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H.B. 28

             1     

INDEPENDENT ENTITIES ACT

             2     
2001 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Ron Bigelow

             5      This act creates the Independent Entities Code, including definitions. This act recodifies
             6      certain existing provisions and creates additional regulations relating to independent entities.
             7      This act creates an Independent Corporations Act. This act takes effect on July 1, 2002.
             8      This act affects sections of Utah Code Annotated 1953 as follows:
             9      ENACTS:
             10          63E-1-101, Utah Code Annotated 1953
             11          63E-1-102, Utah Code Annotated 1953
             12          63E-1-201, Utah Code Annotated 1953
             13          63E-1-202, Utah Code Annotated 1953
             14          63E-1-203, Utah Code Annotated 1953
             15          63E-1-301, Utah Code Annotated 1953
             16          63E-1-302, Utah Code Annotated 1953
             17          63E-1-303, Utah Code Annotated 1953
             18          63E-1-401, Utah Code Annotated 1953
             19          63E-1-402, Utah Code Annotated 1953
             20          63E-1-403, Utah Code Annotated 1953
             21          63E-1-404, Utah Code Annotated 1953
             22          63E-2-101, Utah Code Annotated 1953
             23          63E-2-102, Utah Code Annotated 1953
             24          63E-2-103, Utah Code Annotated 1953
             25          63E-2-104, Utah Code Annotated 1953
             26          63E-2-105, Utah Code Annotated 1953
             27          63E-2-106, Utah Code Annotated 1953


             28          63E-2-107, Utah Code Annotated 1953
             29          63E-2-108, Utah Code Annotated 1953
             30          63E-2-109, Utah Code Annotated 1953
             31          63E-2-110, Utah Code Annotated 1953
             32          63E-2-111, Utah Code Annotated 1953
             33      Be it enacted by the Legislature of the state of Utah:
             34          Section 1. Section 63E-1-101 is enacted to read:
             35     
TITLE 63E. INDEPENDENT ENTITIES CODE

             36     
CHAPTER 1. INDEPENDENT ENTITIES ACT

             37     
Part 1. General Provisions

             38          63E-1-101. Title.
             39          (1) This title is known as the "Independent Entities Code."
             40          (2) This chapter is known as the "Independent Entities Act."
             41          Section 2. Section 63E-1-102 is enacted to read:
             42          63E-1-102. Definitions.
             43          As used in this title:
             44          (1) "Authorizing statute" means the statute creating an entity as an independent entity.
             45          (2) "Committee" means the Legislative Independent Entities Committee created in Section
             46      63E-1-201 .
             47          (3) "Independent corporation" means a corporation incorporated in accordance with
             48      Chapter 2, Independent Corporations Act.
             49          (4) (a) "Independent entity" means an entity having a public purpose relating to the state
             50      or its citizens that is h INDIVIDUALLY h created by the state or is given by the state the right to exist
             50a      and conduct its
             51      affairs as an:
             52          (i) independent state agency; or
             53          (ii) independent corporation.
             54          (b) "Independent entity" includes the:
             55          (i) Dairy Commission created in Title 4, Chapter 22, Dairy Promotion Act;
             56          (ii) Utah Technology Finance Corporation created in Title 9, Chapter 13, Utah Technology
             57      and Small Business Finance Act;
             58          (iii) Heber Valley Railroad Authority created in Title 9, Chapter 3, Part 3, Heber Valley


