S 0226 General Bill, By Leatherman

Similar(H 3856)
 A Bill to amend the Code of Laws of South Carolina, 1976, by adding Section
 11-27-110 so as to provide lease-purchase or lease-back agreements involving
 real property entered into by the State or political subdivisions of the state
 wherein the state or political subdivision is the lessee constitutes general
 obligation debt for the period of the lease and to provide that this general
 obligation debt may not violate the constitutional debt limitations applicable
 to the state or political subdivision under Article X of the State
 Constitution.

   01/19/93  Senate Introduced and read first time SJ-11
   01/19/93  Senate Referred to Committee on Finance SJ-11
   02/02/94  Senate Committee report: Favorable with amendment Finance SJ-9
   02/10/94  Senate Special order SJ-104
   03/08/94  Senate Amended SJ-19
   03/08/94  Senate Read second time SJ-19
   03/08/94  Senate Ordered to third reading with notice of
                     amendments SJ-19
   03/10/94  Senate Special order SJ-24
   03/31/94  Senate Amended SJ-359
   03/31/94  Senate Read third time and sent to House SJ-359
   04/05/94  House  Introduced, read first time, placed on calendar
                     without reference HJ-52
   04/20/94  House  Debate adjourned until Wednesday, April 27, 1994 HJ-60
   04/27/94  House  Debate adjourned until Thursday, April 28, 1994 HJ-22
   04/28/94  House  Debate adjourned until Tuesday, May 3, 1994 HJ-321
   05/03/94  House  Debate adjourned until Wednesday, May 4, 1994 HJ-4
   05/04/94  House  Objection by Rep. Wofford, Williams, Neal,
                     Stille, Gonzales, HJ-22
   05/04/94  House  Objection by Rep. Keyserling, Law, Elliott,
                     D.Wilder & Jennings HJ-22
   05/04/94  House  Objection by Rep. Scott & Anderson HJ-22
   06/01/94  House  Objection withdrawn by Rep. Scott & Anderson HJ-104

April 5, 1994

S. 226

S. Printed 4/5/94--H.

Read the first time April 5, 1994.

1. Estimated Cost to State-First Year $-0-

2. Estimated Cost to State-Annually

Thereafter $-0-

S. 226 amends Section 11-17-110 of the South Carolina Code of Laws, 1976, to provide that lease-purchase and lease-back agreements entered into by the State or a political subdivision constitutes general obligation debt. Further, the general obligation debt incurred by these agreements may not violate the constitutional debt limitations applicable under Article X of the State Constitution.

Pursuant to Section 2-7-76 of the South Carolina Code of Laws, 1976, the State Budget Division surveyed 39 cities and counties on the Fiscal Impact Statement Team (FIST) network and 24 (64%) responses were received. The following cities and counties reported such agreements below:

Subdivision #of Lease Agmt. Amount

Greenville Cnty 1 $22.0 million

York Cnty 1

Beaufort Cnty 2 $22.7 million

Cty of Rock Hill 2

Cty of Myrtle Beach 1

Cty of Goose Creek 1 $2.36 million

Florence Cnty 2 $50.0 million

Orangeburg Cnty 2 $5.5 million

Cty of N. Charleston 1 $20.1 million

In addition, Laurens County reported that it does not have a lease agreement at this time, but this could be a viable financing option when the county constructs its new jail, which is presently in the planning phase. Most local subdivisions reported this new classification would cause them to exceed the constitutional debt limitation. Also, some localities with lease agreements reported this legislation could cause legal problems for them and restrict their ability to finance various projects.

The schedule below represents the Debt Service Limitations for the State for FY 1993-94 and its Debt Service need for FY 1993-94 including the debt for real property lease purchases if this bill should pass.

Debt Service Constitutional Limitation

Fiscal Year 1993-94

FY 1992-93 General Fund Revenues $3,567,159,627

(8-21-92 BEA Estimate)

Less: Debt Service Transfers

(FY 1992-93)

Highway 0

Institution (6,622,237)

Subtotal $3,560,537,390

5%

Debt Service Limitation for

FY 1993-94 $ 178,026,870

Debt Service Need for FY 1993-94

Projected Debt Service Need for

CIB's (P & I) $ 131,579,930

Projected Debt Service Need for

Real Property LP $ 5,618,472

Total Debt Service Funds Needed for

FY 1993-94 $ 137,198,402

The Difference Between Debt Service

Need to Limitation $ 40,828,468 Relationship of Debt Service Need to Limitation

Debt Service Need $137,198,402

-------------------- ------------ = 77.1% or

3.86% of FY

92-93 GF

Revenues

Debt Service Limitation $178,026,870

Prepared By: Approved By:

K. Earle Powell George N. Dorn, Jr.

State Budget Analyst State Budget Division

Allan Kincaid

Chief Budget Analyst

A BILL

TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 11-27-110 SO AS TO PROVIDE LEASE-PURCHASE OR LEASE-BACK AGREEMENTS INVOLVING REAL PROPERTY ENTERED INTO BY THE STATE OR POLITICAL SUBDIVISIONS OF THE STATE WHEREIN THE STATE OR POLITICAL SUBDIVISION IS THE LESSEE CONSTITUTES GENERAL OBLIGATION DEBT FOR THE PERIOD OF THE LEASE AND TO PROVIDE THAT THIS GENERAL OBLIGATION DEBT MAY NOT VIOLATE THE CONSTITUTIONAL DEBT LIMITATIONS APPLICABLE TO THE STATE OR POLITICAL SUBDIVISION UNDER ARTICLE X OF THE STATE CONSTITUTION.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. The 1976 Code is amended by adding:

"Section 11-27-110. (A) As used in this section:

(1) `asset' means any real property and permanent improvements thereon including structures, buildings, and fixtures;

(2) `bond act' means:

(i) the county bond act, as contained in Chapter 15 of Title 4;

(ii) the municipal bond act, as contained in Article 5, Chapter 21 of Title 5;

(iii) the school bond act as contained in Article 1, Chapter 71 of Title 59;

(iv) the provisions contained in Articles 3 and 5 of Chapter 11 of Title 6 pertaining to special purpose districts;

(v) any provision of law by which the State may issue obligations secured in whole or in part by the full faith, credit, and taxing power of the State, and;

(vi) any other law, general or special, providing for the issuance of general obligation bonds by the State or any of its political subdivisions;

(3) `constitutional debt limit' for the State or any political subdivision thereof which has the power to incur general obligation bonded indebtedness, means the limitation of the principal amount of general obligation bonded indebtedness specified in Article X of the Constitution;

(4) `enterprise financing agreement' means a financing agreement entered into to provide an asset for a governmental enterprise the revenues from which are expected to be sufficient to pay the amounts due under the financing agreement;

(5) `financing agreement' means any contract entered into on or after January 1, 1995, under the terms of which a governmental entity acquires the use of an asset which provides:

(i) for payments to be made in more than one fiscal year, whether by the stated term of the contract or under any renewal provisions, optional or otherwise,

(ii) that the payments thereunder are divided into principal and interest components or which contain any reference to any portion of any payment thereunder being treated as interest and,

(iii) that title to the asset will be in the name of or be transferred to the governmental entity if all payments scheduled or provided for in the financing agreement are made, but the term excludes any contracts entered into in connection with issues of general obligation bonds or revenue bonds issued pursuant to authorization provided in Article X of the Constitution;

(6) `governmental enterprise' means any activity undertaken by a governmental entity which derives revenues from or because of the activity on a basis other than the exercise of the power of taxation by that governmental entity;

(7) `governmental entity' means the State and any political subdivision of the State, including a municipality, county, school district, special purpose district, or similar entity, whose general obligation debt is subject to the limitations set forth in Article X of the Constitution;

(8) `limited bonded indebtedness' means the amount of bonded indebtedness that may be incurred by a governmental entity without a referendum or, where the context requires, the amount of such indebtedness then outstanding; and

(9) `principal balance' means the total amount, excluding any amount characterized as interest, payable as of any time of consideration under any financing agreement, including any renewals or extensions thereof.

(B) No governmental entity may enter into a financing agreement, other than an enterprise financing agreement, if the principal balance of the financing agreement, when added to the principal amount of limited bonded indebtedness outstanding on the date of execution of the financing agreement would exceed eight percent of the assessed value of taxable property in the jurisdiction of the governmental entity unless the financing agreement is approved by a majority of the electors voting thereon in a referendum duly called for such purpose by the governmental entity.

(C) In addition to such other terms and conditions as are specified in any bond act, if a governmental entity has outstanding any financing agreement, other than an enterprise financing agreement, the authorization contained in any bond act permitting the governmental entity to incur general obligation bonded indebtedness is hereby amended to provide that on the date of issuance of any limited bonded indebtedness pursuant to the bond act, the amount thereof plus the amount of all other limited bonded indebtedness of the governmental entity, when added to the principal balance under any financing agreement or agreements of such governmental entity shall not exceed the amount of the governmental entity's constitutional debt limit unless such bonded indebtedness is approved by a majority of the electors voting thereon in a referendum duly called for such purpose by such governmental entity."

SECTION 2. The 1976 Code is amended by adding:

"Section 59-17-35. Bonds issued by a school district under the bonded indebtedness limitation of Article X, Section 14(7)(a) of the South Carolina Constitution and called before the maturity date only may be reissued if the amount required to service the reissuance and to pay off the called bonds does not:

(1) increase by more than eight percent in any one year the amount of the district's budget needed to service the original bonded indebtedness; or

(2) exceed the debt limit of the district."

SECTION 3. This act takes effect upon approval by the Governor.