GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	1 

SENATE BILL 694

Short Title:  Special Obligation Bonds.	(Public)
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Sponsors: Senators Carpenter, Hartsell; Lee, Speed, Martin of Pitt, Codington, Cochrane, Blackmon, Forrester, Smith, Allran, and Albertson.
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Referred to:  Finance.
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April 5, 1993

A BILL TO BE ENTITLED
AN ACT TO AUTHORIZE LOCAL GOVERNMENTS TO ISSUE BONDS AND NOTES CONSTITUTING SPECIAL OBLIGATIONS SECURED SOLELY BY SOURCES THAT ARE NOT DERIVED FROM THE EXERCISE OF THEIR TAXING POWER TO PROVIDE FUNDS FOR CERTAIN LOCAL INFRASTRUCTURE NEEDS.
The General Assembly of North Carolina enacts:
Section 1.  Chapter 159 of the General Statutes is amended by adding a new Article to read:
"ARTICLE 6A.
"Special Obligation Bonds.
"§ 159-111.1.  Short title.
This Article may be cited as 'The Local Government Special Obligation Bond Act'.
"§ 159-112.  Definitions.
The following definitions apply in this Article:
(1)	Municipality.  A county, a city, a town, an incorporated village, or a sanitary district.  The term does not include any other form of local government.
(2)	Municipal purpose.  One of the following purposes:
a.	Providing jails and other confinement facilities.
b.	Providing courthouses, including offices, meeting rooms, courtrooms, court facilities, and detention facilities.
c.	Providing sanitary sewer systems, including community sewerage facilities for the collection, treatment, and disposal of sewage, septic tank systems, and other on-site collection and disposal facilities or systems.
d.	Providing water systems, including facilities for the supply, storage, treatment, and distribution of water.
e.	Providing hospital facilities, as defined in G.S. 159-48(7).
	A municipal purpose includes any undertaking for the acquisition, construction, reconstruction, improvement, enlargement, betterment, or extension of any of the foregoing facilities or systems owned or leased as lessee by the municipality.  The cost of an undertaking may include all property, both real and personal and improved and unimproved, plants, works, appurtenances, machinery, equipment, easements, water rights, air rights, franchises, and licenses used or useful in connection with any of the foregoing facilities and systems; the cost of demolishing or moving structures from land acquired and the cost of acquiring any lands to which such structures are to be moved; financing charges; the cost of plans, specifications, surveys, and estimates of cost and revenues; administrative and legal expenses; and any other expense necessary or incident to the undertaking.
(3)	Special obligation bond.  A bond issued by a municipality pursuant to this Article. The term does not include a revenue bond issued pursuant to Article 5 of this Chapter.
(4)	Special obligation bond anticipation note.  A bond anticipation note issued by a municipality pursuant to this Article.  The term does not include a revenue bond anticipation note issued pursuant to Article 5 and Article 9 of this Chapter.
"§ 159-113.  Purpose.
The purpose of this Article is to establish a uniform procedure for the financing by a municipality of municipal purposes without pledging its faith and credit through the issuance of special obligation bonds and special obligation bond anticipation notes that are secured as to principal, interest, and any redemption premium solely from sources that are not derived from the exercise of its taxing power.
"§ 159-114.  Powers.
(a)	In addition to other powers that it may now or hereafter have, each municipality shall have the following powers, subject to the provisions of this Article and of any bond order or trust agreement authorizing or securing special obligation bonds:
(1)	To exercise in connection with any municipal purpose for which it could issue revenue bonds pursuant to Article 5 of this Chapter the powers granted to it pursuant to G.S. 159-83, except that for the purposes of this Article: (i) additional security may be created as provided in this Article notwithstanding the provisions of G.S. 159-83(a)(5); and (ii) any rates, fees, rentals, tolls, and charges fixed and charged by it pursuant to G.S. 159-83(a)(6) need not produce any minimum amount of revenues.
(2)	To borrow money to provide funds for any one or more municipal purposes and to issue its special obligation bonds or special obligation bond anticipation notes in evidence thereof as provided in this Article.