             59      Historic Railroad Authority;
             60          (iv) Utah Science Center Authority created in Title 9, Chapter 3, Part 4, Utah Science
             61      Center Authority;
             62          (v) Utah Housing Finance Agency created in Title 9, Chapter 4, Part 9, Utah Housing
             63      Finance Agency Act;
             64          (vi) Utah State Fair Corporation created in Title 9, Chapter 4, Part 11, Utah State Fair
             65      Corporation Act;
             66          (vii) Workers' Compensation Fund created in Title 31A, Chapter 33, Workers'
             67      Compensation Fund;
             68          (viii) Utah State Retirement Office created in Title 49, Chapter 1, Part 2, Retirement Office
             69      and Board;
             70          (ix) School and Institutional Trust Lands Administration created in Title 53C, Chapter 1,
             71      Part 2, School and Institutional Trust Lands Administration; and
             72          (x) Utah Communications Agency Network created in Title 63C, Chapter 7, Utah
             73      Communications Agency Network Act.
             74          (c) Notwithstanding this Subsection (4), "independent entity" does not include:
             75          (i) the Public Service Commission of Utah created in Section 54-1-1 ;
             76          (ii) an institution within the state system of higher education;
             77          (iii) a city, county, or town;
             78          (iv) a local school district;
             79          (v) a special district created under the authority of Title 17A, Special Districts; or
             80          (vi) a local district created under the authority of Title 17B, Limited Purpose Local
             81      Government Entities.
             82          (5) "Independent state agency" means an entity that is created by the state, but is
             83      independent of the governor's direct supervisory control.
             84          (6) "Monies held in trust" means monies maintained for the benefit of:
             85          (a) one or more private individuals, including public employees;
             86          (b) one or more public or private entities; or
             87          (c) the owners of a quasi-public corporation.
             88          (7) "Public corporation" means an artificial person, public in ownership, h INDIVIDUALLY h
             88a      created h BY THE STATE h as a body
             89      politic and corporate for the administration of a public purpose relating to the state or its citizens.


             90          (8) "Quasi-public corporation" means an artificial person, private in ownership,
             90a      h INDIVIDUALLY h created
             91      as a corporation h BY THE STATE h which has accepted from the state the grant of a franchise or
             91a      contract involving
             92      the performance of a public purpose relating to the state or its citizens.
             93          Section 3. Section 63E-1-201 is enacted to read:
             94     
Part 2. Legislative Committee

             95          63E-1-201. Legislative Independent Entities Committee creation.
             96          (1) There is created a Legislative Independent Entities Committee composed of 14
             97      legislators appointed as follows:
             98          (a) five senators, appointed by the president of the Senate, with at least two senators from
             99      the minority party; and
             100          (b) nine representatives, appointed by the speaker of the House of Representatives, with
             101      at least three representatives from the minority party.
             102          (2) (a) The president of the Senate shall designate one of the Senate appointees as a cochair
             103      of the committee.
             104          (b) The speaker of the House of Representatives shall designate one of the House of
             105      Representatives appointees as a cochair of the committee.
             106          (3) Committee members serve for two years, but may be reappointed by the speaker or the
             107      president.
             108          (4) The committee shall meet at least twice each year, but may meet more frequently if the
             109      chairs determine that additional meetings are needed.
             110          (5) In conducting all of its business, the committee shall comply with the rules of
             111      legislative interim committees.
             112          (6) The Office of Legislative Research and General Counsel shall provide staff services
             113      to the committee.
             114          (7) Salaries and expenses of legislative committee members shall be paid in accordance
             115      with:
             116          (a) Section 36-2-2 ; and
             117          (b) Legislative Joint Rule 15.03.
             118          Section 4. Section 63E-1-202 is enacted to read:
             119          63E-1-202. Duties of the committee.
             120          (1) The committee shall:


