2005 Legislation
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HOUSE BILL NO. 240 – Bond bank authority/municipal bonds

HOUSE BILL NO. 240

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H0240......................................................by STATE AFFAIRS
IDAHO BOND BANK AUTHORITY - Amends and adds to existing law relating to the
Idaho Bond Bank Authority to clarify that the authority can purchase
municipal bonds from entities other than municipalities; to revise the
sales tax intercept mechanism; and to provide that the authority need not
guarantee sales tax moneys on all bonds it purchases.
                                                                        
02/17    House intro - 1st rdg - to printing
02/18    Rpt prt - to St Aff
03/03    Rpt out - rec d/p - to 2nd rdg
03/04    2nd rdg - to 3rd rdg
03/08    3rd rdg - PASSED - 69-0-1
      AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
      Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Cannon, Chadderdon,
      Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge,
      Field(18), Field(23), Garrett, Hart, Harwood, Henbest, Henderson,
      Jaquet, Jones, Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews,
      McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Nonini,
      Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche,
      Rydalch, Sali, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley,
      Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail,
      Wills, Wood, Mr. Speaker
      NAYS -- None
      Absent and excused -- Bradford
    Floor Sponsor - Deal
    Title apvd - to Senate
03/09    Senate intro - 1st rdg - to St Aff
03/24    Rpt out - rec d/p - to 2nd rdg
03/25    2nd rdg - to 3rd rdg
03/29    3rd rdg - PASSED - 35-0-0
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough,
      Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce,
      Richardson, Schroeder, Stegner, Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- None
    Floor Sponsor - Davis
    Title apvd - to House
03/30    To enrol
03/31    Rpt enrol - Sp signed - Pres signed
04/04    To Governor
04/14    Governor signed
         Session Law Chapter 389
         Effective: 04/14/05

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 240
                                                                        
                                 BY STATE AFFAIRS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO THE IDAHO BOND BANK AUTHORITY;  AMENDING  SECTION  67-8702,  IDAHO
  3        CODE,  TO  FURTHER  DEFINE TERMS; AMENDING SECTION 67-8705, IDAHO CODE, TO
  4        REVISE  POWERS AND DUTIES OF  THE  AUTHORITY;  AMENDING  SECTION  67-8710,
  5        IDAHO  CODE,  TO  CLARIFY  THAT  THE  AUTHORITY MAY PLEDGE THE PROCEEDS OF
  6        MUNICIPAL BONDS PURCHASED FROM OTHER SELLERS;  AMENDING  SECTION  67-8712,
  7        IDAHO  CODE, TO CLARIFY THAT MUNICIPAL BONDS MAY BE PURCHASED FROM SOURCES
  8        OTHER THAN MUNICIPALITIES; AMENDING SECTION 67-8713, IDAHO CODE,  TO  PRO-
  9        VIDE  THAT THE RESERVE FUND WILL SECURE BONDS DESIGNATED BY THE AUTHORITY;
 10        AMENDING SECTION 67-8716, IDAHO CODE, TO AUTHORIZE THE AUTHORITY TO  ELECT
 11        TO  NOT  PROVIDE  FOR SALES TAX PAYMENT ON DESIGNATED BONDS AND TO CLARIFY
 12        THE PROCESS FOR PAYMENT OF SALES TAX MONEYS IF OTHER SOURCES ARE NOT  SUF-
 13        FICIENT;  AMENDING SECTION 67-8725, IDAHO CODE, TO PROVIDE FOR BONDS WHERE
 14        NO INTERCEPT  OCCURS,  TO  CLARIFY  THAT  PROVISIONS  FOR  INTERCEPTING  A
 15        MUNICIPALITY'S  FUNDS  TO PAY MUNICIPAL BONDS APPLY ONLY TO MUNICIPALITIES
 16        THAT HAVE AGREED TO BE SUBJECT TO SUCH INTERCEPT AND THAT ONLY FUNDS  LAW-
 17        FULLY AVAILABLE FOR REPAYMENT OF A MUNICIPALITY'S BONDS MAY BE INTERCEPTED
 18        AND  TO MAKE A TECHNICAL CORRECTION; AMENDING SECTION 67-8727, IDAHO CODE,
 19        TO REVISE THE ALTERNATIVE INTERCEPT PROCEDURE AND TO MAKE  TECHNICAL  COR-
 20        RECTIONS;  AND  AMENDING CHAPTER 87, TITLE 67, IDAHO CODE, BY THE ADDITION
 21        OF A NEW SECTION 67-8728, IDAHO CODE, TO PROVIDE A LIMITED EXEMPTION  FROM
 22        INTERCEPT PROVISIONS; AND DECLARING AN EMERGENCY.
                                                                        
 23    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 24        SECTION  1.  That  Section 67-8702, Idaho Code, be, and the same is hereby
 25    amended to read as follows:
                                                                        
