Chapter 537 Oregon Laws 2001

AN ACT

HB 2123

Relating to management of bonds; creating new provisions; amending ORS 33.720, 287.028, 288.594, 288.885, 294.052 and 328.565; and repealing ORS 288.905.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 33.720 is amended to read:

33.720. (1) The determination authorized by ORS 33.710 shall be in the nature of a proceeding in rem; and the practice and procedure therein shall follow the practice and procedure of an action not triable by right to a jury, as far as the same is consistent with the determination sought to be obtained, except as provided in this section.

(2) Jurisdiction of the municipal corporation shall be obtained by the publication of notice directed to the municipal corporation; and jurisdiction of the electors of the municipal corporation shall be obtained by publication of notice directed to all electors, freeholders, taxpayers and other interested persons, without naming such electors, freeholders, taxpayers and other interested persons individually. The notice shall be served on all parties in interest by publication thereof for at least once a week for three successive weeks in a newspaper of general circulation published in the county where the proceeding is pending, or if no such newspaper is published therein, then in a contiguous county. Jurisdiction shall be complete within 10 days after the date of completing publication of the notice as provided in this section.

(3) Any person interested may at any time before the expiration of the 10 days appear and contest the validity of such proceeding, or of any of the acts or things therein enumerated. Such proceeding shall be tried forthwith and judgment rendered as expeditiously as possible declaring the matter so contested to be either valid or invalid. Any order or judgment in the course of such proceeding may be made and rendered by the judge in vacation or otherwise; and for that purpose, the court shall be deemed at all times to be in session and the act of the judge in making the order or judgment shall be the act of the court.

(4) Any party may appeal to the Court of Appeals from the final judgment rendered in such proceeding. The court, in inquiring into the regularity, legality or correctness of any proceeding of the municipal corporation or its governing body shall disregard any error, irregularity or omission which does not affect the substantial rights of the parties to the special proceeding, and may approve the proceedings in part and may disapprove and declare illegal or invalid in part other or subsequent proceedings, or may approve or disapprove the proceedings, or may approve the proceedings in part and disapprove the remainder thereof.

(5) Costs of the proceeding may be allowed and apportioned between the parties in the discretion of the court.

(6) Upon conclusion of a proceeding authorized by ORS 33.710 (2)(b), including any appeal of the judgment, a final judgment entered in the proceeding is binding upon the parties and all other persons. Claim preclusion and issue preclusion apply to all matters adjudicated in the proceeding. Except for an action to enforce a final judgment, the courts of this state do not have jurisdiction over an action by or against the governing body or municipal corporation named in the final judgment if the purpose of the action is to seek judicial review or judicial examination, directly or indirectly, of a matter adjudicated in the proceeding.

SECTION 2. ORS 287.028 is amended to read:

287.028. Notwithstanding any other provision of law, a municipality may negotiate the sale of its bonds, or may sell its bonds at public competitive bid sale. [Unless bonds are sold to the federal government or the State of Oregon or any corporation, department or agency thereof,] When bonds are sold by negotiated sale, the issuer [shall] may engage an expert advisor who shall deliver to the issuer a report evaluating the terms of the proposed negotiated sale, prior to sale of the bonds.

SECTION 3. ORS 288.594 is amended to read:

288.594. [(1) If a public body is authorized by law to pledge its revenues or other funds to secure bonds or other obligations, the pledge shall be valid and binding from the time the pledge is made, revenues and other funds so pledged shall be immediately subject to the lien of the pledge without physical delivery, filing or other act and the lien of pledge shall be superior to all other claims and liens of any kind whatsoever.]

(1) As used in this section:

(a) “Obligation” means a revenue bond, limited tax bond, general obligation bond, certificate of participation, note, lease purchase or installment purchase obligation, financing agreement, credit agreement or other contractual undertaking of a public body, however denominated, to repay borrowed moneys or to pay the purchase price of property acquired by the public body, a credit enhancement device, as the term is defined in ORS 288.805, given as additional security for an obligation described in this paragraph or an intergovernmental agreement entered into under ORS chapter 190.

(b) “Operative document” means a resolution, ordinance, trust indenture, security agreement or other document in which a public body pledges property as security for an obligation of the public body.

(c) “Pledge” means to create a security interest in or a lien on property to secure payment or performance of an obligation. The security interest or lien is created by mortgaging, assigning or encumbering property or by creating a security interest in any other manner.

