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House Engrossed Senate Bill |
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State of Arizona Senate Fiftieth Legislature First Regular Session 2011
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SENATE BILL 1178 |
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AN ACT
amending title 11, chapter 4, Arizona Revised Statutes, by adding article 5; amending title 42, chapter 6, article 3, Arizona Revised Statutes, by adding section 42-6112; relating to county judgment bonds.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 11, chapter 4, Arizona Revised Statutes, is amended by adding article 5, to read:
ARTICLE 5. COUNTY JUDGMENT BONDS
11-681. Definitions
In this article, unless the context otherwise requires:
1. "Board" means the county board of supervisors.
2. "Bond related expenses" means any expenses incurred by the county to issue and administer bonds issued under this article, including underwriting fees and costs, trustee fees, financial consultant fees, printing and advertising costs, paying agent fees, transfer agent fees, legal, accounting, feasibility consultant and other professional fees and expenses, credit enhancement fees, attorney and accounting fees and expenses related to credit enhancement, bond insurance or liquidity enhancement, remarketing fees, rating agency fees and costs, travel and telecommunications expenses and all other expenses considered necessary by the county board of supervisors in order to market and administer the bonds.
3. "Bonds" means the bonds issued pursuant to this article.
4. "County judgment purpose" includes the following purposes:
(a) The payment of obligations of the county resulting from a final court judgment against the county, court costs and attorney fees, including outside legal counsel retained by the county, but not costs incurred by the county attorney in connection with the judgment.
(b) The payment of bond related expenses.
11-681.01. Authorization of county judgment bonds
A. The board of supervisors may issue negotiable bonds pursuant to this article in such principal amount as, in the opinion of the board is necessary to:
1. Provide sufficient monies for any county judgment purpose.
2. Pay necessary bond related expenses.
3. Establish and fully or partially fund any reserves or sinking accounts established by the bond resolution.
4. Issue refunding bonds if the board considers refunding to be expedient. The board may provide for investing and holding the proceeds of the refunding bonds in trust for the benefit of the holders of the bonds being refunded.
5. Refund any bonds issued pursuant to this article if the bonds are secured from the same source of revenues as the bonds authorized in this article by issuing new bonds, whether the bonds to be refunded have or have not matured.
6. Issue bonds partly to refund outstanding bonds and partly for any county judgment purpose consistent with this article.
B. The board shall authorize the bonds by resolution. The resolution shall prescribe:
1. The manner and method of sale.
2. The rate or rates of interest, which may be fixed or variable, the date or dates on which interest is payable and the denominations of the bonds.
3. The date or dates of the bonds and maturity.
4. The manner of executing the bonds.
5. The medium and place of payment.
6. The terms of redemption, which may provide for a premium for early redemption.
11-681.02. Issuance and sale of bonds; notice
A. The board shall issue the bonds in the manner, method, number and amount provided in the resolution.
B. The board shall provide notice of its intention to issue bonds in a manner consistent with market practice.
C. The bonds may be sold by competitive bid, including an online bidding process, or by negotiated sale for public or private offering at the price and on the terms prescribed in the resolution. If bonds are sold through an online bidding process, bids for the bonds that are entered into the system may be concealed until a specified time or disclosed in the bidding process. For the purposes of this subsection, "online bidding process" means a procurement process in which the board receives bids electronically over the internet in a real-time, competitive bidding event.
D. The net proceeds from the sale of the bonds shall be deposited in the bond proceeds fund established pursuant to section 11-681.03.
E. Title 35, chapter 3, article 7 applies to the board and to bonds issued under this article.
11-681.03. Bond proceeds fund; debt service fund
A. If the county issues bonds under this article, the board shall establish a bond proceeds fund consisting of the net proceeds received from the sale of the bonds. The County may use monies in the bond proceeds fund only for county judgment purposes.
B. The board shall establish a debt service fund designated and dedicated for repayment of the bonds, bond related expenses and related expenses associated with redeeming the bonds, consisting of county excise tax revenues pursuant to section 42-6112 and any other excise tax revenues pledged by the county for that purpose. Monies in the debt service fund may be used only for the purposes authorized by this article. The board may segregate the debt service fund into any number of accounts or subaccounts considered necessary to secure bonds issued under this article.
C. The county treasurer shall administer and account for the bond proceeds fund and the debt service fund.
D. No monies derived from selling bonds under this article or pledged or assigned to or in trust for the benefit of the holder or holders of the bonds may be paid into, or commingled with monies in, the county general fund. The treasurer shall deposit all such monies in special accounts or in separate financial institutions that the board designates.
E. The monies in the bond proceeds fund and debt service fund shall be disbursed only as the board directs and according to the terms of any agreements with the holder or holders of the bonds.
F. This section does not limit the power of the board to agree in connection with the issuance of the bonds as to the custody and disposition of the monies received from selling bonds or from the county excise tax revenues pledged or assigned to or in trust for the benefit of the holder or holders of the bonds.
