Chapter 008

2003 -- H 5088 SUBSTITUTE A

Enacted 02/04/03

A N A C T

RELATING TO TOWNS AND CITIES -- QUALIFIED BONDS

Introduced By: Representatives Lima, Montanaro, Mumford, Palumbo, and Handy

Date Introduced: January 16, 2003

It is enacted by the General Assembly as follows:

SECTION 1. Findings – Declarations. – The general assembly finds and declares that:

     (1) Maintenance of strong financial credit in Rhode Island cities and towns is essential to

the citizens of this state;

     (2) The credit status of the city of Cranston can be strengthened by a pledge by the city of

any funds appropriated as state aid to pay debt service payments on qualified bonds;

     (3) Such a pledge should expand the market for and lower the interest costs on qualified

bonds issued pursuant to the terms of this act, thus reducing the borrowing costs of the city.

SECTION 2. Definitions. – For the purposes of this act, unless the context clearly

requires a different meaning:

     (1) “Auditor general” means the auditor general of the state;

     (2) “City” means the city of Cranston, Rhode Island;

     (3) “Debt service” means and includes payments of principal and interest on qualified

bonds issued pursuant to the terms of this act or amounts required in order to satisfy sinking fund

payment requirements with respect to such bonds;

     (4) “Director of administration” means the director of the department of administration of

the state;

     (5) “Director of finance” means the director of finance of the city;

     (6) “General treasurer” means the general treasurer of the state;

     (7) “Paying agent” means any bank, trust company or national banking association

having the power to accept and administer trusts, named or designated in any qualified bond of

the city as the agent for the payment of the principal of and interest thereon and shall include the

holder of any sinking fund established for the payment of such bonds;

     (8) “Qualified bonds” means those bonds issued in conformity with the provisions of this

act;

     (9) “State aid” means the funds made available to cities and towns;

     (i) as state aid pursuant to chapter 45-13 of the general laws, but specifically excluding

reimbursements to cities and towns for the cost of state mandates pursuant to section 45-13-9;

     (ii) as school housing aid pursuant to sections 16-7-35 through 16-7-47 of the general

laws, but specifically excluding school operations aid provided for in sections 16-7-15 through

16-7-34.3 of the general laws;

     (iii) in replacement of motor vehicle and trailer excise taxes pursuant to chapter 44-34.1

of the general laws;

     (iv) from the public service corporation tax pursuant to chapter 44-13 of the general laws;

and

     (v) pursuant to all acts supplementing such chapters listed in subdivisions (i) through (iv)

above or pursuant to any other law hereafter enacted providing for funds to municipalities in lieu

of or in substitution for the funds presently provided pursuant to acts supplementing such chapters

listed in (i) through (iv); and

     (10) “State” means the State of Rhode Island and Providence Plantations.

SECTION 3. Application to issue qualified bonds – Review – Costs. – Whenever

under any general law or special law authority has already been granted to the city of Cranston to

issue general obligation bonds for any purpose or purposes, the director of finance of the city of

Cranston, may file an application with the director of administration to qualify the bonds pursuant

to the provisions of this act. Upon receipt of the application, the director of administration shall

cause a review of the application to be made, taking into consideration the purpose of the

financing, the ability of the city to provide other essential public improvements and services and

to pay when due the principal and interest on its debts, the reasonableness of the amounts to be

expended for each of the purposes or improvements to be financed, the amount of state aid

payments likely to be made to the city based on the amount of state aid paid to that city over the

prior two (2) fiscal years, the payments to be made on the proposed bonds, and such other factors

as the director of administration may deem necessary or advisable. As a condition to approving

any such application, the director of administration shall determine that the total amount of state

aid appropriated and payable to the city for the next prior fiscal year shall equal at least two

hundred percent (200%) of the maximum annual debt service of the bonds to be issued and any

outstanding qualified bonds issued by the city. The cost of the review shall be assessed against

the city and, notwithstanding any provision of the general or special law authorizing the

indebtedness, may be paid from the proceeds of the qualified bonds or of any temporary notes in

anticipation of the sale of the bonds.

SECTION 4. Authorization of qualified bonds. – If the review shows to the

satisfaction of the director of administration that the city should be entitled to issue qualified

bonds, the director of administration may authorize the city to issue such qualified bonds. In

considering any application and before certifying approval thereof and authorization of qualified

bonds, the director of administration may require, in writing, the city council to adopt resolutions

restricting or limiting any future proceedings with respect to the authorization of bonds or other

matters deemed by the director of administration to affect any estimate made or to be made as a

part of the review made in accordance with section 3 hereof. Every resolution so adopted shall

constitute a valid and binding obligation of the city; provided, however, that upon application of

the city, the director of administration may, after review thereof, release the city council from any

restrictions or limitations contained in the resolution, if the director of administration finds that

such release is in the best interest of the city and will not impair the security of the qualified

bonds. Notwithstanding any other provision of this act, in addition to the approval of the director

of administration, no qualified bonds shall be issued hereunder with out the approval of the

auditor general.

