SSB 3070 (LSB 5606XC (1) 89)

SENATE FILE _____ 

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON SCHULTZ)

A BILL FOR

An Act regarding port authorities, including by allowing port authorities to enter into certain loan agreements and lease contracts. 
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 28J.1, subsections 1 and 3, Code 2022, are amended to read as follows:
   1.  “Authorized purposes” means an activity that enhances, fosters, aids, provides, or promotes transportation, infrastructure, utility service, flood and erosion control, economic development, housing, recreation, education, governmental operations, culture, or research within the jurisdiction of a port authority.
   3.  “City” means the same as defined in section 362.2, and also includes a city enterprise as defined in section 384.24.
    Sec. 2.  Section 28J.1, subsection 6, paragraphs d, f, and g, Code 2022, are amended to read as follows:
   d.  The cost of machinery, furnishings, equipment, financing charges, interest prior to and during construction and for no more than twelve months after completion of construction, engineering, architectural services, technical services, preliminary reports, property valuations, consequential damages or costs, provisions for contingencies, supervision, inspection, testing, and expenses of research and development with respect to a facility.
   f.  The interest upon the revenue bonds, and pledge orders, loan agreements, lease contracts, and certificates of participation in or other participatory interests or evidences of any obligation under a loan agreement or lease contract, during the period or estimated period of construction and for twelve months thereafter, or for twelve months after the acquisition date, and upon reserve funds as the port authority deems advisable in connection with a facility and the issuance of port authority revenue bonds, and pledge orders, loan agreements, lease contracts, and certificates of participation in or other participatory interests or evidences of any obligation under a loan agreement or lease contract.
   g.  The costs of issuance of port authority revenue bonds, and pledge orders, loan agreements, lease contracts, and certificates of participation in or other participatory interests or evidences of any obligations under a loan agreement or lease contract.
    Sec. 3.  Section 28J.1, subsections 7 and 8, Code 2022, are amended to read as follows:
   7.  “Facility” or “port authority facility” means any public works project, intermodal freight or transportation facility, project for which tax-exempt financing is authorized by the Internal Revenue Code, and real or personal property or improvements owned, leased, constructed, or otherwise controlled or financed by or for a port authority and that is related to or in furtherance of one or more authorized purposes.
   8.  “Governmental agency” means a department, division, or other unit of state government of this state or any other state, city, county, any political subdivision, township, or other governmental subdivision, or any city utility, any other public corporation, special purpose district, authority, or agency created under the laws of this state, any other state, the United States, or any department or agency thereof, or any agency, commission, or authority established pursuant to an interstate compact or agreement or combination thereof.
    Sec. 4.  Section 28J.1, Code 2022, is amended by adding the following new subsection:
   NEW SUBSECTION.  8A.  “Net revenues” means revenues less operating expenses. 
    Sec. 5.  Section 28J.1, subsections 11, 12, and 14, Code 2022, are amended to read as follows:
   11.  “Political subdivision” means a city, county, city-county consolidation, or multicounty consolidation, or combination thereof municipality as defined in section 16.151.
   12.  “Political subdivisions comprising the port authority” means the each political subdivisions subdivision which created or participated in the creation of the port authority under section 28J.2, or which joined an existing port authority under section 28J.4.
   14.  “Port authority revenue bonds” or “revenue bonds” means revenue bonds and revenue refunding bonds issued pursuant to section 28J.21.
    Sec. 6.  Section 28J.1, Code 2022, is amended by adding the following new subsection:
   NEW SUBSECTION.  15A.  “Public works project” means a project of a type that a political subdivision is authorized to undertake as otherwise provided by law, including but not limited to public roads and other transportation infrastructure, utility systems such as water treatment facilities and sewage treatment facilities, or a project as defined in section 384.80.
