HSB 204 (LSB 2373YC (1) 91)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON LOCAL GOVERNMENT BILL BY CHAIRPERSON JONES)

A BILL FOR

An Act relating to approval requirements for city utilities.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 364.2, subsection 4, paragraphs a, b, and c, Code 2025, are amended to read as follows:
   a.  A city may grant to any person a franchise to erect, maintain, and operate plants and systems for electric light and power, heating, telegraph, cable television, district telegraph and alarm, motor bus, trolley bus, street railway or other public transit, waterworks, sewer services, or gasworks, within the city for a term of not more than twenty-five years. When considering whether to grant, amend, extend, or renew a franchise, a city shall hold a public hearing on the question follow the same procedure for approval as provided in section 364.7. Notice of the time and place of the hearing shall be published as provided in section 362.3. The franchise may be granted, amended, extended, or renewed only by an ordinance, but no exclusive franchise shall be granted, amended, extended, or renewed.
   b.  Such an ordinance shall not become effective unless approved at an election. The A proposal may be submitted by the council on its own motion to the voters at any city election or by petition of eligible electors. Upon receipt of a petition meeting the requirements of section 362.4 requesting that a proposal be submitted to the voters, the council shall submit the proposal at the next regular city election or at a special election called for that purpose before the next regular city election. However, the city council may dispense with such election as to the grant, amendment, extension, or renewal of an electric light and power, heating, waterworks, sewer services under section 357A.23, or gasworks franchise unless there is a valid petition requesting submission of the proposal to the voters, or the party seeking such franchise, grant, amendment, extension, or renewal requests an election. If a majority of those voting approves the proposal, the city may proceed as proposed. The complete text of the ordinance shall be included on the ballot if conventional paper ballots are used. If an optical scan voting system is used, the proposal shall be stated on the optical scan ballot, and the full text of the ordinance posted for the voters pursuant to section 52.25. All absentee voters shall receive the full text of the ordinance.
   c.  Notice of the election shall be given by publication as prescribed in section 49.53 in a newspaper of general circulation in the city.
    Sec. 2.  Section 380.3, Code 2025, is amended to read as follows:
   380.3  Two considerations before final passage —— how waived.
   1.  A proposed ordinance or amendment must be considered and voted on for passage at two council meetings prior to the meeting at which it is to be finally passed, unless this requirement is suspended by a recorded vote of not less than three-fourths of all of the members of the council. If a proposed ordinance, amendment, or resolution fails to receive sufficient votes for passage at any consideration and vote thereon, the proposed ordinance, amendment, or resolution shall be considered defeated.
   2.  Notwithstanding subsection 1, a proposed ordinance under section 364.2, subsection 4, may be passed following the same procedure for approval as provided in section 364.7.
    Sec. 3.  Section 388.2, Code 2025, is amended to read as follows:
   388.2  Submission to voters council.
   1.  a.  The proposal of a city to establish, acquire, lease, or dispose of a city utility, except a sanitary sewage or storm water drainage system, in order to undertake or to discontinue the operation of the city utility, or the proposal to establish or dissolve a combined utility system, or the proposal to establish or discontinue a utility board, is subject to the approval of the voters of the city, except that a same procedure for approval as provided in section 364.7. Additionally, a board may be discontinued by resolution of the council when the city utility, city utilities, or combined utility system it administers is disposed of or leased for a period of over five years.
   b.  Upon the council’s own motion, the proposal may be submitted to the voters at the general election, the regular city election, or at a special election called for that purpose. Upon receipt of a valid petition as defined in section 362.4, requesting that a proposal be submitted to the voters, the council shall submit the proposal at the next regular city election.
   c.  If the special election is to establish a gas or electric utility pursuant to this section, or if such a proposal is to be included on the ballot at the regular city or general election, the mayor or council shall give notice as required by section 376.1 to the county commissioner of elections and to any utility whose property would be affected by such election not less than sixty days before the proposed date of the special, regular city, or general election.
   d.  A proposal for the establishment of a utility board must specify a board of either three or five members.
   2.  a.  If a majority of those voting for and against the proposal approves the proposal, the city may proceed as proposed.
   b.  If a majority of those voting for and against the proposal does not approve the proposal, the same or a similar proposal may not be submitted to the voters of the city for at least four years from the date of the election at which the proposal was defeated.
    Sec. 4.  Section 388.2A, Code 2025, is amended to read as follows:
   388.2A  Procedure for disposal of city utility by sale.
   1.  A proposal to discontinue a city utility and dispose of such utility by sale, whether upon the council’s own motion or upon the receipt of a valid petition pursuant to section 388.2, subsection 1, paragraph “b”, shall not be submitted to the voters of the city pursuant to section 388.2 at any election unless the governing body of the city utility meets the requirements of this section shall meet the requirements of this section before a final determination is made.
   2.  a.  (1)  The governing body of the city utility shall determine the fair market value of the utility system after obtaining two appraisals of the system’s fair market value. One appraisal shall be obtained from an independent appraiser selected by the governing body, and the other appraisal shall be obtained from an independent appraiser approved by the Iowa utilities commission. Both appraisals shall be conducted in conformance with the uniform standards of professional appraisal practice or substantially similar standards.