SECTION 5. Authorization to issue bonds – Time for approval. – Within sixty (60)

days after the submission to it of an application under section 3 hereof, the director of

administration and the auditor general shall authorize the issuance of qualified bonds, if the state

director of administration and the auditor general are satisfied that the issuance of qualified bonds

is appropriate and the city is taking appropriate fiscal actions to improve the financial conditions

of the city. If the director of administration and the auditor general are satisfied, the director of

administration and the auditor general shall so indicate by issuing an approval of the request

within said sixty (60) day period. Failure to issue an approval of the request within this sixty (60)

day period shall be a denial of the application.

SECTION 6. Recital of issuance pursuant to this chapter - Payment dates - Maturity

date. - All qualified bonds when issued shall contain a recital to the effect that they are issued

pursuant to this act and are entitled to the benefits of the provisions of this act. Notwithstanding

any contrary provisions of general or special law, all qualified bonds shall be payable in annual,

equal or diminishing installments of principal. No qualified bond shall have scheduled interest

payments due and payable in the month of July and no qualified bond shall have scheduled

principal payments due and payable in the months of July, August, September, October,

November, December or January. The final maturity of such qualified bonds shall occur not less

than five (5) nor more than thirty (30) years from the date of issuance without regard to any

limitation as to maturities or amounts of annual installments for bonds provided in any other law.

SECTION 7. Certification to general treasurer - Payment of debt service - Costs

assessed. – The director of finance of the city shall certify to the general treasurer and to the

office of municipal affairs within the state department of administration the maturity schedule,

interest rates, and dates of payment of debt service on the qualified bonds within ten (10) days

after the date of issuance of the qualified bonds. The paying agents for the qualified bonds shall

be approved by the general treasurer. Fifteen (15) days before any principal or interest payment

date, the general treasurer shall pay such debt service, to the extent state aid is appropriated by the

state and is due and payable, and after payment shall withhold from the state aid payable to the

city, an amount which will be sufficient to pay the debt service on the qualified bonds. From the

time withheld by the general treasurer, all such state aid so withheld and paid shall be exempt

from being levied upon, taken, sequestered, or applied toward paying the debts of the city other

than for payment of debt service on such qualified bonds.

SECTION 8. Covenant by state. – The state hereby covenants with the purchasers,

holders and owners, from time to time, of qualified bonds that it will not repeal, revoke, rescind,

modify, or amend the provisions of section 6 so as to create any lien or charge on or pledge,

assignment, diversion, withholding of payment, or other use of or deduction from any state aid, to

be paid to any holder of qualified bonds which is prior in time or superior in right to the payment

required by said section; provided, however, that nothing herein contained shall be deemed or

construed to require the state to continue to make payments of state aid or other amounts or to

limit or prohibit the state from repealing or amending any law heretofore or hereafter enacted for

the payment or apportionment of state aid, of the manner, time, or amount thereof.

SECTION 9. Certification conclusive as to amount payable – Estoppel. – The

certification to the general treasurer as to the amount payable in any year for debt service on such

qualified bonds shall be fully conclusive as to such qualified bonds from and after the time of

issuance of such qualified bonds, notwithstanding any irregularity, omission, or failure as to

compliance with any of the provisions of this act with respect to such qualified bonds; provided,

however, that such qualified bonds contain a recital to the effect that they are entitled to the

benefits of the provisions of this act. All persons shall be forever estopped from denying that such

qualified bonds are entitled to the benefits of the provisions of this act.

SECTION 10. Obligation to appropriate or levy taxes to pay bonds when due. –

Nothing in this act shall be construed to relieve the city of the obligation imposed on it by law to

appropriate and to include in its annual tax levy amounts necessary to pay, in each year, the debt

service becoming due on any qualified bonds issued by the city; provided, however, that to the

extent of the amounts of state aid payable to the city which have been withheld and have been or

are to be forwarded to the paying agent for such qualified bonds, the general treasurer shall

certify to the city director of finance, the amounts so withheld and thereafter such amounts shall

be credited to the appropriations of the city for the current fiscal year; and provided, further, that

to the extent to which state aid is not appropriated by the state in any fiscal year, such

appropriated amounts of the city shall be used to pay the debt service maturing and becoming due

in such year on such qualified bonds of the city. Any such application of state aid payments shall

not constitute a loss in nonproperty tax revenues for purposes of subsection 44-5-2(c)(1).

SECTION 11. Bonds for projects commenced prior to effective date. – The

provisions of this act shall not be construed to prohibit the city from applying for authorization to

issue qualified bonds pursuant to the terms of this act in connection with the construction,

reconstruction, development, extension, or improvement of property, notwithstanding that the

construction, reconstruction, development, extension, improvement or acquisition was authorized,

approved or commenced prior to the effective date of this act.

SECTION 12. State not to act as pledge or surety. – Nothing in this act shall be

construed to pledge the credit and assets of the state to the support of bonds issued pursuant to

this act or to guarantee payment or stand as surety for the payment of bonds pursuant to this act.

SECTION 13. Authorized amount. – The total amount of qualified bonds issued under

this act shall not exceed twenty-eight million dollars ($28,000,000).

SECTION 14. This act shall take effect upon passage.

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LC00684/SUB A

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