             121          (a) study the scope of this title and determine what entities should be treated under this title
             122      as independent entities;
             123          (b) study the provisions of the Utah Code that govern each independent entity, including
             124      whether or not there should be consistency in these provisions;
             125          (c) study what provisions of the Utah Code, if any, from which each independent entity
             126      should be exempted;
             127          (d) study whether or not the state should receive services from or provide services to each
             128      independent entity;
             129          (e) request and hear reports from each independent entity;
             130          (f) review the annual audit of each independent entity that is performed in accordance with
             131      the statutes governing the independent entity;
             132          (g) comply with Part 3, Creation of Independent Entities, in reviewing a proposal to create
             133      a new independent entity;
             134          (h) if the committee recommends a change in the organizational status of an independent
             135      entity as provided in Subsection (2) and subject to Part 4, Privatization of Independent Entities,
             136      recommend the appropriate method of changing the organizational status of the independent entity;
             137          (i) study the following concerning an entity created by local agreement under Title 11,
             138      Chapter 13, Interlocal Cooperation Act, if the state is a party to the agreement creating the entity:
             139          (i) whether or not the entity should be subject to this chapter;
             140          (ii) whether or not the state should receive services from or provide services to the entity;
             141          (iii) reporting and audit requirements for the entity; and
             142          (iv) the need, if any, to modify statutes related to the entity;
             143          (j) make a recommendation on the organizational status of each independent entity prior
             144      to the 2002 General Session; and
             145          (k) report annually to the Legislative Management Committee by no later than the
             146      Legislative Management Committee's November meeting.
             147          (2) The committee may:
             148          (a) establish a form for any report required under Subsection (1);
             149          (b) make recommendations to the Legislature concerning the organizational status of an
             150      independent entity;
             151          (c) advise the Legislature concerning issues involving independent entities; and


             152          (d) study issues related to the implementation of Title 49, Utah State Retirement Act.
             153          Section 5. Section 63E-1-203 is enacted to read:
             154          63E-1-203. Exemptions from committee activities.
             155          Notwithstanding the other provisions of this Part 2 and Subsection 63E-1-102 (4), the
             156      following independent entities are exempt from the study by the committee under Section
             157      63E-1-202 :
             158          (1) the Utah Housing Finance Agency created in Title 9, Chapter 4, Part 9; and
             159          (2) the Workers' Compensation Fund created in Title 31A, Chapter 33.
             160          Section 6. Section 63E-1-301 is enacted to read:
             161     
Part 3. Creation of Independent Entities

             162          63E-1-301. Definitions.
             163          As used in this part, "Government requestor" means:
             164          (1) the governor;
             165          (2) an executive branch officer other than the governor;
             166          (3) an executive branch agency;
             167          (4) a legislator, including a legislative sponsor of legislation creating an independent
             168      entity; or
             169          (5) a legislative committee.
             170          Section 7. Section 63E-1-302 is enacted to read:
             171          63E-1-302. Review by committee required for creating an independent entity.
             172          (1) If a government requestor proposes that the Legislature create an independent entity,
             173      that government requestor shall request that the committee review the proposal.
             174          (2) After receiving a request for review under Subsection (1), the chairs of the committee:
             175          (a) shall schedule a meeting of the committee to review the proposal; and
             176          (b) may request information from executive and legislative branch entities and officers
             177      concerning the proposal including:
             178          (i) whether or not the proposed independent entity should be exempt from any state statute;
             179          (ii) the need for oversight of the proposed independent entity by an executive branch
             180      agency;
             181          (iii) the need for and requirements of audits of the proposed independent entity;
             182          (iv) the custody of the proposed independent entity's funds;


             183          (v) the legal representation of the proposed independent entity;
             184          (vi) whether or not the state should receive services from or provide services to the
             185      proposed independent entity; and
             186          (vii) the legal liability, if any, to the state if the proposed independent entity is created.
             187          (3) In requesting information from executive and legislative branch entities or officers
             188      under Subsection (2), the committee should specifically consider seeking information from:
             189          (a) the state auditor;
             190          (b) the state treasurer;
             191          (c) the attorney general;
             192          (d) the risk manager; and
             193          (e) the executive director of the Department of Administrative Services.
             194          Section 8. Section 63E-1-303 is enacted to read:
             195          63E-1-303. Recommendations of the committee.
             196          After the committee has reviewed a proposal to create an independent entity in accordance
             197      with Section 63E-1-302 , the committee shall make a report to the Legislature stating whether the
             198      committee:
             199          (1) recommends creation of the proposed independent entity;
             200          (2) recommends that the proposed independent entity not be created; or
             201          (3) makes no recommendation regarding the creation of the proposed independent entity.
             202          Section 9. Section 63E-1-401 is enacted to read:
             203     
Part 4. Privatization of Independent Entities