 26        67-8702.  DEFINITIONS. As used in this chapter:
 27        (1)  "Authority" or "bond  bank  authority"  means  the  Idaho  bond  bank
 28    authority.
 29        (2)  "Bonds"  means  bonds,  notes  or  other obligations of the authority
 30    issued under this chapter.
 31        (3)  "Municipal bond" means a bond, note or other obligation, including  a
 32    loan,  lease  or installment sale agreement, issued or undertaken by a munici-
 33    pality for any purpose authorized by law.
 34        (4)  "Municipality" means any county, city, municipal corporation,  school
 35    district,  irrigation  district,  sewer district, water district, highway dis-
 36    trict or other special purpose district or political subdivision of the  state
 37    established by law.
 38        (5)  "State  sales  tax  account"  means  any fund or account in the state
 39    treasury in which state sales tax moneys are deposited, but only to the extent
 40    moneys in such fund or account are attributable to the state sales tax moneys.
                                                                        
 41        SECTION 2.  That Section 67-8705, Idaho Code, be, and the same  is  hereby
 42    amended to read as follows:
                                                                        
                                           2
                                                                        
  1        67-8705.  POWERS AND DUTIES OF THE AUTHORITY. The authority shall have the
  2    following powers and duties:
  3        (1)  To sue and be sued in its own name;
  4        (2)  To adopt and from time to time alter an official seal;
  5        (3)  To adopt and from time to time amend or repeal rules and bylaws;
  6        (4)  To  accept  and  receive  public grants or private gifts, bequests or
  7    other moneys;
  8        (5)  To purchase municipal bonds on original issue or  previously  issued,
  9    from the municipality issuer or from any other source, and to obtain funds for
 10    such other purposes of the authority authorized by this chapter by:
 11        (a)  Issuing  bonds  payable from or secured by municipal bonds of one (1)
 12        or more municipalities;
 13        (b)  Pledging or otherwise obligating, for and in the name and  on  behalf
 14        of  the  state as its agent and instrumentality, sales tax revenues of the
 15        state as a source of payment or security for bonds issued by  the  author-
 16        ity;
 17        (c)  Establishing debt service reserve funds or other reserve funds;
 18        (d)  Obtaining  private credit enhancement for bonds issued by the author-
 19        ity;
 20        (e)  Investing moneys held by the authority, as  proceeds  or  to  pay  or
 21        secure bonds issued by the authority, in such securities or obligations as
 22        are  described  in the indenture, trust agreement or other instrument pro-
 23        viding for the authority's issuance of the bonds;
 24        (f)  Investing any moneys held  by  the  authority,  in  excess  of  funds
 25        described  in paragraph (e) of this subsection, in any securities or other
 26        obligations in which a trustee may invest as provided by law;
 27        (g)  Taking any other actions and entering into such other  contracts  and
 28        agreements  as  the authority may determine to be necessary or appropriate
 29        to accomplish the purposes of the authority and this chapter; or
 30        (h)  Facilitating the purchase of  notes from municipalities  to  be  uti-
 31        lized  by a municipality in purchasing, leasing or lease-purchasing tangi-
 32        ble personal property when the  note  was  otherwise  legally  issued  and
 33        authorized  by  a municipality and the purchase of the note from a munici-
 34        pality does not violate the state constitution.
 35        (6)  To charge such fees to municipalities or other potential  sellers  of
 36    municipal  bonds  in  connection with application for and receipt of financing
 37    under this chapter and interest and other charges on  or  in  connection  with
 38    municipal bonds purchased as it may deem necessary or appropriate to cover all
 39    costs  and expenses of the authority and its operations, and to set such other
 40    terms and conditions on its services or purchase of municipal bonds as may  be
 41    necessary or appropriate to secure the bonds or improve their marketability or
 42    to otherwise achieve the purposes of the authority; and
 43        (7)  To take any and all actions, execute any and all contracts, including
 44    payment  of  any  arbitrage  rebate  as may be necessary to obtain or maintain
 45    exemption of interest on bonds issued by the  authority  from  federal  income
 46    taxes; provided however, that nothing shall prevent the authority from issuing
 47    bonds bearing interest subject to federal income tax; and
 48        (8)  To  develop  underwriting  policies  or guidelines in connection with
 49    municipal bonds purchased by the authority.
                                                                        
 50        SECTION 3.  That Section 67-8710, Idaho Code, be, and the same  is  hereby
 51    amended to read as follows:
                                                                        
 52        67-8710.  ISSUANCE  OF  BONDS -- FORM OF ISSUANCE -- SALE PRICE -- PAYMENT
 53    OR REFUNDING OF BONDS -- TERMS OF AGREEMENT WITH BONDHOLDER. (1) The authority
                                                                        
