Florida Senate - 2016 SB 324 By Senator Legg 17-00042-16 2016324__ 1 A bill to be entitled 2 An act relating to utility projects; providing a short 3 title; defining terms; authorizing certain local 4 governmental entities to finance the costs of a 5 utility project by issuing utility cost containment 6 bonds upon application by a local agency; specifying 7 application requirements; requiring a successor entity 8 of a local agency to assume and perform the 9 obligations of the local agency with respect to the 10 financing of a utility project; providing procedures 11 for local agencies to use when applying to finance a 12 utility project using utility cost containment bonds; 13 authorizing an authority to issue utility cost 14 containment bonds for specified purposes related to 15 utility projects; authorizing an authority to form 16 alternate entities to finance utility projects; 17 requiring the governing body of the authority to adopt 18 a financing resolution and impose a utility project 19 charge on customers of a publicly owned utility as a 20 condition of utility project financing; specifying 21 required and optional provisions of the financing 22 resolution; specifying powers of the authority; 23 requiring the local agency or its publicly owned 24 utility to assist the authority in the establishment 25 or adjustment of the utility project charge; requiring 26 that customers of the public utility specified in the 27 financing resolution pay the utility project charge; 28 providing for adjustment of the utility project 29 charge; establishing ownership of the revenues of the 30 utility project charge; requiring the local agency or 31 its publicly owned utility to collect the utility 32 project charge; conditioning a customer’s receipt of 33 public utility services on payment of the utility 34 project charge; authorizing a local agency or its 35 publicly owned utility to use available remedies to 36 enforce collection of the utility project charge; 37 providing that the pledge of the utility project 38 charge to secure payment of bonds issued to finance 39 the utility project is irrevocable and cannot be 40 reduced or impaired except under certain conditions; 41 providing that a utility project charge constitutes 42 utility project property; providing that utility 43 project property is subject to a lien to secure 44 payment of costs relating to utility cost containment 45 bonds; establishing payment priorities for the use of 46 revenues of the utility project property; providing 47 for the issuance and validation of utility cost 48 containment bonds; securing the payment of utility 49 cost containment bonds and related costs; providing 50 that utility cost containment bonds do not obligate 51 the state or any political subdivision and are not 52 backed by their full faith and credit and taxing 53 power; requiring that certain disclosures be printed 54 on utility cost containment bonds; providing that 55 financing costs related to utility cost containment 56 bonds are an obligation of the authority only; 57 providing limitations on the state’s ability to alter 58 financing costs or utility project property under 59 certain circumstances; prohibiting an authority with 60 outstanding payment obligations on utility cost 61 containment bonds from becoming a debtor under certain 62 federal or state laws; providing for construction; 63 endowing public entities with certain powers; 64 providing an effective date. 65 66 Be It Enacted by the Legislature of the State of Florida: 67 68 Section 1. Utility Cost Containment Bond Act.— 69 (1) SHORT TITLE.—This section may be cited as the “Utility 70 Cost Containment Bond Act.” 71 (2) DEFINITIONS.—As used in this section, the term: 72 (a) “Authority” means an entity created under s. 73 163.01(7)(g), Florida Statutes, which provides public utility 74 services and whose membership consists of at least three 75 counties. The term includes any successor to the powers and 76 functions of such an entity. 77 (b) “Cost,” as applied to a utility project or a portion of 78 a utility project financed under this section, means: 79 1. Any part of the expense of constructing, renovating, or 80 acquiring lands, structures, real or personal property, rights, 81 rights-of-way, franchises, easements, and interests acquired or 82 used for a utility project; 83 2. The expense of demolishing or removing any buildings or 84 structures on acquired land, including the expense of acquiring 85 any lands to which the buildings or structures may be moved, and 86 the cost of all machinery and equipment used for the demolition 87 or removal; 88 3. Finance charges; 89 4. Interest, as determined by the authority; 90 5. Provisions for working capital and debt service 91 reserves; 92 6. Expenses for extensions, enlargements, additions, 93 replacements, renovations, and improvements; 94 7. Expenses for architectural, engineering, financial, 95 accounting, and legal services, plans, specifications, 96 estimates, and administration; or 97 8. Any other expenses necessary or incidental to 98 determining the feasibility of constructing a utility project or 99 incidental to the construction, acquisition, or financing of a 100 utility project. 101 (c) “Customer” means a person receiving water or wastewater 102 service from a publicly owned utility. 