SF4982

Purpose

Authorizes the state to use lease-purchase financing to fund the MAXIS system improvements, including the sale of certificates of participation to help pay for the MAXIS project.

Key Definitions

• MAXIS project: development, acquisition, installation, and implementation of a modernization plan or replacement of the MAXIS system.
• Lease-purchase agreement: a lease and installment-purchase arrangement between the state (through the commissioner) and a vendor or financing source for the MAXIS project.
• MAXIS lease-purchase guidelines: policies and requirements set by the commissioner for financing the MAXIS project.
• MAXIS lease project fund: a state treasury fund where lease-purchase proceeds and related activity are deposited and managed.

Financing Authority and Terms

• The commissioner may enter into a lease-purchase agreement and may issue and sell certificates of participation (COPs) to fund the MAXIS project, as long as the project is authorized by law for this financing.
• The term of the lease-purchase agreement and COPs must not exceed the lesser of:
  • the expected useful life of the MAXIS project, or
  • ten years from the date of issuance.
• The arrangement must include sufficient funds to cover costs of issuance, capitalized interest, credit enhancement, or reserves if required.
• Money necessary to make lease payments for the current year must be committed in the authorizing legislation; the state is not obligated to appropriate money in future years.

Covenants and Protections

• The state may covenant customary terms of lease-purchase financing, including:
  • maintaining required insurance,
  • being responsible for public liability or property damage related to MAXIS,
  • allowing the lessor to exercise rights as a secured party if there is a default or non-appropriation,
  • recovering lease payments as liquidated damages if needed.

Use and Management of Proceeds

• Proceeds from the lease-purchase agreement and COPs must be credited to the MAXIS lease project fund.
• Net investment income from the proceeds goes to the appropriate MAXIS fund accounts.
• The MAXIS lease project fund is appropriated for the MAXIS project purposes described in the authorizing law.

Transfers and Administrative Provisions

• Before proceeds are received, the commissioner may temporarily transfer up to the expected proceeds from the general fund to the MAXIS lease project fund; such transfers must later be repaid when proceeds are received.
• Administrative expenses related to the sale, printing, execution, and delivery of the lease-purchase agreement and COPs may be paid from the lease-purchase proceeds.
• Any remaining funds in the MAXIS lease project fund after the project’s purpose is completed or abandoned must be transferred to the general fund.

Tax and Debt Status

• A lease-purchase does not create general or moral debt for the state beyond money that is actually appropriated for payments; payments in a current lease term with appropriated money are a current state expense.
• Property purchased under a lease-purchase is not subject to personal property taxes. The purchaser (the state) is not subject to sales tax on the purchase or payments, but the state is subject to the sales/use tax provisions under Chapter 297A on property acquired under the agreement.

Refunding Provisions

• The commissioner may issue new lease-purchase agreements and COPs to refund existing ones, including paying any premiums, interest, or costs related to the refunding.
• Refundings may be funded through escrow arrangements and investments permitted under state law, with proceeds applied to the refunding payments, retirement, or other related costs.

Funding Authorization and Sunset

• Sec. 2 establishes an annual MAXIS lease-purchase appropriation of:
  • 10,000,000 in fiscal year 2027,
  • 10,000,000 in fiscal year 2028,
  • 10,000,000 in fiscal years 2029 through 2036, for MAXIS project payments, with no obligation to continue in future years.
• Unexpended amounts cancel to the general fund at the end of each biennium.
• This authorization expires June 30, 2037.

What Changes This Brings

• Creates a formal framework to finance MAXIS system improvements through lease-purchase arrangements and COPs.
• Establishes a dedicated MAXIS lease project fund and specific management rules for proceeds, investments, and transfers.
• Treats MAXIS financing as a current expense rather than general debt, with caps on terms and explicit appropriation terms.
• Sets up refunding options and related protections to manage outstanding obligations.

Relevant Terms MAXIS, MAXIS project, MAXIS lease project fund, lease-purchase agreement, certificates of participation, MAXIS leasepurchase guidelines, refunding certificates, credit enhancement, reserves, general fund, current expense, not a general obligation, not public debt, insurance, liquidated damages, transfers, costs of issuance, capitalized interest, sale tax/tax treatment (Chapter 297A), escrow, investment income, appropriation, biennium, expiration date (June 30, 2037).