11-681.04. Securing principal and interest
In connection with issuing bonds authorized by this article and to enhance the security of the bonds, the board by resolution may:
1. Segregate the debt service fund into one or more accounts and subaccounts.
2. Provide that the bonds issued under this article are secured by a first lien on the monies paid into the debt service fund and pledge and assign to or in trust for the benefit of the holder or holders of the bonds all or part of the monies in the debt service fund or an account or subaccount as necessary to secure and pay the principal, the interest and any premium on the bonds as they come due.
3. Establish priorities among bondholders based on criteria adopted by the board.
4. Set aside, regulate and dispose of reserves and sinking accounts.
5. Prescribe the procedure, if any, by which the terms of any contract with bondholders may be amended or abrogated, the amount of bonds the holders of which must consent to and the manner in which the consent may be given.
6. Provide for payment of bond related expenses from the proceeds of the sale of the bonds or other revenues available to the board.
7. Provide for the services of trustees, cotrustees, agents, consultants and other specialized services with respect to the bonds.
8. Provide additional security for the bonds in the form of a line of credit, letter of credit, insurance policy or other security and:
(a) Pay the cost of the additional security from amounts produced from the bond issue or from other available sources.
(b) Enter into reimbursement obligations in connection with the additional security.
9. Refund any bonds issued pursuant to this article, if the new bonds are secured from the same source of revenues as the original bonds, by issuing new bonds, whether at or before maturity of the bonds being refunded.
10. Issue bonds partly to refund outstanding bonds and partly for any other purpose consistent with this article.
11. Take any other action that in any way may affect the security and protection of the bonds or interest on the bonds.
11-681.05. Lien of pledge
A. Any pledge made under this article is valid and binding from the time when the pledge is made.
B. The monies pledged and received by the board to be placed in the debt service fund are immediately subject to the lien of the pledge without any future physical delivery or further act. Any lien of any pledge is valid and binding against all parties who have claims of any kind against the county, regardless of whether the parties have notice of the lien. The official resolution or trust indenture or any instrument by which this pledge is created, when adopted by the board, is notice to all concerned of the creation of the pledge, and those instruments need not be recorded in any other place to perfect the pledge.
11-681.06. Bond purchase; cancellation
The board may purchase bonds for cancellation, using any available monies, at a price not exceeding the following:
1. If the bonds are redeemable at the time of purchase, the applicable redemption price plus accrued interest to the next interest payment date.
2. If the bonds are not redeemable at the time of purchase, the applicable redemption price on the first date on which the bonds become subject to redemption plus accrued interest to that date.
11-681.07. Payment of bonds
A. The bonds shall be paid solely from monies from the debt service fund.
B. The county treasurer shall cancel all bonds when paid.
11-681.08. Use of surplus monies
A. If a balance remains in the bond proceeds fund after all county judgment purposes have been paid, the remaining balance shall be used to reduce the county primary property tax levy in the following year.
B. If a balance remains in the debt service fund after the retirement and payment of all bonds, interest and other charges related to bonds issued under this article, the remaining balance shall be used to reduce the county primary property tax levy in the following year.
11-681.09. Investment of monies in the bond proceeds fund and the debt service fund
A. The board may authorize the county treasurer to invest monies in the bond proceeds fund in the manner prescribed by this section. The order directing an investment shall state a date on which the proceeds from the sale of the bonds will be needed for use, and the treasurer shall make the investment in such a way as to mature at the specified date. All monies earned as interest or otherwise derived from the investment of the monies in the bond proceeds fund shall be credited to the debt service fund.
B. The board may authorize the county treasurer to invest and reinvest any monies in the debt service fund as provided by this section. All monies earned as interest or otherwise derived from the investment of the monies in the debt service fund shall be credited to that fund.
C. The monies in either the bond proceeds fund or the debt service fund may be invested and reinvested in any of the following:
1. United States treasury obligations.
2. Consolidated farm loan bonds.
3. Obligations issued by the federal intermediate credit banks or by bonds for cooperatives on authority of the farm credit act of 1933.
4. Any other obligations guaranteed by the United States government.
5. Any investments that are authorized by any other agencies of the united states government and that are authorized to secure public deposits.
6. State and local government series United States treasury securities.
7. The pooled investment funds established by the state treasurer pursuant to section 35-326.
8. State, county or municipal bonds issued in this state and on which the payments of interest have not been deferred.
9. Investment agreements and repurchase agreements collateralized by investments described in paragraphs 1 through 5.
D. The board may place any restrictions on reinvestment yield on the bonds or on any monies pledged to pay the bonds if necessary to comply with federal income tax laws and regulations to gain any federal tax benefits available with respect to the bonds. Monies shall be invested under this section in a manner that avoids arbitrage penalties prescribed by federal law.