                                           3
                                                                        
  1    may issue its bonds from time to time in principal amounts that  it  considers
  2    necessary  to  provide  funds  for  any purpose under this chapter, including,
  3    without limitations, to purchase municipal bonds, to fund  reserves or to  pay
  4    costs  of  issuance,  refunding, including redemption premium, credit enhance-
  5    ment, or other matters related to the purpose, structure or marketing  of  the
  6    bonds.
  7        (2)  Bonds  shall  be  authorized by resolution of the authority and shall
  8    bear the date, mature at the time or times, bear interest at the rate or rates
  9    of fixed or variable interest, payable at the times, be in the  denominations,
 10    be  in  the  forms,  carry the conversion or registration privileges, have the
 11    rank or priority, be executed in the manner, be payable from  the  sources  in
 12    the  medium of payment at the place or places inside or outside the state, and
 13    be subject to the terms of redemption, with  or  without  premium,  rights  of
 14    holders  to  tender for purchase and other terms and conditions as the resolu-
 15    tion of the authority provides.
 16        (3)  Bonds of the authority may be issued in one (1) or more series.
 17        (4)  Bonds of the authority may be sold at public or private sale  at  the
 18    price or prices the authority determines.
 19        (5)  The  authority  may,  from  time  to time, issue its bonds under this
 20    chapter and pay and retire, or fund or refund  previously  issued  bonds  from
 21    proceeds  of  refunding  bonds,  or from other funds or money of the authority
 22    available for that purpose.
 23        (6)  By resolution, the authority may authorize entering into an indenture
 24    or trust agreement with a corporate trustee  located  within  or  outside  the
 25    state in order:
 26        (a)  To  provide  for the issuance of the bonds with such terms, including
 27        without limitation those terms referred to in subsection (2) of this  sec-
 28        tion, as the authority may determine;
 29        (b)  To  pledge or assign to the trustee for the benefit of holders of the
 30        bonds all or any part of the proceeds of the bonds,  any  municipal  bonds
 31        purchased  from municipalities or other sellers, any other assets or reve-
 32        nues of or received by or pledged to the  authority,  and  the  income  or
 33        other proceeds from any or all of the foregoing;
 34        (c)  To  provide  for the establishment of reserves and any other funds or
 35        accounts that the authority determines to be necessary or appropriate,  in
 36        addition  to  or in lieu of the reserve fund established pursuant to  sec-
 37        tion 67-8713, Idaho Code, which  will  secure  all  bonds  issued  by  the
 38        authority unless the resolution of the authority providing for issuance of
 39        the bonds provides otherwise;
 40        (d)  To provide for the custody, safekeeping and enforcement of the munic-
 41        ipal bonds acquired;
 42        (e)  To  provide for the right to sell or otherwise dispose of property of
 43        any kind, including municipal bonds;
 44        (f)  To provide for the investment of bond proceeds or other  moneys  held
 45        by  the  trustee  in such securities or obligations as may be described in
 46        the indenture or trust agreement;
 47        (g)  To provide for amending the indenture or  trust  agreement,  with  or
 48        without the consent of the holders of the bonds;
 49        (h)  To  provide  for  the replacement of lost, stolen, destroyed or muti-
 50        lated bonds;
 51        (i)  To provide for the issuance or limitations on issuance of  additional
 52        bonds;
 53        (j)  To  provide  for  the  rights, liabilities, powers and duties arising
 54        upon the breach of any covenant, condition or  obligation,  to  limit  the
 55        rights of bondholders to enforce covenants, conditions or obligations, and
                                                                        
                                           4
                                                                        
  1        to prescribe the events of default and the terms and conditions upon which
  2        any  or  all of the bonds become or may be declared due and payable before
  3        maturity, and the terms and conditions upon which the declaration and  its
  4        consequences may be waived;
  5        (k)  To  appoint and to provide for the duties and obligations of a paying
  6        agent or agents or other fiduciaries inside or outside the state;
  7        (l)  To make covenants to do or refrain  from  doing  acts,  including  to
  8        enter  into  any  contract,  and to provide any other terms and conditions
  9        which the authority may determine to be necessary or appropriate in  order
 10        to better secure the bonds or improve their marketability; and
 11        (m)  To  intercept certain payments, and to impose interest and penalties,
 12        as provided in section 67-8725, Idaho Code.
                                                                        
 13        SECTION 4.  That Section 67-8712, Idaho Code, be, and the same  is  hereby
 14    amended to read as follows:
                                                                        
 15        67-8712.  PRESUMPTION  OF  VALIDITY.  After  issuance,  all  bonds  of the
 16    authority, and the purchase of all municipal bonds  from  municipalities  with
 17    the  proceeds  of the bonds, and any contracts entered into in connection with
 18    issuance of the bonds, shall be conclusively presumed to be  fully  authorized
 19    and  issued under the laws of the state, and all persons, entities and munici-
 20    palities are estopped from questioning the authorization, sale, issuance, exe-
 21    cution or delivery of the bonds and other agreements by the authority.
                                                                        
