(1) The following types of bonds will be
accepted by the department as evidence of and security for a loan to a
municipality under the program if Montana law authorizes the municipality to
issue such bonds to finance the project and the department determines the
municipality has the ability to repay the loan. Notwithstanding compliance with
the provisions of state law, the department may determine that it will not
approve the loan if it determines that the loan is not likely to be repaid in
accordance with its terms or it may impose additional requirements that in its
judgment it considers necessary.
(a) The
department may accept general obligation bonds issued by a municipality, upon
the following terms:
(i) the bond will not
cause the municipality to exceed its statutory indebtedness
limitation;
(ii) all statutory
requirements for the issuance of such bonds shall have been met prior to the
issuance of the bonds; and
(iii)
the election authorizing the issuance of the bonds has been conducted by the
date of a binding commitment unless such requirement is waived by the
department.
(b) The
department may accept revenue bonds issued by a municipality in accordance with
the provisions of Title 7, chapter 7, part 44, or Title 7, chapter 13, part 2,
MCA, or other applicable statutory provisions, subject to the following terms
and conditions:
(i) the bonds must be payable
from the revenues of the system on a parity with any outstanding revenue bonds
payable from the system. The bond must be secured by a pledge of the net
revenues of the system. If bonds are currently outstanding payable from the
gross revenues of the system, a gross revenue pledge will be acceptable
provided the requirements of (ii) -(iv) are met.
(ii) the payment of principal and interest on
the revenue bonds must be secured by a reserve account equal to reserve
requirement, such requirement to be met upon the issuance of the
bonds;
(iii) the municipality shall
covenant to collect and maintain rates, charges, and rentals such that the
revenue for each fiscal year the bonds are outstanding will be at least
sufficient to pay the current expenses of operation and maintenance of the
system, to maintain the operating reserve, and to produce net revenues during
each fiscal year not less than 125% of the maximum amount of principal and
interest due on all outstanding bonds payable from the revenues of the system
in any future fiscal year or, if the municipality calculates debt service on
such outstanding bonds on a calendar year basis, then in any future calendar
year;
(iv) the municipality shall
agree not to incur any additional debt payable from the revenues of the system,
unless the net revenues of the system for the last complete fiscal year
preceding the issuance of such additional bonds have equaled at least 125% of
the maximum amount of principal and interest payable from the revenue bond
account in any subsequent fiscal year during the term of the then outstanding
bonds and the additional bonds proposed to be issued, or, if the municipality
calculates debt service on such outstanding bonds on a calendar year basis,
then in any future calendar year.
(A) For the
purpose of the foregoing computation, the net revenues must be those shown by
the financial reports caused to be prepared by the municipality, except that if
the rates and charges for service provided by the system have been changed
since the beginning of the preceding fiscal year, then the rates and charges in
effect at the time of issuance of the additional bonds must be applied to the
quantities of service actually rendered and made available during such
preceding fiscal year to ascertain the gross revenues, from which there shall
be deducted, to determine the net revenues, the actual operation and
maintenance cost plus any additional annual costs of operation and maintenance
which the engineer for the municipality estimates will be incurred because of
the improvement or extension of the system to be constructed from the proceeds
of the additional bonds proposed to be issued.
(B) In no event may any such additional bonds
be issued and made payable from the revenue bond account if there then exists
any deficiency in the balances required to be maintained in any of the accounts
of the fund or if the municipality is in default in any of the other
provisions;
(v)
applications indicating the loan will be evidenced by the issuance of a revenue
bond must be accompanied by:
(A) if requested
by the department, audited financial statements of the system for the last two
completed fiscal years;
(B) if
requested by the department, a certificate as to the municipality's current
population and number of system users, a schedule of the 10 largest users of
the system showing the percentage of total revenues provided by such users and
the amount of outstanding system debt;
(C) a description of the existing and
proposed facilities constituting the system, including a discussion of the
additional capital needs for the system over the next three-year
period;
(D) a copy of the ordinance
or resolution establishing and describing the system of rates and charges for
the use or availability of the system;
(E) a pro forma showing revenues of the
system in an amount sufficient to meet the requirements of these rules and any
outstanding obligations payable from the system;
(F) if the pro forma indicates an increase in
rates and charges to meet the requirements of these rules, a copy of the
proposed rates and charge resolution and a proposed schedule for the adoption
of the charges and if subject to review or approval by another entity, the
schedule for the rate approval;
(G)
any other information deemed necessary by the department to assess the
feasibility of the project and the financial security of the bonds.