    Sec. 7.  Section 28J.1, subsection 16, Code 2022, is amended to read as follows:
   16.  “Revenues” means rental rents, fees, income, rates, tolls, receipts, and other charges or revenues received by a port authority or derived from the operations of a facility or for the use or services of a facility, a gift or grant received with respect to a facility, moneys received with respect to the lease, sublease, sale, including installment sale or conditional sale, or other disposition of a facility, moneys received in repayment of and for interest on any loans made by the port authority to a person or governmental agency, proceeds of port authority revenue bonds for payment of principal, premium, or interest on the bonds authorized by the port authority, proceeds or borrowings under port authority loan agreements for payment of principal, premium, or interest on the port authority obligations thereunder, proceeds or borrowings under lease contracts for the payment of lease payments thereunder, proceeds under any certificates of participation in or other participatory interests or evidences of any obligations under a loan agreement or lease contract, proceeds from any insurance, condemnation, or guarantee pertaining to the financing of the facility, and income and profit from the investment of the proceeds of port authority revenue bonds, proceeds, or borrowings under loan agreements, lease contracts, or proceeds of certificates of participation in or other participatory interests or evidences of any obligation under any loan agreement or lease contract or of any revenues.
    Sec. 8.  Section 28J.2, subsection 1, Code 2022, is amended to read as follows:
   1.  Two One or more political subdivisions may by resolution create a port authority under this chapter by resolution anywhere in this state, regardless of proximity to a body of water. If a proposal to create a port authority receives a favorable majority of the members of the elected legislative body of each of the political subdivisions, the port authority is created at the time provided in the resolution. The jurisdiction of a port authority includes the territory described in section 28J.8.
    Sec. 9.  Section 28J.2, Code 2022, is amended by adding the following new subsection:
   NEW SUBSECTION.  5.  A port authority is an entity separate from the political subdivisions comprising the port authority. The powers granted to the port authority pursuant to this chapter are in addition to other powers, and constitute independent powers that may be exercised by the port authority whether or not the political subdivisions comprising the port authority have or may exercise any of those powers individually.
    Sec. 10.  Section 28J.3, subsection 1, Code 2022, is amended to read as follows:
   1.  The political subdivisions comprising a port authority may appropriate and expend public funds and make contributions to the port authority to finance or subsidize the operation and authorized purposes of the port authority and pay the costs and expenses incurred by the port authority in carrying out any operations or authorized purposes of the port authority.  Political subdivisions comprising the port authority may enter into agreements with each other or the port authority providing for the contributions to the port authority to be made by each of the political subdivisions and providing for the obligations of each of the political subdivisions to pay, finance, or subsidize the costs and expenses incurred by the port authority. Political subdivisions comprising the port authority may, by resolution, authorize and appropriate funds for any contribution, payment, or financing required to be made under such agreement by the use of any method available to government agencies for providing funds or financing under section 28J.16. A port authority shall control tax revenues allocated to the facilities the port authority administers and all revenues derived from the operation of the port authority, the sale of its property, interest on investments, or from any other source related to the port authority.
    Sec. 11.  Section 28J.5, subsections 1, 2, and 5, Code 2022, are amended to read as follows:
   1.  A port authority created pursuant to section 28J.2 shall be governed by a board of directors. Members of a board of directors of a port authority created by two or more political subdivisions shall be divided among the political subdivisions comprising the port authority in such proportions as the political subdivisions may agree and shall be appointed by the respective political subdivision’s elected legislative body.  Members of a board of directors of a port authority created by one political subdivision shall be appointed by the political subdivision’s governing body.
   2.  The number of directors comprising the board of a port authority created by two or more political subdivisions shall be determined by agreement between the political subdivisions comprising the port authority, and which. The number of directors comprising the board of directors of a port authority created by one political subdivision shall consist of the number of directors the political subdivision considers necessary. The number may be changed by resolution of each of the political subdivisions comprising the port authority and in accordance with any agreement between the political subdivisions comprising the port authority.
