LRB-3728/1
MES&EVM:cjs:rs
2009 - 2010 LEGISLATURE
December 8, 2009 - Introduced by Representatives Seidel, Hilgenberg, Dexter,
Fields, Berceau, Jorgensen, Petrowski, Smith, Staskunas, Benedict, Hintz
and Hraychuck, cosponsored by Senators Kreitlow, Plale, Hopper, Darling,
Taylor, Schultz, Hansen and Olsen. Referred to Committee on Urban and
Local Affairs. Referred to Joint Survey Committee on Tax Exemptions.
AB605,1,6
1An Act to amend 32.02 (1), 66.0303 (1) and 71.36 (1m); and
to create 66.0304,
271.05 (1) (c) 10., 71.26 (1m) (k) and 71.45 (1t) (k) of the statutes;
relating to:
3authorizing two or more cities, villages, towns, or counties, or a combination of
4such political subdivisions, to create a commission to issue conduit revenue
5bonds and exercise eminent domain authority and exempting from taxation
6interest on such bonds.
Analysis by the Legislative Reference Bureau
This bill authorizes two or more political subdivisions to enter into an
agreement to create a commission to issue a type of municipal bonds referred to as
conduit bonds. A commission is created using the current law procedures for
intergovernmental or interstate cooperation agreements. Generally, conduit bonds
(bonds) are bonds issued by a unit of government under which the proceeds of the
bond sale are transferred to a private entity (the borrower), who must be "qualified"
under federal law. The borrower uses the proceeds to finance a project that has a
public benefit as authorized under state or federal law. In effect, the unit of
government serves as a conduit between the borrower and the bond purchaser.
Generally, the borrower pays a lower interest rate on the bond proceeds than it would
have paid if it had borrowed the money on the open market because the bonds issued
by a unit of government may be exempt from federal or state taxation.
Under this arrangement, the borrower is solely responsible to repay the bonds
and interest on the bonds from revenue generated by the project financed by the bond
sale. Security for the bonds is supported by collateral or revenues of the borrower
who receives the proceeds from the bond sale. Collateral for the bonds may be a
building, equipment, or a revenue stream generated by the borrower's construction
or remodeling of a project. The borrower, not the unit of government that issues the
bonds, is responsible for all debt service payments to the bondholders. And the
borrower, not the unit of government that issues the bonds, is liable to the
bondholders if the bonds are not paid off.
A commission created as authorized under the bill is a unit of government and
a body corporate and politic that is completely separate from the creating political
subdivisions and from the state. The bill defines political subdivision to mean any
city, village, town, or county in this state or any city, village, town, county, district,
authority, agency, commission, or similar governmental entity in another state. A
political subdivision that is a party to an agreement is considered to be a member of
a commission. Before an agreement may take effect, it must be approved by the
attorney general.
A commission is governed, under the bill, by a board and the board members
are appointed under the terms of the agreement creating the commission. The
agreement may also provide for an additional political subdivision to become a
member of a commission, or for a member to withdraw from a commission. At all
times, however, at least one member of a commission must be a political subdivision
that is located in this state.
Under the bill, a commission is granted all of the powers that are necessary or
convenient to carry out the purposes described in the bill. Primarily, a commission
is authorized to issue bonds or refunding bonds to finance or refinance a project,
including funding a reserve fund or capitalized interest, payment of costs of issuance
and other costs related to the financing or refinancing, and to enter into agreements
related to the issuance of bonds, including liquidity and credit facilities, remarketing
agreements, currency exchange agreements, commodity swap agreements, and
other hedge agreements. The bill defines a project as any capital improvement,
investment or program of investment, purchase of receivables, property, assets,
commodities, bonds or other revenue streams or related assets, working capital
program, or liability or other insurance program, located within or outside of this
state.
Other powers of a commission include the authority to employ or appoint
agents, employees, finance professionals, and special advisors; the authority to
establish and collect fees, plus administrative expenses, from a participant who
benefits from the commission's services, or services provided by an outside entity;
and, at the request of a participant, the authority to combine and pledge revenues
of multiple projects for repayment of one or more series of bonds. The bill defines a
participant as any public or private entity, including federally recognized Indian
tribe or band, that contracts with a commission for the purpose of financing or
refinancing a project that is owned, sponsored, or controlled by the entity.
Unless the bond resolution states otherwise, bonds issued by a commission are
the obligation of the commission, to be paid solely out of amounts received by the
commission from revenues derived from the project that is financed or refinanced,
or by another agreement entered into or investment made that relates to, and is
pledged to, the bonds. The state, and the political subdivisions who are parties to the
agreement creating the commission, are not liable on the bonds or other contracts
entered into by a commission, nor are any of the commission's board members
personally liable on the bonds unless the personal liability or accountability is the
result of willful misconduct.
