2022 -- S 2321 SUBSTITUTE A

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LC004720/SUB A/4

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2022

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A N   A C T

AUTHORIZING THE CITY OF PROVIDENCE TO FINANCE A CONTRIBUTION

TOWARDS THE UNFUNDED PENSION LIABILITY OF THE EMPLOYEE RETIREMENT

SYSTEM OF THE CITY OF PROVIDENCE BY THE ISSUANCE OF BONDS IN A

PRINCIPAL AMOUNT NOT TO EXCEED $515,000,000

     Introduced By: Senators Goodwin, Quezada, Ciccone, Mack, Bell, Zurier, Acosta, and
Cano

     Date Introduced: February 15, 2022

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. The city of Providence (the "city") is hereby empowered to issue at one time

or from time to time, bonds up to a principal amount not exceeding five hundred fifteen million

dollars ($515,000,000) in order to finance a contribution towards the unfunded pension liability of

the Employee Retirement System of the city of Providence (the "retirement system") and the costs

of issuing the bonds. Bond proceeds may also be deposited to a reserve fund, if any, established

pursuant to section 3 of this act. The bonds of each issue may be issued in the form of serial bonds

or term bonds or a combination thereof and shall be payable either by maturity of principal in the

case of serial bonds or by mandatory serial redemption in the case of term bonds, in annual

installments of principal, the first installment to be not later than twelve (12) months and the last

installment not later than twenty-five (25) years after the date of their issuance. Annual installments

of principal may be provided for by maturity of principal in the case of serial bonds or by mandatory

serial redemption in the case of term bonds.

     SECTION 2. The bonds shall be signed by the manual or facsimile signatures of the city

treasurer and mayor and shall be issued and sold in such principal amounts as the city council may

authorize by resolution or ordinance. The manner of sale, denominations, maturities, fixed interest

rates and other terms, conditions and details of any bonds issued under this act may be fixed by

proceedings of the city council authorizing the issue or by separate resolution or ordinance of the

city council or, to the extent provisions for these matters are not so made, they may be fixed by the

officers authorized to sign the bonds. The bonds shall be sold at a "true interest cost" not in excess

of four and nine-tenths percent (4.9%) per annum. The true interest cost shall be calculated as that

rate which, as of the date of delivery of the bonds, discounts semiannually all future payments of

principal and interest payments with respect to the bonds to the aggregate amount of bond proceeds.

For purposes of this calculation, the amount of bond proceeds is adjusted by any accrued interest,

original issue discount or original issue premium. The bonds shall be sold with the city retaining

the right to redeem the bonds without penalty or redemption premium on a date not later than ten

(10) years after issuance. In addition to any other security provided by law, bonds issued hereunder

may, in the discretion of the city treasurer and mayor, be secured or supported, in whole or in part,

by insurance or by lines or letters of credit or other credit or liquidity facilitates provided by any

bank, trust company, insurance company or other financial institution, but the city shall not enter

into an interest rate swap or other derivative transaction in connection with the bonds. The proceeds

derived from the sale of the bonds shall be delivered to the city treasurer, and such proceeds,

exclusive of premiums and accrued interest, shall be: (1) Deposited in the retirement system

pension trust fund; (2) Deposited to the reserve fund, if any, established pursuant to section 3 of

this act; and (3) Expended for payment of costs in connection with the issuance of the bonds. No

purchaser of any bonds under this act shall be in any way responsible for the proper application of

the proceeds derived from the sale thereof. The proceeds of bonds issued under this act shall be

deemed appropriated for the purposes of this act without further action than that required by this

act. The bonds authorized by this act may be consolidated for the purposes of issuance and sale

with any other bond issue of the city heretofore or hereafter authorized; provided that,

notwithstanding any such consolidation, the proceeds from the sale of the bonds authorized by this

act shall be expended for the purposes set forth above.