103 (d) “Finance” or “financing” includes refinancing. 104 (e) “Financing cost” means: 105 1. Interest and redemption premiums that are payable on 106 utility cost containment bonds; 107 2. The cost of retiring the principal of utility cost 108 containment bonds, whether at maturity, including acceleration 109 of maturity upon an event of default, or upon redemption, 110 including sinking fund redemption; 111 3. The cost related to issuing or servicing utility cost 112 containment bonds, including any payment under an interest rate 113 swap agreement and any type of fee; 114 4. A payment or expense associated with a bond insurance 115 policy; financial guaranty; contract, agreement, or other credit 116 or liquidity enhancement for bonds; or contract, agreement, or 117 other financial agreement entered into in connection with 118 utility cost containment bonds; 119 5. Any coverage charges; or 120 6. The funding of one or more reserve accounts relating to 121 utility cost containment bonds. 122 (f) “Financing resolution” means a resolution adopted by 123 the governing body of an authority that provides for the 124 financing or refinancing of a utility project with utility cost 125 containment bonds and that imposes a utility project charge in 126 connection with the utility cost containment bonds in accordance 127 with subsection (4). A financing resolution may be separate from 128 a resolution authorizing the issuance of the bonds. 129 (g) “Governing body” means the body that governs a local 130 agency. 131 (h) “Local agency” means a member of the authority, or an 132 agency or subdivision of that member, which is sponsoring or 133 refinancing a utility project, or any municipality, county, 134 authority, special district, public corporation, regional water 135 authority, or other governmental entity of the state that is 136 sponsoring or refinancing a utility project. 137 (i) “Public utility services” means water or wastewater 138 services provided by a publicly owned utility. The term does not 139 include communications services, as defined in s. 202.11, 140 Florida Statutes, Internet access services, or information 141 services. 142 (j) “Publicly owned utility” means a utility providing 143 retail or wholesale water or wastewater services which is owned 144 and operated by a local agency. The term includes any successor 145 to the powers and functions of such a utility. 146 (k) “Revenue” means income and receipts of the authority 147 related to the financing of utility projects and issuance of 148 utility cost containment bonds, including any of the following: 149 1. Bond purchase agreements; 150 2. Bonds acquired by the authority; 151 3. Installment sales agreements and other revenue-producing 152 agreements entered into by the authority; 153 4. Utility projects financed or refinanced by the 154 authority; 155 5. Grants and other sources of income; 156 6. Moneys paid by a local agency; 157 7. Interlocal agreements with a local agency, including all 158 service agreements; or 159 8. Interest or other income from any investment of money in 160 any fund or account established for the payment of principal, 161 interest, or premiums on utility cost containment bonds, or the 162 deposit of proceeds of utility cost containment bonds. 163 (l) “Utility cost containment bonds” means bonds, notes, 164 commercial paper, variable rate securities, and any other 165 evidence of indebtedness issued by an authority the proceeds of 166 which are used directly or indirectly to pay or reimburse a 167 local agency or its publicly owned utility for the costs of a 168 utility project and which are secured by a pledge of, and are 169 payable from, utility project property. 170 (m) “Utility project” means the acquisition, construction, 171 installation, retrofitting, rebuilding, or other addition to or 172 improvement of any equipment, device, structure, process, 173 facility, technology, rights, or property located within or 174 outside this state which is used in connection with the 175 operations of a publicly owned utility. 176 (n) “Utility project charge” means a charge levied on 177 customers of a publicly owned utility to pay the financing costs 178 of utility cost containment bonds issued under subsection (4). 179 The term includes any adjustments to the utility project charge 180 made under subsection (5). 181 (o) “Utility project property” means the property right 182 created pursuant to subsection (6). The term does not include 183 any interest in a customer’s real or personal property but 184 includes the right, title, and interest of an authority in any 185 of the following: 186 1. The financing resolution, the utility project charge, 187 and any adjustment to the utility project charge established in 188 accordance with subsection (5); 189 2. The financing costs of the utility cost containment 190 bonds and all revenues, and all collections, claims, payments, 191 moneys, or proceeds for, or arising from, the utility project 192 charge; or 193 3. All rights to obtain adjustments to the utility project 194 charge pursuant to subsection (5). 195 (3) UTILITY PROJECTS.