Florida Senate - 2016 CS for CS for SB 324 By the Committees on Communications, Energy, and Public Utilities; and Finance and Tax; and Senators Legg and Simpson 579-04014-16 2016324c2 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, or a separate legal entity 74 created by one or more local agencies. The term includes any 75 successor to the powers and functions of such an entity. 76 (b) “Cost,” as applied to a utility project or a portion of 77 a utility project financed under this section, means: 78 1. Any part of the expense of constructing, renovating, or 79 acquiring lands, structures, real or personal property, rights, 80 rights-of-way, franchises, easements, and interests acquired or 81 used for a utility project; 82 2. The expense of demolishing or removing any buildings or 83 structures on acquired land, including the expense of acquiring 84 any lands to which the buildings or structures may be moved, and 85 the cost of all machinery and equipment used for the demolition 86 or removal; 87 3. Finance charges; 88 4. Interest, as determined by the authority; 89 5. Provisions for working capital and debt service 90 reserves; 91 6. Expenses for extensions, enlargements, additions, 92 replacements, renovations, and improvements; 93 7. Expenses for architectural, engineering, financial, 94 accounting, and legal services, plans, specifications, 95 estimates, and administration; or 96 8. Any other expenses necessary or incidental to 97 determining the feasibility of constructing a utility project or 98 incidental to the construction, acquisition, or financing of a 99 utility project. 100 (c) “Customer” means a person receiving water or wastewater 101 service from a publicly owned utility. 102 (d) “Finance” or “financing” includes refinancing. 103 (e) “Financing cost” means: 104 1. Interest and redemption premiums that are payable on 105 utility cost containment bonds; 106 2. The cost of retiring the principal of utility cost 107 containment bonds, whether at maturity, including acceleration 108 of maturity upon an event of default, or upon redemption, 109 including sinking fund redemption; 110 3. The cost related to issuing or servicing utility cost 111 containment bonds, including any payment under an interest rate 112 swap agreement and any type of fee; 113 4. A payment or expense associated with a bond insurance 114 policy; financial guaranty; contract, agreement, or other credit 115 or liquidity enhancement for bonds; or contract, agreement, or 116 other financial agreement entered into in connection with 117 utility cost containment bonds; 118 5. Any coverage charges; or 119 6. The funding of one or more reserve accounts relating to 120 utility cost containment bonds. 121 (f) “Financing resolution” means a resolution adopted by 122 the governing body of an authority that provides for the 123 financing or refinancing of a utility project with utility cost 124 containment bonds and that imposes a utility project charge in 125 connection with the utility cost containment bonds in accordance 126 with subsection (4). A financing resolution may be separate from 127 a resolution authorizing the issuance of the bonds. 128 (g) “Governing body” means the body that governs a local 129 agency. 130 (h) “Local agency” means a member of the authority, or an 131 agency or subdivision of that member, which is sponsoring or 132 refinancing a utility project, or any municipality, county, 133 authority, special district, public corporation, regional water 134 authority, or other governmental entity of the state that is 135 sponsoring or refinancing a utility project. 136 (i) “Public utility services” means water or wastewater 137 services provided by a publicly owned utility. The term does not 138 include communications services, as defined in s. 202.11, 139 Florida Statutes, Internet access services, or information 140 services. 141 (j) “Publicly owned utility” means a utility providing 142 retail or wholesale water or wastewater services which is owned 143 and operated by a local agency. The term includes any successor 144 to the powers and functions of such a utility. 145 (k) “Revenue” means income and receipts of the authority 146 related to the financing of utility projects and issuance of 147 utility cost containment bonds, including any of the following: 148 1. Bond purchase agreements; 149 2. Bonds acquired by the authority; 150 3. Installment sales agreements and other revenue-producing 151 agreements entered into by the authority; 152 4. Utility projects financed or refinanced by the 153 authority; 154 5. Grants and other sources of income; 155 6. Moneys paid by a local agency; 156 7. Interlocal agreements with a local agency, including all 157 service agreements; or 158 8. Interest or other income from any investment of money in 159 any fund or account established for the payment of principal, 160 interest, or premiums on utility cost containment bonds, or the 161 deposit of proceeds of utility cost containment bonds. 162 (l) “Utility cost containment bonds” means bonds, notes, 163 commercial paper, variable rate securities, and any other 164 evidence of indebtedness issued by an authority the proceeds of 165 which are used directly or indirectly to pay or reimburse a 166 local agency or its publicly owned utility for the costs of a 167 utility project and which are secured by a pledge of, and are 168 payable from, utility project property. 169 (m) “Utility project” means the acquisition, construction, 170 installation, retrofitting, rebuilding, or other addition to or 171 improvement of any equipment, device, structure, process, 172 facility, technology, rights, or property located within or 173 outside this state which is used in connection with the 174 operations of a publicly owned utility. 