Introduced Version






HOUSE BILL No. 1174

_____


DIGEST OF INTRODUCED BILL



Citations Affected: IC 8-1.5; IC 36-9-23-25.

Synopsis: Municipal utility funds and economic development. Allows the board of a municipally owned utility to approve or recommend a transfer of all or part of the utility's surplus earnings from the utility's cash reserve fund to: (1) the municipality's general fund; or (2) a local economic development organization to benefit or promote the municipality, the utility's service area, or the county or region in which the municipality or the utility's service area is located. (Current law allows for a transfer of the utility's surplus earnings only to the municipality's general fund.) Provides that rates and charges in lieu of taxes incorporated into a municipally owned utility's rates and charges may be transferred to: (1) the municipal general fund; or (2) if the cash revenue requirements of the utility have been met, the utility's cash reserve fund. (Current law allows for a transfer of rates and charges in lieu of taxes only to the municipality's general fund.) Provides that a municipality that seeks to make a transfer from the municipally owned utility's cash reserve fund to a local economic development organization may not impose a special rate, charge, surcharge, or other fee on the customers of the utility in order to pay for the transfer. Authorizes the state board of accounts to adopt rules, including emergency rules, to implement these provisions.

Effective: Upon passage; July 1, 2013.





Friend, Wolkins




    January 10, 2013, read first time and referred to Committee on Local Government.







Introduced

First Regular Session 118th General Assembly (2013)


PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts between statutes enacted by the 2012 Regular Session of the General Assembly.

HOUSE BILL No. 1174



    A BILL FOR AN ACT to amend the Indiana Code concerning utilities.

Be it enacted by the General Assembly of the State of Indiana:

SOURCE: IC 8-1.5-1-7.3; (13)IN1174.1.1. -->     SECTION 1. IC 8-1.5-1-7.3 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 7.3. "Local economic development organization" includes any:
        (1) organization listed in IC 5-28-11-2; or
        (2) organization similar to an organization listed in IC 5-28-11-2, including a partnership between private enterprise and local units of government, whose purposes include economic development activities in one (1) or more Indiana counties, including:
            (A) coordinating local efforts to attract jobs and new business investment;
            (B) providing assistance to existing businesses to foster growth and job retention; and
            (C) sustaining and improving the quality of life in the communities served.

SOURCE: IC 8-1.5-3-4; (13)IN1174.1.2. -->     SECTION 2. IC 8-1.5-3-4 IS AMENDED TO READ AS

FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 4. (a) The board has general supervisory powers over the utilities under its control, with responsibility for the detailed supervision of each utility to be vested in its superintendent or manager, who is responsible to the board for the business and technical operation of the utility. The board shall:
        (1) fix the number and compensation of employees;
        (2) adopt rules governing the appointment of employees including making proper classifications and rules to:
            (A) determine the eligibility of applicants;
            (B) determine by competitive examination the relative fitness of applicants for positions;
            (C) establish eligible lists arranged according to the ratings secured;
            (D) provide for the appointment of those having the highest ratings; and
            (E) provide for the promotion of employees;
        (3) subject to IC 36-4-9-2, appoint a superintendent or manager of each utility under its control who is responsible to the board for the business and technical operation of the utility; the board shall make the appointment on the basis of fitness to manage the particular utility to which he the superintendent or manager is to be assigned, taking into account his the superintendent's or manager's executive ability and his knowledge of the utility industry;
        (4) subject to IC 36-4-9-12, hire attorneys when required for the operation of the utility;
        (5) hire professional or expert personnel when required for the operation of the utility;
        (6) submit a budget of its financial needs for the next year in the detail required by the municipal legislative body;
        (7) recommend to the legislative body reasonable and just rates and charges for services to the patrons of each utility;
        (8) appropriate, lease, rent, purchase, and hold all real and personal property of the utility;
        (9) enter upon lands for the purpose of surveying or examining the land to determine the location of any plant or appurtenances;
        (10) award contracts for:
            (A) the purchase of capital equipment;
            (B) the construction of capital improvements; or
            (C) other property or purposes that are necessary for the full and efficient construction, management, and operation of each utility;