(d) “Pledgee” means:

(A) A trustee for the holder of an obligation; or

(B) The holder of an obligation if a trustee was not appointed in the operative document or if the operative document authorizes the holder of an obligation to foreclose the lien of a pledge and enforce the remedies consequent to the pledge in lieu of the trustee.

(e) “Property” means real or personal property of a public body, tangible or intangible, whether owned by the public body when the pledge is made or acquired subsequently by the public body. “Property” also means revenues as that term is defined in ORS 288.805, contract rights, receivables and securities.

(2) Notwithstanding the Uniform Commercial Code, this section governs the creation, perfection, priority and enforcement of a lien of a pledge made by a public body. The Uniform Commercial Code does not apply to the creation, perfection, priority or enforcement of a lien of a pledge made by a public body.

(3) A public body may pledge all or a portion of its property as security for payment of its obligations and for performance of a covenant or agreement entered into in relation to the issuance of an obligation of the public body. The lien created by the pledge is valid and binding from the time the pledge is made. Pledged property is subject immediately to the lien of the pledge without physical delivery, filing or any other act.

(4) Except as provided otherwise expressly in the operative document, the lien of the pledge is superior to and has priority over other claims and liens of any kind.

(5) When property subject to a pledge is acquired by a public body after the pledge is made, the property is subject to the lien upon acquisition by the public body without physical delivery, filing or any other act, and the lien shall relate to the time the public body originally made the pledge.

(6) A public body may reserve the right to pledge a pledged property as security for an obligation subsequently issued by the public body. If a public body reserves that right, subject to the terms of the operative document that created the previous pledge, the lien of the subsequent pledge may be on a parity or pari passu basis with the lien of the previous pledge, on a prior and superior basis with the lien of the previous pledge or on a subordinate basis with the lien of the previous pledge, as specified in the operative document creating the subsequent pledge. The lien of the subsequent pledge:

(a) Has the priority specified in the operative document creating the subsequent pledge; and

(b) Is superior to and has priority over other claims and liens of any kind except the lien of a pledge with which the lien of the subsequent pledge is on a parity or subordinate basis, as specified in the operative document.

(7) Except as provided in subsection (8) of this section, a pledgee may commence an action in a court of competent jurisdiction to foreclose the lien of the pledge and exercise rights and remedies available to the pledgee under the operative document.

(8) When pledged property consists of moneys or property in a fund for debt service reserves or payments, a pledgee may foreclose the lien of the pledge by applying the moneys or property in the fund to the payment of obligations subject to the terms, conditions and limitations in the operative document.

(9) Any initiative or referendum measure approved by the electors of the public body that changes statutory or municipal charter provisions affecting rates, fees, tolls, rentals or other charges shall not be given any force or effect if to do so would impair existing covenants made with holders of existing bonds or other obligations regarding the imposition, levy or collection of [such] the rates, fees, tolls, rentals or other charges pledged to secure outstanding bonds or other obligations.

[(2)] (10) If a public body is authorized by law to pledge its revenues to secure revenue bonds or other borrowings, the public body may enter into rate covenants. Rate covenants authorized by this subsection may obligate the public body to periodically set the rates and charges:

(a) That generate the pledged revenues at specific levels including, but not limited to, a specific monetary charge for each unit of commodity or service provided or a schedule of rates and charges that includes fixed and variable components;

(b) In accordance with a formula established in the operative document governing the revenue bonds or other borrowings. The formula may provide for rates to be determined by reference to factors including, but not limited to:

(A) Historical operating expenses;

(B) Projected future operating expenses;

(C) The funding of depreciation;

(D) The costs of capital improvements;

(E) The costs of complying with contractual obligations and covenants;

(F) The costs of complying with regulatory requirements;

(G) Reports of independent consultants regarding the level of pledged revenues required to operate and maintain a utility in accordance with prudent utility practice;

(H) Debt service on the revenue bonds or other borrowings; and

(I) The funds needed to establish or maintain reserves required by law or contract and the funds needed to maintain an unencumbered carryforward fund balance or working capital to meet unanticipated expenses or fluctuations in revenues that may arise;

(c) At levels sufficient to maintain underlying credit ratings assigned to the revenue bonds and other borrowings by one or more nationally recognized credit rating services without regard to any improvement in credit ratings due to the provision of additional security for revenue bonds and other borrowings through bond insurance or credit enhancement; or

(d) [Impose rates and charges] That generate pledged revenues each year in amounts at least equal to operations and maintenance expenses of the system that produces the pledged revenues, plus debt service on the revenue bonds and other borrowings, plus an additional amount that is reasonably required to obtain favorable terms for the revenue bonds and other borrowings.