175 (n) “Utility project charge” means a charge levied on 176 customers of a publicly owned utility to pay the financing costs 177 of utility cost containment bonds issued under subsection (4). 178 The term includes any adjustments to the utility project charge 179 made under subsection (5). 180 (o) “Utility project property” means the property right 181 created pursuant to subsection (6). The term does not include 182 any interest in a customer’s real or personal property but 183 includes the right, title, and interest of an authority in any 184 of the following: 185 1. The financing resolution, the utility project charge, 186 and any adjustment to the utility project charge established in 187 accordance with subsection (5); 188 2. The financing costs of the utility cost containment 189 bonds and all revenues, and all collections, claims, payments, 190 moneys, or proceeds for, or arising from, the utility project 191 charge; or 192 3. All rights to obtain adjustments to the utility project 193 charge pursuant to subsection (5). 194 (3) UTILITY PROJECTS.— 195 (a) A local agency that owns and operates a publicly owned 196 utility may apply to an authority to finance the costs of a 197 utility project using the proceeds of utility cost containment 198 bonds. In its application to the authority, the local agency 199 shall specify the utility project to be financed by the utility 200 cost containment bonds and the maximum principal amount, the 201 maximum interest rate, and the maximum stated terms of the 202 utility cost containment bonds. 203 (b) A local agency may not apply to an authority for the 204 financing of a utility project under this section unless the 205 governing body has determined, in a duly noticed public meeting, 206 all of the following: 207 1. The project to be financed is a utility project. 208 2. The local agency will finance costs of the utility 209 project, and the costs associated with the financing will be 210 paid from utility project property, including the utility 211 project charge for the utility cost containment bonds. 212 3. Based on the best information available to the governing 213 body, the rates charged to the local agency’s retail customers 214 by the publicly owned utility, including the utility project 215 charge resulting from the financing of the utility project with 216 utility cost containment bonds, are expected to be lower than 217 the rates that would be charged if the project were financed 218 with bonds payable from revenues of the publicly owned utility. 219 (c) A determination by the governing body that a project to 220 be financed with utility cost containment bonds is a utility 221 project is final and conclusive, and the utility cost 222 containment bonds issued to finance the utility project and the 223 utility project charge are valid and enforceable as set forth in 224 the financing resolution and the documents relating to the 225 utility cost containment bonds. 226 (d) If a local agency that has outstanding utility cost 227 containment bonds ceases to operate a water or wastewater 228 utility, directly or through its publicly owned utility, 229 references in this section to the local agency or to its 230 publicly owned utility must be to the successor entity. The 231 successor entity shall assume and perform all obligations of the 232 local agency and its publicly owned utility required by this 233 section and shall assume the servicing agreement required under 234 subsection (4) while the utility cost containment bonds remain 235 outstanding. 236 (4) FINANCING UTILITY PROJECTS.— 237 (a) An authority may issue utility cost containment bonds 238 to finance or refinance utility projects; refinance debt of a 239 local agency incurred in financing or refinancing utility 240 projects, provided such refinancing results in present value 241 savings to the local agency; or, with the approval of the local 242 agency, refinance previously issued utility cost containment 243 bonds. 244 1. To finance a utility project, the authority may: 245 a. Form a single-purpose limited liability company and 246 authorize the company to adopt the financing resolution of such 247 utility project; or 248 b. Create a new single-purpose entity by interlocal 249 agreement under s. 163.01, Florida Statutes, the membership of 250 which shall consist of the authority and two or more of its 251 members or other public agencies. 252 2. A single-purpose limited liability company or a single 253 purpose entity may be created by the authority solely for the 254 purpose of performing the duties and responsibilities of the 255 authority specified in this section and constitutes an authority 256 for all purposes of this section. Reference to the authority 257 includes a company or entity created under this paragraph. 258 (b) The governing body of an authority that is financing 259 the costs of a utility project shall adopt a financing 260 resolution and shall impose a utility project charge as 261 described in subsection (5). All provisions of a financing 262 resolution adopted pursuant to this section are binding on the 263 authority. 