— 196 (a) A local agency that owns and operates a publicly owned 197 utility may apply to an authority to finance the costs of a 198 utility project using the proceeds of utility cost containment 199 bonds. In its application to the authority, the local agency 200 shall specify the utility project to be financed by the utility 201 cost containment bonds and the maximum principal amount, the 202 maximum interest rate, and the maximum stated terms of the 203 utility cost containment bonds. 204 (b) A local agency may not apply to an authority for the 205 financing of a utility project under this section unless the 206 governing body has determined, in a duly noticed public meeting, 207 all of the following: 208 1. The project to be financed is a utility project. 209 2. The local agency will finance costs of the utility 210 project, and the costs associated with the financing will be 211 paid from utility project property, including the utility 212 project charge for the utility cost containment bonds. 213 3. Based on the best information available to the governing 214 body, the rates charged to the local agency’s retail customers 215 by the publicly owned utility, including the utility project 216 charge resulting from the financing of the utility project with 217 utility cost containment bonds, are expected to be lower than 218 the rates that would be charged if the project were financed 219 with bonds payable from revenues of the publicly owned utility. 220 (c) A determination by the governing body that a project to 221 be financed with utility cost containment bonds is a utility 222 project is final and conclusive, and the utility cost 223 containment bonds issued to finance the utility project and the 224 utility project charge are valid and enforceable as set forth in 225 the financing resolution and the documents relating to the 226 utility cost containment bonds. 227 (d) If a local agency that has outstanding utility cost 228 containment bonds ceases to operate a water or wastewater 229 utility, directly or through its publicly owned utility, 230 references in this section to the local agency or to its 231 publicly owned utility must be to the successor entity. The 232 successor entity shall assume and perform all obligations of the 233 local agency and its publicly owned utility required by this 234 section and shall assume the servicing agreement required under 235 subsection (4) while the utility cost containment bonds remain 236 outstanding. 237 (4) FINANCING UTILITY PROJECTS.— 238 (a) An authority may issue utility cost containment bonds 239 to finance or refinance utility projects; refinance debt of a 240 local agency incurred in financing or refinancing utility 241 projects, provided such refinancing results in present value 242 savings to the local agency; or, with the approval of the local 243 agency, refinance previously issued utility cost containment 244 bonds. 245 1. To finance a utility project, the authority may: 246 a. Form a single-purpose limited liability company and 247 authorize the company to adopt the financing resolution of such 248 utility project; or 249 b. Create a new single-purpose entity by interlocal 250 agreement under s. 163.01, Florida Statutes, the membership of 251 which shall consist of the authority and two or more of its 252 members or other public agencies. 253 2. A single-purpose limited liability company or a single 254 purpose entity may be created by the authority solely for the 255 purpose of performing the duties and responsibilities of the 256 authority specified in this section and constitutes an authority 257 for all purposes of this section. Reference to the authority 258 includes a company or entity created under this paragraph. 259 (b) The governing body of an authority that is financing 260 the costs of a utility project shall adopt a financing 261 resolution and shall impose a utility project charge as 262 described in subsection (5). All provisions of a financing 263 resolution adopted pursuant to this section are binding on the 264 authority. 265 1. The financing resolution must: 266 a. Provide a brief description of the financial calculation 267 method the authority will use in determining the utility project 268 charge. The calculation method must include a periodic 269 adjustment methodology to be applied at least annually to the 270 utility project charge. The authority shall establish the 271 allocation of the utility project charge among classes of 272 customers of the publicly owned utility. The decision of the 273 authority is final and conclusive, and the method of calculating 274 the utility project charge and the periodic adjustment may not 275 be changed; 276 b. Require each customer in the class or classes of 277 customers specified in the financing resolution who receives 278 water or wastewater service through the publicly owned utility 279 to pay the utility project charge regardless of whether the 280 customer has an agreement to receive water or wastewater service 281 from a person other than the publicly owned utility; 282 c. Require that the utility project charge be charged 283 separately from other charges on the bill of customers of the 284 publicly owned utility in the class or classes of customers 285 specified in the financing resolution; and 286 d. Require that the authority enter into a servicing 287 agreement with the local agency or its publicly owned utility to 288 collect the utility project charge. 