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 general file March 25.

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.

Under the 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.

An Urban Affairs Committee amendment, adopted 33-0, limits 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 significant taxpayer savings over traditional bond financing.

The amendment also adds additional 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.

Bellevue Sen. Sue Crawford, chairperson of the committee, said the bill is an attempt to remove ambiguity regarding whether cities and villages have the authority to engage in direct borrowing, while placing reasonable restrictions on that authority.

“We want to make sure that we have appropriate limitations to protect the public interest and the taxpayer while still being workable on the ground for municipalities and banks,” Crawford said.

Gothenburg Sen. Matt Williams spoke in favor of the bill, saying it would clarify the issue of direct borrowing.

“Currently, we have city attorneys that are giving communities conflicting advice on whether or not they can borrow from their local financial institutions,” he said. “And LB152 will clear that up.”

Sen. John Stinner of Gering said banks have financed many small projects for cities and villages, including replacing fire trucks and upgrading water systems. Such projects are more suitable for direct borrowing than bond financing, he said.

“The idea of going out and trying to get bonding for this is extremely expensive,” Stinner said.

The bill advanced to select file on a 37-0 vote.