264 1. The financing resolution must: 265 a. Provide a brief description of the financial calculation 266 method the authority will use in determining the utility project 267 charge. The calculation method must include a periodic 268 adjustment methodology to be applied at least annually to the 269 utility project charge. The authority shall establish the 270 allocation of the utility project charge among classes of 271 customers of the publicly owned utility. The decision of the 272 authority is final and conclusive, and the method of calculating 273 the utility project charge and the periodic adjustment may not 274 be changed; 275 b. Require each customer in the class or classes of 276 customers specified in the financing resolution who receives 277 water or wastewater service through the publicly owned utility 278 to pay the utility project charge regardless of whether the 279 customer has an agreement to receive water or wastewater service 280 from a person other than the publicly owned utility; 281 c. Require that the utility project charge be charged 282 separately from other charges on the bill of customers of the 283 publicly owned utility in the class or classes of customers 284 specified in the financing resolution; and 285 d. Require that the authority enter into a servicing 286 agreement with the local agency or its publicly owned utility to 287 collect the utility project charge. 288 2. The authority may require in the financing resolution 289 that, in the event of a default by the local agency or its 290 publicly owned utility with respect to revenues from the utility 291 project property, the authority, upon application by the 292 beneficiaries of the statutory lien as set forth in subsection 293 (6), shall order the sequestration and payment to the 294 beneficiaries of revenues arising from utility project property. 295 This subparagraph does not limit any other remedies available to 296 the beneficiaries by reason of default. 297 (c) An authority has all the powers provided in this 298 section and s. 163.01(7)(g), Florida Statutes. 299 (d) Each authority may work with local agencies that 300 request assistance to determine the most cost-effective manner 301 of financing regional water projects. If these entities 302 determine that the issuance of utility cost containment bonds 303 will result in lower financing costs for a project, the 304 authority may cooperate with such local agencies and, if 305 requested by the local agencies, issue utility cost containment 306 bonds as provided in this section. 307 (5) UTILITY PROJECT CHARGE.— 308 (a) The authority shall impose a sufficient utility project 309 charge, based on estimates of water or wastewater service usage, 310 to ensure timely payment of all financing costs with respect to 311 utility cost containment bonds. The local agency or its publicly 312 owned utility shall provide the authority with information 313 concerning the publicly owned utility which may be required by 314 the authority in establishing the utility project charge. 315 (b) The utility project charge is a nonbypassable charge to 316 all present and future customers of the publicly owned utility 317 in the class or classes of customers specified in the financing 318 resolution upon its adoption. If the regulatory structure for 319 the water or wastewater industry changes in a manner that 320 authorizes a customer to choose to take service from an 321 alternative supplier and the customer chooses an alternative 322 supplier, the customer remains liable for paying the utility 323 project charge if the customer continues to receive any service 324 from the publicly owned utility for the transmission, 325 distribution, processing, delivery, or metering of the 326 underlying water or wastewater service. 327 (c) The authority shall determine at least annually and at 328 such additional intervals as provided in the financing 329 resolution and documents related to the applicable utility cost 330 containment bonds whether adjustments to the utility project 331 charge are required. The authority shall use the adjustment to 332 correct for any overcollection or undercollection of financing 333 costs from the utility project charge or to make any other 334 adjustment necessary to ensure the timely payment of the 335 financing costs of the utility cost containment bonds, including 336 adjustment of the utility project charge to pay any debt service 337 coverage requirement for the utility cost containment bonds. The 338 local agency or its publicly owned utility shall provide the 339 authority with information concerning the publicly owned utility 340 which may be required by the authority in adjusting the utility 341 project charge. 342 1. If the authority determines that an adjustment to the 343 utility project charge is required, the adjustment must be made 344 using the methodology specified in the financing resolution. 345 2. The adjustment may not impose the utility project charge 346 on a class of customers which was not subject to the utility 347 project charge pursuant to the financing resolution imposing the 348 utility project charge. 349 (d) Revenues from a utility project charge are special 350 revenues of the authority and do not constitute revenue of the 351 local agency or its publicly owned utility for any purpose, 352 including any dedication, commitment, or pledge of revenue, 353 receipts, or other income that the local agency or its publicly 354 owned utility has made or will make for the security of any of 355 its obligations. 356 (e) The local agency or its publicly owned utility shall 357 act as a servicing agent for collecting the utility project 358 charge throughout the duration of the servicing agreement 359 required by the financing resolution. The local agency or its 360 publicly owned utility shall hold the money collected in trust 361 for the exclusive benefit of the persons entitled to have the 362 financing costs paid from the utility project charge, and the 363 money does not lose its designation as revenues of the authority 364 by virtue of possession by the local agency or its publicly 365 owned utility. 