 22        SECTION 5.  That Section 67-8713, Idaho Code, be, and the same  is  hereby
 23    amended to read as follows:
                                                                        
 24        67-8713.  RESERVE  FUND  --  ADDITIONAL  FUNDS  AND ACCOUNTS. (1) There is
 25    hereby created in the state treasury a fund to be known as the "Idaho  Munici-
 26    pal  Bond  Bank  Authority  Reserve Fund" (hereinafter referred to as "reserve
 27    fund") in which there shall be deposited or transferred:
 28        (a)  All proceeds of bonds or municipal bonds or any reserve surety policy
 29        or similar credit enhancement obtained to secure bonds  of  the  authority
 30        that  the authority may require, by contract with the municipality or by a
 31        resolution of the authority, to be deposited in the reserve fund; and
 32        (b)  All moneys appropriated by the legislature for  the  purpose  of  the
 33        fund.
 34        (2)  Moneys  in  the reserve fund shall be maintained by the authority and
 35    are pledged and shall be held and applied solely to the payment of the  inter-
 36    est  on  and principal of those bonds designated by the authority, pursuant to
 37    the provisions of section 67-8725, Idaho Code, as the interest  and  principal
 38    become due and payable. Moneys may not be withdrawn from the reserve fund if a
 39    withdrawal  would reduce the amount in the reserve fund to an amount less than
 40    the required debt service reserve, as herein defined, except  for  payment  of
 41    interest  then due and payable on bonds and the principal of bonds then matur-
 42    ing and payable, whether by reason of maturity or  mandatory  redemption,  for
 43    which payments other than moneys of the authority pledged to pay such interest
 44    and  principal are not then available. As used in this chapter, "required debt
 45    service reserve" means, as of the date of computation, the amount required  to
 46    be on deposit in the reserve fund as provided by resolution of the authority.
 47        (3)  For  purposes  of valuation, investments in the reserve fund shall be
 48    valued at par, or if purchased at less than par, at cost unless otherwise pro-
 49    vided by resolution of the authority. Valuation on  a  particular  date  shall
 50    include  the  amount  of  interest  then earned or accrued to that date on the
 51    moneys or investments in the reserve fund.
                                                                        
                                           5
                                                                        
  1        (4)  Moneys in the reserve fund in excess of  the  required  debt  service
  2    reserve, whether by reason of investment or otherwise, may be withdrawn at any
  3    time  by  the  authority  and  transferred  to  another fund or account of the
  4    authority, subject to the provisions of any agreement with the holders of  any
  5    bonds.
  6        (5)  In  order  to  assure  the  maintenance  of the required debt service
  7    reserve in the reserve fund, the legislature may annually appropriate  to  the
  8    authority  for  deposit in the reserve fund the sum, certified by the chairman
  9    of the authority to the legislature, that is necessary to restore the fund  to
 10    an  amount  equal  to  the  required debt service reserve. The chairman of the
 11    authority, annually before December 1, shall make and deliver to the  legisla-
 12    ture  his  certificate  stating  the sum required to restore the funds to that
 13    amount. Nothing in this subsection creates a debt or liability of the state to
 14    make any appropriation.
 15        (6)  All amounts received on account of moneys appropriated by  the  state
 16    to the reserve fund shall be held and applied in accordance with this section;
 17    provided however, at the end of each fiscal year, if the amount in the reserve
 18    fund derived from amounts appropriated by the legislature exceeds the required
 19    debt  service  reserve, any amount representing earnings or income received on
 20    account of moneys appropriated to the reserve fund  by  the  legislature  that
 21    exceed the expenses of the authority for that fiscal year shall be transferred
 22    to the general fund of the state.
 23        (7)  The  authority  may  establish subaccounts in the reserve fund, addi-
 24    tional reserves or other funds or accounts as may be, in its discretion,  nec-
 25    essary or appropriate to further the accomplishment of its purposes or to com-
 26    ply with the provisions of any of its agreements or resolutions.
                                                                        
 27        SECTION  6.  That  Section 67-8716, Idaho Code, be, and the same is hereby
 28    amended to read as follows:
                                                                        
 29        67-8716.  UNLIMITED SALES TAX ACCOUNT PLEDGE. (1) If moneys expected to be
 30    intercepted pursuant to section 67-8725, Idaho Code, are expected to be insuf-
 31    ficient to reimburse the state for its payments in respect  of  the  municipal
 32    bonds, except for bonds the authority has specifically designated, at the time
 33    of  issuance,  not  to receive payment from the sales tax, the state treasurer
 34    shall certify to and give notice to the state tax commission of the amount  of
 35    the deficiency.
 36        (2)  If  sufficient  moneys  are  not available to pay debt service on the
 37    bonds, except for bonds the  authority  has  specifically  designated  not  to
 38    receive payment from the sales tax, as of five (5) days prior to the scheduled
 39    payment  date of the bonds, the state treasurer shall give notice to the state
 40    tax commission, certifying the amount of the deficiency,  at  least  five  (5)
 41    days  prior  to  the  scheduled  payment  date. After receipt of the certified
 42    notice from the state treasurer pursuant to section 67-8727,  Idaho  Code,  or
 43    subsection  (1)  of this section or this subsection (2), the state tax commis-
 44    sion shall:
 45        (a)  Immediately fix the amount necessary and in the amount of  the  defi-
 46        ciency stated in the notice; and
 47        (b)  Cause  moneys  to be transferred from the state sales tax moneys sub-
 48        ject to distribution under section 63-3638, Idaho Code, to be  transferred
 49        from  the state sales tax account pursuant to section 63-3638, Idaho Code,
 50        and deposited in the bond bank authority fund, which is hereby statutorily
 51        created in the state treasury; provided however, that in no event shall  a
 52        transfer  of  moneys from the state sales tax account under the provisions
 53        of this chapter impede or otherwise affect  the  payment  of  sales    tax
                                                                        