        (11) adopt rules for the safe, economical, and efficient management and protection of each utility;
        (12) deposit at least weekly with the municipal fiscal officer all money collected from each utility to be kept in a separate fund subject to the order of the board; and
        (13) make monthly reports to the fiscal officer of the receipts and disbursements of money belonging to each utility and an annual report of the condition of the utility.
    (b) The board may purchase by contract electricity, water, gas, power, or any other commodity or service for the purpose of furnishing the commodity or service to the patrons of the municipally owned utility or to the municipality itself.
    (c) If the board wants to purchase the commodity or service from a public utility and the parties cannot agree on a rate or charge to be paid for it, either party may apply to the commission or other appropriate state or federal regulatory agency to establish a fair and reasonable rate or charge to be paid for the commodity or service.
    (d) The board may discontinue water service by a waterworks to:
        (1) a water consumer; or
        (2) any property;
upon failure by the water consumer or the property owner to pay charges legally due for sewer or sewage disposal plant service. However, the water service may not be discontinued for nonpayment of sewer or sewage disposal plant service charges until the charges have been due and unpaid for at least thirty (30) days.
    (e) Before water service is discontinued under subsection (d), the board must give written notice to the water consumer or property owner of its intention to discontinue water service if the unpaid sewer or sewage disposal plant service charges are not paid before a date specified in the notice. The notice must be mailed not less than ten (10) days before water service is to be discontinued and addressed to the water consumer or the property owner at his the consumer's or owner's last known address.
     (f) The board may approve or recommend a transfer of all or part of the municipally owned utility's surplus earnings to:
        (1) the municipality's general fund; or
        (2) after June 30, 2013, a local economic development organization;
under section 11 of this chapter.

SOURCE: IC 8-1.5-3-8; (13)IN1174.1.3. -->     SECTION 3. IC 8-1.5-3-8, AS AMENDED BY P.L.172-2009, SECTION 5, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 8. (a) A municipality owning a utility under this

chapter shall furnish reasonably adequate services and facilities.
    (b) The rates and charges made by a municipality for a service rendered or to be rendered, either directly or in connection therewith, must be nondiscriminatory, reasonable, and just.
    (c) "Reasonable and just rates and charges for services" means rates and charges that produce sufficient revenue to:
        (1) pay all the legal and other necessary expenses incident to the operation of the utility, including:
            (A) maintenance costs;
            (B) operating charges;
            (C) upkeep;
            (D) repairs;
            (E) depreciation;
            (F) interest charges on bonds or other obligations, including leases; and
            (G) costs associated with the acquisition of utility property under IC 8-1.5-2;
        (2) provide a sinking fund for the liquidation of bonds or other obligations, including leases;
        (3) provide a debt service reserve for bonds or other obligations, including leases, in an amount established by the municipality, not to exceed the maximum annual debt service on the bonds or obligations or the maximum annual lease rentals;
        (4) provide adequate money for working capital;
        (5) provide adequate money for making extensions and replacements to the extent not provided for through depreciation in subdivision (1); and
        (6) provide money for the payment of any taxes that may be assessed against the utility.
    (d) It is the intent of this section that the rates and charges produce an income sufficient to maintain the utility property in a sound physical and financial condition to render adequate and efficient service. Rates and charges too low to meet these requirements are unlawful.
    (e) The board may recommend to the municipal legislative body rates and charges sufficient to include a reasonable return on the utility plant of the municipality.
    (f) Rates and charges established under this section are subject to the approval of:
        (1) the municipal legislative body by ordinance; and
        (2) the commission, in accordance with the procedures set forth in IC 8-1-2.
The commission shall approve rates and charges that are sufficient, in

