SB217INTRODUCED
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SB217
W11HW99-1
By Senator Orr
RFD: County and Municipal Government
First Read: 04-Mar-25
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5 W11HW99-1 03/04/2025 KMS (L)evp 2025-1146
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First Read: 04-Mar-25
SYNOPSIS:
Existing law requires a county to complete a
county government bond financing review form that is
prepared by the Department of Examiners of Public
Accounts when executing a bond financing agreement that
acknowledges that the county has considered the
relevant factors important to the decision of entering
into bonded indebtedness. The form must be submitted to
the Department of Examiners of Public Accounts and made
available for public inspection.
This bill would require the bond financing
agreement documents to include a schedule of all of the
debt obligations of the county for the time span of the
maturity of the debt obligation at issue and would
require the chair of the county commission and the
authorized signatory for the bond underwriter to sign
an acknowledgment that the total amount of debt
obligations and a schedule of the total debt payments
have been presented and explained to all members of the
county commission prior to the sale of bonds.
This bill would add to the county government
bond financing review form a statement acknowledging
that the county commission has received from the bond
underwriter a potential debt service schedule for all
county debt for the time span of the maturity of the
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county debt for the time span of the maturity of the
debt obligation at issue and has been advised of the
ability of the county to pay all of the debt
obligations.
This bill would require a municipality to follow
the same procedures required of a county before
entering into a bond financing agreement and would
require the municipality to complete a government bond
financing review form developed by the Department of
Examiners of Public Accounts when executing a bond
financing agreement acknowledging that the municipality
has considered the relevant factors important to the
decision of entering into bonded indebtedness.
This bill would also require that the form be
submitted to the Department of Examiners of Public
Accounts and made available for public inspection.
A BILL
TO BE ENTITLED
AN ACT
To amend Sections 11-8A-3 and 11-8A-4, Code of Alabama
1975, relating to the county government bond financing review
form; to require the bond financing agreement documents to
include a schedule of all of the debt obligations of the
county under certain conditions; to require the chair of the
county commission and the authorized signatory for the bond
underwriter to sign an acknowledgement that the total amount
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underwriter to sign an acknowledgement that the total amount
of debt obligations and a schedule of the total debt payments
have been presented and explained to the county commission; to
add a statement to the county government bond financing review
form acknowledging that the county commission has received the
debt service schedule under certain conditions; to require
that a municipality would follow the same procedures required
of a county before entering into a bond financing agreement
and would complete a government bond financing review form
developed by the Department of Examiners of Public Accounts;
and to require that the form be submitted to the Department of
Examiners of Public Accounts and be made available for public
inspection.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 11-8A-3 and 11-8A-4 of the Code of
Alabama 1975, are amended to read as follows:
"§11-8A-3
(a) In addition to any and all other documents
presented for examination and execution of a bond financing
agreement which, for the purposes of this chapter, takes place
at the time a county commission makes an official award of the
bonds, the county commission shall execute a county government
bond financing review form. The standard review form shall be
prepared by the Department of Examiners of Public Accounts and
shall include statements to the effect that:
(1) The county commission has considered whether it can
satisfy its financial obligations for the life of the bonds.
(2) In the case of limited obligation indebtedness, the
county commission has identified the source for the debt
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county commission has identified the source for the debt
service payments for the life of the bonds, and in the case of
general obligation indebtedness, the county commission has
indicated that the full faith and credit of the county has
been pledged for the debt service payments for the life of the
bonds.
(3) The county commission has considered the period of
usefulness of the improvement or property for which the bonds
are to be issued in light of the duration of the term of the
bonds under the bond financing agreement.
(4) The county commission acknowledges that bond
proceeds shall not be used for general operating expenses of
the county.
(5) The county commission has received from the bond
underwriter, bond counsel, issuer's counsel, trustee, and any
others associated with the issuance of bonds an itemized
listing of their respective fees and all other costs which
shall not be subject to change prior to the sale or issuance
of bonds.
(6) The county commission has received from the bond
underwriter a clear and understandable written proposal
explaining all details of the proposed bond issue, its
repayment schedule, and any external factors which could
affect the total cost to the county if it issues the bonds.
(7) The county commission has considered the effect, if
any, that the bonds will have on the county's constitutional
debt limit.
(8) The county commission has received from the bond
underwriter information demonstrating that the estimated
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underwriter information demonstrating that the estimated
interest rate on the bonds is reasonable and, that if
information regarding similar recent issuances is available,
the interest rates are comparable with other similar issuances
based on current bond market conditions on the date of
execution of the bond financing agreement.