   5.  The board may provide procedures for the removal of a director who fails to attend three consecutive regular meetings of the board. If a director is so removed, a successor shall be appointed for the remaining term of the removed director in the same manner provided for the original appointment. The appointing body Any political subdivisions comprising the port authority may at any time remove a director appointed by it for misfeasance, nonfeasance, or malfeasance in office and appoint a successor for the remaining term of the removed director in the same manner as provided for by the original appointment.
    Sec. 12.  Section 28J.8, subsection 1, Code 2022, is amended to read as follows:
   1.  The area of jurisdiction of a port authority shall include all of the territory of the port authority facility and of the political subdivisions comprising the port authority and, if the port authority owns or leases a railroad line or airport, the territory on which the railroad’s line, terminals, and related facilities or the airport’s runways, terminals, and related facilities are located, regardless of whether the territory is located in the political subdivisions comprising the port authority.
    Sec. 13.  Section 28J.9, subsections 4, 8, and 10, Code 2022, are amended to read as follows:
   4.  Acquire, construct, furnish, equip, maintain, repair, sell, exchange, lease, lease with an option to purchase, convey interests in real or personal property, and operate any property of the port authority within or outside the territory of the political subdivisions comprising the port authority in furtherance of any authorized purpose, including in connection with transportation, recreational, governmental operations, or cultural activities in furtherance of an authorized purpose.
   8.  Issue port authority revenue bonds beyond the limit of bonded indebtedness provided by law, payable solely from revenues as provided in section 28J.21, and enter into loan agreements and lease contracts as provided in section 28J.21A, for the purpose of providing funds to pay the costs of any facility or facilities of the port authority or parts thereof.
   10.  Enjoy and possess the same legislative and executive rights, privileges, and powers granted cities under chapter chapters 28F, 364, and 384, and counties under chapter 331, including the exercise of police power but excluding the power to levy taxes.
    Sec. 14.  Section 28J.11, subsection 2, Code 2022, is amended to read as follows:
   2.  Impair the powers of a political subdivision to develop or improve a port and terminal authority facility except as restricted by section 28J.15.
    Sec. 15.  Section 28J.13, Code 2022, is amended to read as follows:
   28J.13  Annual budget —— use of rents and charges.
   The board shall annually prepare a budget for the port authority. Revenues received by the port authority shall be used for the general expenses of the port authority and to pay interest, amortization, and retirement charges on, and principal of, money borrowed and to make payments under lease contracts. Except as provided in section 28J.26, if there remains, at the end of any fiscal year, a surplus of such funds after providing for the above uses, the board shall pay such surplus into the general funds of the political subdivisions comprising the port authority as agreed to by the subdivisions.
    Sec. 16.  Section 28J.15, Code 2022, is amended to read as follows:
   28J.15  Limitation on certain powers of political subdivisions.
   A political subdivision creating or participating in the creation of a port authority in accordance with section 28J.2 shall not, during the time the port authority is in existence, exercise the rights and powers provided in chapters 28A, 28K, and 384 relating to the political subdivision’s authority over a port, wharf, dock, harbor, or other facility substantially similar to that political subdivision’s authority under a port authority granted under this chapter, except as provided in section 28J.2.
    Sec. 17.  Section 28J.16, subsection 1, paragraphs a and c, Code 2022, are amended to read as follows:
   a.  A port authority may charge, alter, and collect rental rents, fees, or other charges or revenues for the use or services of any port authority facility and contract for the use or services of a facility, and fix the terms, conditions, rental rents, fees, or other charges for the use or services.
   c.  The rental rents, fees, or other charges, and other revenues of a port authority shall not be subject to supervision or regulation by any other authority, commission, board, bureau, or governmental agency of the state and the contract may provide for acquisition of all or any part of the port authority facility for such consideration payable over the period of the contract or otherwise as the port authority determines to be appropriate, but subject to the provisions of any resolution authorizing the issuance of port authority revenue bonds, loan agreements, lease contracts, or certificates of participation in or other participatory interests or evidences of any obligations under a loan agreement or lease contract, or of any trust agreement securing the bonds, loan agreements, lease contracts, or certificates of participation in or other participatory interests or evidences of any obligation under a loan agreement or lease contract.