addition to the cash revenue requirements set forth in subsection (c), to include a reasonable return on the utility plant of the municipality if the legislative body so elects.
    (g) Subject to subsection (j), and except for a municipally owned utility taxed under IC 6-1.1-8-3, the municipal legislative body may approve and, with respect to a municipally owned utility that has not withdrawn from the commission's jurisdiction for the approval of rates and charges as allowed under this chapter, the commission shall approve rates and charges sufficient to compensate the municipality for taxes that would be due the municipality on the utility property were it privately owned. All or part of these rates and charges in lieu of taxes may be transferred to:
         (1) the municipal general fund; or
         (2) after June 30, 2013, if the cash revenue requirements set forth in subsection (c) have been met, the municipally owned utility's cash reserve fund established under section 11 of this chapter;
if the legislative body so elects.
    (h) The commission shall grant a request that an increase in rates and charges not be effective until after the occurrence of a future event if the legislative body so requests.
    (i) A municipality that acquires and operates a utility under IC 8-1.5-2 by exercising the power of eminent domain may not impose a special rate, charge, surcharge, or other fee, other than rates and charges approved under this section or otherwise authorized by law, on the customers of the utility in order to pay for the costs associated with acquiring the utility through the exercise of the power of eminent domain.
     (j) A municipality that seeks to make a transfer under:
        (1) subsection (g)(2) to the municipally owned utility's cash reserve fund established under section 11 of this chapter; or
        (2) section 11(a)(2) of this chapter to a local economic development organization;
may not impose a special rate, charge, surcharge, or other fee, other than rates and charges approved under this section or otherwise authorized by law, on the customers of the utility in order to pay for the transfer. This subsection does not impair the authority of a municipality to adopt a rate ordinance that offers reduced rates or charges for certain industrial or commercial customer classes to provide incentives for those customers to expand or locate their operations in the municipally owned utility's service area.


SOURCE: IC 8-1.5-3-11; (13)IN1174.1.4. -->     SECTION 4. IC 8-1.5-3-11 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 11. (a) The money belonging to each municipally owned utility shall be kept by the municipal fiscal officer as separate funds as required by any bond ordinance or accounting procedures established by the commission or the state board of accounts. The municipal legislative body, with the approval or recommendation of the board, and subject to subsections (d) and (e) and section 8(j) of this chapter, may transfer surplus earnings of the utility, including a municipally owned sewer utility subject to IC 36-9-23, to:
         (1) the municipality's general fund; or
        (2) after June 30, 2013, a local economic development organization to benefit or promote:
            (A) the municipality;
            (B) one (1) or more areas within the municipally owned utility's service area; or
            (C) the county or region in which:
                (i) the municipality; or
                (ii) the municipally owned utility's service area;
            is located.

The Money may not, however, be transferred under this subsection unless the terms and conditions of any bond ordinance, resolution, indenture, contract under IC 8-1-2.2, or similar instrument binding upon the utility are complied with.
    (b) A cash reserve fund shall be created by ordinance and carried on the records of the utility or utilities by providing for monthly contributions or transfers to the cash reserve fund of surplus earnings of the utility or utilities.
    (c) "Surplus earnings" are those cash earnings remaining after provision has been made to take care of current obligations, including:
        (1) operating expense;
        (2) depreciation or replacement fund;
        (3) bond and interest sinking fund;
        (4) retirement fund; or
        (5) any other priority fund requirements fixed by law.
    (d) After creation of the cash reserve fund, the legislative body may do the following:
        (1)
Include in the municipal general fund budget, as revenue in lieu of taxes, an amount equal to the actual balance, or part of the actual balance, in the cash reserve fund as of June 30 of the current year. However, except as provided in subsection (e), the available cash reserve fund balance, or part of the available

cash reserve fund balance, may be transferred to the municipal general fund only during the calendar year for which the budget was adopted, and transfers may not be made from any utility funds to the general fund except from the cash reserve fund.
         (2) After June 30, 2013, transfer to a local economic development organization under subsection (a) an amount equal to the actual balance, or part of the actual balance, in the cash reserve fund at the time of the transfer, to the extent that the funds transferred are not needed or anticipated to be needed for a transfer to the general fund under subdivision (1) or subsection (e) for general municipal purposes. Transfers may not be made from any utility funds to a local economic development organization under subsection (a) except from the cash reserve fund.
    (e) If at any time after the final approval of the budget an emergency should arise for further appropriations from the general fund, the legislative body may, by ordinance, transfer additional money from the cash reserve fund to the general fund to provide for the additional appropriations, the transfer to be limited to the accretions to the cash reserve fund since the preceding June 30.
    (f) A cash reserve fund if authorized by ordinance, may be used to make loans to another utility owned by the same municipality, for periods not to exceed five (5) years, at any interest rate, if such loans are authorized by ordinance of the municipal legislative body. The repayment of the loan and interest shall be returned to the cash reserve fund.
     (g) The state board of accounts may adopt rules under IC 4-22-2, including emergency rules in the manner provided under IC 4-22-2-37.1, to implement this section.

