Representative Johnny Anderson proposes the following substitute bill:


1     
INTERLOCAL ENTITIES REVISIONS

2     
2015 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Johnny Anderson

5     
Senate Sponsor: ____________

6     

7     LONG TITLE
8     General Description:
9          This bill enacts language related to property taxes levied and general obligation bonds
10     issued by an interlocal entity.
11     Highlighted Provisions:
12          This bill:
13          ▸     authorizes certain interlocal entities to issue general obligation bonds; and
14          ▸     authorizes certain interlocal entities to levy ad valorem property taxes.
15     Money Appropriated in this Bill:
16          None
17     Other Special Clauses:
18          This bill provides a coordination clause.
19     Utah Code Sections Affected:
20     AMENDS:
21          11-13-204 (Effective 05/12/15), as last amended by Laws of Utah 2014, Chapter 115
22     ENACTS:
23          11-13-218.5, Utah Code Annotated 1953
24          11-13-218.6, Utah Code Annotated 1953
25          11-13-218.7, Utah Code Annotated 1953

26          11-13-218.8, Utah Code Annotated 1953
27          11-13-218.9, Utah Code Annotated 1953
28     Utah Code Sections Affected by Coordination Clause:
29          11-13-218.5, Utah Code Annotated 1953
30          11-13-218.6, Utah Code Annotated 1953
31          11-13-218.7, Utah Code Annotated 1953
32          11-13-218.8, Utah Code Annotated 1953
33          11-13-218.9, Utah Code Annotated 1953
34     

35     Be it enacted by the Legislature of the state of Utah:
36          Section 1. Section 11-13-204 (Effective 05/12/15) is amended to read:
37          11-13-204 (Effective 05/12/15). Powers and duties of interlocal entities --
38     Additional powers of energy services interlocal entities -- Length of term of agreement
39     and interlocal entity -- Notice to lieutenant governor -- Recording requirements -- Public
40     Service Commission.
41          (1) (a) An interlocal entity:
42          (i) shall adopt bylaws, policies, and procedures for the regulation of its affairs and the
43     conduct of its business;
44          (ii) may:
45          (A) amend or repeal a bylaw, policy, or procedure;
46          (B) sue and be sued;
47          (C) have an official seal and alter that seal at will;
48          (D) make and execute contracts and other instruments necessary or convenient for the
49     performance of its duties and the exercise of its powers and functions;
50          (E) acquire real or personal property, or an undivided, fractional, or other interest in
51     real or personal property, necessary or convenient for the purposes contemplated in the
52     agreement creating the interlocal entity and sell, lease, or otherwise dispose of that property;
53          (F) directly or by contract with another:
54          (I) own and acquire facilities and improvements or an undivided, fractional, or other
55     interest in facilities and improvements;
56          (II) construct, operate, maintain, and repair facilities and improvements; and

57          (III) provide the services contemplated in the agreement creating the interlocal entity;
58          (G) borrow money, incur indebtedness, and issue revenue bonds, notes, or other
59     obligations and secure their payment by an assignment, pledge, or other conveyance of all or
60     any part of the revenues and receipts from the facilities, improvements, or services that the
61     interlocal entity provides;
62          (H) offer, issue, and sell warrants, options, or other rights related to the bonds, notes, or
63     other obligations issued by the interlocal entity; and
64          (I) sell or contract for the sale of the services, output, product, or other benefits
65     provided by the interlocal entity to:
66          (I) public agencies inside or outside the state; and
67          (II) with respect to any excess services, output, product, or benefits, any person on
68     terms that the interlocal entity considers to be in the best interest of the public agencies that are
69     parties to the agreement creating the interlocal entity; and
70          (iii) except as provided in Section 11-13-218.6, may not levy, assess, or collect ad
71     valorem property taxes.
72          (b) An assignment, pledge, or other conveyance under Subsection (1)(a)(ii)(G) may, to
73     the extent provided by the documents under which the assignment, pledge, or other conveyance
74     is made, rank prior in right to any other obligation except taxes or payments in lieu of taxes
75     payable to the state or its political subdivisions.
76          (c) (i) (A) Except as provided in Subsection (1)(c)(i)(B), an interlocal entity is subject
77     to each state law that governs each public agency that is a member of the entity to the extent
78     that the law governs an activity or action of the public agency in which the interlocal entity is
79     also engaged.
80          (B) Subsection (1)(c)(i)(A) does not apply if an interlocal entity is expressly exempt
81     from the law.
82          (C) A law described in Subsection (1)(c)(i)(A) does not include a local ordinance or
83     other local law.
84          (ii) If a state law that governs a public agency that is a member of the interlocal entity
85     conflicts with a state law that governs another member entity, the interlocal entity shall choose
86     and comply with one of the conflicting state laws.
87          (iii) (A) If a public agency that is a member of the interlocal entity is an institution of