(vi) notwithstanding the fact that
the municipal revenue bond act does not require that the issuance of revenue
bonds be approved by the voters, the department may require the municipality to
conduct an election to evidence community support and acceptance of the project
or require the bonds be authorized by the electors and issued as general
obligation bonds in accordance with
7-7-4202, MCA. A municipality shall
conduct an election to evidence community support and acceptance of the project
when in the opinion of the department there are projected large rate increases
due to the improved facility or the facility is a projected high cost
facility.
(vii) the municipality
may pledge water system revenues for a loan where the financed project consists
of treatment of side stream waste from a water system or otherwise constitutes
a wastewater project;
(viii) in
addition to the foregoing terms and conditions, in the case of loans to finance
nonpoint source projects, particularly where there is no existing system or
history of revenues, the department may impose such requirements as the
department determines are reasonable and prudent to determine or realize
adequate security for the loan; for example, in connection with a solid waste
management system project, the department may require, without limitation:
(A) a financial feasibility study;
(B) a description of other solid waste
management services available in the area;
(C) that the municipality place the fees and
charges on the tax bill and collect them in accordance with the provisions of
Title 7, chapter 13, part 2, MCA; and
(D) require that the debt be secured by the
full faith and credit of the municipality.
(c) General obligation bonds issued by county
water and sewer districts shall comply with the requirements of ARM
36.24.104(1) (a)
hereof, and the provisions of Title 7, chapter 13, parts 22 and 23, MCA.
Revenue bonds issued by county water and sewer districts created pursuant to
Title 7, chapter 13, parts 22 and 23, MCA will be accepted as evidence of the
loan, subject to the following terms and conditions:
(i) the issuance of the bonds must be
authorized by the electors of the district as provided in
7-13-2321 through
7-13-2328, MCA;
(ii) the election authorizing the incurrence
of the debt shall be conducted by the date of the binding commitment, unless
such requirement is waived by the department;
(iii) the district shall covenant that it
will cause taxes to be levied to meet the district's obligation on any bond
issued to the department in the event that the revenues of the system are
inadequate therefore in accordance with the provisions of
7-13-2302 through
7-13-2310, MCA;
(iv) the bonds must be payable from the
revenues of the system on a parity with any outstanding revenue bonds payable
from the system;
(v) the district
shall covenant to collect and maintain rates, charges, and rentals such that
the revenue for each fiscal year the bonds are outstanding will be at least
sufficient to pay the current expenses of operation and maintenance of the
system, to maintain the operating reserve and to produce net revenues during
each fiscal year not less than 120% of the maximum amount of principal and
interest due on all outstanding bonds payable from the revenues of the system
in any future fiscal year, or, if the district calculated debt service on such
outstanding bonds on a calendar year basis, then in any future calendar
year;
(vi) the payment of principal
and interest on the bonds must be secured by a reserve account equal to the
reserve requirement, such requirement to be proportionately funded from each
periodic draw so that the requirement is fully satisfied upon the final
draw;
(vii) the district shall
agree not to incur any additional debt payable from the revenues of the system
without the written consent of the department, unless the net revenues of the
system for the last complete fiscal year preceding the issuance of such
additional bonds have equaled at least 120% of the maximum amount of principal
and interest payable from the revenue bond account in any subsequent fiscal
year during the term of the then outstanding bonds and the additional bonds
proposed to be issued, or, if the district calculates debt service on such
outstanding bonds on a calendar year basis, then in any future calendar year.