    Sec. 18.  Section 28J.16, subsection 2, paragraph a, Code 2022, is amended to read as follows:
   a.  A governmental agency may cooperate with the port authority in the acquisition, operation, or construction of a port authority facility and shall enter into such agreements with the port authority as may be appropriate, which shall provide for contributions by the parties in a proportion as may be agreed upon and other terms as may be mutually satisfactory to the parties including the authorization of the construction of the facility by one of the parties acting as agent for all of the parties and the ownership, operation, and control of the facility by the port authority to the extent necessary or appropriate.
    Sec. 19.  Section 28J.17, subsection 1, paragraph a, Code 2022, is amended to read as follows:
   a.  A port authority may enter into a contract or other arrangement with a person, railroad, utility company, corporation, governmental agency including sewerage, drainage, conservation, conservancy, or other improvement districts in this or other states, or the governments or agencies of foreign countries as may be necessary or convenient for the exercise of the powers granted by this chapter. The port authority may purchase, lease, or acquire land or other property in any county of this state and in adjoining states for the accomplishment of authorized purposes of the port authority, or for the improvement of the harbor and port authority facilities over which the port authority may have jurisdiction including development of port authority facilities in adjoining states. The authority granted in this section to enter into contracts or other arrangements with the federal government includes the power to enter into any contracts, arrangements, or agreements that may be necessary to hold and save harmless the United States from damages due to the construction and maintenance by the United States of work the United States undertakes.
    Sec. 20.  Section 28J.19, Code 2022, is amended to read as follows:
   28J.19  Property tax exemption.
   A port authority shall be exempt from and shall not be required to pay taxes on real property that is purchased by a port authority or real property belonging to a port authority that is used exclusively for an authorized purpose, as provided in section 427.1, subsection 34.
    Sec. 21.  NEW SECTION.  28J.21A  Loan agreements —— lease contracts —— trust agreements.
   1.  Definitions.  As used in this section, unless the context otherwise requires:
   a.  “Lease contract” includes any certificates of participation or other participatory interests in the lease contract or obligations arising out of the lease contract.
   b.  “Loan agreement” includes any notes, certificates, or any other participatory interests issued to evidence the parties’ obligations arising out of the loan agreement.
   2.  Loan agreements.  A port authority may enter into loan agreements to borrow money to pay the costs of any facility, or parts thereof, or to refund other obligations which are payable from the net revenues of the port authority at lower, the same, or higher rates of interest in accordance with the all of the following terms and procedures:
   a.  A loan agreement entered into by a port authority may contain provisions similar to those in loan agreements between private parties, including but not limited to any of the following: 
   (1)  The loan agreement may provide for the issuance of notes, certificates of participation, or any other participatory interests to evidence the parties’ obligations.
   (2)  The loan agreement may provide for maturity in one or more installments.
   (3)  The loan agreement may be in registered form and carry registration and conversion privileges.
   (4)  The loan agreement may be payable as to principal and interest at times and places as specified.
   (5)  The loan agreement may be subject to terms of redemption prior to maturity with or without a premium.
   (6)  The loan agreement may be in one or more denominations. 
   b.  A provision of a loan agreement which stipulates that a portion of the payments be applied as interest is subject to chapter 74A and such interest may be at a variable rate or rates changing from time to time in accordance with a base or formula. Other laws relating to interest rates do not apply and the provisions of chapter 75 are not applicable. 
   c.  The board may authorize a loan agreement to be payable solely from the net revenues of a port authority by substantially following the authorization procedures of section 28J.21 for the issuance of revenue bonds. The resolution authorizing the loan agreement may also prescribe additional provisions, terms, conditions, and covenants that the port authority deems advisable, consistent with this chapter, including provisions for creating and maintaining reserve funds and for the authorization of additional loan agreements ranking on a parity with such loan agreements and additional loan agreements junior and subordinate to such loan agreement, and that such loan agreement shall rank on a parity with or be junior and subordinate to any loan agreement which may be then outstanding. A port authority loan agreement shall be a contract between the port authority and the lender and the resolution shall be made part of the contract.