(9) The county commission has received from the bond
underwriter a separate document of the potential debt service
schedule for all county debt for the time span of the maturity
of the debt obligation at issue and has been advised of the
ability of the county to pay all of the debt obligations.
(b) If the proceeds of the proposed bonds are to be
used in whole or in part for the purpose of refinancing or
refunding outstanding bonds, the county government bond
financing review form shall also include statements to the
effect that:
(1) The county commission understands how the issuance
of refunding bonds may extend the county's initial debt
repayment period and the total cost paid by the county by the
end of the refunding period.
(2) The county commission has considered whether the
refunding bonds will create net present value savings for the
county, including the costs of refinancing.
(c) In connection with a swap agreement, the county
government bond financing review form shall include statements
to the effect that:
(1) The county commission has complied with paragraph
a. of subdivision (2) of Section 41-1-42 (2)a.
(2) The county commission has reviewed or had explained
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(2) The county commission has reviewed or had explained
by the adviser selected as provided in Section 11-8A-5 all
documentation provided pertaining to the swap agreement as
required in subsection (d).
(3) The county commission has designated an employee or
official who will have primary responsibility for the
consideration, execution, and monitoring of interest rate
swaps and financial hedges entered into by the county.
(4) The county commission has determined whether the
county's obligations under the swap agreement constitute a
general obligation indebtedness of the county and whether the
source of payment is sufficient.
(5) The county commission has sought and received
specific information disclosing the potential risks inherent
in the swap agreement including those risks commonly referred
to in the derivatives industry as basis risk, tax risk,
interest rate risk, counterparty risk, termination risk,
market-access risk, rollover or anticipation risk, and credit
risk.
(d) The county government bond financing review form
shall also include a statement acknowledging that all
enumerated items on the review form have been considered by
the county commission, and that the county commission has
voted to enter into the bond financing agreement or swap
agreement by an affirmative vote of a majority of the members
of the county commission. The statement of acknowledgment
shall be signed by the chair of the county commission or
another commission member designated by the county commission
and the adviser or consultant utilized by the county
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and the adviser or consultant utilized by the county
commission pursuant to Section 11-8A-5.
(e) A copy of the county government bond financing
review form shall be forwarded to the Department of Examiners
of Public Accounts within 10 business days of the issuance of
the bonds or swap agreement. All county government bond
financing review forms shall be kept on file at the department
and shall be available for public inspection for a period of
seven years."
"§11-8A-4
(a) In addition to the requirements of Section 11-8A-3,
the bond financing agreement documents shall include a
detailed itemization of the costs and fees which will be paid
directly by the county commission or from bond proceeds under
the bond financing agreement. This itemization shall include a
statement acknowledging that the amounts of these costs and
fees have been presented and explained to all members of the
county commission prior to the sale of bonds. The
acknowledgement statement shall be signed by the chair of the
county commission or another commission member designated by
the county commission and by the authorized signatory for the
bond underwriter.
(b) In addition to the requirements of Section 11-8A-3,
the bond financing agreement documents shall include a
schedule of all the debt obligations of the county for the
time span of the maturity of the debt obligations at issue.
This schedule shall include a statement acknowledging that the
total amount of all debt obligations and a schedule of the
total debt payments have been presented and explained to all
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total debt payments have been presented and explained to all
members of the county commission prior to the sale of bonds.
The acknowledgement statement shall be signed by the chair of
the county commission or another commission member designated
by the county commission and by the authorized signatory for
the bond underwriter.
(b)(c) In connection with a swap agreement, the
documentation necessary to effectuate the swap agreement shall
also include a statement from the authorized signatory for the
bond underwriter or authorized signatory of the provider of
the swap agreement to the effect that:
(1) It has provided the county commission with a
disclosure of the potential risks inherent in the swap
agreement.
(2) It has disclosed all fees associated with the swap
agreement.
(3) It has provided the county commission with
documentation necessary to effectuate the swap agreement
including master agreements, schedules, credit support
annexes, confirmations, legal opinions, fairness opinions, and
any other information necessary to comply with subdivisions
(3) and (5) of subsection (c) of Section 11-8A-3 (c)(3) and
Section 11-8A-3(c)(5) ."
Section 2. For the purposes of Sections 2 through 7,
the following terms shall have the following meanings:
(1) BOND FINANCING AGREEMENT. An agreement or other
document relating to the sale or issuance of bonds including,
but not limited to, a bond purchase agreement, a loan
agreement, a refinancing agreement, or documents providing for
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agreement, a refinancing agreement, or documents providing for
bonds sold or issued on a competitive sale basis.