                                           6
                                                                        
  1        moneys  pledged  for  the  payment on other state bonds outstanding on the
  2        effective date of this act or  subsequently  issued  as  tax  anticipation
  3        notes pursuant to section 63-3202, Idaho Code.
  4        (3)  Moneys  transferred from the state sales tax account to the bond bank
  5    authority fund pursuant to subsection (2) of this section shall  be  deposited
  6    in  the  reserve  fund  as  replacement  moneys for amounts withdrawn from the
  7    reserve fund to pay debt service on the bonds  pursuant  to  section  67-8725,
  8    Idaho Code, to the extent such moneys are derived from amounts appropriated to
  9    the reserve fund by the legislature, or shall be used to pay debt service when
 10    due  on  bonds  for  which other moneys available pursuant to section 67-8727,
 11    Idaho Code, are insufficient.
 12        (4)  The state of Idaho pledges to and agrees  with  the  holders  of  any
 13    bonds  that the state will not alter, impair or limit the rights vested by the
 14    sales tax account pledge provided in this  section  and  in  section  63-3638,
 15    Idaho  Code, with respect to the bonds until the bonds, together with applica-
 16    ble interest, are fully paid and discharged.
 17        (5)  To the extent that other legally available revenues and funds of  the
 18    state  are sufficient to meet the certified deficiency, the transfer of moneys
 19    from the sales tax account in section 63-3638, Idaho Code, is abated.
                                                                        
 20        SECTION 7.  That Section 67-8725, Idaho Code, be, and the same  is  hereby
 21    amended to read as follows:
                                                                        
 22        67-8725.  PAYMENT  TRANSFER  --  NOTICE  OF  NONPAYMENT -- STATE FINANCIAL
 23    ASSISTANCE INTERCEPT MECHANISM -- STATE TREASURER DUTIES -- INTEREST AND  PEN-
 24    ALTY PROVISIONS.
 25        (1)  (a) Each  municipality with outstanding unpaid municipal bonds as set
 26        forth in this chapter held by or  for  the  authority,  except  for  those
 27        municipal  bonds  described  in section 67-8728, Idaho Code, and so desig-
 28        nated by the authority at the time it issues bonds to acquire such munici-
 29        pal bonds, shall transfer moneys sufficient for the scheduled debt service
 30        payment to its paying agent at least fifteen (15) days before any  princi-
 31        pal  or  interest  payment date for the bonds. The paying agent may be the
 32        trustee for the bonds of the authority that are secured by those municipal
 33        bonds.
 34        (b)  A municipality subject to this section and chapter with regard to any
 35        municipal bonds and which is unable to transfer the scheduled debt service
 36        payment to the paying agent at least fifteen (15) days before  the  sched-
 37        uled  payment date shall immediately notify the paying agent and the state
 38        treasurer by:
 39             (i)   Telephone;
 40             (ii)  A writing sent by facsimile transmission; and
 41             (iii) A writing sent by first-class United States mail.
 42        (c)  If sufficient funds are  not  transferred  to  the  paying  agent  as
 43        required  by  this subsection, the paying agent shall notify the authority
 44        and the state treasurer of that failure in writing at least ten (10)  days
 45        before the scheduled debt service payment date by:
 46             (i)   Telephone;
 47             (ii)  A writing sent by facsimile transmission; and
 48             (iii) A writing sent by first-class United States mail.
 49        (d)  If  sufficient  moneys to pay the scheduled debt service payment have
 50        not been transferred to the paying agent at least ten (10) days before the
 51        scheduled payment date, the authority or the state treasurer  shall  cause
 52        sufficient  moneys  to be transferred from the reserve fund as provided in
 53        section 67-8713, Idaho Code, to the paying agent  to  make  the  scheduled
                                                                        
                                           7
                                                                        
  1        debt service payment.
  2        (e)  To  the  extent  moneys transferred from the reserve fund are derived
  3        from moneys appropriated to the reserve fund by the legislature, the  pay-
  4        ment by the state treasurer:
  5             (i)   Discharges  the  obligation  of the issuing municipality to its
  6             bondholders for the payment; and
  7             (ii)  Transfers the rights represented by the general  obligation  of
  8             the municipality from the bondholders to the state.
  9        (2)  (a) If  one (1) or more payments on bonds are made by the state trea-
 10        surer from moneys in the reserve fund that are derived from moneys  appro-
 11        priated  to the reserve fund by the legislature, due to the failure of the
 12        municipality to make payment on its bonds in a timely  manner,  the  state
 13        treasurer,  subject  to  the limitations provided in paragraph (b) of this
 14        subsection shall:
 15             (i)  Immediately intercept any payments from:
 16                  (A)  The receipts of any payment of property taxes; or
 17                  (B)  Sales tax moneys that would be distributed pursuant to sec-
 18                  tion 63-3638, Idaho Code; or
 19                  (C)  Any other source of operating moneys provided by the  state
 20                  to  the  municipality that issued the municipal bonds that would
 21                  otherwise be paid to the municipality by the state; and
 22             (ii) Apply the intercepted payments to reimburse the state  for  pay-
 23             ments  made by the state for the bonds by deposit to the reserve fund
 24             up to the amount withdrawn from the reserve  fund  for  such  purpose
 25             until  all  obligations of the municipality to the state arising from
 26             those payments, including interest and penalties, are paid in full.
 27        (b)  When intercepting payments under paragraph (a)  of  this  subsection,
 28        the  state  treasurer  shall  intercept  only such payments, if any, which
 29        would otherwise be lawfully available to the municipality for  the  repay-
 30        ment of its municipal bonds and further subject to the limitations of sec-
 31        tion 67-8728, Idaho Code.
 32        (c)  The  state  has no obligation to the municipality or to any person or
 33        entity to replace any moneys intercepted under the authority of this  sub-
 34        section.
 35        (3)  The  municipality that issued municipal bonds for which the state has
 36    made all or part of a debt service payment, either from amounts in the reserve
 37    fund that are derived from moneys appropriated  by  the  legislature  or  from
 38    moneys  transferred  from  the  state  sales  tax  account pursuant to section
 39    67-8716, Idaho Code, shall:
 40        (a)  Reimburse all moneys drawn by the state treasurer on its behalf;
 41        (b)  Pay interest to the state on all moneys paid by the  state  from  the
 42        date  the  moneys are drawn to the date they are repaid at a rate not less
 43        than the average prime rate for national money center banks plus five per-
 44        cent (5%); and
 45        (c)  Pay all penalties required by this chapter.
 46        (4)  (a) The state treasurer shall establish  the  reimbursement  interest
 47        rate after considering the circumstances of any prior draws by the munici-
 48        pality  on  the  state, market interest and penalty rates, and the cost of
 49        funds, if any, that were required to be borrowed by the state to make pay-
 50        ments on the bonds.
 51        (b)  The state treasurer may, after considering the  circumstances  giving
 52        rise  to the failure of the municipality to make payment on its bonds in a
 53        timely manner, impose  on the municipality a penalty of not more than five
 54        percent (5%) of the amount paid by the state for each instance in which  a
 55        payment by the state is made.
                                                                        