289 2. The authority may require in the financing resolution 290 that, in the event of a default by the local agency or its 291 publicly owned utility with respect to revenues from the utility 292 project property, the authority, upon application by the 293 beneficiaries of the statutory lien as set forth in subsection 294 (6), shall order the sequestration and payment to the 295 beneficiaries of revenues arising from utility project property. 296 This subparagraph does not limit any other remedies available to 297 the beneficiaries by reason of default. 298 (c) An authority has all the powers provided in this 299 section and s. 163.01(7)(g), Florida Statutes. 300 (d) Each authority shall work with local agencies that 301 request assistance to determine the most cost-effective manner 302 of financing regional water projects. If the entities determine 303 that the issuance of utility cost containment bonds will result 304 in lower financing costs for a project, the authority shall 305 cooperate with such local agencies and, if requested by the 306 local agencies, issue utility cost containment bonds as provided 307 in this section. 308 (5) UTILITY PROJECT CHARGE.— 309 (a) The authority shall impose a sufficient utility project 310 charge, based on estimates of water or wastewater service usage, 311 to ensure timely payment of all financing costs with respect to 312 utility cost containment bonds. The local agency or its publicly 313 owned utility shall provide the authority with information 314 concerning the publicly owned utility which may be required by 315 the authority in establishing the utility project charge. 316 (b) The utility project charge is a nonbypassable charge to 317 all present and future customers of the publicly owned utility 318 in the class or classes of customers specified in the financing 319 resolution upon its adoption. If the regulatory structure for 320 the water or wastewater industry changes in a manner that 321 authorizes a customer to choose to take service from an 322 alternative supplier and the customer chooses an alternative 323 supplier, the customer remains liable for paying the utility 324 project charge if the customer continues to receive any service 325 from the publicly owned utility for the transmission, 326 distribution, processing, delivery, or metering of the 327 underlying water or wastewater service. 328 (c) The authority shall determine at least annually and at 329 such additional intervals as provided in the financing 330 resolution and documents related to the applicable utility cost 331 containment bonds whether adjustments to the utility project 332 charge are required. The authority shall use the adjustment to 333 correct for any overcollection or undercollection of financing 334 costs from the utility project charge or to make any other 335 adjustment necessary to ensure the timely payment of the 336 financing costs of the utility cost containment bonds, including 337 adjustment of the utility project charge to pay any debt service 338 coverage requirement for the utility cost containment bonds. The 339 local agency or its publicly owned utility shall provide the 340 authority with information concerning the publicly owned utility 341 which may be required by the authority in adjusting the utility 342 project charge. 343 1. If the authority determines that an adjustment to the 344 utility project charge is required, the adjustment must be made 345 using the methodology specified in the financing resolution. 346 2. The adjustment may not impose the utility project charge 347 on a class of customers which was not subject to the utility 348 project charge pursuant to the financing resolution imposing the 349 utility project charge. 350 (d) Revenues from a utility project charge are special 351 revenues of the authority and do not constitute revenue of the 352 local agency or its publicly owned utility for any purpose, 353 including any dedication, commitment, or pledge of revenue, 354 receipts, or other income that the local agency or its publicly 355 owned utility has made or will make for the security of any of 356 its obligations. 357 (e) The local agency or its publicly owned utility shall 358 act as a servicing agent for collecting the utility project 359 charge throughout the duration of the servicing agreement 360 required by the financing resolution. The local agency or its 361 publicly owned utility shall hold the money collected in trust 362 for the exclusive benefit of the persons entitled to have the 363 financing costs paid from the utility project charge, and the 364 money does not lose its designation as revenues of the authority 365 by virtue of possession by the local agency or its publicly 366 owned utility. 367 (f) The customer must make timely and complete payment of 368 all utility project charges as a condition of receiving water or 369 wastewater service from the publicly owned utility. The local 370 agency or its publicly owned utility may use its established 371 collection policies and remedies provided under law to enforce 372 collection of the utility project charge. A customer liable for 373 a utility project charge may not withhold payment, in whole or 374 in part, thereof. 375 (g) The pledge of a utility project charge to secure 376 payment of utility cost containment bonds is irrevocable, and 377 the state, or any other entity, may not reduce, impair, or 378 otherwise adjust the utility project charge, except that the 379 authority shall implement the periodic adjustments to the 380 utility project charge as provided under this subsection. 