SB 1595

Present law provides the procedures governing a petition for the incorporation of a utility district. Among those procedures is the requirement that the county mayor schedules a public hearing to discuss the incorporation of the district. This bill rem oves the requirement that the county mayor read the final comments of the Tennessee board of utility regulation (the "board"") to those in attendance at the public meeting. CONSOLIDATION OF UTILITY SYSTEMS This bill authorizes two or more utility systems, with at least one being a utility district, to agree to consolidate to more efficiently and conveniently furnish the utility systems' services. In order to initiate the consolidation, the utility systems ' governing bodies must pass a resolution that includes a petition to one or more county mayors requesting that the mayor or mayors enter an order approving the agreement, and that the petition be submitted to the county mayor of the county or counties in w hich the utility system will be created. If one of the utilities is a multi-county utility system, then the petition must be submitted to the county mayor of any county within the utility system. A petition for consolidation must name up to five individ uals, each of whom is an existing member of the governing body of one of the existing utilities, to serve as commissioners for the consolidated utility. If five individuals are not named, then the county mayor or mayors who receive the petition must appo in t a sufficient number of qualified individuals. Public H earing This bill requires a petition filed for the consolidation of two or more utility systems to proceed in the same manner as provided in present law for the creation of a utility district. Present law requires any such petition filed with a mayor to be sim ultaneously filed with the board. This bill requires the county mayor or mayors that received the petition to hold a public hearing within their respective county. Notice of this hearing must be provided to the public via newspaper publication or postin g in an obvious public area. The chief executive officer of each affected utility system, and the chief executive officer of each utility system, municipality, or county, with territory that overlaps or is located within five miles of the proposed utility system, must also receive notice of the public hearing. Order and A greement This bill requires the county mayor or mayors who received the petition to enter an order approving the agreement if the consolidation (i) would enhance the public convenience and necessity, (ii) is economically sound and feasible, and (iii) is in the be st interest of the public served by the utilities systems in the agreement. If the petition was submitted to more than one county mayor, then the order entered by each mayor must be substantially identical. If the county mayors cannot agree as to the ap po intment of a commissioner, then the county mayor with the most customers in the consolidated utility must determine the disputed appointments. Further, this bill requires the agreement and order to do all of the following:  Designate a name for the consolidated utility.  Define the consolidated utility's services and boundaries, and provide that the consolidated utility assumes the operation of the existing utilities.  Account for the revenues from the existing utilities without impairing the legal obligations of the consolidated utility.  Preserve and protect the contract rights vested in the owners of any outstanding bonds, obligations, or contractual interests.  Provide for an equitable distribution of the existing utilities' assets and liabilities.  Provide for the termination of the existence of the existing utilities, if necessary, and establish the legal rights, duties, and obligations of any surviving entities and parties involved.  Appoint commissioners to the new utility district, as named in the petition, unless the individual is not qualified to serve as a commissioner. Board S ize This bill generally allows two or more existing utilities to establish in the agreement that the board of commissioners of the consolidated utility will consist of five commissioners. However, this provision only applies when the consolidated utility is a utility district and at least two of the existing utilities are utility districts. Four or more consolidating utility districts may agree to increase the size of the board of commissioners of the consolidated utility to seven. Merge r or C onsolidation with a U tility A uthority This bill clarifies that petitions for a merger or consolidation of a utility district with a municipality or county also includes petitions for a merger or consolidation of a utility district with a utility authority. CONTINUING EDUCATION FOR MEMBERS Present law describes the continuing education requirements for members of the governing body of utility systems. This bill revises those provisions, and applies the revised provisions to all of the elected or appointed body that supervises, controls, o r operates a utility system (""governing body""), including commissioners and members of the board (together, ""members""). This bill requires members to meet the same continuing education requirements provided in present law, which requires members to attend a minimum of 12 hours of continuing education within one year of initial election or appointment, and to complete a mi nimum of five hours of continuing education in each continuing education period, which is a three-year period, thereafter. Subjects for the required continuing education include board governance, financial oversight, policymaking responsibilities, and ot he r topics reasonably related to the duties of a governing body. Extension Present law allows a member to request a continuing education extension of up to six months. This bill requires that such a request be made in writing and clarifies that it will only be granted upon a reasonable showing of substantial compliance with thi s bill or unforeseeable hardship. Present law requires the comptroller of the treasury to provide online continuing education courses and any curricula developed by third parties to be approved by the comptroller prior to use. This bill clarifies that members may take online courses in lieu of attending courses in person, if the education provider gives a certificate of completion or attendance. Such certificate must be submitted by the member to the utility system, and the system must keep the certificate for six years. Fees and E xpenses This bill requires the utility system to pay registration fees and travel expenses for continuing education courses required for its members. However, the utility system is not required to pay for continuing education that must be completed by a member who has filed a petition for reinstatement after becoming ineligible to serve on the governing body for failing to meet the continuing education requirements. Annual S tatement Present law requires each member to file with the utility system an annual written statement that certifies the continuing education courses attended by the member. The annual statement must (i) identify the date of the course, subject matter of the cou rse, the location, the sponsor, and the hours attended; and (ii) include a certificate of attendance. This bill requires that the annual statement also include copies of any continuing education extension requests. Present law requires the annual writte n statements to be kept