88     higher education, the interlocal entity shall adopt the policies of the Board of Regents.
89          (B) If a policy of the Board of Regents adopted by an interlocal entity in accordance
90     with Subsection (1)(c)(iii)(A) conflicts with a state law that governs a public agency that is a
91     member entity, the state law governs.
92          (2) An energy services interlocal entity:
93          (a) except with respect to any ownership interest it has in facilities providing additional
94     project capacity, is not subject to:
95          (i) Part 3, Project Entity Provisions; or
96          (ii) Title 59, Chapter 8, Gross Receipts Tax on Certain Corporations Not Required to
97     Pay Corporate Franchise or Income Tax Act; and
98          (b) may:
99          (i) own, acquire, and, by itself or by contract with another, construct, operate, and
100     maintain a facility or improvement for the generation, transmission, and transportation of
101     electric energy or related fuel supplies;
102          (ii) enter into a contract to obtain a supply of electric power and energy and ancillary
103     services, transmission, and transportation services, and supplies of natural gas and fuels
104     necessary for the operation of generation facilities;
105          (iii) enter into a contract with public agencies, investor-owned or cooperative utilities,
106     and others, whether located in or out of the state, for the sale of wholesale services provided by
107     the energy services interlocal entity; and
108          (iv) adopt and implement risk management policies and strategies and enter into
109     transactions and agreements to manage the risks associated with the purchase and sale of
110     energy, including forward purchase and sale contracts, hedging, tolling and swap agreements,
111     and other instruments.
112          (3) Notwithstanding Section 11-13-216, an agreement creating an interlocal entity or
113     an amendment to that agreement may provide that the agreement may continue and the
114     interlocal entity may remain in existence until the latest to occur of:
115          (a) 50 years after the date of the agreement or amendment;
116          (b) five years after the interlocal entity has fully paid or otherwise discharged all of its
117     indebtedness;
118          (c) five years after the interlocal entity has abandoned, decommissioned, or conveyed

119     or transferred all of its interest in its facilities and improvements; or
120          (d) five years after the facilities and improvements of the interlocal entity are no longer
121     useful in providing the service, output, product, or other benefit of the facilities and
122     improvements, as determined under the agreement governing the sale of the service, output,
123     product, or other benefit.
124          (4) (a) The governing body of each party to the agreement to approve the creation of an
125     interlocal entity, including an electric interlocal entity and an energy services interlocal entity,
126     under Section 11-13-203 shall:
127          (i) within 30 days after the date of the agreement, jointly file with the lieutenant
128     governor:
129          (A) a copy of a notice of an impending boundary action, as defined in Section
130     67-1a-6.5, that meets the requirements of Subsection 67-1a-6.5(3); and
131          (B) if less than all of the territory of any Utah public agency that is a party to the
132     agreement is included within the interlocal entity, a copy of an approved final local entity plat,
133     as defined in Section 67-1a-6.5; and
134          (ii) upon the lieutenant governor's issuance of a certificate of creation under Section
135     67-1a-6.5:
136          (A) if the interlocal entity is located within the boundary of a single county, submit to
137     the recorder of that county:
138          (I) the original:
139          (Aa) notice of an impending boundary action;
140          (Bb) certificate of creation; and
141          (Cc) approved final local entity plat, if an approved final local entity plat was required
142     to be filed with the lieutenant governor under Subsection (4)(a)(i)(B); and
143          (II) a certified copy of the agreement approving the creation of the interlocal entity; or
144          (B) if the interlocal entity is located within the boundaries of more than a single
145     county:
146          (I) submit to the recorder of one of those counties:
147          (Aa) the original of the documents listed in Subsections (4)(a)(ii)(A)(I)(Aa), (Bb), and
148     (Cc); and
149          (Bb) a certified copy of the agreement approving the creation of the interlocal entity;