   d.  A loan agreement to which a port authority is a party is an obligation of the political subdivisions comprising the port authority for the purposes of chapters 502 and 636, and is a lawful investment for any bank, trust company, savings association, deposit guaranty association, investment company, insurance company, insurance association, executor, guardian or trustee, and any fiduciary responsible for the investment of funds or having charge of the loan retirement funds or sinking funds of any port authority, governmental agency, or taxing district of this state, any pension and annuity retirement system, the Iowa public employees’ retirement system, the police officers and fire fighters retirement systems under chapters 410 and 411, or a revolving fund of a governmental agency of this state, and are acceptable as security for the deposit of public funds under chapter 12C.
   3.  Lease contracts.  A port authority may enter into lease contracts for real or personal property comprising a port authority facility, or parts thereof, in accordance with all of the following terms and procedures:
   a.  A port authority shall lease property only for a term which does not exceed the economic life of the property, as determined by the board.
   b.  A lease contract entered into by a port authority may contain provisions similar to those found in lease contracts between private parties, including but not limited to any of the following:
   (1)  The lease contract may provide for the issuance of certificates of participation or other participatory interests in the lease contracts or any obligations thereunder.
   (2)  The lease contract may provide for the lessee to pay any of the costs of operation or ownership of the leased property and for the right to purchase the leased property.
   c.  A provision of a lease contract which stipulates that a portion of the rent or lease payments be applied as interest is subject to the provisions of chapter 74A and such interest may be at a variable rate or rates changing from time to time in accordance with a base or formula. Other laws relating to interest rates shall not apply and the provisions of chapter 75 are not applicable. 
   d.  The board may authorize a lease contract payable solely from the net revenues of a port authority by substantially following the authorization procedures set forth in section 28J.21 for the issuance of port authority revenue bonds. The resolution authorizing the lease contract may also prescribe additional provisions, terms, conditions, and covenants which the port authority deems advisable, consistent with this chapter, including provisions for creating and maintaining reserve funds and the authorization of additional lease contracts ranking on a parity with such lease contracts and additional lease contracts junior and subordinate to such lease contracts, and that such lease contracts shall rank on a parity with or be junior and subordinate to any lease contract which may be then outstanding. A port authority lease contract shall be a contract between the port authority and the lessor and the resolution shall be part of the contract.
   e.  A lease contract to which a port authority is a party is an obligation of the political subdivisions comprising the port authority for the purposes of chapters 502 and 636, and is a lawful investment for any bank, trust company, savings association, deposit guaranty association, investment company, insurance company, insurance association, executor, guardian or trustee, and any fiduciary responsible for the investment of funds or having charge of the lease retirement funds or sinking funds of any port authority, governmental agency or taxing district of this state, any pension and annuity retirement system, the Iowa public employees’ retirement system, the police officers and fire fighters retirement systems under chapters 410 and 411, or a revolving fund of a governmental agency of this state, and are acceptable as security for the deposit of public funds under chapter 12C.
   f.  A contract for construction by a private party of property to be leased by a port authority is not a contract for a public improvement and shall not be subject to the provisions of chapter 26 and section 28J.3, subsection 3. This paragraph applies to all contracts that are subject to this subsection, notwithstanding section 28J.9, subsection 18, or any other provision of law that might otherwise apply, including a requirement of notice, competitive bidding or selection, or for the provision of security. However, if a contract is funded in advance by means of the lessor depositing moneys to be administered by a port authority with the port authority’s obligation to make rent or lease payments commencing with its receipt of moneys, a contract for construction of the property in question awarded by the port authority is a public improvement and is subject to the provisions of chapter 26.