             204          63E-1-401. Definitions.
             205          As used in this part:
             206          (1) "Asset" means property of all kinds, real and personal, tangible and intangible, and
             207      includes:
             208          (a) cash, except reasonable compensation or salary for services rendered;
             209          (b) stock or other investments;
             210          (c) goodwill;
             211          (d) real property;
             212          (e) an ownership interest;
             213          (f) a license;


             214          (g) a cause of action; and
             215          (h) any similar property.
             216          (2) "Business interest" means:
             217          (a) holding the position of trustee, director, officer, or other similar position with a
             218      business entity; or
             219          (b) the ownership, either legally or equitably, of at least 10% of the outstanding shares of
             220      a corporation or 10% interest in any other business entity, being held by:
             221          (i) an individual;
             222          (ii) the individual's spouse;
             223          (iii) a minor child of the individual; or
             224          (iv) any combination of Subsections (2)(b)(i) through (iii).
             225          (3) "Interested party" means a person that held or holds the position of trustee, director,
             226      officer, or other similar position with an independent entity within:
             227          (a) five years prior to the date of an action described in Subsection (5); or
             228          (b) during the privatization of an independent entity.
             229          (4) "Lobbyist" is a person that provided or provides services as a lobbyist, as defined in
             230      Section 36-11-102 , within:
             231          (a) five years prior to the date of an action described in Subsection (5); or
             232          (b) during the privatization of an independent entity.
             233          (5) (a) "Privatized" means an action described in Subsection (5)(b) taken under
             234      circumstances in which the operations of the independent entity are continued by a successor entity
             235      that:
             236          (i) is privately owned;
             237          (ii) is unaffiliated to the state; and
             238          (iii) receives any asset of the independent entity.
             239          (b) An action referred to in Subsection (5)(a) includes:
             240          (i) the repeal of the authorizing statute of an independent entity and the revision to state
             241      laws to terminate the relationship between the state and the independent entity;
             242          (ii) the dissolution of the independent entity;
             243          (iii) the merger or consolidation of the independent entity with another entity; or
             244          (iv) the sale of all or substantially all of the assets of the independent entity.


             245          Section 10. Section 63E-1-402 is enacted to read:
             246          63E-1-402. Benefits to interested parties of an independent entity.
             247          (1) If an independent entity is privatized, the following may not receive any benefit
             248      prohibited under Subsection (2):
             249          (a) an interested party of the independent entity;
             250          (b) an entity in which an interested party holds a business interest;
             251          (c) a lobbyist of the independent entity; or
             252          (d) an entity in which a lobbyist of the independent entity holds a business interest.
             253          (2) If an independent entity is privatized:
             254          (a) a person described in Subsection (1)(a) or (b) may not receive:
             255          (i) compensation from an independent entity that is conditioned in whole or in part on:
             256          (A) the passage, defeat, or amendment of legislative action related to privatization; or
             257          (B) the approval, modification, or denial of an executive action related to privatization;
             258      or
             259          (ii) any asset of the independent entity or its successor; and
             260          (b) a person described in Subsection (1)(c) or (d) may not receive any:
             261          (i) compensation that if received by the lobbyist would be in violation of Section
             262      36-11-301 ; or
             263          (ii) asset of the independent entity or its successor.
             264          Section 11. Section 63E-1-403 is enacted to read:
             265          63E-1-403. Privatization process -- Audit.
             266          (1) If an independent entity seeks to privatize the independent entity, it shall:
             267          (a) submit to the Legislature recommended legislation to:
             268          (i) repeal the authorizing statute and revise state law as necessary to terminate its
             269      relationship to the state; and
             270          (ii) address the value of any interests the state holds in the independent entity and whether
             271      the state should receive compensation for those interests as part of privatization; and
             272          (b) be audited by the state auditor:
             273          (i) within one year prior to the effective date of legislation that repeals the authorizing
             274      statute to terminate the relationship between the independent entity and the state; and
             275          (ii) to determine the amount, nature, and source of revenues and assets of the independent