381 (6) UTILITY PROJECT PROPERTY.— 382 (a) A utility project charge constitutes utility project 383 property on the effective date of the financing resolution 384 authorizing such utility project charge. Utility project 385 property constitutes property, including contracts for securing 386 utility cost containment bonds, regardless of whether the 387 revenues and proceeds arising with respect to the utility 388 project property have accrued. Utility project property shall 389 continuously exist as property for all purposes with all of the 390 rights and privileges of this section through the end of the 391 period provided in the financing resolution or until all 392 financing costs with respect to the related utility cost 393 containment bonds are paid in full, whichever occurs first. 394 (b) Upon the effective date of the financing resolution, 395 the utility project property is subject to a first-priority 396 statutory lien to secure the payment of the utility cost 397 containment bonds. 398 1. The lien secures the payment of all financing costs then 399 existing or subsequently arising to the holders of the utility 400 cost containment bonds, the trustees or representatives of the 401 holders of the utility cost containment bonds, and any other 402 entity specified in the financing resolution or the documents 403 relating to the utility cost containment bonds. 404 2. The lien attaches to the utility project property 405 regardless of the current ownership of the utility project 406 property, including any local agency or its publicly owned 407 utility, the authority, or any other person. 408 3. Upon the effective date of the financing resolution, the 409 lien is valid and enforceable against the owner of the utility 410 project property and all third parties, and additional public 411 notice is not required. 412 4. The lien is a continuously perfected lien on all 413 revenues and proceeds generated from the utility project 414 property regardless of whether the revenues or proceeds have 415 accrued. 416 (c) All revenues with respect to utility project property 417 related to utility cost containment bonds, including payments of 418 the utility project charge, shall be applied first to the 419 payment of the financing costs of the utility cost containment 420 bonds then due, including the funding of reserves for the 421 utility cost containment bonds. Any excess revenues shall be 422 applied as determined by the authority for the benefit of the 423 utility for which the utility cost containment bonds were 424 issued. 425 (7) UTILITY COST CONTAINMENT BONDS.— 426 (a) Utility cost containment bonds shall be issued within 427 the parameters of the financing provided by the authority 428 pursuant to this section. The proceeds of the utility cost 429 containment bonds made available to the local agency or its 430 publicly owned utility shall be used for the utility project 431 identified in the application for financing of the utility 432 project or used to refinance indebtedness of the local agency 433 which financed or refinanced utility projects. 434 (b) Utility cost containment bonds shall be issued as set 435 forth in this section and s. 163.01(7)(g)8., Florida Statutes, 436 and may be validated pursuant to s. 163.01(7)(g)9., Florida 437 Statutes. 438 (c) The authority shall pledge the utility project property 439 as security for the payment of the utility cost containment 440 bonds. All rights of an authority with respect to utility 441 project property pledged as security for the payment of utility 442 cost containment bonds shall be for the benefit of, and 443 enforceable by, the beneficiaries of the pledge to the extent 444 provided in the financing documents relating to the utility cost 445 containment bonds. 446 1. If utility project property is pledged as security for 447 the payment of utility cost containment bonds, the local agency 448 or its publicly owned utility shall enter into a contract with 449 the authority which requires, at a minimum, that the publicly 450 owned utility: 451 a. Continue to operate its publicly owned utility, 452 including the utility project that is being financed or 453 refinanced; 454 b. Collect the utility project charge from customers for 455 the benefit and account of the authority and the beneficiaries 456 of the pledge of the utility project charge; and 457 c. Separately account for and remit revenue from the 458 utility project charge to, or for the account of, the authority. 459 2. The pledge of a utility project charge to secure payment 460 of utility cost containment bonds is irrevocable, and the state 461 or any other entity may not reduce, impair, or otherwise adjust 462 the utility project charge, except that the authority shall 463 implement periodic adjustments to the utility project charge as 464 provided under subsection (5). 