   4.  Trust agreements.
   a.  In the discretion of the port authority, a loan agreement or a lease contract authorized under this section and the port authority’s obligations thereunder may be secured by a trust agreement between the port authority and a corporate trustee that may be any trust company or bank having the powers of a trust company within this or any other state. Subject to the other provisions of this paragraph, the corporate trustee may also be the lender under a loan agreement or the lessor under a lease contract authorized under this section.
   b.  The trust agreement may provide for the issuance of notes to evidence the port authority’s obligations under a loan agreement to which the port authority is a party. The trust agreement may also provide for the issuance of certificates of participation or other participatory interests in a lease contract to which a port authority is a party. The trust agreement, or any resolution authorizing the loan agreement or the lease contract, may pledge or assign revenues of the port authority to be received as payment of obligations under the loan agreement or the lease contract and may contain provisions for protecting and enforcing the rights and remedies of the lender, the lessor, or the holders of notes evidencing the port authority’s obligations under the loan agreement. These provisions may include covenants setting forth the duties of the port authority in relation to the acquisition of property, the construction, improvement, maintenance, repair, operation, and insurance of the port authority facility in connection with which the loan agreement or the lease contract is authorized, the rentals or other charges to be imposed for the use or services of any port authority facility, the custody, safeguarding, and application of all moneys, and provisions for the employment of consulting engineers in connection with the construction or operation of any port authority facility.
   c.  A bank or trust company incorporated under the laws of this state that acts as the depository of the proceeds or borrowings provided under the loan agreement or lease contract or of revenues, shall furnish any indemnifying bonds and may pledge any securities that are required by the port authority. The trust agreement may set forth the rights and remedies of the lender, the lessor, or the holders of notes evidencing the port authority’s obligations under the loan agreement and may restrict the individual right of action by the lender, the lessor, or the holders of notes evidencing the port authority’s obligations under the loan agreement as is customary in trust agreements or trust indentures securing similar loan agreements or lease contracts. The trust agreement may contain any other provisions that the port authority determines reasonable and proper for the security of the lender, the lessor, or the holders of notes evidencing the port authority’s obligations under the loan agreement. All expenses incurred in carrying out the provisions of the trust agreement may be treated as a part of the cost of the operation of the port authority facility.
   5.  Exclusions.  Port authority loan agreements and lease contracts authorized under this chapter shall not constitute a debt, indebtedness, or a pledge of the faith and credit of the port authority or the state or any political subdivision of the state, within the meaning of any state constitutional provision or statutory limitation, nor constitute or give rise to a pecuniary liability of the port authority, any political subdivisions comprising the port authority, the state, or any political subdivision of the state, or a charge against the general credit or taxing power of the port authority. Any political subdivisions comprising the port authority, the state, or any political subdivision of the state, and the holders or owners of the obligations owed under a loan agreement or lease contract shall not have taxes levied by the state or by a taxing authority of a governmental agency of the state for the payment of the principal of or interest owed on such obligations. However, a loan agreement or lease contract and the obligation owed thereunder are payable solely from the revenues and funds pledged for their payment as authorized by this chapter. All loan agreements and lease contracts authorized under this chapter and the evidence of obligations owed under such loan agreements or lease contracts such shall contain a statement to the effect that the loan agreement or lease contract authorized under this chapter and the evidence of obligations owed under the loan agreement or lease contract, as to both principal and interest, are not debts of the port authority or the state or any political subdivision of the state, but are payable solely from revenues and funds pledged for their payment.
   6.  Judicial proceedings.
   a.  The sole remedy for a breach or default of a term of any port authority loan agreement or lease contract authorized under this chapter is a proceeding in law or in equity by suit, action, or mandamus to enforce and compel performance of the duties required by this chapter and of the terms of the resolution authorizing the loan agreement or lease contract, or to obtain the appointment of a receiver to take possession of and operate the port authority and to perform the duties required by this chapter and the terms of the resolution authorizing the loan agreement or lease contract.
   b.  An action shall not be brought after fifteen days from the time the loan agreement or lease contract is authorized by the port authority with regards to any of the following:
   (1)  The legality of the port authority loan agreement or lease contract. 