366 (f) The customer must make timely and complete payment of 367 all utility project charges as a condition of receiving water or 368 wastewater service from the publicly owned utility. The local 369 agency or its publicly owned utility may use its established 370 collection policies and remedies provided under law to enforce 371 collection of the utility project charge. A customer liable for 372 a utility project charge may not withhold payment, in whole or 373 in part, thereof. 374 (g) The pledge of a utility project charge to secure 375 payment of utility cost containment bonds is irrevocable, and 376 the state, or any other entity, may not reduce, impair, or 377 otherwise adjust the utility project charge, except that the 378 authority shall implement the periodic adjustments to the 379 utility project charge as provided under this subsection. 380 (6) UTILITY PROJECT PROPERTY.— 381 (a) A utility project charge constitutes utility project 382 property on the effective date of the financing resolution 383 authorizing such utility project charge. Utility project 384 property constitutes property, including contracts for securing 385 utility cost containment bonds, regardless of whether the 386 revenues and proceeds arising with respect to the utility 387 project property have accrued. Utility project property shall 388 continuously exist as property for all purposes with all of the 389 rights and privileges of this section through the end of the 390 period provided in the financing resolution or until all 391 financing costs with respect to the related utility cost 392 containment bonds are paid in full, whichever occurs first. 393 (b) Upon the effective date of the financing resolution, 394 the utility project property is subject to a first-priority 395 statutory lien to secure the payment of the utility cost 396 containment bonds. 397 1. The lien secures the payment of all financing costs then 398 existing or subsequently arising to the holders of the utility 399 cost containment bonds, the trustees or representatives of the 400 holders of the utility cost containment bonds, and any other 401 entity specified in the financing resolution or the documents 402 relating to the utility cost containment bonds. 403 2. The lien attaches to the utility project property 404 regardless of the current ownership of the utility project 405 property, including any local agency or its publicly owned 406 utility, the authority, or any other person. 407 3. Upon the effective date of the financing resolution, the 408 lien is valid and enforceable against the owner of the utility 409 project property and all third parties, and additional public 410 notice is not required. 411 4. The lien is a continuously perfected lien on all 412 revenues and proceeds generated from the utility project 413 property regardless of whether the revenues or proceeds have 414 accrued. 415 (c) All revenues with respect to utility project property 416 related to utility cost containment bonds, including payments of 417 the utility project charge, shall be applied first to the 418 payment of the financing costs of the utility cost containment 419 bonds then due, including the funding of reserves for the 420 utility cost containment bonds. Any excess revenues shall be 421 applied as determined by the authority for the benefit of the 422 utility for which the utility cost containment bonds were 423 issued. 424 (7) UTILITY COST CONTAINMENT BONDS.— 425 (a) Utility cost containment bonds shall be issued within 426 the parameters of the financing provided by the authority 427 pursuant to this section. The proceeds of the utility cost 428 containment bonds made available to the local agency or its 429 publicly owned utility shall be used for the utility project 430 identified in the application for financing of the utility 431 project or used to refinance indebtedness of the local agency 432 which financed or refinanced utility projects. 433 (b) Utility cost containment bonds shall be issued as set 434 forth in this section and s. 163.01(7)(g)8., Florida Statutes, 435 and may be validated pursuant to s. 163.01(7)(g)9., Florida 436 Statutes. 437 (c) The authority shall pledge the utility project property 438 as security for the payment of the utility cost containment 439 bonds. All rights of an authority with respect to utility 440 project property pledged as security for the payment of utility 441 cost containment bonds shall be for the benefit of, and 442 enforceable by, the beneficiaries of the pledge to the extent 443 provided in the financing documents relating to the utility cost 444 containment bonds. 445 1. If utility project property is pledged as security for 446 the payment of utility cost containment bonds, the local agency 447 or its publicly owned utility shall enter into a contract with 448 the authority which requires, at a minimum, that the publicly 449 owned utility: 450 a. Continue to operate its publicly owned utility, 451 including the utility project that is being financed or 452 refinanced; 453 b. Collect the utility project charge from customers for 454 the benefit and account of the authority and the beneficiaries 455 of the pledge of the utility project charge; and 456 c. Separately account for and remit revenue from the 457 utility project charge to, or for the account of, the authority. 458 2. The pledge of a utility project charge to secure payment 459 of utility cost containment bonds is irrevocable, and the state 460 or any other entity may not reduce, impair, or otherwise adjust 461 the utility project charge, except that the authority shall 462 implement periodic adjustments to the utility project charge as 463 provided under subsection (5). 