H.B. 251

1

AUDITING OF LEASES RELATED TO
2 REVENUE BONDS
3 2007 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Neil A. Hansen
6 Senate Sponsor: ____________
7
8 LONG TITLE
9 General Description:
10 This bill modifies the Local Government Bonding Act to require certain contract
11 clauses related to the financial condition of a private entity that is making lease
12 payments pledged to pay the principal or interest on revenue bonds.
13 Highlighted Provisions:
14 This bill:
15 . requires that any new contract or agreement between a local political subdivision
16 and a private entity that involves lease payments where the lease revenue is pledged
17 for payment of a revenue bond include provisions that allow the local political
18 subdivision to:
19 . independently assess the ability of the private entity to meet its financial
20 obligations; and
21 . rescind or amend the contract or agreement if the assessment finds that the
22 private entity is or will be unable to meet its financial obligations and the local
23 political subdivision determines that rescission or amendment is necessary to
24 protect its financial interests;
25 . requires the local political subdivision to ensure that the independent assessment is
26 conducted before entering into a new contract or agreement and at least annually on
27 existing contracts;

28 . requires the independent assessment to be performed using audited financial
29 statements provided by the private entity;
30 . requires the audited financial statements to include an opinion by an independent
31 certified public accountant indicating that the financial statements are fairly stated
32 in accordance with accounting principles adopted by the Federal Accounting
33 Standards Board; and
34 . requires that the independent assessment determine whether there are adequate
35 available net assets or a reasonable expectation of sufficient future cash flows and
36 revenues in excess of expenses to provide for the lease payments during the next
37 reporting period.
38 Monies Appropriated in this Bill:
39 None
40 Other Special Clauses:
41 None
42 Utah Code Sections Affected:
43 ENACTS:
44 11-14-318, Utah Code Annotated 1953
45
46 Be it enacted by the Legislature of the state of Utah:
47 Section 1. Section 11-14-318 is enacted to read:
48 11-14-318. Contract with private entities -- Lease payments for revenue bonds --
49 Independent assessment of financial ability -- Opinion by independent certified public
50 accountant.
51 (1) Beginning July 1, 2007, any contract or agreement between a local political
52 subdivision and a private entity shall include provisions that allow the local political
53 subdivision to:
54 (a) independently assess, as provided under Subsection (2), the ability of the private
55 entity to meet its financial obligations to the local political subdivision if the contract or
56 agreement involves lease payments, the revenue from which is pledged for the payment of
57 principal or interest on a revenue bond; and
58 (b) rescind or amend the contract or agreement if:

59 (i) the independent assessment performed under Subsection (1)(a) produces a finding
60 that the private entity is unable to meet its lease payments to the local political subdivision; and
61 (ii) based on the assessment performed under Subsection (1)(a), the local political
62 subdivision determines that the rescission or amendment is necessary to protect the financial
63 interests of the local political subdivision.
64 (2) The local political subdivision shall ensure the independent assessment under
65 Subsection (1)(a) is conducted:
66 (a) before entering into a new contract or agreement;
67 (b) at least annually on an existing contract or agreement; and
68 (c) using audited financial statements provided by the private entity.
69 (3) The audited financial statements shall include an opinion by an independent
70 certified public accountant indicating the financial statements are fairly stated in accordance
71 with generally accepted accounting principles adopted by the Federal Accounting Standards
72 Board.
73 (4) The independent assessment shall determine whether there are adequate available
74 net assets or a reasonable expectation of sufficient future cash flows and revenues in excess of
75 expenses to provide for the lease payments through the date of the next scheduled independent
76 assessment.




Legislative Review Note
as of 11-22-06 8:03 AM

Office of Legislative Research and General Counsel