150     and
151          (II) submit to the recorder of each other county:
152          (Aa) a certified copy of the documents listed in Subsections (4)(a)(ii)(A)(I)(Aa), (Bb),
153     and (Cc); and
154          (Bb) a certified copy of the agreement approving the creation of the interlocal entity.
155          (b) Upon the lieutenant governor's issuance of a certificate of creation under Section
156     67-1a-6.5, the interlocal entity is created.
157          (c) Until the documents listed in Subsection (4)(a)(ii) are recorded in the office of the
158     recorder of each county in which the property is located, a newly created interlocal entity may
159     not charge or collect a fee for service provided to property within the interlocal entity.
160          (5) Nothing in this section may be construed as expanding the rights of any
161     municipality or interlocal entity to sell or provide retail service.
162          (6) Except as provided in Subsection (7):
163          (a) nothing in this section may be construed to expand or limit the rights of a
164     municipality to sell or provide retail electric service; and
165          (b) an energy services interlocal entity may not provide retail electric service to
166     customers located outside the municipal boundaries of its members.
167          (7) (a) An energy services interlocal entity created before July 1, 2003, that is
168     comprised solely of Utah municipalities and that, for a minimum of 50 years before July 1,
169     2010, provided retail electric service to customers outside the municipal boundaries of its
170     members, may provide retail electric service outside the municipal boundaries of its members
171     if:
172          (i) the energy services interlocal entity:
173          (A) enters into a written agreement with each public utility holding a certificate of
174     public convenience and necessity issued by the Public Service Commission to provide service
175     within an agreed upon geographic area for the energy services interlocal entity to be
176     responsible to provide electric service in the agreed upon geographic area outside the municipal
177     boundaries of the members of the energy services interlocal entity; and
178          (B) obtains a franchise agreement, with the legislative body of the county or other
179     governmental entity for the geographic area in which the energy services interlocal entity
180     provides service outside the municipal boundaries of its members; and

181          (ii) each public utility described in Subsection (7)(a)(i)(A) applies for and obtains from
182     the Public Service Commission approval of the agreement specified in Subsection (7)(a)(i)(A).
183          (b) (i) The Public Service Commission shall, after a public hearing held in accordance
184     with Title 52, Chapter 4, Open and Public Meetings Act, approve an agreement described in
185     Subsection (7)(a)(ii) if it determines that the agreement is in the public interest in that it
186     incorporates the customer protections described in Subsection (7)(c) and the franchise
187     agreement described in Subsection (7)(a)(i)(B) provides a reasonable mechanism using a
188     neutral arbiter or ombudsman for resolving potential future complaints by customers of the
189     energy services interlocal entity.
190          (ii) In approving an agreement, the Public Service Commission shall also amend the
191     certificate of public convenience and necessity of any public utility described in Subsection
192     (7)(a)(i) to delete from the geographic area specified in the certificate or certificates of the
193     public utility the geographic area that the energy services interlocal entity has agreed to serve.
194          (c) In providing retail electric service to customers outside of the municipal boundaries
195     of its members, but not within the municipal boundaries of another municipality that grants a
196     franchise agreement in accordance with Subsection (7)(a)(i)(B), an energy services interlocal
197     entity shall comply with the following:
198          (i) the rates and conditions of service for customers outside the municipal boundaries
199     of the members shall be at least as favorable as the rates and conditions of service for similarly
200     situated customers within the municipal boundaries of the members;
201          (ii) the energy services interlocal entity shall operate as a single entity providing
202     service both inside and outside of the municipal boundaries of its members;
203          (iii) a general rebate, refund, or other payment made to customers located within the
204     municipal boundaries of the members shall also be provided to similarly situated customers
205     located outside the municipal boundaries of the members;
206          (iv) a schedule of rates and conditions of service, or any change to the rates and
207     conditions of service, shall be approved by the governing body of the energy services interlocal
208     entity;
209          (v) before implementation of any rate increase, the governing body of the energy
210     services interlocal entity shall first hold a public meeting to take public comment on the
211     proposed increase, after providing at least 20 days and not more than 60 days' advance written