464 (d) Utility cost containment bonds shall be nonrecourse to 465 the credit or any assets of the local agency or the publicly 466 owned utility but are payable from, and secured by a pledge of 467 the utility project property relating to the utility cost 468 containment bonds and any additional security or credit 469 enhancement specified in the documents relating to the utility 470 cost containment bonds. If, pursuant to subsection (4), the 471 authority is financing the project through a single-purpose 472 limited liability company, the utility cost containment bonds 473 shall be payable from, and secured by, a pledge of amounts paid 474 by the company to the authority from the applicable utility 475 project property. This paragraph is the exclusive method of 476 perfecting a pledge of utility project property by the company 477 securing the payment of financing costs under any agreement of 478 the company in connection with the issuance of utility cost 479 containment bonds. 480 (e) The issuance of utility cost containment bonds does not 481 obligate the state or any political subdivision thereof to levy 482 or to pledge any form of taxation to pay the utility cost 483 containment bonds or to make any appropriation for their 484 payment. Each utility cost containment bond must contain on its 485 face a statement in substantially the following form: 486 487 “Neither the full faith and credit nor the taxing power of the 488 State of Florida or any political subdivision thereof is pledged 489 to the payment of the principal of, or interest on, this bond.” 490 491 (f) Notwithstanding any other law or this section, a 492 financing resolution or other resolution of the authority, or 493 documents relating to utility cost containment bonds, the 494 authority may not rescind, alter, or amend any resolution or 495 document that pledges utility cost charges for payment of 496 utility cost containment bonds. 497 (g) Subject to the terms of any pledge document created 498 under this section, the validity and relative priority of a 499 pledge is not defeated or adversely affected by the commingling 500 of revenues generated by the utility project property with other 501 funds of the local agency or the publicly owned utility 502 collecting a utility project charge on behalf of an authority. 503 (h) Financing costs in connection with utility cost 504 containment bonds are a special obligation of the authority and 505 do not constitute a liability of the state or any political 506 subdivision thereof. Financing costs are not a pledge of the 507 full faith and credit of the state or any political subdivision 508 thereof, including the authority, but are payable solely from 509 the funds identified in the documents relating to the utility 510 cost containment bonds. This paragraph does not preclude 511 guarantees or credit enhancements in connection with utility 512 cost containment bonds. 513 (i) Except as otherwise provided in this section with 514 respect to adjustments to a utility project charge, the recovery 515 of the financing costs for the utility cost containment bonds 516 from the utility project charge is irrevocable, and the 517 authority does not have the power, by rescinding, altering, or 518 amending the applicable financing resolution, to revalue or 519 revise for ratemaking purposes the financing costs of utility 520 cost containment bonds; to determine that the financing costs 521 for the related utility cost containment bonds or the utility 522 project charge is unjust or unreasonable; or to in any way, 523 either directly or indirectly, reduce or impair the value of 524 utility project property that includes the utility project 525 charge. The amount of revenues arising with respect to the 526 financing costs for the related utility cost containment bonds 527 or the utility project charge is not subject to reduction, 528 impairment, postponement, or termination for any reason until 529 all financing costs to be paid from the utility project charge 530 are fully met and discharged. 531 (j) Except as provided in subsection (5) with respect to 532 adjustments to a utility project charge, the state pledges and 533 agrees with the owners of utility cost containment bonds that 534 the state may not limit or alter the financing costs or the 535 utility project property, including the utility project charge, 536 relating to the utility cost containment bonds, or any rights 537 related to the utility project property, until all financing 538 costs with respect to the utility cost containment bonds are 539 fully met and discharged. This paragraph does not preclude 540 limitation or alteration if adequate provision is made by law to 541 protect the owners. The authority may include the state’s pledge 542 in the governing documents for utility cost containment bonds. 543 (8) LIMITATION ON DEBT RELIEF.—Notwithstanding any other 544 law, an authority that issued utility cost containment bonds may 545 not, and a governmental officer or organization may not 546 authorize the authority to, become a debtor under the United 547 States Bankruptcy Code or become the subject of any similar case 548 or proceeding under any other state or federal law if any 549 payment obligation from utility project property remains with 550 respect to the utility cost containment bonds. 551 (9) CONSTRUCTION.—This section and all grants of power and 552 authority in this section shall be liberally construed to 553 effectuate their purposes. All incidental powers necessary to 554 carry this section into effect are expressly granted to, and 555 conferred upon, public entities. 556 Section 2. This act shall take effect July 1, 2016.