     SECTION 3. The city council, by resolution or ordinance, is authorized to establish a

reserve fund, from bond proceeds or monies other than bond proceeds, for the purposes of this act

upon such terms and conditions as the city council shall determine. Any such reserve shall be held

and controlled by the city and shall be separate from any other reserve or fund of the city allowed

or required by statute. The city council shall establish a method to calculate any minimum value to

be maintained in the reserve, the required amount of any periodic contribution to the reserve and

shall prescribe conditions for expenditures from the reserve, its only permitted uses being to make

contributions to the retirement system, to pay principal and interest on the bonds, and to redeem

bonds.

     SECTION 4. The city council may, by resolution or ordinance, authorize that a portion of

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its real property taxes, tangible property taxes and motor vehicle excise taxes be escrowed,

segregated or separately deposited for the payment of principal and interest on the bonds, making

contributions to the retirement system and making deposits to the reserve fund described in section

3 of this act. The city is authorized to enter into escrow agreements, intercept arrangements, and

other banking arrangements to effectuate the intent of this section which agreements may have a

term of years up to the final maturity of the bonds. If authorized by the city council, the tax assessor

may include provisions for allocation of such taxes in tax bills.

     SECTION 5. Any proceeds of bonds issued hereunder shall be invested by the city board

of investment commissioners established by the city pursuant to the city charter and code of

ordinances. The board of investment commissioners shall develop an investment policy for

investments in the retirement system pension trust fund with the assistance of a nationally

recognized pension investment advisor. So long as any bonds issued pursuant to this act are

outstanding, the city shall continue to retain a nationally recognized pension investment advisor to

advise the board regarding investment of the bond proceeds. Funds may also be invested in

investments which are legal for investment by the state investment commission pursuant to chapter

10 of title 35 (the "state investment commission") or in one or more investment pools established

pursuant to chapter 10.2 of title 35. The city and the state investment commission are each hereby

authorized to enter into agreements with each other with respect to the investment of any proceeds

of bonds issued hereunder, with the resulting transactional cost savings passed on to the city;

provided, however that if any bond proceeds are commingled with other funds for purposes of

investment, that appropriate records shall be maintained of the investments or portions thereof held

for the account of the city's retirement system. Such agreements may have a term of years up to the

final maturity of the bonds. To the extent that any proceeds of the bonds are not invested with the

state investment commission, the city and its board of investment commissioners shall be required

to consult with the state investment commission on initial planned investment strategies and

consider making changes to the initial planned investments of the proceeds of the bonds based upon

the advice provided by the state investment commission.

     SECTION 6. Any accrued interest received upon the sale of bonds hereunder shall be

applied to the payment of the first interest due thereon. Original issue premium, if any, may, in the

discretion of the city treasurer, be applied to the cost of preparing, issuing and marketing bonds

hereunder to the extent not otherwise provided, to the retirement system pension trust fund to

finance unfunded pension liability costs, to the payment of the principal of or interest on bonds

issued hereunder or to any one or more of the foregoing. The cost of preparing, issuing and

marketing bonds hereunder may also, in the discretion of the city treasurer, be met from bond

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proceeds exclusive of premium and accrued interest or from other monies available therefor. In

exercising any discretion under this section, the city treasurer shall be governed by any instructions

adopted by resolution or ordinance of the city council. Except as provided in section 9 hereof, bond

proceeds shall not be used to reimburse the city for previous contributions to the retirement system

pension trust fund or any prior costs associated with the retirement system. So long as any bonds

issued by the city under this act outstanding, the city shall not withdraw funds from the retirement

system pension trust fund for any purpose other than providing benefits to members and their

beneficiaries, defraying reasonable expenses of administering the funds of the retirement system,

conforming with accounting adjustments and return of employee contributions in appropriate cases.