                                           8
                                                                        
  1        (5)(a)(i)  If  the  state treasurer determines that amounts obtained under
  2             this section will not reimburse the state in full within one (1) year
  3             from the state's payment of a municipality's scheduled  debt  service
  4             payment, the state treasurer shall pursue any legal action, including
  5             mandamus, against the municipality to compel it to:
  6                  (A)  Levy  and provide tax or other revenues to pay debt service
  7                  on its municipal bonds when due; and
  8                  (B)  Meet its repayment obligations to the state.
  9             (ii)  In pursuing its rights under paragraph (a) of this  subsection,
 10             the  state  shall  have the same substantive and procedural rights as
 11             would a holder of the bonds of a municipality.
 12        (b)  The attorney general  shall  assist  the  state  treasurer  in  these
 13        duties.
 14        (c)  The municipality shall pay the attorney's fees, expenses and costs of
 15        the state treasurer and the attorney general.
 16        (6) (a)  Except  as  provided  in  paragraph  (c)  of this subsection, any
 17        municipality whose operating funds were intercepted under this section may
 18        replace those funds from other municipal moneys or  from  property  taxes,
 19        subject to the limitations provided in this subsection.
 20        (b)  A  municipality  may  use  property  taxes or other moneys to replace
 21        intercepted funds only if the property taxes or other moneys were  derived
 22        from:
 23             (i)   Taxes  originally levied to make the payment but which were not
 24             timely received by the municipality;
 25             (ii)  Taxes from a supplemental levy made to make the missed  payment
 26             or to replace the intercepted moneys;
 27             (iii) Moneys  transferred  from the undistributed reserve, if any, of
 28             the municipality; or
 29             (iv)  Any other source of money on hand and legally available.
 30        (c)  Notwithstanding the provisions of paragraphs (a) and (b) of this sub-
 31        section, a municipality may not replace operating funds intercepted by the
 32        state with moneys collected and held to make payments  on  bonds  if  that
 33        replacement would divert moneys from the payment of future debt service on
 34        the  bonds  and  increase  the risk that the state would be called upon an
 35        additional time to make payments on the bonds.
                                                                        
 36        SECTION 8.  That Section 67-8727, Idaho Code, be, and the same  is  hereby
 37    amended to read as follows:
                                                                        
 38        67-8727.  ALTERNATIVE  INTERCEPT PROCEDURE. Notwithstanding any other pro-
 39    vision of law to the contrary, to the extent that any bonds are not secured by
 40    moneys appropriated by the legislature to the reserve fund established  pursu-
 41    ant  to  section  67-8713,  Idaho Code, or such moneys are insufficient to pay
 42    debt service when due on the bonds, in lieu of the  provisions  set  forth  in
 43    section  67-8725,  Idaho  Code, the following provisions shall apply, provided
 44    that the provisions of section 67-8725, Idaho Code, shall  continue  to  apply
 45    with  respect  to transfers of amounts in the reserve fund derived from moneys
 46    appropriated by the legislature:
 47        (1)  (a) Each municipality with outstanding unpaid municipal bonds as  set
 48        forth  in  this  chapter  held  by  or for the authority, except for those
 49        municipal bonds described in section 67-8728, Idaho Code,  and  so  desig-
 50        nated by the authority at the time it issues bonds to acquire such munici-
 51        pal bonds, shall transfer moneys sufficient for the scheduled debt service
 52        payment  to its paying agent at least fifteen (15) days before any princi-
 53        pal or interest payment date for the bonds. The paying agent  may  be  the
                                                                        
