Borrowing authority for municipalities amended, advanced

Cities and towns in Nebraska would have the express authority to borrow funds to purchase property or construct improvements under a bill advanced from select file April 13.

LB152, introduced by the Urban Affairs Committee, would allow municipalities to borrow from state- or federally-chartered banks, savings banks, building and loan associations and savings and loan associations.

Bellevue Sen. Sue Crawford, chairperson of the committee, brought an amendment on select file that made several changes to the bill.

The amendment authorizes direct borrowing by resolution as well as ordinance and clarifies that municipalities could use direct borrowing to refinance loans at a lower rate. The amendment also removed the term “significant” in reference to taxpayer savings over traditional bond financing as a requirement for direct borrowing.

Crawford said concerns were raised after the bill was discussed on general file that the term was ambiguous and possibly could leave municipalities vulnerable to litigation.

Under the amended bill, funds could be borrowed for any purpose for which a municipality is authorized by law to purchase property or fund improvements. Loans would not be restricted to a single year and could be repaid in installments.

The ability of municipalities to borrow directly from financial institutions to cases in which financing the purchase of property or construction of improvements:
• would be impractical;
• could not be completed within the time restraints facing the municipality; or
• would generate taxpayer savings over traditional bond financing.

The bill also includes public notice requirements for direct borrowing from a financial institution and caps the total amount of indebtedness from direct borrowing to 10 percent of the municipal budget for a city or 20 percent of the municipal budget for a village.

Following adoption of the Crawford amendment on a 30-0 vote, the bill advanced to final reading by voice vote.