(2) BONDS. Bonds, bond anticipation notes, warrants,
warrant anticipation notes, or indebtedness issued or entered
into on behalf of a municipality for a term of at least three
years or more.
(3) BUSINESS DAY. A day, other than a Saturday or a
Sunday, on which commercial banking institutions are open for
business in this state and a day on which the payment system
of the Federal Reserve System is operational.
(4) CAPITAL EXPENDITURE. Any cost or expense of a type
that is properly chargeable to a capital account under general
federal income tax principles.
(5) GENERAL OBLIGATION INDEBTEDNESS. A bond financing
agreement which, according to its terms, will be repaid from
any funds at the disposal of the municipality.
(6) GENERAL OPERATING EXPENSES. Any expense incurred by
a municipality in the general operation and function of the
municipality. The term includes salaries and other associated
expenses, but does not include a capital expenditure or
expense.
(7) LIMITED OBLIGATION INDEBTEDNESS. Bonds which,
according to their terms, are required to be paid solely from
the proceeds of a specific tax, fee, license, charge, or other
specific revenue stream.
(8) NET PRESENT VALUE SAVINGS. The projected cost
savings to the municipality from refinancing any bonds, by
comparing the net present value of the costs of the bonds
proposed for refunding, including the original costs of
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proposed for refunding, including the original costs of
issuance and the payment of principal and interest on the
bonds proposed for refunding, with the net present value of
the costs of the proposed bonds, including the costs of
issuance and refinancing and the payment of principal and
interest on the proposed bonds.
(9) SWAP AGREEMENT. A swap agreement as defined in
Article 3 of Chapter 1 of Title 41, Code of Alabama 1975.
Section 3. Notwithstanding any other provision of law,
after October 1, 2024, no municipality may enter into any bond
financing agreement or other transaction related to
establishing bonded indebtedness that constitutes or creates
an obligation, debt, or charge against the credit or taxing
power of the municipality until and unless the municipality
has satisfied the requirements of Sections 2 through 6.
Section 4. (a) In addition to any and all other
documents presented for examination and execution of a bond
financing agreement which, for the purposes of Sections 2
through 6, takes place at the time a municipality makes an
official award of the bonds, the municipality shall execute a
government bond financing review form. The standard review
form shall be prepared by the Department of Examiners of
Public Accounts and shall include statements to the effect
that:
(1) The municipality has considered whether it can
satisfy its financial obligations for the life of the bonds.
(2) In the case of limited obligation indebtedness, the
municipality has identified the source for the debt service
payments for the life of the bonds and, in the case of general
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payments for the life of the bonds and, in the case of general
obligation indebtedness, the municipality has indicated that
the full faith and credit of the municipality has been pledged
for the debt service payments for the life of the bonds.
(3) The municipality has considered the period of
usefulness of the improvement or property for which the bonds
are to be issued in light of the duration of the term of the
bonds under the bond financing agreement.
(4) The municipality acknowledges that bond proceeds
shall not be used for general operating expenses of the
municipality.
(5) The municipality has received from the bond
underwriter, bond counsel, issuer's counsel, trustee, and any
others associated with the issuance of bonds an itemized
listing of his or her respective fees and all other costs
which shall not be subject to change prior to the sale or
issuance of bonds.
(6) The municipality has received from the bond
underwriter a clear and understandable written proposal
explaining all details of the proposed bond issue, its
repayment schedule, and any external factors which could
affect the total cost to the municipality if it issues the
bonds.
(7) The municipality has considered the effect, if any,
that the bonds will have on the municipality's constitutional
debt limit.
(8) The municipality has received from the bond
underwriter information demonstrating that the estimated
interest rate on the bonds is reasonable and, that if
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interest rate on the bonds is reasonable and, that if
information regarding similar recent issuances is available,
the interest rates are comparable with other similar issuances
based on current bond market conditions on the date of
execution of the bond financing agreement.
(9) The municipality has received from the bond
underwriter a separate document of the potential debt service
schedule for all municipality debt for the time span of the
maturity of the debt obligation at issue and has been advised
of the ability of the municipality to pay all of the debt
obligations.
(b) If the proceeds of the proposed bonds are to be
used in whole or in part for the purpose of refinancing or
refunding outstanding bonds, the government bond financing
review form shall also include statements to the effect that:
(1) The municipality understands how the issuance of
refunding bonds may extend the municipality's initial debt
repayment period and the total cost paid by the municipality
by the end of the refunding period.