The commission is required to annually prepare a budget, and maintain an
accounting system in accordance with generally accepted accounting principals. The
bill also requires the commission to have its financial statements and debt covenants
audited annually by an independent certified public accountant, except that the
commission may decide, by unanimous vote of its board, to have an audit performed
every two years. The commission must send a copy of its budget and audit to the
governing body of each political subdivision which is a party to the agreement which
created the commission.
The bill authorizes a commission to be dissolved, according to the terms of the
agreement under which it was created, if the commission provides for the payment
of its bonds, including interest, and the performance of its other contractual
obligations. The attorney general must approve the dissolution of a commission. The
bill also contains a state pledge under which the state agrees and pledges that it will
not limit, impair, or alter the rights and powers of a commission before the
commission has met and discharged the bonds, including interest, and has fulfilled
its contractual obligations.
Any interest that is generated by the bonds is exempt from taxation. The
method of issuing bonds and entering into of contracts related to those bonds that
is created in the bill is a complete alternative method to all other methods under
current law which authorize the issuance of bonds by a unit of government.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB605, s. 1
1Section
1. 32.02 (1) of the statutes is amended to read:
AB605,4,82
32.02
(1) Any county, town, village, city, including villages and cities
3incorporated under general or special acts, school district, the department of health
4services, the department of corrections, the board of regents of the University of
5Wisconsin System, the building commission, a commission created by contract under
1s. 66.0301, with the approval of the municipality in which condemnation is proposed,
2a commission created by contract under s. 66.0303 that is acting under s. 66.0304,
3if the condemnation occurs within the boundaries of a member of the commission, or
4any public board or commission, for any lawful purpose, but in the case of city and
5village boards or commissions approval of that action is required to be granted by the
6governing body. A mosquito control commission, created under s. 59.70 (12), and a
7local professional football stadium district board, created under subch. IV of ch. 229,
8may not acquire property by condemnation.
AB605, s. 2
9Section
2. 66.0303 (1) of the statutes is amended to read:
AB605,4,1210
66.0303
(1) In this section, "municipality" has the meaning given in s. 66.0301
11(1) (a)
, except that with regard to agreements described in s. 66.0304, "municipality"
12includes a political subdivision, as defined in s. 66.0304 (1) (f).
AB605, s. 3
13Section
3. 66.0304 of the statutes is created to read:
AB605,4,14
1466.0304 Conduit revenue bonds. (1) Definitions. In this section:
AB605,4,1815
(a) "Agreement" means a contract entered into under this section by the
16political subdivisions which form a commission. The contract may be amended
17according to the terms of the contract, and the amended contract remains an
18agreement.
AB605,4,2119
(b) "Bond" means any bond, note or other obligation of a commission issued
20under this section, including any refunding bond or certificate of participation or
21lease-purchase agreement.
AB605,4,2422
(c) "Commission" means an entity created by two or more political subdivisions,
23who contract with each other under s. 66.0301 (2) or 66.0303 (2), for the purpose of
24issuing bonds under this section.
AB605,4,2525
(d) "Member" means a party to an agreement.
AB605,5,4
1(e) "Participant" means any public or private entity, including a federally
2recognized Indian tribe or band, that contracts with a commission for the purpose of
3financing or refinancing a project that is owned, sponsored, or controlled by the
4public or private entity.
AB605,5,75
(f) "Political subdivision" means any city, village, town, or county in this state
6or any city, village, town, county, district, authority, agency, commission, or other
7similar governmental entity in another state.
AB605,5,118
(g) "Project" means any capital improvement, investment or program of
9investment, purchase of receivables, property, assets, commodities, bonds or other
10revenue streams or related assets, working capital program, or liability or other
11insurance program, located within or outside of this state.
AB605,5,1312
(h) "Revenue" means all moneys and fees received from any source by a
13commission.
AB605,6,2
14(2) Attorney general review. (a) Before an agreement may take effect, the
15proposed agreement shall be submitted to the attorney general who shall determine
16whether the agreement is in proper form and compatible with the laws of this state.
17The attorney general shall approve any agreement submitted under this subsection
18unless the attorney general finds that it does not meet the conditions set forth in this
19section and details in writing addressed to the concerned political subdivisions'
20governing bodies the specific respects in which the proposed agreement fails to meet
21the requirements of law. Failure to disapprove an agreement submitted under this
22subsection within 90 days of its submission constitutes approval. The attorney
23general, upon submission of an agreement, shall transmit a copy of the agreement
24to the governor who shall consult with any state department or agency affected by
1the agreement. The governor shall forward to the attorney general any comments
2the governor may have concerning the agreement.