(11) Without regard to whether a rate covenant was entered into before or after October 23, 1999, a rate covenant authorized by this [subsection shall bind] section is a contract that binds the public body making the rate covenant and [shall be] is enforceable against the public body in accordance with the terms of the rate covenant.

SECTION 4. ORS 288.885 is amended to read:

288.885. Except when the public body is the State of Oregon or when the revenue bonds are sold in accordance with the competitive bidding process of the public body, as defined in ORS 288.875, for any public competitive bid sale:

(1) The issuer shall cause the notice of [revenue] bond sale, or a summary thereof, to be published [in one or more newspapers having general circulation within the boundaries of the issuer] as provided in subsection (2) of this section not fewer than 10 calendar days [preceding] prior to the date of the bond sale.

(2) [In addition to the publication described in subsection (1) of this section, a notice or summary of the notice shall be published in a business and financial newspaper published in Portland, Oregon, not fewer than 10 calendar days preceding the date of bond sale.] The issuer shall publish the notice of bond sale, or a summary of the notice of bond sale, by one or more of the following methods:

(a) Publication in a newspaper of general circulation within the boundaries of the issuer;

(b) Publication in a newspaper of general circulation in Portland, Oregon;

(c) Publication in a national newspaper;

(d) Electronic publication on the Internet; or

(e) Electronic publication in another form that is reasonably calculated to reach potential bidders effectively.

(3) If a summary of the notice of bond sale is published under this [subsection] section, [it] the summary must specify where the complete notice of bond sale is published or available.

[(3) For issues of $10 million or more par value, a notice or summary of the notice of bond sale shall be submitted for publication in at least one issue of a national financial newspaper not less than 10 calendar days preceding the date of bond sale.]

(4) Copies of the complete notice of bond sale shall be furnished upon request to bidders, investors and the public.

[(5) If circumstances warrant, the State Treasurer may on an individual sale basis approve other terms and conditions for the public notice of revenue bond sale in lieu of or in addition to those specified in subsections (1) to (4) of this section.]

SECTION 5. ORS 328.565 is amended to read:

328.565. (1) [As provided by ORS 288.165, any] As used in this section, “qualified zone academy bond” has the meaning given the term in 26 U.S.C. 1397E, as amended and in effect on the effective date of this 2001 Act.

(2) A district school board may contract indebtedness [by the issuance of warrants or short-term promissory notes for the purpose of meeting current expenses, retiring outstanding bonds or warrants, or paying the interest thereon] as provided under ORS 288.165.

(3) A district school board may issue qualified zone academy bonds or similar tax credit bonds authorized by resolution of the district school board. Unless the bond issue has been approved by electors under ORS 328.205 to 328.304, the district school board must issue the bonds as limited tax bonds under ORS 288.155 or as revenue bonds under ORS 288.805 to 288.945.

SECTION 6. ORS 288.905 is repealed.

SECTION 7. ORS 294.052 is amended to read:

294.052. (1) As used in this section[,]:

(a) “Bond” [and] has the meaning given that term in ORS 288.605.

(b) “Certificate of participation” [have the meanings given those terms in] has the meaning given that term in ORS 288.605.

(c) “Municipality” means a unit of local government within Oregon including, but not limited to, cities, counties, school districts, special districts, public corporations and intergovernmental corporations organized under the authority of ORS 190.010.

(2) Notwithstanding ORS 294.135 or 294.145 or any other law or charter provision, a municipality may invest proceeds of bonds or certificates of participation and amounts held in a bond or certificate of participation payment, reserve or proceeds fund or account in float agreements, debt service deposit agreements, forward investment agreements, guaranteed investment contracts or other investment agreements if the agreements or contracts:

(a) Produce a guaranteed rate of return;

(b) Are fully collateralized by direct obligations of, or obligations guaranteed by, the United States; and

(c) Require that the collateral be held by the municipality, an agent of the municipality or a third-party safekeeping agent.

SECTION 8. (1) The amendments to ORS 33.720 by section 1 of this 2001 Act apply to a proceeding in which the final judgment is entered on or after the effective date of this 2001 Act.

(2) The amendments to ORS 287.028 and 288.885 by sections 2 and 4 of this 2001 Act apply to bonds issued on or after the effective date of this 2001 Act.

(3) The amendments to ORS 288.594 by section 3 of this 2001 Act apply to a pledge of property as security for an obligation made before, on or after the effective date of this 2001 Act.

Approved by the Governor June 22, 2001

Filed in the office of Secretary of State June 25, 2001

Effective date January 1, 2002

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