212     notice to its customers on the ordinary billing and on the Utah Public Notice Website, created
213     by Section 63F-1-701; and
214          (vi) the energy services interlocal entity shall file with the Public Service Commission
215     its current schedule of rates and conditions of service.
216          (d) The Public Service Commission shall make the schedule of rates and conditions of
217     service of the energy services interlocal entity available for public inspection.
218          (e) Nothing in this section:
219          (i) gives the Public Service Commission jurisdiction over the provision of retail
220     electric service by an energy services interlocal entity within the municipal boundaries of its
221     members; or
222          (ii) makes an energy services interlocal entity a public utility under Title 54, Public
223     Utilities.
224          (f) Nothing in this section expands or diminishes the jurisdiction of the Public Service
225     Commission over a municipality or an association of municipalities organized under Title 11,
226     Chapter 13, Interlocal Cooperation Act, except as specifically authorized by this section's
227     language.
228          (g) (i) An energy services interlocal entity described in Subsection (7)(a) retains its
229     authority to provide electric service to the extent authorized by Sections 11-13-202 and
230     11-13-203 and Subsections 11-13-204 (1) through (5).
231          (ii) Notwithstanding Subsection (7)(g)(i), if the Public Service Commission approves
232     the agreement described in Subsection (7)(a)(i), the energy services interlocal entity may not
233     provide retail electric service to customers located outside the municipal boundaries of its
234     members, except for customers located within the geographic area described in the agreement.
235          Section 2. Section 11-13-218.5 is enacted to read:
236          11-13-218.5. General obligation bonds.
237          (1) (a) An interlocal entity may only issue general obligation bonds if:
238          (i) each member of the interlocal entity is a municipality, county, special service
239     district, or local district;
240          (ii) the interlocal entity governing body is composed entirely of elected officials
241     appointed, respectively, by a member described in Subsection (1)(a)(i);
242          (iii) the interlocal entity has not issued any bonds currently in default; and

243          (iv) no area designated by a member for inclusion in the interlocal entity is included in
244     the area or areas designated by any other member for inclusion in the interlocal entity.
245          (b) Except as provided in Subsection (4), if an interlocal entity intends to issue general
246     obligation bonds, the interlocal entity shall first obtain the approval of the governing body of
247     each member agency for the specific bond issuance, including approval of the amount and
248     purpose of the issuance.
249          (c) If the proposed issuance is approved by the members in accordance with Subsection
250     (1)(b), the proposed general obligation bonds may not be issued unless submitted to and
251     approved by the voters residing within the boundaries of the interlocal entity at an election held
252     for that purpose as provided in Chapter 14, Local Government Bonding Act.
253          (2) General obligation bonds may be issued for the following purposes only:
254          (a) to construct and equip public safety facilities; or
255          (b) to construct and equip facilities required for the operation of a system, or one or
256     more components of a system, for the collection, storage, retention, control, conservation,
257     treatment, supplying, distribution, or reclamation of water, including storm, flood, sewage,
258     irrigation, and culinary water, whether the system is operated on a wholesale or retail level or
259     both.
260          (3) General obligation bonds are secured by a pledge of the full faith and credit of the
261     interlocal entity.
262          (4) An interlocal entity may issue refunding general obligation bonds, as provided in
263     Chapter 27, Utah Refunding Bond Act, without obtaining voter approval.
264          (5) An interlocal entity may not issue general obligation bonds if:
265          (a) the issuance of the bonds will cause the outstanding principal amount of all the
266     interlocal entity's general obligation bonds to exceed an amount that results from multiplying
267     the fair market value of the taxable property within the interlocal entity, as determined under
268     Subsection 11-14-301(3)(b) by .12; or
269          (b) (i) for each member, the interlocal entity shall calculate an amount equal to the
270     assessed value of the taxable property in the member entity divided by the total taxable value in
271     the interlocal entity multiplied by the amount of the proposed general obligation bond issuance;
272     and
273          (ii) for each member, the amount calculated in accordance with Subsection (5)(b)(i)