for six years. This bill requires copies of extension requests, and the comptroller of the treasury's decision on such requests, to also be kept for six years. Noncompliance Present law allows the board to order reasonable sanctions against a municipality when members of its utility board of commissioners fail to meet continuing education requirements. This bill, likewise, authorizes the board to impose reasonable sanctions on any utility system if a member fails to meet the continuing education requirements provided in this bill. Further, this bill clarifies the individual consequences for a member who fails to meet continuing education requirements. A member who fails t o meet the continuing education requirements is not eligible to receive any payment or benefit from the utility system. The member is not eligible for reappointment or reelection to another term of office unless the board has approved their petition for re instatement. The board may order the utility system to take any necessary and legal action to recover funds paid to a member who was ineligible to receive them and may order the utility system to cease providing any payment or benefit to the member who f ai led to meet the continuing education requirements. Any existing member nominated for reappointment must certify that the member has complied with the continuing education requirements. This bill creates a process for reinstatement of a member who has become ineligible to serve on the governing body for failing to meet continuing education requirements. This bill requires the member to file a petition for reinstatement with the board. This petition cannot be filed until the completion of the term of office for which the member has failed to meet the continuing education requirements. The petition is treated as an informal hearing. The board may issue an order establishing the terms an d conditions for reinstatement. The board's order (i) must require the petitioner to obtain 12 hours of continuing education within one year of the date of the order; (ii) must include an effective date for reinstatement, contingent upon the governing bo dy member meeting the board's requirements; and (iii) may include any other terms and conditions the board considers appropriate. Any decision of the board in an informal hearing is subject to appellate review in the same manner as a contested case under t he Uniform Administrative Procedures Act, with the Davidson County chancery court having jurisdiction over judicial review of the board's actions. This bill requires a member who is seeking reelection to certify to the utility system that the member has complied with the continuing education requirements prior to seeking reelection. However, this requirement only applies to members serving on the governing body of a utility district where the governing body is elected. REQUIREMENTS FOR WHOLESALE SUPPLIERS Present law provides that a government joint venture that supplies or treats water or wastewater for wholesale use only to other governments does not fall under the jurisdiction of the board for the purpose of reporting negative change in net position an nually. This bill eliminates this exception and, instead, provides that a utility system does not fall under the jurisdiction of the board for the purpose of reporting negative change in net position if the utility system (i) supplies wholesale water ser vi ce only or treats wastewater for wholesale use only and (ii) is approved by the board. In order to obtain board approval, a utility system must first submit a plan of service to the board. Once the board has determined that the submission is complete, th e board must review the request at the next available board meeting. The board has discretion to allow a minimal amount of retail service by a utility system primarily serving as a wholesale provider when in the public interest. As used in this bill, a ""c hange in net position"" means total revenues less all grants, capital contributions, and expenses. ANNUAL AUDITS Present law requires the commissioners of each utility district to create an audited financial report of the books and records of their district. The result of each audit must be kept as a permanent, public record of the district, and copies must be mad e available to the press. FINANCIALLY DISTRESSED UTILITY SYSTEMS Present law provides that a utility system is financially distressed when it has a deficit total net position in any one year, has a deficit unrestricted net position in any one year, has a negative change in net position for two consecutive years withou t regard to any grants or capital contributions, or is currently in default on any of its debt instruments. This bill clarifies that a utility system remains financially distressed until the board issues an order closing the system's financial distress c as e, or until the utility system has, for a period of two or more consecutive years (i) not meet any criteria for financial distress and (ii) not been on the agenda of a board meeting or been discussed at a board meeting. AILING UTILITY SYSTEMS Present law authorizes the board to order the merger or consolidation of an ailing utility system if the merger is necessary to restore the financial stability of the system, continued service, or otherwise ensure the well-being of the public served by t he utility system. This bill revises this authority by authorizing the board to order such merger or consolidation if, instead, the merger is necessary to ensure the best interests of the ailing system and the utility system into which the ailing utility i s consolidating or merging. Study Present law authorizes the board to order an ailing utility system to obtain a study from a qualified expert on the feasibility and benefit of the ailing system merging or consolidating with another system. If the board determines that the ailing system is unable or unwilling to obtain a feasibility study, or if the study is inconclusive, then this bill authorizes the board to order board staff to conduct a feasibility study of a merger with utility systems surrounding the ailing utility. In doing so, t he board staff may review any information necessary to determine whether a merger or consolidation with a surrounding utility system is feasible, is in the best interests of the ailing utility, and would not harm the utility systems with which a merger or c onsolidation is being considered. The board must adopt a minimum list of factors and information that must be collected as part of a study. Public H earing Present law requires the board to hold a public hearing within the service area of the ailing utility system if the results of the feasibility study favor a merger or consolidation. This bill requires that such a public hearing on the merger or consolid ation be held within the service area of the ailing utility system or within 10 miles of the system's administrative headquarters. The hearing must notify customers of the potential merger or consolidation, and allow an opportunity for customers to provi de feedback. Any such feedback must be presented to the board at the board's next meeting, and must be presented to the board before it tak es final action on the merger or consolidation. INTERNAL LOANS Present law provides guidelines for when local governments may make internal loans. This bill allows utility systems to make internal loans in accordance with procedures and guidelines set by the comptroller of the treasury."