             276      entity.
             277          (2) The relationship between the state and an independent entity may not be terminated
             278      except by the repeal of the authorizing statute of the independent entity.
             279          Section 12. Section 63E-1-404 is enacted to read:
             280          63E-1-404. Penalties for violation.
             281          (1) A person who knowingly violates this part:
             282          (a) is guilty of a third degree felony if the combined value of any compensation or assets
             283      received by the person as a result of the violation is equal to or greater than $10,000; or
             284          (b) is guilty of a class A misdemeanor if the combined value of any compensation or assets
             285      received by the person as a result of the violation is less than $10,000.
             286          (2) (a) In addition to any penalty imposed under Subsection (1), a person that violates this
             287      part shall return to the successor of the independent entity any compensation or assets received in
             288      violation of this part.
             289          (b) If the assets received by the person in violation of this part are no longer in the
             290      possession of the person, the person shall pay the successor of the independent entity an amount
             291      equal to the fair market value of the asset at the time the person received the asset.
             292          (3) Notwithstanding Subsection 36-11-401 (3), if a lobbyist violates Subsection
             293      63E-1-402 (2)(b)(i), the lobbyist is guilty of the crime outlined in Subsection (1), which crime shall
             294      be determined by the value of compensation or assets received by the lobbyist.
             295          Section 13. Section 63E-2-101 is enacted to read:
             296     
CHAPTER 2. INDEPENDENT CORPORATIONS ACT

             297          63E-2-101. Title.
             298          This chapter is known as the "Independent Corporations Act."
             299          Section 14. Section 63E-2-102 is enacted to read:
             300          63E-2-102. Independent corporations.
             301          An independent corporation is granted a franchise to incorporate in this state in accordance
             302      with this title and its authorizing statute.
             303          Section 15. Section 63E-2-103 is enacted to read:
             304          63E-2-103. Public purpose -- Legislative findings.
             305          (1) Each independent corporation shall have a specific public purpose related to the state
             306      or its citizens stated in its authorizing statute.


             307          (2) Prior to enacting its authorizing statute, the Legislature shall make a finding that the
             308      independent corporation needs to be created by the state or be given by the state the right to exist
             309      and conduct its affairs as an independent corporation to serve its public purpose.
             310          (3) Prior to enacting an authorizing statute, the Legislature shall also make a finding that:
             311          (a) if the independent corporation receives ongoing state funding for operations, it:
             312          (i) performs a public purpose that is not performed by private entities; or
             313          (ii) acts as a trustee over monies held in trust;
             314          (b) if the independent corporation does not receive ongoing state funding for operations,
             315      it requires:
             316          (i) exemption from federal or state income tax to meet its public purpose; or
             317          (ii) the interest on its indebtedness to be exempt from federal or state income tax to meet
             318      its public purpose; or
             319          (c) the independent corporation is created by the Utah Constitution.
             320          Section 16. Section 63E-2-104 is enacted to read:
             321          63E-2-104. Legislative review.
             322           h (1) h Each independent corporation is subject to review by the Legislative Independent
             322a      Entities
             323      Committee in accordance with Chapter 1 of this title.
             323a           h (2) NOTWITHSTANDING SECTION 36-12-15, THE OFFICE OF LEGISLATIVE AUDITOR
             323b      GENERAL MAY CONDUCT COMPREHENSIVE AND SPECIAL PURPOSE AUDITS, EXAMINATIONS,
             323c      AND REVIEWS OF ANY INDEPENDENT CORPORATION.
             323d          (3) EACH INDEPENDENT CORPORATION
             323e      SHALL REPORT, AS REQUESTED, TO THE COMMITTEE ON MATTERS RELATED TO AUDITS. h
             324          Section 17. Section 63E-2-105 is enacted to read:
             325          63E-2-105. Boards.
             326          (1) As used in this section, "director" includes a trustee or other board member.
             327          (2) Each independent corporation shall be governed by a board of directors.
             328          (3) The authorizing statute of each independent corporation shall specify:
             329          (a) the process for appointing, removing, and replacing directors;
             330          (b) the number and terms of office for directors;
             331          (c) the board chair selection procedure;
             332          (d) board quorum requirements;
             333          (e) director qualifications; and
             334          (f) the duties and fiduciary responsibilities of directors.
             335          Section 18. Section 63E-2-106 is enacted to read:
             336          63E-2-106. Powers.
             337          Except as specifically modified in its authorizing statute each independent corporation shall