E. The purchase of the securities shall be made by the county treasurer on authority of a resolution of the board. The treasurer shall act as custodian of all securities purchased.
11-681.10. Characteristics of bonds; negotiable; obligation; legal investments; exemption from taxation
A. Subject to any registration requirements, the bonds issued under this article are fully negotiable within the meaning and for all purposes of the uniform commercial code regardless of whether the bonds actually constitute negotiable instruments under the uniform commercial code.
B. The bonds, their transfer and the income from the bonds are at all times free from taxation in this state.
C. Bonds issued under this article:
1. Are payable only according to their terms.
2. Are obligations of the county, and are not general, special or other obligations of this state.
3. Do not constitute a general obligation debt of this state or of the county.
4. Are not enforceable against this state or the county nor is payment of the bonds enforceable out of any monies other than the revenue pledged and assigned to, or in trust for the benefit of, the holder or holders of the bonds.
5. Are government obligation securities suitable for investment by:
(a) Public officers and bodies of this state and of counties, municipalities and other political subdivisions of this state.
(b) Insurance companies, associations and other persons carrying on an insurance business.
(c) Financial institutions, investment companies and other persons carrying on a banking business.
(d) Fiduciaries.
(e) All other persons who are authorized to invest in government obligations.
6. Are securities that may be deposited with public officers or bodies of this state and counties, municipalities and other political subdivisions of this state for purposes that require the deposit of government bonds or obligations.
11-681.11. Effect of changing circumstances on bonds; agreement of state
A. Bonds issued under this article remain valid and binding obligations of the county notwithstanding that before the delivery of the bonds any of the persons whose signatures appear on the bonds cease to be officers of the county.
B. An amendment of any provision in this article does not diminish or impair the validity of bonds issued under this article or the remedies and rights of bondholders.
C. This state pledges to and agrees with the bondholders that this state will not limit, alter or impair the rights vested in the county to collect the monies, including county excise tax revenues under section 42‑6112, or an equivalent source, necessary to produce sufficient revenue to fulfill the terms of any agreements made with the holders of the bonds, or in any way impair the rights and remedies of the bondholders, until all bonds issued under this article, together with interest on the bonds, interest on any unpaid installments of principal or interest and all costs and expenses in connection with any action or proceedings by or on behalf of the bondholders, are fully met and discharged. The board may include this pledge and undertaking in its resolutions and indentures authorizing and securing its bonds.
11-681.12. Validity of bonds; legal opinion
A. This article constitutes full authority for authorizing and issuing county judgment bonds without reference to any other law of this state. No other statute with regard to authorizing or issuing obligations or that in any way impedes or restricts performing the acts authorized by this article may be construed to apply to any proceedings taken or acts done pursuant to this article.
B. The board may submit bonds to be issued under this article to the county attorney or other legal counsel after all proceedings for authorizing the bonds have been completed. Within fifteen days after submission, the county attorney or counsel shall examine and pass on the validity of the bonds and the regularity of the proceedings. If counsel determines that the bonds and proceedings comply with this article, and if the bonds when delivered and paid for will constitute binding and legal obligations of the county, the county attorney or counsel shall render a legal opinion in substance that the bonds are issued according to the constitution and laws of this state.
C. The bonds shall recite that they are regularly issued pursuant to this article. That recital, together with the legal opinion under subsection B, constitutes prima facie evidence of the legality and validity of the bonds. From and after the sale and delivery of the bonds, they are incontestable by any party.
Sec. 2. Title 42, chapter 6, article 3, Arizona Revised Statutes, is amended by adding section 42-6112, to read:
42-6112. County excise tax for county judgment bonds
A. A county, by resolution that is dated on or before December 31, 2011 and that is approved by a unanimous vote of the board of supervisors, may levy and, if levied, the department shall collect a county excise tax on each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title and under section 42-5352, subsection A. The tax authorized by this section is in addition to any tax authorized pursuant to section 42‑6103.
B. The excise tax levied pursuant to this section shall be at a rate adopted by the board of supervisors in the resolution levying the tax, applied as a percentage of the tax rates prescribed on the date of the resolution by section 42-5010, subsection A on each class of business subject to the transaction privilege tax imposed by chapter 5, article 1 of this title and the jet fuel excise tax imposed by section 42-5352, subsection A, but not more than ten per cent through May 31, 2013 and thirty per cent thereafter.
C. Each month the state treasurer shall transmit the net revenues collected pursuant to this section to the treasurer of the county levying the tax for credit to the county's debt service fund established pursuant to section 11-681.03.
D. A tax levied pursuant to this section terminates when all debt service costs have been paid relating to county judgment bonds issued pursuant to title 11, chapter 4, article 5. Not more than thirty days before the final debt service payment is due, the board of supervisors shall notify the department by certified mail of the termination of the tax. Any surplus monies that are not encumbered for debt service purposes shall be used to reduce the county primary property tax levy in the following year.