SOURCE: IC 36-9-23-25; (13)IN1174.1.5. -->     SECTION 5. IC 36-9-23-25, AS AMENDED BY P.L.114-2008, SECTION 29, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 25. (a) Subject to section 37 of this chapter, the municipal legislative body shall, by ordinance, establish just and equitable fees for the services rendered by the sewage works, and provide the dates on which the fees are due.
    (b) Just and equitable fees are the fees required to maintain the sewage works in the sound physical and financial condition necessary to render adequate and efficient service. The fees must be sufficient to:
        (1) pay all expenses incidental to the operation of the works, including legal expenses, maintenance costs, operating charges, repairs, lease rentals, and interest charges on bonds or other obligations;
        (2) provide the sinking fund required by section 21 of this chapter;
        (3) provide adequate money to be used as working capital; and
        (4) provide adequate money for improving and replacing the works.
Fees established after notice and hearing under this chapter are presumed to be just and equitable.
    (c) The fees are payable by the owner of each lot, parcel of real property, or building that:
        (1) is connected with the sewage works by or through any part of the municipal sewer system; or
        (2) uses or is served by the works.
Unless the municipal legislative body finds otherwise, the works are considered to benefit every lot, parcel of real property, or building connected or to be connected with the municipal sewer system as a result of construction work under the contract, and the fees shall be billed and collected accordingly.
    (d) The municipal legislative body may use one (1) or more of the following factors to establish the fees:
        (1) A flat charge for each sewer connection.
        (2) The amount of water used on the property.
        (3) The number and size of water outlets on the property.
        (4) The amount, strength, or character of sewage discharged into the sewers.
        (5) The size of sewer connections.
        (6) Whether the property has been or will be required to pay separately for any part of the sewage works.
        (7) Whether the property, although vacant or unimproved, is benefited by a local or lateral sewer because of the availability of that sewer. However, the owner must have been notified, by recorded covenants and restrictions or deed restrictions in the chain of title of his property, that a fee or assessment for sewer availability may be charged, and the fee may reflect only the capital cost of the sewer and not the cost of operation and maintenance of the sewage works.
        (8) The cost of collecting, treating, and disposing of garbage in a sanitary manner, including equipment and wages.
        (9) Subject to subsection (g), the amount of money sufficient to compensate the municipality for the property taxes that would be paid on the sewage works if the sewage works were privately owned.
        (10) Any other factors the legislative body considers necessary.
     (e) Fees collected under subdivision (8) subsection (d)(8) may be spent for that purpose only after compliance with all provisions of the ordinance authorizing the issuance of the revenue bonds for the sewage works. The board may transfer all or part of the fees collected in lieu of taxes under subdivision (9) subsection (d)(9) to:
         (1) the general fund of the municipality; or
        (2) after June 30, 2013, if the requirements set forth in subsection (b) have been met, a cash reserve fund established under IC 8-1.5-3-11.

    (e) (f) The municipal legislative body may exercise reasonable discretion in adopting different schedules of fees, or making classifications in schedules of fees, based on variations in:
        (1) the costs, including capital expenditures, of furnishing services to various classes of users or to various locations; or
        (2) the number of users in various locations.
     (g) A municipality that seeks to make a transfer under:
        (1) subsection (e)(2) to a cash reserve fund established under IC 8-1.5-3-11; or
        (2) IC 8-1.5-3-11(a)(2) to a local economic development organization;
may not impose a special rate, charge, surcharge, or other fee, other than rates and charges approved under this section or otherwise authorized by law, on the customers of the utility in order to pay for the transfer. This subsection does not impair the authority of a municipality to adopt a rate ordinance that offers reduced rates or charges for certain industrial or commercial customer classes to provide incentives for those customers to expand or locate their operations in the municipally owned utility's service area.

SOURCE: ; (13)IN1174.1.6. -->     SECTION 6. An emergency is declared for this act.