     SECTION 7. All bonds issued under this act and the debts evidenced thereby shall be

obligatory on the city in the same manner and to the same extent as other debts lawfully contracted

by it shall be excepted from the operation of § 45-12-2 and the provisions of the city charter. No

such obligation shall at any time be included in the debt of the city for the purpose of ascertaining

its borrowing capacity. The city shall annually appropriate a sum sufficient to pay the principal and

interest coming due within the year on bonds issued hereunder to the extent that monies therefor

are not otherwise provided. If such sum is not appropriated, it shall nevertheless be added to the

annual tax levy. In order to provide such sum in each year and notwithstanding any provision of

law to the contrary, all taxable property in the city shall be subject to ad valorem taxation by the

city without limitation as to rate or amount.

     SECTION 8. Any bonds issued under the provisions of this act, and coupons, if any, if

properly executed by officers of the city in office on the date of execution, shall be valid and binding

according to their terms notwithstanding that before the delivery thereof and payment therefor any

or all of such officers shall for any reason have ceased to hold office.

     SECTION 9. Pending any authorization or issue of bonds hereunder, the city treasurer,

with the approval of the city council given by a resolution or ordinance passed and approved in the

manner provided in the city charter, may, to the extent that bonds may be issued hereunder, apply

funds in the treasury of the city to the purposes specified in section 2, such advances to be repaid

without interest from the proceeds of bonds subsequently issued or from the proceeds of applicable

federal or state assistance or from other available funds.

     SECTION 10. If the unfunded pension liability to be funded with the proceeds of an issue

of bonds issued under this act relates in part to employees of a component unit, department or board

of the city, each such component unit, department or board shall be responsible for reimbursing the

city for such proportion of the annual debt service expense paid by the city for bonds issued

hereunder as is equal to the proportion of the total unfunded pension liability to be funded with the

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proceeds of the bonds as relates to that component unit, department or board. Notwithstanding the

provisions of any general or special law, the city's maintenance of effort obligations pursuant to §

16-7-23 or any other law, shall be unaffected by: (1) The city's appropriation and payment of the

portion of annual debt service for the bonds which is applicable to school department personnel

who are members of the city retirement system; and (2) The school department's budgetary

allocation and reimbursement of such amount as provided in this section 10.

     SECTION 11. Until such time as: (1) All bonds issued under this act (including any

refunding bonds or other evidences of indebtedness issued to refinance the bonds issued under this

act) are paid in full, or provision has been made for their payment; or (2) Such time as the system

is one hundred percent (100%) funded, whichever occurs first, the city shall not approve any

agreement or amendment to an agreement which has the effect of shifting pension benefit costs

from employees to the city, nor shall the city approve any agreement or amendment to an agreement

which has the effect of permitting employees who are participants in the retirement system to

contribute to the retirement system an amount less than eight percent (8%) of the employee's

pensionable compensation for all employees who are not sworn public safety employees of the fire

department or the police department (also sometimes known as class A employees), or less than

fifteen percent (15%) of the employee's pensionable compensation for sworn public safety

employees of the fire department and the police department (also sometimes known as class B

employees) in the current or any future fiscal year. For purposes of this section "one hundred

percent (100%) funded" is the funded percentage on a "market value of assets" basis from the

system's annual actuarial valuation. This section shall not be construed in any way to limit the city

retirement board's ability to approve changes to actuarial assumptions.

     SECTION 12. It shall be a condition precedent to the issuance of any bonds hereunder that

the city shall first make a deposit of at least ten million dollars ($10,000,000) into one or more

restricted and segregated accounts to be held in trust by the city director of finance, together with

any income accruing thereon, solely for the purpose of funding employee benefit plans (which

plans may be those currently set forth in collective bargaining agreements) that provide post-

employment benefits other than pensions ("OPEB") such as, but not limited to, medical, dental,

prescription, vision care and similar post-employment benefits to plan participants who are eligible

for coverage thereunder (not including teachers), and expenses of the plans. Not later than July 1,

2023, the city board of investment commissioners, established pursuant to section 815 of the city's

home rule charter, shall enter into one or more formal OPEB trust arrangements, which may provide

for one or more agreements with banks, trust companies or other financial intermediaries to serve

as custodian of trust funds. The board of investment commissioners shall invest and reinvest the