   (2)  Any appraisal obtained pursuant to this paragraph shall consider the depreciated value of the capital assets to be sold, the loss of future revenues to the city utility, including the right to generate surpluses, and the cost of any capital improvements reasonably necessary to provide adequate service and facilities to the city utility’s customers. 
   b.  After considering the appraisals obtained pursuant to paragraph “a”, the governing body shall establish the city utility’s fair market value. The fair market value shall be the greater of any of the following:
   (1)  The average of the two appraisals obtained pursuant to paragraph “a”.
   (2)  The depreciated value of the capital assets to be sold.
   (3)  The amount necessary to retire all of the city’s outstanding revenue and general obligations issued for purposes of the city utility.
   c.  The governing body’s determination of a city utility’s fair market value pursuant to this subsection shall not be dispositive of the city utility’s system price, which shall be subject to negotiation by the governing body. 
   d.  The governing body shall prepare an inventory of the city utility’s real and personal property, and a statement of net position or balance sheet of the city utility, including all assets, liabilities, outstanding revenue and general obligations used to finance the city utility system.
   e.  The governing body shall prepare a financial information statement of the city utility that includes current and projected rate schedules for the next five fiscal years, as well as the five most recent fiscal year revenue statements, if such statements exist, and a projection of the city utility’s revenue statements for the next five fiscal years.
   f.  The governing body shall consider alternatives to disposing of the city utility system by sale, including entering into an agreement pursuant to chapter 28E, or into a finance agreement, purchase agreement, or lease agreement with another entity described in section 476.1, subsection 3.
   g.  (1)  The governing body shall make available on its internet site, at least sixty thirty days prior to submitting a proposal for election pursuant to section 388.2, a copy of each item listed in paragraphs “a” through “f” of this subsection.
   (2)  If, at the time of posting information pursuant to subparagraph (1), the governing body has received any offers or appraisals of fair market value from any prospective purchasers of the city utility system in connection with a proposal to discontinue the city utility and dispose of such utility by sale, then the governing body shall make available on its internet site each offer and appraisal then in existence. Proprietary information of a rate-regulated public utility under chapter 476 that is exempt from disclosure pursuant to section 22.7 may be withheld from disclosure on the governing body’s internet site. The governing body may continue to receive new or revised offers or appraisals thereafter. 
   (3)  The governing body shall make a good-faith effort to provide, by regular mail to each property owner of the city and each ratepayer of the city utility, a notice of the proposal to dispose of the city utility by sale, a summary of the proposal, a summary of the information described in subparagraphs (1) and (2), and instructions for locating the information described in subparagraphs (1) and (2) on the governing body’s internet site.
   3.  Upon the governing body meeting the requirements of subsection 2, a city council may submit a proposal to discontinue and dispose of a city utility pursuant to section 388.2.
   4.  If a proposal to discontinue and dispose of a city utility is to be submitted to voters following the receipt of a valid petition pursuant to section 388.2, subsection 1, paragraph “b”, the council shall submit the proposal at the next general election, regular city election, or a special election called for that purpose, within one hundred twenty days after the governing body of the city utility meets the requirements of subsection 2.
   5.  4.  A proposal to discontinue and dispose of a city utility by sale that is approved by the voters pursuant to section 388.2, subsection 2, paragraph “a”, shall not require the governing body or any purchasing entity to finalize a sale of the city utility.
   6.  No action may be brought which questions the legality of the election or the city and governing body’s compliance with this section, except as provided in section 57.1, within twenty days of the canvass of votes for the election by the county board of supervisors.
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 approval requirements for city utilities.
   Under current law, when a city is considering whether to grant, amend, extend, or renew a franchise within the city, a public hearing must be held. After the public hearing, the franchise may be granted, amended, extended, or renewed only by an ordinance, and is not effective unless approved at an election. Generally, an ordinance must be considered and voted on for passage at two council meetings prior to the meeting at which the ordinance is to be finally passed. The bill provides that after the public hearing, the city council may make the final determination on whether to grant, amend, extend, or renew the franchise. The bill allows the city council to make the final determination in a single meeting.
   Under current law, a proposal of a city to establish, acquire, lease, or dispose of a city utility, in order to undertake or to discontinue the operation of the city utility, or the proposal to establish or dissolve a combined utility system, or the proposal to establish or discontinue a utility board, is subject to the approval of the voters of the city. Under the bill, the approval requirement is changed to require the city council to set forth its proposal in a resolution and publish notice of the resolution and of a date, time, and place of a public hearing on the proposal. The bill provides that after the public hearing, the city council may make the final determination on the proposal by resolution.
   Under current law, a proposal to discontinue a city utility and dispose of such utility by sale, whether upon the city council’s motion or upon the receipt of a valid petition is subject to the approval of the voters of the city. The city must make the proposal available at least 60 days before submitting a proposal for the election. Under the bill, the approval requirement is changed to require the city council to set forth the proposal in a resolution and publish notice of the resolution and of a date, time, and place of a public hearing on the proposal at least 30 days before the hearing. The bill also provides that after the public hearing, the city council may make the final determination on the proposal by resolution.