(2) The municipality has considered whether the
refunding bonds will create net present value savings for the
municipality, including the costs of refinancing.
(c) In connection with a swap agreement, the government
bond financing review form shall include statements to the
effect that:
(1) The municipality has complied with Section
41-1-42(2)a., Code of Alabama 1975.
(2) The municipality has reviewed or had explained by
the adviser selected as provided in Section 6 all
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the adviser selected as provided in Section 6 all
documentation provided pertaining to the swap agreement as
required in subsection (d).
(3) The municipality has designated an employee or
official who will have primary responsibility for the
consideration, execution, and monitoring of interest rate
swaps and financial hedges entered into by the municipality.
(4) The municipality has determined whether the
municipality's obligations under the swap agreement constitute
a general obligation indebtedness of the municipality and
whether the source of payment is sufficient.
(5) The municipality has sought and received specific
information disclosing the potential risks inherent in the
swap agreement, including those risks commonly referred to in
the derivatives industry as basis risk, tax risk, interest
rate risk, counterparty risk, termination risk, market-access
risk, rollover or anticipation risk, and credit risk.
(d) The government bond financing review form shall
also include a statement acknowledging that all enumerated
items on the review form have been considered by the
municipality, and that the municipality has voted to enter
into the bond financing agreement or swap agreement by an
affirmative vote of a majority of the members of the city
council of the municipality. The statement of acknowledgment
shall be signed by the chair of the city council of the
municipality or another member designated by the municipality
and the adviser or consultant utilized by the municipality
pursuant to Section 6.
(e) A copy of the government bond financing review form
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(e) A copy of the government bond financing review form
shall be forwarded to the Department of Examiners of Public
Accounts within 10 business days of the issuance of the bonds
or swap agreement. All government bond financing review forms
shall be kept on file at the Department of Examiners of Public
Accounts and shall be available for public inspection for a
period of seven years.
Section 5. (a) In addition to the requirements of
Section 4, the bond financing agreement documents shall
include a detailed itemization of the costs and fees which
will be paid directly by the municipality or from bond
proceeds under the bond financing agreement. This itemization
shall include a statement acknowledging that the amounts of
these costs and fees have been presented and explained to all
members of the city council of the municipality prior to the
sale of bonds. The acknowledgement statement shall be signed
by the chair of the city council or another member designated
by the municipality and by the authorized signatory for the
bond underwriter.
(b) In addition to the requirements of Section 4, the
bond financing agreement documents shall include a schedule of
all of the debt obligations of the municipality for the time
span of the maturity of the debt obligation at issue. This
schedule shall include a statement acknowledging that the
total amount of all debt obligations and a schedule of the
total debt payments have been presented and explained to all
members of the city council prior to the sale of bonds. The
acknowledgement statement shall be signed by the chair of the
city council or a member designated by the city council and by
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city council or a member designated by the city council and by
the authorized signatory for the bond underwriter.
(c) In connection with a swap agreement, the
documentation necessary to effectuate the swap agreement shall
also include a statement from the authorized signatory for the
bond underwriter or authorized signatory of the provider of
the swap agreement to the effect that:
(1) It has provided the municipality with a disclosure
of the potential risks inherent in the swap agreement.
(2) It has disclosed all fees associated with the swap
agreement.
(3) It has provided the municipality with documentation
necessary to effectuate the swap agreement including master
agreements, schedules, credit support annexes, confirmations,
legal opinions, fairness opinions, and any other information
necessary to comply with Section 4(c)(3) and Section 4(c)(5).
Section 6. In preparing the government bond financing
review form, the municipality shall consult with and obtain
advice from either an attorney for the municipality, or, at
the option of the municipality, a certified public accountant
regarding any and all bond or swap proposals received by the
municipality. The individual or individuals utilized by the
municipality for advice and consultation shall review all
documents to be included at the execution of the bond
financing agreement or swap agreement.
Section 7. The requirements of Sections 2 through 6
shall not apply with respect to any bond financing agreement
or other transaction related to incurring or establishing
bonded or other indebtedness that constitutes or creates an
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bonded or other indebtedness that constitutes or creates an
obligation, debt, or charge against the credit or taxing power
of a municipality, which obligation, debt, or charge is to be
incurred to finance improvements to, betterments, or expansion
of a gas, electric, water, sewer, or other utility system
owned or controlled by the municipality or is to be payable
from revenues or properties of a gas, electric, water, sewer,
or other utility system pledged or otherwise contractually
obligated to the payment of the obligation, debt, or charge.
Section 8. This act shall become effective on October
1, 2024.
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