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amounts temporarily held in the restricted and segregated account or accounts and the amounts held

in the OPEB trust funds in any investment permitted for the city's pension funds consistent with

the prudent person rule and investment policies of the city. Pending the establishment of the formal

OPEB trust arrangements, the director of finance may disburse not more than five percent (5%) of

the monies held in the segregated account or accounts to reimburse the city for current or past

OPEB payments, to pay healthcare providers or premiums directly, to reimburse or pay eligible

plan participants, or to pay for expenses of the plans. To the extent of any conflict of this section

with any general or special law of applicability or the city's home rule charter, this act shall be

controlling.

     SECTION 13. Bonds may be issued under this act without obtaining approval of any

governmental agency or the taking of any proceedings or the happening of any conditions except

as specifically required by this act for such issue, and shall not be subject to § 45-12-22.4. In

carrying out the financing under this act, all action shall be taken which is necessary to meet

constitutional requirements whether or not such action is otherwise required by statute, but the

validity of bonds issued hereunder shall in no way depend upon the validity or occurrence of such

action.

     SECTION 14. Any unissued authority to issue bonds under this act shall be extinguished

without further action of the general assembly or the city council on the date which is five (5) years

after the effective date of this act.

     SECTION 15. The city treasurer and mayor, on behalf of the city, are hereby authorized to

execute such instruments, documents or other papers as they deem necessary or desirable to carry

out the intent of this act and are also authorized to take all actions and execute all documents or

agreements necessary to comply with federal tax and securities laws, which documents or

agreements may have a term coextensive with the maturity of the bonds authorized hereby,

including Rule 15c2-12 of the Securities and Exchange Commission (the "Rule") and to execute

and deliver a continuing disclosure agreement or certificate in connection with the bonds in the

form as shall be deemed advisable by such officers in order to comply with the Rule.

     SECTION 16. The provisions of this act are severable, and if any of its provisions are held

unconstitutional or invalid for any reason by any court of competent jurisdiction, the decision of

the court shall not affect or impair any of the remaining provisions.

     SECTION 17. The question of the issuance of the bonds shall be submitted to the electors

of the city at a special citywide election other than a primary, to be held on a date to be determined

by resolution of the city council. The question shall be submitted in substantially the following

form: "Shall the City of Providence finance a contribution towards the unfunded pension liability

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of the Employee Retirement System of the City of Providence by the issuance of general obligation

bonds in a principal amount not to exceed $515,000,000?" and the warning for the election shall

contain the question to be submitted. From the time the election is warned and until it is held, it

shall be the duty of the city clerk to keep a copy of the act available at the city clerk's office for

public inspection, but the validity of the election shall not be affected by this requirement. To the

extent of any inconsistency between this act and the city charter or any other general law or law of

special applicability to the city, this act shall prevail.

     SECTION 18. This section 18 and section 17 shall take effect upon passage. The remainder

of this act shall take effect upon the approval of this act by a majority of those voting on the question

at the election prescribed by section 17, or upon passage, whichever occurs last.

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EXPLANATION

OF

A N   A C T

AUTHORIZING THE CITY OF PROVIDENCE TO FINANCE A CONTRIBUTION

TOWARDS THE UNFUNDED PENSION LIABILITY OF THE EMPLOYEE RETIREMENT

SYSTEM OF THE CITY OF PROVIDENCE BY THE ISSUANCE OF BONDS IN A

PRINCIPAL AMOUNT NOT TO EXCEED $515,000,000

***

     This act would authorize the city of Providence to finance a contribution towards the

unfunded pension liability of the employee retirement system of the city of Providence by the

issuance of bonds in the principal amount of $515,000,000 therefor.

     Sections 17 and 18 of the act would take effect upon passage. The remainder of the act

would take effect upon approval by the electors of the city of the question provided for in section

17, or upon passage, whichever occurs last.

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