                                           9
                                                                        
  1        trustee for the bonds of the authority that are secured by those municipal
  2        bonds.
  3        (b)  A municipality which is unable to transfer the scheduled debt service
  4        payment  to  the paying agent at least fifteen (15) days before the sched-
  5        uled payment date shall immediately notify the paying agent, the authority
  6        and the state treasurer by:
  7             (i)   Telephone;
  8             (ii)  A writing sent by facsimile transmission; and
  9             (iii) A writing sent by first-class United States mail.
 10        (c)  If sufficient funds are  not  transferred  to  the  paying  agent  as
 11        trustee for the bonds of the authority that are secured by those municipal
 12        bonds  at  least  ten  (10) days before the scheduled debt service payment
 13        date of those bonds,  the  trustee  shall  transfer  any  available  funds
 14        pledged  to  secure payment of the bonds held in any reserve fund or other
 15        pledged fund, or draw on any reserve surety  policy  securing  the  bonds,
 16        sufficient amounts to make up any shortfall in the amount necessary to pay
 17        debt  service  on the bonds on the scheduled payment date and deposit such
 18        amount in the debt service payment fund for those bonds.
 19        (d)  If, as a result of the failure of the municipality to make payment on
 20        its municipal bonds in a timely manner, the trustee is required to  trans-
 21        fer funds pursuant to paragraph (c) of this subsection to pay debt service
 22        on the bonds or there are not sufficient funds available pursuant to para-
 23        graph  (c)  of this subsection to make up for  any shortfall in the amount
 24        necessary to pay debt service on the bonds, at least ten (10) days  before
 25        the  scheduled  debt  service payment date of the bonds, the trustee shall
 26        notify the authority and the state treasurer by:
 27             (i)   Telephone;
 28             (ii)  A writing sent by facsimile transmission; and
 29             (iii) A writing sent by first-class United States mail.
 30        (e)  Upon the notice provided in subsection (1)(d) of  this  section,  the
 31        state  treasurer,  subject  to  the  limitations  provided  in  subsection
 32        (1)(e)(iii) of this section shall:
 33             (i)   Immediately intercept any payments from:
 34                  (A)  The receipts of any payment of property taxes; or
 35                  (B)  Sales tax moneys that would be distributed pursuant to sec-
 36                  tion 63-3638, Idaho Code; or
 37                  (C)  Any  other source of operating moneys provided by the state
 38                  to the municipality that issued the municipal bonds  that  would
 39                  otherwise be paid to the municipality by the state; and
 40             (ii)  Transfer  the  intercepted  payments  in the following order of
 41             priority:
 42                  (A)  To the trustee for the bonds for deposit in the  debt  ser-
 43                  vice  payment  fund  for  the  bonds  until there are sufficient
 44                  amounts on deposit to pay debt  service  on  the  bonds  on  the
 45                  scheduled  payment  date;  provided  that if the state treasurer
 46                  will be unable to transfer sufficient intercepted  payments  for
 47                  such purpose, the state treasurer shall give notice to the state
 48                  tax  commission,  certifying  the  amount  of the deficiency, at
 49                  least five (5) days prior to the scheduled payment date  of  the
 50                  bonds;
 51                  (B)  To  the  trustee  for  the  bonds  to reimburse any amounts
 52                  transferred from a reserve or other pledged fund or surety  pol-
 53                  icy  pursuant  to  paragraph  (c)  of  this subsection up to the
 54                  required balance in such fund or required reimbursement of  such
 55                  surety; and
                                                                        
                                           10
                                                                        
  1                  (C)  To  the  state  for  the reimbursement of any moneys trans-
  2                  ferred from the state sales  tax  account  pursuant  to  section
  3                  67-8716,  Idaho  Code,  to  pay debt service on the bonds on the
  4                  scheduled payment date, together with any interest or  penalties
  5                  established pursuant to section 67-8725, Idaho Code;
  6             (iii) When  intercepting  payments  under  this subsection, the state
  7             treasurer shall intercept only such payments,  if  any,  which  would
  8             otherwise be lawfully available to the municipality for the repayment
  9             of its municipal bonds and further subject to the limitations of sec-
 10             tion 67-8728, Idaho Code.
 11        (f)  The  state  has no obligation to the municipality or to any person or
 12        entity to replace any moneys intercepted under the authority of this  sub-
 13        section.
 14        (2)  (a) The  municipal bonds or the agreement for purchase of the munici-
 15        pal bonds by the authority may provide for payment of interest and  penal-
 16        ties  and  other terms for reimbursement of any amounts drawn from reserve
 17        funds, pledged funds, reserve surety policies or other credit  enhancement
 18        to pay debt service on the bonds due to the failure of the municipality to
 19        make payment on its municipal bonds in a timely manner. To the extent that
 20        debt  service on the bonds is paid from the state sales tax account pursu-
 21        ant to section 67-8716, Idaho Code, the provisions of sections 67-8725(3),
 22        (4) and (5), Idaho Code, shall apply.
 23        (b)  If the authority determines that amounts obtained under this  section
 24        will  not fully make up any amounts which a municipality has failed to pay
 25        on its municipal bonds when due, together with any interest and  penalties
 26        established pursuant to this section, within one (1) year from the payment
 27        of the municipality's scheduled debt service payment, the authority or the
 28        trustee  for  the  bonds  may pursue any legal action, including mandamus,
 29        against the municipality to compel the municipality to:
 30             (i)   Levy and provide tax or other revenues to pay debt  service  on
 31             its municipal bonds when due; and
 32             (ii)  Meet  its  repayment  obligations, under its municipal bonds or
 33             otherwise, to the authority.
 34        (c)  In pursuing their rights under this subsection, the authority and the
 35        trustee shall have the same substantive and procedural rights as a  holder
 36        of the bonds of a municipality.
 37        (d)  The  attorney  general shall assist the authority in carrying out its
 38        duties under this subsection.
 39        (e)  The municipality shall pay the attorney's fees, expenses and costs of
 40        the authority, the trustee and the attorney general.
 41        (43)  (a) Except as provided in paragraph  (c)  of  this  subsection,  any
 42        municipality whose operating funds were intercepted under this section may
 43        replace  those  funds  from other municipal moneys or from property taxes,
 44        subject to the limitations provided in this subsection.
 45        (b)  A municipality may use property taxes  or  other  moneys  to  replace
 46        intercepted  funds only if the property taxes or other moneys were derived
 47        from:
 48             (i)   Taxes originally levied to make the payment but which were  not
 49             timely received by the municipality;
 50             (ii)  Taxes  from a supplemental levy made to make the missed payment
 51             or to replace the intercepted moneys;
 52             (iii) Moneys transferred from the undistributed reserve, if  any,  of
 53             the municipality; or
 54             (iv)  Any other source of money on hand and legally available.
 55        (c)  Notwithstanding  the  provisions  of  subsections (43) (a) and (b) of
                                                                        
