Chapter 06-057

2006 -- H 7615 SUBSTITUTE A

Enacted 06/09/06

A N A C T

RELATING TO TOWNS AND CITIES -- COUNCILS AND GOVERNING BODIES

Introduced By: Representatives Anguilla, McHugh, Scott, Gallison, and Pacheco

Date Introduced: February 16, 2006

It is enacted by the General Assembly as follows:

     SECTION 1. Section 45-5-20.1 of the General Laws in Chapter 45-5 entitled "Councils

and Governing Bodies" is hereby amended to read as follows:

45-5-20.1. Power of city and town councils to jointly establish an insurance

corporation, to obtain insurance, and to enter into a cooperative risk management program.

Power of city and town councils and regional school districts to jointly establish an

insurance corporation, to obtain insurance, and to enter into a cooperative risk

management program. -- (a) City Cities and town councils, school committees, and water and

fire districts may, through passage of a resolution, establish agreements between two (2) or more

cities, town councils, school committees, and water and fire districts and towns for obtaining or

effecting insurance by self insurance, for obtaining or effecting insurance from any insurer

authorized to transact insurance in the state, or for obtaining and effecting insurance secured in

accordance with any other method provided by law, or by combination and of the provisions of

this section for obtaining and effecting insurance. Agreements made pursuant to this section may

provide for pooling of self insurance reserves, risks, claims and losses, and of administrative

expenses associated with the same, among local government units.

      (b) To accomplish the purposes of this section any two (2) or more cities, and towns,

school committee or water and fire districts may authorize the creation of a corporation separate

corporations (the "corporation") for the purpose of; (1) issuing to the cities, and towns, school

committees, and water and fire districts which are members of the corporation corporations, their

departments, officials, and employees, their boards, commissions, authorities, and other agencies,

and their members, policies of insurance and reinsurance of all types and categories, including,

without being limited to, the following types and categories: property, casualty, and life, accident,

and health insurance, and (2) developing and administering an interlocal risk management

program. The corporation corporations, in addition, may have as its their purposes reducing the

risk of its members; safety engineering; distributing, sharing, and pooling risks; acquiring excess

loss insurance; and processing and defending claims against the members of the corporation

corporations. Any contributions made to the corporation corporations for the purpose of

distributing, sharing, or pooling risks shall be made on actuarially sound basis, and the

corporation corporations shall have an audit performed annually, copies of which shall be

provided to the members of the corporation corporations, the insurance administrator, and the

auditor general; discrete accounts shall be kept for each risk management program developed and

administered by the corporation corporations. The corporation shall not receive funds from any

local government or local government agency for the purpose of distributing, sharing, or pooling

any risk, until a plan for the operation of the corporation has been approved by the insurance

administrator, which approval shall not be unreasonably withheld.

      (c) The corporation corporations shall not be considered an insurance company and shall

not be subject to the provisions of the laws of the state of Rhode Island regulating insurance

companies. and therefore shall in no way be regulated by the Rhode Island department of

business regulation.

      (d) The corporation corporations created pursuant to the provisions of this section will be

created by filing articles of incorporation pursuant to chapter 6 of title 7 entitled Rhode Island

Nonprofit Corporation Act and the articles of incorporation will be filed by an

incorporator/incorporators designated by the city, or town councils, school committees or water

or fire districts authorizing the creation of the corporation. The articles of incorporation creating

the corporation corporations pursuant to the provisions of this section may contain provisions, not

inconsistent with this section, that the incorporators determine to be desirable or useful in

fulfilling the purposes set forth in this section. The corporation corporations created pursuant to

the provisions of this section will have the powers of a nonprofit corporation created under

chapter 6 of title 7 entitled Rhode Island Nonprofit Corporation Act including, without being

limited to, the power to issue bonds, notes, and other obligations in any amounts and upon any

terms that the corporation's governing board determines.