274     when added to the existing general obligation debt of the member would exceed the debt limit
275     fixed by law for that member entity.
276          (6) Bonds issued by an interlocal entity that are not general obligation bonds are not
277     subject to this section or Section 11-13-218.6.
278          (7) An interlocal entity is not considered to be a municipal corporation for purposes of
279     the debt limitation of the Utah Constitution, Article XIV, Section 4.
280          (8) Bonds issued by an interlocal entity created under this chapter are not bonds of a
281     public agency that participates in the agreement creating the interlocal entity.
282          Section 3. Section 11-13-218.6 is enacted to read:
283          11-13-218.6. Levy to pay for general obligation bonds.
284          (1) If an interlocal entity issues general obligation bonds, or expects to have debt
285     service payments due on general obligation bonds during the current year, the interlocal entity's
286     governing body may make an annual levy of ad valorem property taxes within the interlocal
287     boundaries as described in a certificate issued under Section 67-1a-6.5 for the following
288     purposes only:
289          (a) to pay the principal of and interest on the general obligation bonds;
290          (b) to establish a sinking fund for defaults and future debt service on the general
291     obligation bonds; and
292          (c) to establish a reserve to secure payment of the general obligation bonds.
293          (2) (a) Each interlocal entity that levies an ad valorem property tax under Subsection
294     (1) shall:
295          (i) levy the tax as a separate and special levy solely for the purpose stated in Subsection
296     (1)(a) or (b); and
297          (ii) apply the proceeds from the levy solely for the purpose of paying the principal of
298     and interest on the general obligation bonds, even though the proceeds may be used to establish
299     or replenish a sinking fund under Subsection (1)(b) or a reserve under Subsection (1)(c).
300          (b) A levy under Subsection (2)(a) is not subject to a priority in favor of an interlocal
301     entity obligation in existence at the time the bonds were issued.
302          Section 4. Section 11-13-218.7 is enacted to read:
303          11-13-218.7. Property tax levy -- Time for setting -- Computation of total levy --
304     Apportionment of proceeds -- Maximum levy.

305          (1) (a) The governing body of an interlocal entity authorized to levy a property tax for
306     the payment of principal and interest on general obligation bonds issued by the interlocal entity
307     shall, at a regular meeting or special meeting called for that purpose and by resolution, set the
308     rate to be applied to all taxable property within the boundaries of the interlocal entity by the
309     date set under Section 59-2-912.
310          (b) Notwithstanding Subsection (1)(a), the governing body may set the rate to be
311     applied to all taxable property within the boundaries of the interlocal entity at an appropriate
312     later date in accordance with Sections 59-2-919 through 59-2-923.
313          (2) In the governing body's computation of the total levy, the governing body shall:
314          (a) determine the amount of property tax required for payment of principal and interest
315     on general obligation bonds issued by the interlocal entity; and
316          (b) specify in the governing body's resolution adopting the tax rate the amount
317     allocated for such payment.
318          Section 5. Section 11-13-218.8 is enacted to read:
319          11-13-218.8. Certification of resolution setting levy.
320          The interlocal entity's clerk, appointed by the governing body, shall certify the
321     resolution setting the levy described in Section 11-13-218.7 to each county auditor of a county
322     in which the interlocal entity is located in accordance with Section 59-2-912.
323          Section 6. Section 11-13-218.9 is enacted to read:
324          11-13-218.9. Property tax levy -- Amount in budget as basis for determining
325     property tax levy.
326          From the effective date of the budget or of an amendment enacted prior to the date on
327     which property taxes are levied, the amount stated as the amount of estimated revenue from
328     property taxes for the payment principal and interest on general obligation bonds issued by the
329     interlocal entity shall constitute the basis for determining the property tax levy to be set by the
330     governing body for the corresponding tax year.
331          Section 7. Coordinating H.B. 330 with H.B. 251 -- Substantive amendments.
332          If this H.B. 330 and H.B. 251, Amendments to the Interlocal Act, both pass and become
333     law, it is the intent of the Legislature that the Office of Legislative Research and General
334     Counsel, in preparing the Utah Code database for publication, change the terminology in the
335     following provisions from "governing body" or "governing body's" to "governing authority" or

336     "governing authority's":
337          (1) Subsection 11-13-218.5(1)(a)(ii);
338          (2) Subsection 11-13-218.6(1);
339          (3) Subsections 11-13-218.7(1)(a), (1)(b), (2), and (2)(b);
340          (4) Section 11-13-218.8; and
341          (5) Section 11-13-218.9.