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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


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