Senate Study Bill 3008 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON DAWSON) A BILL FOR An Act relating to the disposal and acquisition of city water 1 utilities, including at-risk systems. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5204XC (2) 88 js/ns

S.F. _____ Section 1. Section 388.2A, subsection 2, paragraphs a and b, 1 Code 2020, are amended to read as follows: 2 a. (1) The governing body of the city utility shall 3 determine the fair market value of the utility system after 4 obtaining two appraisals an appraisal of the system’s fair 5 market value. One The appraisal shall be obtained from an 6 independent appraiser selected by the governing body, and the 7 other appraisal shall be obtained from an independent appraiser 8 approved by the Iowa utilities board. Both appraisals For 9 systems with more than two thousand connections, a second 10 appraisal shall be obtained from an independent appraiser 11 selected by the governing body. Appraisals shall be conducted 12 in conformance with the uniform standards of professional 13 appraisal practice or substantially similar standards. 14 (2) Any appraisal obtained pursuant to this paragraph 15 shall consider the depreciated value of the capital assets 16 to be sold, the loss of future revenues to the city utility, 17 including the right to generate surpluses, and the cost of any 18 capital improvements reasonably necessary to provide adequate 19 service and facilities to the city utility’s customers. 20 b. After considering the appraisal or appraisals obtained 21 pursuant to paragraph “a” , as applicable, the governing body 22 shall establish the city utility’s fair market value. The fair 23 market value shall be the greater of any of the following: 24 (1) The appraisal or, in the case of a system with more than 25 two thousand connections, the average of the two appraisals 26 obtained pursuant to paragraph “a” . 27 (2) The depreciated value of the capital assets to be sold. 28 (3) The amount necessary to retire all of the city’s 29 outstanding revenue and general obligations issued for purposes 30 of the city utility. 31 Sec. 2. NEW SECTION . 455B.199D At-risk utility systems. 32 1. For purposes of this section, “at-risk system” means a 33 city drinking water, sanitary sewage, or storm water drainage 34 system that the city determines meets any of the following 35 -1- LSB 5204XC (2) 88 js/ns 1/ 3

S.F. _____ criteria: 1 a. The system serves a disadvantaged community as described 2 in section 455B.199B. 3 b. The system includes a water treatment plant, water 4 distribution system, or wastewater treatment plant that has 5 not been operated by a competent operator pursuant to section 6 455B.223 within the previous twelve months. 7 c. The system serves two thousand or fewer connections. 8 d. The system violated one or more state or federal 9 statutory or regulatory requirements in a manner that affects 10 the safety, adequacy, or efficiency of its services or 11 facilities. 12 2. A new owner of an at-risk system following disposal of 13 the system by sale pursuant to section 388.2A may provide to 14 the department proof of the availability of financial resources 15 to meet system upgrade requirements and a revised timetable 16 for compliance with department rules. The department shall 17 agree to the revised timetable if the department determines 18 the revised timetable is reasonable based on the information 19 provided by the new owner. 20 Sec. 3. Section 476.84, subsection 2, Code 2020, is amended 21 by adding the following new paragraph: 22 NEW PARAGRAPH . 0e. If the acquisition involves a utility 23 that is an at-risk system as defined in section 455B.199D, the 24 board shall issue a final order on an application for approval 25 of the acquisition within one hundred eighty days of the filing 26 date of the application. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanation’s substance by the members of the general assembly. 30 This bill relates to the disposal and acquisition of city 31 water utilities. 32 Current law requires the governing body of a city utility 33 to determine the fair market value of the utility system by 34 obtaining the average of two appraisals from an independent 35 -2- LSB 5204XC (2) 88 js/ns 2/ 3

S.F. _____ appraiser, among other factors. The bill requires a governing 1 body to seek two appraisals only when the system has more than 2 2,000 connections; otherwise the governing body only needs to 3 seek one appraisal. 4 The bill defines the term “at-risk system” as it relates 5 to city water utilities. Under the bill, when a city utility 6 system that is disposed of by sale is an at-risk system, the 7 new owner may provide to the department of natural resources 8 proof of the availability of financial resources to meet 9 system upgrade requirements and provide a revised timetable 10 for compliance with department rules. If the department 11 determines that the revised timetable is reasonable based on 12 the information provided by the new owner, the department shall 13 agree to the timetable. 14 The bill requires the utilities board within the utilities 15 division of the department of commerce to issue a final order 16 within 180 days when a public utility applies for approval of 17 the acquisition of an at-risk system. 18 -3- LSB 5204XC (2) 88 js/ns 3/ 3