis of general property tax equivalents. General 29 property tax equivalents shall be determined by applying the 30 levy rates reported by each local taxing district to the 31 department of management on or before June 30 following a 32 tax year to the taxable value of taxpayer property allocated 33 to each such local taxing district as adjusted and reported 34 to the department of management in such tax year by the 35 -7- LSB 1348XS (5) 86 md/sc 7/ 10

S.F. 37 director pursuant to section 437A.19, subsection 2 . The 1 general allocation formula for a tax year shall allocate to 2 each local taxing district that portion of the replacement 3 taxes owed by each taxpayer which bears the same ratio as such 4 taxpayer’s general property tax equivalents for each local 5 taxing district bears to such taxpayer’s total general property 6 tax equivalents for all local taxing districts in Iowa. For 7 tax years beginning on or after January 1, 2016, the amount of 8 replacement taxes allocated by the department of management 9 under this section and paid to local taxing districts located 10 in whole or in part within a replacement tax district created 11 under section 28F.5A shall be adjusted to take into account the 12 use of replacement taxes under section 28F.5A by a natural gas 13 distribution agency. 14 Sec. 7. Section 437A.23, Code 2015, is amended to read as 15 follows: 16 437A.23 Deposit of tax proceeds. 17 All Following any required allocation and payment of 18 statewide property tax revenues to natural gas distribution 19 agencies pursuant to section 28F.5A, revenues received from 20 imposition of the statewide property tax shall be deposited in 21 the general fund of the state. Fifty percent of the revenues 22 shall be available, as appropriated by the general assembly, to 23 the department of management for salaries, support, services, 24 and equipment to administer the replacement tax. The balance 25 of the revenues shall be available, as appropriated by the 26 general assembly, to the department of revenue for salaries, 27 support, services, and equipment to administer and enforce the 28 replacement tax and the statewide property tax. 29 Sec. 8. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 30 immediate importance, takes effect upon enactment. 31 EXPLANATION 32 The inclusion of this explanation does not constitute agreement with 33 the explanation’s substance by the members of the general assembly. 34 Code chapter 28F provides a means for the joint financing 35 -8- LSB 1348XS (5) 86 md/sc 8/ 10

S.F. 37 by public agencies of works or facilities for the collection, 1 treatment, purification, and disposal in a sanitary manner 2 of liquid and solid waste, sewage, and industrial waste, 3 facilities used for the conversion of solid waste to energy, 4 and also electric power facilities constructed within the 5 state of Iowa. Code chapter 28F applies to the acquisition, 6 construction, reconstruction, ownership, operation, repair, 7 extension, or improvement of such works or facilities by a 8 separate administrative or legal entity created pursuant to 9 Code chapter 28E or Code chapter 389. 10 This bill adds facilities and works for the storage, 11 transportation, transmission, and delivery of natural gas to 12 the types of works and facilities that may be jointly financed 13 by public agencies under Code chapter 28F. 14 Current Code chapter 28F authorizes joint agencies to 15 issue revenue bonds to finance such works or facilities that 16 are payable from the net revenues of the project and other 17 revenues that the entity may have and which are lawfully 18 available for the payment of revenue bonds. New Code section 19 28F.5A authorizes a natural gas distribution agency that is 20 undertaking a project to acquire, construct, reconstruct, 21 operate, repair, extend, or improve natural gas facilities and 22 works used for the storage, transportation, transmission, and 23 delivery of natural gas to authorize, by resolution, the use of 24 certain replacement tax revenue collected under Code chapter 25 437A for the payment of bonds issued under Code chapter 28F. 26 Under the bill, for each tax year after a designated base 27 year, the natural gas distribution agency that has adopted the 28 required resolution shall receive an amount of replacement 29 tax paid by the agency under Code chapter 437A in an amount 30 not to exceed the maximum amount allowed in the bill. The 31 maximum amount of replacement tax that may be paid to a natural 32 gas distribution agency for a tax year is the total amount 33 of statewide property taxes under Code section 437A.18 and 34 replacement taxes paid by the natural gas distribution agency 35 -9- LSB 1348XS (5) 86 md/sc 9/ 10

S.F. 37 in the tax year minus the total amount of statewide property 1 taxes under Code section 437A.18 and replacement taxes paid by 2 the natural gas distribution agency in the base year. 3 The bill requires the natural gas distribution agency to 4 certify to the department of management and the county auditor 5 of each county in which the replacement tax district is located 6 the amount of bonds issued under this Code chapter, including 7 interest on the bonds, that qualify for payment from the 8 replacement tax revenue received under this Code section. The 9 bill also requires a natural gas distribution agency receiving 10 replacement tax revenue to, on or before March 1 of each year, 11 file a report containing information specified in the bill with 12 the department of management, the department of revenue, and 13 the county auditor of each county in which the replacement tax 14 district is located. 15 The maximum period of years that a natural gas distribution 16 agency may receive replacement tax revenue is 40 consecutive 17 tax years following the base year. The bill allows the 18 resolution adopted by the natural gas distribution agency to 19 be amended or repealed. 20 The bill makes corresponding changes to Code chapter 437A 21 to provide for the allocation and payment of replacement tax 22 revenues to natural gas distribution agencies. 23 The bill takes effect upon enactment. 24 -10- LSB 1348XS (5) 86 md/sc 10/ 10