   (2)  The power of a port authority to authorize the port authority loan agreement or lease contract.
   (3)  The effectiveness of any proceedings relating to the authorization of the port authority loan agreement or lease contract.
    Sec. 22.  Section 28J.25, Code 2022, is amended to read as follows:
   28J.25  Funds and property held in trust —— use and deposit of funds.
   All revenues, funds, properties, and assets acquired by the port authority under this chapter, whether as proceeds from the sale of port authority revenue bonds, pledge orders, borrowings under a loan agreement, entering into a lease contract, proceeds from the issuance of certificates of participation or any other participatory interests in such loan agreement or lease contract or as revenues, shall be held in trust for the purposes of carrying out the port authority’s powers and duties, shall be used and reused as provided in this chapter, and shall at no time be part of other public funds. Such funds, except as otherwise provided in a resolution authorizing port authority revenue bonds or pledge orders, the loan agreement or lease contract, or in a trust agreement securing the same, or except when invested pursuant to section 28J.26, shall be kept in depositories selected by the port authority in the manner provided in chapter 12C, and the deposits shall be secured as provided in that chapter. The resolution authorizing the issuance of revenue bonds or pledge orders, the loan agreement or lease contract, or the trust agreement securing such bonds or pledge orders, shall provide that any officer to whom, or any bank or trust company to which, such moneys are paid shall act as trustee of such moneys and hold and apply them for the purposes hereof, subject to such conditions as this chapter and such resolution or trust agreement provide.
    Sec. 23.  Section 28J.26, subsection 1, Code 2022, is amended to read as follows:
   1.  If a port authority has surplus funds after making all deposits into all funds required by the terms, covenants, conditions, and provisions of outstanding revenue bonds, pledge orders, loan agreements, or lease contracts and refunding bonds which are payable from the revenues of the port authority and after complying with all of the requirements, terms, covenants, conditions, and provisions of the proceedings and resolutions pursuant to which revenue bonds, pledge orders, and refunding bonds are issued or the loan agreement or lease contract is authorized, the board may transfer the surplus funds to any other fund of the port authority in accordance with this chapter and chapter 12C, provided that a transfer shall not be made if it conflicts with any of the requirements, terms, covenants, conditions, or provisions of a resolution authorizing the issuance of revenue bonds, pledge orders, or other obligations which are or loan agreements or lease contracts payable from the revenues of the port authority which are then outstanding.
    Sec. 24.  Section 427.1, subsection 34, Code 2022, is amended to read as follows:
   34.  Port authority property.  The property of a port authority created pursuant to section 28J.2, when devoted to public use and not held for pecuniary profit, or property purchased by a port authority.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the powers and duties of port authorities.
   Under Code chapter 28J, the bill modifies the defined terms “authorized purposes”, “city”, “cost”, “facility” or “port authority facility”, “governmental agency”, “political subdivision”, “political subdivisions comprising the port authority”, “port authority revenue bonds” or “revenue bonds”, and “revenues”. The bill creates and defines the terms “net revenues” and “public works project”.
   The bill allows for the creation of a port authority by one or more political subdivisions, rather than by two or more political subdivisions. The bill provides for the creation of a port authority anywhere in this state regardless of proximity to a body of water. The bill also provides that a port authority is an entity separate from the political subdivisions comprising the port authority. The powers granted to the port authority may be exercised whether or not the political subdivisions comprising the port authority may exercise those same powers. 