AB605,6,83
(b) No approval is required under this subsection for an amendment to an
4agreement to take effect, or for an addition or withdrawal of a member, unless
5required by the terms of the agreement. A commission may not be dissolved under
6sub. (4m) without the approval of the attorney general, who shall certify to the
7commission and the participants that the dissolution resolution provides for the
8payment of any outstanding bonds or other obligations of the commission.
AB605,6,14
9(3) Creation and organization. (a) Two or more political subdivisions may
10create a commission for the purpose of issuing bonds by entering into an agreement
11to do so under s. 66.0301 (2) or 66.0303 (2). A commission that is created as provided
12in this section is a unit of government, and a body corporate and politic, that is
13separate and distinct from, and independent of, the state and the political
14subdivisions which are parties to the agreement.
AB605,6,1815
(b) A commission shall be governed by a board, the members of which shall be
16appointed under the terms of the agreement. Board members may be reimbursed
17for their actual and necessary expenses incurred in performing their duties to the
18extent provided in the agreement or the bylaws of the commission.
AB605,6,2419
(c) An additional political subdivision may become a member of a commission,
20and a member may withdraw from a commission, as provided in the agreement. For
21an agreement to be valid, at least one commission member shall be a political
22subdivision that is located in this state and a commission shall consist of at least 2
23political subdivisions. A commission may not take any action under this paragraph
24that would invalidate an agreement.
AB605,7,3
1(4) Powers of a commission. A commission has all of the powers necessary or
2convenient to carry out the purposes and provisions of this section. In addition to all
3other powers granted by this section, a commission may do any of the following:
AB605,7,44
(a) Adopt bylaws for the regulation of its affairs and the conduct of its business.
AB605,7,55
(b) Sue and be sued in its own name, plead and be impleaded.
AB605,7,86
(c) Acquire, buy, sell, lease as lessor or lessee, encumber, mortgage,
7hypothecate, pledge, assign, or transfer any property or interest in property that is
8located within or outside of this state.
AB605,7,99
(d) Enter into contracts related to the issuance of bonds.
AB605,7,1910
(e) Issue bonds or refunding bonds, subject to sub. (5), to finance or refinance
11a project, including funding a reserve fund or capitalized interest, payment of costs
12of issuance and other costs related to the financing or refinancing, or credit
13enhancement, and enter into agreements related to the issuance of bonds, including
14liquidity and credit facilities, remarketing agreements, insurance policies, guaranty
15agreements, letter of credit or reimbursement agreements, indexing agreements,
16interest rate swap agreements, currency exchange agreements, commodity swap
17agreements, and other hedge agreements and any other like agreements, in each
18case with such payment, interest rate, currency security, remedy, and other terms
19and conditions as the commission determines.
AB605,7,2120
(f) Employ or appoint agents, employees, finance professionals, and special
21advisers as the commission finds necessary and fix their compensation.
AB605,7,2222
(g) Accept gifts, loans, or other aid.
AB605,7,2523
(h) Establish and collect fees, plus administrative expenses, from participants
24who benefit from the commission's services, or services provided by an outside entity,
25and distribute the fees and expenses as provided in the agreement.
AB605,8,2
1(i) Make loans to, lease property from or to, or enter into any other kind of an
2agreement with a participant or other entity, in connection with financing a project.
AB605,8,43
(j) Mortgage, pledge, or otherwise encumber the commission's property or its
4interest in projects.
AB605,8,85
(k) Assign or pledge any portion of its interests in mortgages, deeds of trust,
6indentures of mortgage or trust, leases, purchase or sale agreements or other
7financing agreements, or similar instruments, notes, and security interests in
8property, of a participant, or contracts entered into in connection with bonds.
AB605,8,129
(L) Issue, obtain, or aid in obtaining, from any person, any insurance or
10guarantee to, or for, the payment or repayment of interest or principal, or both, on
11any loan, lease, bond, or other obligation evidencing or securing such a loan, lease,
12bond, or obligation that is entered into under this section.
AB605,8,1613
(m) Apply on its own behalf or on behalf of a participant to any unit of
14government for an allocation of volume cap, tax credit, subsidy, grant, loan, credit
15enhancement, or any other federal, state, or local program in connection with the
16financing or refinancing of a project.
AB605,8,2017
(n) Invest any bond proceeds or any money held for payment or security of the
18bonds, or any contract entered into under this section, in any securities or obligations
19permitted by the resolution, trust agreement, indenture, or other agreement
20providing for issuance of the bonds or the contract.