             338      have the power to:
             339          (1) exist as a:
             340          (a) public corporation; or
             341          (b) quasi-public corporation;
             342          (2) perform its stated public purpose;
             343          (3) sue and be sued in its own name;
             344          (4) retain and be represented by legal counsel independent of the attorney general;
             345          (5) create foundations or subsidiaries;
             346          (6) act in accordance with all other powers granted in its authorizing statute and by duly
             347      issued license or franchise;
             348          (7) act in all ways as a nonprofit corporation established under Title 16, Chapter 6a, Utah
             349      Revised Nonprofit Corporation Act, that do not conflict with:
             350          (a) this title;
             351          (b) the authorizing statute of the independent corporation; or
             352          (c) statutes and regulations to which the independent corporation is subject.
             353          Section 19. Section 63E-2-107 is enacted to read:
             354          63E-2-107. Prohibited participation.
             355          Except as specifically modified in its authorizing statute, each independent corporation may
             356      not participate in the:
             357          (1) issuance of bonds that are the obligation of the state; or
             358          (2) services provided to state agencies, including:
             359          (a) fuel dispensing;
             360          (b) motor pool services;
             361          (c) surplus property services;
             362          (d) risk management coverage;
             363          (e) information technology services; or
             364          (f) archive services.
             365          Section 20. Section 63E-2-108 is enacted to read:
             366          63E-2-108. Eligible participation.
             367          Except as specifically modified in its authorizing statute, each independent corporation may
             368      participate in the state retirement system.


             369          Section 21. Section 63E-2-109 is enacted to read:
             370          63E-2-109. State statutes.
             371          (1) Except as specifically modified in its authorizing statute, each independent corporation
             372      shall be exempt from the statutes governing state agencies, including:
             373          (a) Title 51, Chapter 5, Funds Consolidation Act;
             374          (b) Title 51, Chapter 7, State Money Management Act;
             375          (c) Title 63, Chapter 38, Budgetary Procedures Act;
             376          (d) Title 63, Chapter 38a, Revenue Procedures and Control Act;
             377          (e) Title 63, Chapter 46a, Utah Administrative Rulemaking Act;
             378          (f) Title 63, Chapter 46b, Administrative Procedures Act;
             379          (g) Title 63, Chapter 56, Utah Procurement Code;
             380          (h) Title 63A, Utah Administrative Services Code; and
             381          (i) Title 67, Chapter 19, Utah Personnel Management Act.
             382          (2) Except as specifically modified in its authorizing statute, each independent corporation
             383      shall be subject to:
             384          (a) Title 52, Chapter 4, Open and Public Meetings; and
             385          (b) Title 63, Chapter 2, Government Records Access and Management Act.
             386          (3) Each independent corporation board may adopt its own policies and procedures
             387      governing its:
             388          (a) funds management;
             389          (b) audits; and
             390          (c) personnel.
             391          Section 22. Section 63E-2-110 is enacted to read:
             392          63E-2-110. Budgetary and fiscal requirements.
             393          (1) The board of each independent corporation shall annually adopt a budget.
             394          (2) (a) All monies held in trust by an independent corporation are not public funds, even
             395      if they were public funds before those monies were received by the independent corporation.
             396          (b) The monies of an independent corporation are not required to be held in the custody
             397      of the state treasurer.
             398          Section 23. Section 63E-2-111 is enacted to read:
             399          63E-2-111. State liability.


             400          Except as expressly provided in this title or in an authorizing statute, the state is not liable
             401      for any independent corporation's obligations, expenses, debts, and liabilities.
             402          Section 24. Effective date.
             403          This act takes effect on July 1, 2002.




Legislative Review Note
    as of 11-30-00 9:34 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


Committee Note

The Quasi-Governmental Entities Committee recommended this bill.


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