(A) For the purpose of the foregoing
computation, the net revenues must be those shown by the financial reports
caused to be prepared by the district, except that if the rates and charges for
services provided by the system have been changed since the beginning of the
preceding fiscal year, then the rates and charges in effect at the time of
issuance of the additional bonds must be applied to the quantities of service
actually rendered and made available during such preceding fiscal year to
ascertain the gross revenues, from which there shall be deducted, to determine
the net revenues, the actual operation and maintenance cost plus any additional
annual costs of operation and maintenance which the engineer for the district
estimates will be incurred because of the improvement or extension of the
system to be constructed from the proceeds of the additional bonds proposed to
be issued.
(B) In no event shall
any such additional bonds be issued and made payable from the revenue bond
account if there then exists any deficiency in the balances required to be
maintained in any of the accounts of the fund or if the district is in default
in any of the other provisions;
(viii) an application by a district must be
accompanied by:
(A) if requested by the
department, audited financial statements of the system for the last two
completed fiscal years if there is an existing system;
(B) a map depicting the boundaries of the
district;
(C) a certificate as to
numbers of persons in the district subject to levy described in (v) and the
number of wastewater system customers and the amount of outstanding wastewater
debt;
(D) a pro forma showing
revenues of the system in an amount sufficient to meet the requirements of
these rules and any outstanding obligations payable from the system;
(E) if the pro forma indicates an increase in
rates and charges to meet the requirements of these rules, a copy of the
proposed rates and charge resolution and a proposed schedule for the adoption
of the charges.
(d) The department may accept as evidence of
the loan, bonds issued by a municipality payable from assessments levied upon
real property included within a special improvement district and specially
benefitted by the project being financed from the proceeds of the loan, upon
the following terms and conditions:
(i) the
district be created in accordance with the provisions of Title 7, chapter 12,
part 21 and/or Title 7, chapter 12, parts 41 and 42, MCA;
(ii) the city or county agrees to maintain a
revolving fund as authorized by
7-12-2181 through
7-12-2186 and
7-12-4221 through
7-12-4225, MCA (respectively, the
revolving fund statutes) and covenants to secure the bonds by such revolving
fund and agrees to provide funds for the revolving fund by levying such tax or
making such loan from the general fund as authorized by the revolving fund
statutes;
(iii) 5% of the principal
amount of the loan be deposited into the revolving fund and the city or county
shall agree to maintain in the revolving fund to the extent allowed by law, an
amount not less than 5% of the principal of the bonds secured by the revolving
fund. The department may, if the financial risks associated with a proposed
district warrant it, as a condition to the purchase of such bond, require the
city or county to establish a district reserve fund and fund it from the
proceeds of the loan, as permitted by law;
(iv) the special improvement district be at
least 75% developed, except if the loan is for the purpose of acquiring an
existing system. For purposes of this section, a district will be deemed to be
75% developed if 75% of the lots or assessable area in the district have a
habitable residential dwelling thereon that is currently occupied or there is a
commercial, professional, manufacturing, industrial, or other non-residential
facility thereon;
(v) the total
amount of special assessment debt including the amounts to be assessed for
repayment of the loan against the lots or parcels of land in the district does
not exceed 50% of the fair market value of such lots or parcels within the
district;
(vi) if the project to be
financed from the loan secured by a special assessment bond is not part of a
system currently existing and operated by the municipality receiving the loan
and for the normal maintenance and operation of which the municipality is
responsible and provides for such through rates and charges, a special
maintenance district must be created at the time the improvement district is
created pursuant to the applicable statutes in order to provide for the
operation and maintenance of the project or an agreement must have been entered
into at the time the loan is made between the municipality and another
governmental entity, pursuant to which the governmental entity agrees to
operate and maintain the project.