   The bill provides that the political subdivisions comprising the port authority may make contributions to the port authority, in addition to appropriating or expending public funds as set forth in current law, to finance or subsidize the operation and authorized purposes of the port authority, and pay the costs and expenses incurred by the port authority in carrying out any operations or authorized purposes of the port authority. Under the bill, political subdivisions comprising the port authority are allowed to enter into agreements with each other or the port authority providing for the contributions to the port authority to be made by each of the political subdivisions and providing for the obligations of each of the political subdivisions to pay, finance, or subsidize the costs and expenses incurred by the port authority. 
   The bill makes conforming changes to Code section 28J.5 relating to the membership of the board of directors of a port authority created by one political subdivision. The bill further provides that any political subdivisions comprising the port authority may appoint a successor for the remaining term of a removed director. 
   The bill modifies the powers of a port authority as it relates to its property regardless of whatever the property is within or outside the territory of the political subdivisions comprising the port authority if in furtherance of any authorized purpose. The bill further allows a port authority to enter into loan agreements and lease contracts, as provided for in the bill, and to exercise the same powers granted to cities under Code chapters 28F (joint financing of public works and facilities) and 384 (city finance). 
   The bill allows a port authority to use its revenues for principal on borrowed money and payments under lease contracts. The bill further provides that a contract regarding rentals or charges for use of services of a port authority may provide for acquisition of the port authority facility subject to the provisions of any resolution authorizing the issuance of port authority revenue bonds, loan agreements, lease contracts, or any trust agreement securing such bonds, loan agreements, or lease contracts. 
   The bill allows a governmental agency to cooperate with the port authority in the operation of a port authority facility.
   The bill provides that real property that is purchased by a port authority is not subject to certain property taxes.
   Under the provisions of the bill, a port authority may enter into certain loan agreements and lease contracts. A port authority may enter into loan agreements to borrow money to pay the costs of any facility, or parts thereof, or to refund other obligations which are payable from the net revenues of the port authority at lower, the same, or higher rates of interests. A port authority may enter into lease contracts for real or personal property comprising a port authority facility, but can only lease property for a term that does not exceed the economic life of the property. The bill details certain provisions similar to those in loan agreements and lease contracts between private parties that a loan agreement or lease contract entered into by a port authority may contain. The bill provides certain conditions for when a loan agreement or lease contract stipulates that a portion of the payments be applied as interest. The board of a port authority can authorize a loan agreement or lease contract, along with prescribing additional terms and provisions, by resolution and such resolution becomes part of the loan agreement or lease contract. A loan agreement or lease contract in which a port authority is a party is an obligation of political subdivisions comprising the port authority. A contract for construction by a private party of property to be leased by a port authority is not a contract for public improvement, except under certain conditions. 
   The bill authorizes loan agreements or lease contracts to be secured by a trust agreement between the port authority and a corporate trustee, and further provides how the trust agreement functions. 
   The bill provides that loan agreements and lease contracts authorized by the bill do not constitute a debt, indebtedness, or a pledge of faith and credit of the port authority or of the state or any political subdivisions of the state nor do any such agreements give rise to pecuniary liability as to these entities or act as a charge against the general credit or taxing power of the port authority. The bill provides that any political subdivisions comprising the port authority, the state, or any political subdivisions of the state, and the holders or owners of obligations owed under a loan agreement or lease contract cannot have taxes levied by the state or by a taxing authority of a governmental agency of the state for the payment of the principal of or interest owed on such obligations. 
   Under the bill, the sole remedy for a breach or default of any port authority loan agreement or lease contract authorized by the bill is a proceeding in law or in equity to enforce and compel performance of required duties and the terms of the resolution authorizing the loan agreement or lease contract, or to obtain the appointment of a receiver to take possession and operate the port authority to perform the required duties and terms. An action cannot be brought after 15 days from the time the loan agreement or lease contract is authorized by the port authority if the action regards the legality of the loan agreement or lease contract, the power of the port authority to authorize the loan agreement or lease contract, or the effectiveness of any proceeding relating to the authorization of the loan agreement or lease contract. 
   The bill makes conforming changes to Code sections 28J.8, 28J.11, 28J.15, 28J.17, 28J.25, and 28J.26.