68-221-1005 - Program for loans, financing and refinancing Powers of department and authority Audit Assignment of rights and obligations.
68-221-1005. Program for loans, financing and refinancing Powers of department and authority Audit Assignment of rights and obligations.
(a) The department, in conjunction with the authority, shall administer a program for low cost loans to local governments for wastewater facilities, and shall adopt regulations to govern the application procedure for loans under this part.
(b) The department shall recommend to the authority an appropriate financing method for each wastewater facility which has applied for financial assistance under this part and which appears on the construction grants program wastewater treatment project priority list established under the authority of part 8 of this chapter. As part of the recommended financing method, the department may consider partial grants to wastewater facilities to be funded pursuant to part 8 of this chapter. In recommending the interest rate for a loan, the department shall utilize an economic index based upon factors which include, but are not limited to, per capita incomes and property values of the local government applicant. Local governments falling within the lower economic scale on the index shall be eligible for lower interest rates. The department shall promulgate regulations regarding the appropriate index, interest rate and loan percentages to be recommended.
(c) The department shall present to the authority no less than annually its recommendations, in descending order of priority, for loans to local governments. Prior to making a recommendation for loans to local governments, the department may ensure through an environmental review that loan funded projects shall be environmentally sound. The authority shall have final approval of such loans. Both the department and the authority shall be parties to the contracts with local governments concerning loans.
(d) The comptroller of the treasury shall make an annual audit of the fund as part of the comptroller's annual audit of the authority and the department pursuant to § 9-3-211.
(e) The authority and the department shall have such other authority as may be necessary and appropriate for the exercise of the powers and duties conferred by this part.
(f) Notwithstanding any other provision of this part to the contrary, the department, in conjunction with the authority, may develop alternative financial assistance programs, which may include the issuance of the authority's revenue bonds, for wastewater facilities using the funds appropriated herein to effect the legislative intent of providing low-cost financial assistance to local governments for wastewater facilities, provided such programs are permissible under the Clean Water Act (33 U.S.C. § 1251 et seq.).
(g) Local governments are empowered and are authorized to contract debts for the construction of a wastewater facility and to make contracts and execute instruments with the authority for the purpose of obtaining a loan under this part. In order to provide adequate security as may be required by the authority for a loan under this part, local governments are further empowered and authorized to:
(1) Pledge the full faith and credit and unlimited taxing power, if any, of the local government as to all taxable property of the local government or a portion of the local government, if applicable, to the punctual payment of the principal and interest on the loan;
(2) Assess, levy and collect ad valorem taxes on all taxable property within the local government or a portion of the local government, if applicable, sufficient to pay the principal of and interest on the loan;
(3) Fix, levy and collect fees, rents, tolls or other charges in connection with any wastewater facility and pledge all or any of such fees, rents, tolls or other charges to the payment of principal and interest on the loan; and
(4) Pledge any other security determined by the authority to be acceptable to secure a loan under this part.
(h) (1) Any pledge made by the local government pursuant to this part shall be valid and binding from the time when the pledge is made, the moneys or property so pledged and thereafter received by the local government shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of any such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the local government, irrespective of whether such parties have notice of the lien of such pledge.
(2) Neither the resolution nor any other instrument by which a pledge is created need be recorded.
(i) (1) In the event any local government having entered into a loan agreement pursuant to this part and having pledged its state-shared taxes, as defined in § 4-31-102, fails to remit funds in accordance with the loan agreement, the commissioner of finance and administration shall deliver by certified mail a written notice of such failure to the local government within five (5) days of such failure.
(2) In the event the local government fails to remit the amount set forth in the notice within sixty (60) days of the receipt of the notice, the commissioner shall, without further authorization, withhold for the benefit of the authority such sum or part of such sum from any state-shared taxes which are otherwise apportioned to such local government.
(3) A local government shall not have any claim on state-shared taxes withheld as permitted under this part and the loan agreement.
(4) For purposes of this subsection (i), notice of failure to remit funds shall be delivered to any entity jointly participating in the wastewater facility being funded pursuant to the loan agreement and qualifying as a local government as provided in § 68-221-1003(7), and funds shall be withheld as provided therein.
(j) To encourage joint action by governmental entities, including utility districts, in the establishment of fiscally self-sufficient wastewater facilities, utility districts and other entities which constitute local governments, as defined under this part, are authorized and empowered to serve as guarantors and to provide such other security as required by the authority for loans under this part.
(k) With consent of the authority and upon provision of such other security as required by the authority for loans under this part, any local government is authorized to assign its rights and obligations under a loan received pursuant to this part to any other local government. Any local government is authorized to receive such assignment and to assume such obligations. Upon such assignment, the local government originally obligated under the loan and any security provided therefore shall be released from all obligations under the loan; provided, however, that the local government originally obligated under the loan may agree upon resolution of the governing body to retain its obligation to make payments under the loan in the event that the local government to which the loan is assigned fails to make such payments.
(l) (1) The department and the authority may use any funds from the American Recovery and Reinvestment Act of 2009 to make loans and to subsidize loans made through the program authorized by this part, through such mechanisms as forgiveness of principal and negative interest rates;
(2) The department and the authority may administer the program using the funds in accordance with the criteria set by the federal government; and
(3) The department may promulgate rules and develop forms that may be deemed necessary for the program.
[Acts 1987, ch. 299, § 5; 1988, ch. 708, § 1; 1989, ch. 233, § 38; 1989, ch. 280, § 1; T.C.A., § 68-13-1005; Acts 1992, ch. 1023, §§ 3, 4; 2002, ch. 603, § 2; 2009, ch. 402, § 2.]