      (e) The corporation corporations created pursuant to the provisions of this section,

notwithstanding the filing of its articles of incorporation pursuant to chapter 6 of title 7 entitled

Rhode Island Nonprofit Corporation Act, (1) will be deemed to be a public corporation

corporations, instrumentality, and agency of the state of Rhode Island acting for the benefit of the

municipalities which are members of the corporation corporations but will not constitute a

department of the government of the state of Rhode Island, and (2) will be deemed to be

exercising public and essential governmental functions of the state of Rhode Island. No part of

the net earnings of the corporation corporations created pursuant to the provisions of this section

will be distributable to, or inure to the benefit of, any private person. The members of the

governing board of the corporation corporations created pursuant to the provisions of this section

will consist solely of chief executives, chief elected officials, finance directors, or treasurers of

municipalities, or any other municipal officials that may be provided for in the bylaws of the

corporation corporations, and the members shall receive no compensation for the performance of

their duties but each member may be reimbursed for his or her reasonable expenses incurred in

carrying out their duties.

      (f) The bonds, notes, or other obligations issued by the corporation corporations created

pursuant to the provisions of this section will not be deemed to constitute a debt or liability or

obligation of the state of Rhode Island or of any political subdivision of the state or of any

municipality which is a member of the corporation but will be payable solely from the revenues

or assets of the corporation corporations.

      (g) Notwithstanding any provision of this chapter or special or general law to the

contrary, each city, or town, school committee, or water or fire district which is a member of the

corporation corporations created pursuant to the provisions of this section will be authorized to

enter into contracts with the corporation corporations with respect to, among other matters, the

payment of premiums and other payments, for terms not exceeding twenty-five (25) years in

duration. To the extent that the obligation to pay premiums or make other payments under any

contract is deemed to constitute the incurring of indebtedness by a city, or town, school

committee, or water or fire district, the contract may nevertheless be entered into without

obtaining the approval of the electors of the city or town notwithstanding the provisions of

sections 45-12-19 and 45-12-20 and notwithstanding any provisions of the city's or town's charter

or any special or general law to the contrary. Any contract may be entered into by a city, or town,

school committee or water or fire district either prior to or subsequent to the making of any

appropriations which may be needed to carry out the obligations of the city, or town, school

committee or water or fire district under the contract.

      (h) The property and assets of the corporation corporations created pursuant to the

provisions of this section, the income of the corporation corporations, and any bonds, notes, or

other obligations issued by the corporation, their transfer, and the income from these (including

any profits made on the sale thereof) will at all times be free from taxation by the state of Rhode

Island or any political subdivision or other instrumentality of the state of Rhode Island, excepting

inheritance, estate, and gift taxes with respect to the bonds, notes, or other obligations issued by

the corporation corporations.

      (i) Whenever the governing board of a corporation the corporations created pursuant to

the provisions of this section determines that the purposes for which the corporation corporations

was were created have been substantially fulfilled and all bonds, notes, or other obligations of the

corporation corporations have been fully paid or adequate provision has been made for their

payment, the corporation corporations may be dissolved in the manner provided for nonprofit

corporations pursuant to chapter 6 of title 7 entitled Rhode Island Nonprofit Corporation Act and,

upon the corporation's corporations' dissolution, title to all funds and assets of the corporation

shall vest in and become the property of the members of the corporation in proportions that are

provided for in the corporation's articles of incorporation.

      (j) No corporation corporations created pursuant to the provisions of this section shall be

required to pay any recording or filing fee or any transfer tax of any kind on account of papers or

instruments recorded or filed by it or on its behalf.

      (k) No corporation corporations created pursuant to the provisions of this section and no

agent or broker acting on behalf of the corporation corporations shall be required to pay a surplus

line premium tax of any kind on premiums for any policies of insurance and reinsurance to or

from the corporation corporations.

     SECTION 2. This act shall take effect upon passage.

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LC02059/SUB A

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