71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 1169
House Bill 2123
Ordered printed by the Speaker pursuant to House Rule 12.00A (5).
Presession filed (at the request of State Treasurer Jim Hill)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Applies claim preclusion and issue preclusion to judicial
proceeding to determine legality of issuance and sale of bonds by
municipal corporation.
Declares lien of pledge of public body to be attached and
automatically perfected without physical delivery, filing or
other act.
Authorizes municipality to exercise discretion whether to
engage expert advisor when executing negotiated sale of bonds.
Authorizes public body to periodically adjust rates and charges
that generate pledged revenues. Modifies notice requirement for
bond sale.
Authorizes school district to issue qualified zone academy
bonds.
A BILL FOR AN ACT
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. + }
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