                                           11
                                                                        
  1        this section, a municipality may not replace operating  funds  intercepted
  2        by  the  state with moneys collected and held to make payments on bonds if
  3        that replacement would divert moneys from the payment of future debt  ser-
  4        vice  on  the  bonds  and increase the risk that the state would be called
  5        upon an additional time to make payments on the bonds.
                                                                        
  6        SECTION 9.  That Chapter 87, Title 67, Idaho Code, be,  and  the  same  is
  7    hereby  amended by the addition thereto of a NEW SECTION, to be known and des-
  8    ignated as Section 67-8728, Idaho Code, and to read as follows:
                                                                        
  9        67-8728.  LIMITED EXEMPTION FROM INTERCEPT PROVISIONS. (1)  The  intercept
 10    provisions provided for by sections 67-8725 and 67-8727, Idaho Code, shall not
 11    apply to:
 12        (a)  Municipal  bonds  where  a  municipality has the authority through an
 13        election held and results certified pursuant to section 3, article VIII of
 14        the constitution of the state of Idaho to collect revenues  sufficient  to
 15        pay the interest and principal of such municipal bonds;
 16        (b)  Municipal  bonds which are local improvement bonds issued under chap-
 17        ter 17, title 50, Idaho Code; or
 18        (c)  Municipal bonds purchased by the authority from  proceeds  of  bonds,
 19        which  the  authority has designated at the time its bonds are issued, not
 20        to receive payment from the sales tax.
 21        (2)  Any municipality seeking either of the limited exemptions  set  forth
 22    in  subsection  (1)(a) or (1)(b) of this section shall do so through a resolu-
 23    tion of the municipality duly adopted indicating that the  municipality  meets
 24    the requirements for this limited exemption.
                                                                        
 25        SECTION  10.  An  emergency  existing  therefor, which emergency is hereby
 26    declared to exist, this act shall be in full force and effect on and after its
 27    passage and approval.

Statement of Purpose / Fiscal Impact


                       STATEMENT OF PURPOSE

                             RS 14995

In 2000, the voters of Idaho approved a constitutional amendment
authorizing the Idaho Bond Bank Authority to issue bonds to
assist municipalities (cities, counties, school districts,
irrigation districts, sewer districts, water districts, highway
districts or other special purpose districts or political
subdivisions) in financing needed facilities at a lower cost to
the taxpayers and to secure the repayment of the bonds of the
Authority by funds of the state, including the sales tax.  In
2001, the legislature adopted enabling legislation to implement
the constitutional amendment, and this legislation was amended
again in 2002.  In December, 2004, the Authority completed its
first bond issue, assisting seven Idaho municipalities to save
financing costs.

Based on information gained during the preparation of this recent
bond issue from municipalities, rating agencies, and others, the
Authority is proposing certain amendments which would:

(1) provide that the bonds of Idaho municipalities may be
purchased from such municipalities or from other sources;

(2) clarify that the reserve fund shall secure those bonds
designated by the Authority;

(3) provide that the procedures for intercept of funds coming to
such municipalities from the state, in the event of a failure of
a municipality to pay such bonds, would apply to funds that the
municipality can legally commit to such bonds and would be
limited in certain other cases; and

(4) clarify the references to the sales tax account and the
process for payment of the Authority's bonds from the state sales
tax, if funds are not available from the municipalities or from
other sources.


                           FISCAL NOTE

There will be no fiscal impact to the state as a result of this
legislation.  The intended result is for lower interest costs for
local governmental units throughout the state.


Contact
Name:  Liza Carberry, Idaho State Treasurer's Office 
Phone: 208-332-2997




STATEMENT OF PURPOSE/FISCAL NOTE                    H 240