465 (d) Utility cost containment bonds shall be nonrecourse to 466 the credit or any assets of the local agency or the publicly 467 owned utility but are payable from, and secured by a pledge of 468 the utility project property relating to the utility cost 469 containment bonds and any additional security or credit 470 enhancement specified in the documents relating to the utility 471 cost containment bonds. If, pursuant to subsection (4), the 472 authority is financing the project through a single-purpose 473 limited liability company, the utility cost containment bonds 474 shall be payable from, and secured by, a pledge of amounts paid 475 by the company to the authority from the applicable utility 476 project property. This paragraph is the exclusive method of 477 perfecting a pledge of utility project property by the company 478 securing the payment of financing costs under any agreement of 479 the company in connection with the issuance of utility cost 480 containment bonds. 481 (e) The issuance of utility cost containment bonds does not 482 obligate the state or any political subdivision thereof to levy 483 or to pledge any form of taxation to pay the utility cost 484 containment bonds or to make any appropriation for their 485 payment. Each utility cost containment bond must contain on its 486 face a statement in substantially the following form: 487 488 “Neither the full faith and credit nor the taxing power of the 489 State of Florida or any political subdivision thereof is pledged 490 to the payment of the principal of, or interest on, this bond.” 491 492 (f) Notwithstanding any other law or this section, a 493 financing resolution or other resolution of the authority, or 494 documents relating to utility cost containment bonds, the 495 authority may not rescind, alter, or amend any resolution or 496 document that pledges utility cost charges for payment of 497 utility cost containment bonds. 498 (g) Subject to the terms of any pledge document created 499 under this section, the validity and relative priority of a 500 pledge is not defeated or adversely affected by the commingling 501 of revenues generated by the utility project property with other 502 funds of the local agency or the publicly owned utility 503 collecting a utility project charge on behalf of an authority. 504 (h) Financing costs in connection with utility cost 505 containment bonds are a special obligation of the authority and 506 do not constitute a liability of the state or any political 507 subdivision thereof. Financing costs are not a pledge of the 508 full faith and credit of the state or any political subdivision 509 thereof, including the authority, but are payable solely from 510 the funds identified in the documents relating to the utility 511 cost containment bonds. This paragraph does not preclude 512 guarantees or credit enhancements in connection with utility 513 cost containment bonds. 514 (i) Except as otherwise provided in this section with 515 respect to adjustments to a utility project charge, the recovery 516 of the financing costs for the utility cost containment bonds 517 from the utility project charge is irrevocable, and the 518 authority does not have the power, by rescinding, altering, or 519 amending the applicable financing resolution, to revalue or 520 revise for ratemaking purposes the financing costs of utility 521 cost containment bonds; to determine that the financing costs 522 for the related utility cost containment bonds or the utility 523 project charge is unjust or unreasonable; or to in any way, 524 either directly or indirectly, reduce or impair the value of 525 utility project property that includes the utility project 526 charge. The amount of revenues arising with respect to the 527 financing costs for the related utility cost containment bonds 528 or the utility project charge is not subject to reduction, 529 impairment, postponement, or termination for any reason until 530 all financing costs to be paid from the utility project charge 531 are fully met and discharged. 532 (j) Except as provided in subsection (5) with respect to 533 adjustments to a utility project charge, the state pledges and 534 agrees with the owners of utility cost containment bonds that 535 the state may not limit or alter the financing costs or the 536 utility project property, including the utility project charge, 537 relating to the utility cost containment bonds, or any rights 538 related to the utility project property, until all financing 539 costs with respect to the utility cost containment bonds are 540 fully met and discharged. This paragraph does not preclude 541 limitation or alteration if adequate provision is made by law to 542 protect the owners. The authority may include the state’s pledge 543 in the governing documents for utility cost containment bonds. 544 (8) LIMITATION ON DEBT RELIEF.—Notwithstanding any other 545 law, an authority that issued utility cost containment bonds may 546 not, and a governmental officer or organization may not 547 authorize the authority to, become a debtor under the United 548 States Bankruptcy Code or become the subject of any similar case 549 or proceeding under any other state or federal law if any 550 payment obligation from utility project property remains with 551 respect to the utility cost containment bonds. 552 (9) CONSTRUCTION.—This section and all grants of power and 553 authority in this section shall be liberally construed to 554 effectuate their purposes. All incidental powers necessary to 555 carry this section into effect are expressly granted to, and 556 conferred upon, public entities. 557 Section 2. This act shall take effect July 1, 2016.