(3)	To pledge for the payment of its special obligation bonds, special obligation bond anticipation notes, and interest and any premium on bonds and notes any revenue source that may be available for use by the municipality for the municipal purpose or purposes to be financed and, to the extent the generation of revenue is within the power of the municipality, to enter into covenants to take action to generate the revenue, but only to the extent that any use of a source to pay the principal of or interest or premium on the bonds or notes or any covenant to generate revenues will not constitute a pledge of the taxing power of the municipality.  A municipality may, in its sole discretion, use tax proceeds to pay the principal of or interest or premium on the bonds or notes, but shall not pledge or agree to do so.
(4)	To appropriate, apply, or expend for the following purposes the proceeds of its special obligation bonds, special obligation bond anticipation notes, and revenue sources that may be used under any bond order or trust agreement authorizing or securing such bonds or notes:  (i)  to pay interest on the bonds or notes and the principal or redemption price of the bonds or notes when due; (ii)  to meet reserves and other requirements set forth in the bond order or trust agreement; (iii) to provide funds for the municipal purpose authorized in the bond order or trust agreement and to provide working capital for initial maintenance and operation; and (iv) to pay and discharge special obligation bonds, revenue bonds, general obligation bonds, and notes issued in anticipation of these bonds.
(5)	In connection with issuing its special obligation bonds or special obligation bond anticipation notes to finance the providing of a municipal purpose pursuant to this Article, to grant a security interest in the municipal purpose financed, or in all or some portion of the property on which the municipal purpose is located, or in both.  If a municipality determines to provide additional security as authorized by this subdivision, the following conditions apply:
a.	No bond order may contain a nonsubstitution clause that restricts the right of a municipality to:  (i)	continue to provide a service or activity or (ii)  replace or provide a substitute for any municipal purpose financed pursuant to such bond order.
b.	A bond order is subject to approval by the Commission under Article 8 of this Chapter if it:  (i)	meets the standards set out in G.S. 159-148(a)(1), 159-148(a)(2), and 159-148(a)(3), or involves the construction or repair of fixtures or improvements on real property; and (ii)  is not exempted from the provisions of Article 8 of this Chapter by one of the exemptions contained in G.S. 159-148(b).
c.	No deficiency judgment payable from sources derived from the exercise of a municipality's taxing power may be rendered against any municipality in any action for breach of a bond order authorized by this Article, and the taxing power of a municipality is not and may not be pledged directly or indirectly to secure any moneys due under a bond order authorized by this section.  A municipality may, in its sole discretion, use tax proceeds to pay the principal of or interest or premium on bonds or notes, but shall not pledge or agree to do so.
(b)	The Commission shall approve any contract, agreement, lease, deed, covenant, or other instrument or document evidencing an agreement or covenant between bondholders or any public agency and a municipality issuing special obligation bonds or special obligation bond anticipation notes with respect to any of the powers conferred in this section.
"§ 159-115.  Authorization of special obligation bonds and notes.
Each municipality may issue its special obligation bonds and special obligation bond anticipation notes in such principal amount as may be necessary to provide sufficient funds for one or more municipal purposes, including engineering, inspection, legal, and financial fees and costs; interest on the bonds or notes issued in anticipation of the bonds during construction; if deemed advisable by the municipality, for a period not exceeding two years after the estimated date of completion of construction, establishment of debt service reserves; and all other expenditures of the municipality incidental and necessary or convenient to the municipal purposes, including, except as expressly modified by this Article, the costs set forth as the cost of an undertaking in the last paragraph of G.S. 159-81(3).
Each municipality may issue further special obligation bonds and may refund outstanding special obligation bonds issued pursuant to this Article or G.S. 159I-30, general obligation bonds issued pursuant to Article 4 of this Chapter, or revenue bonds issued pursuant to Article 5 of this Chapter, whether or not they have matured.  Special obligation bonds may be issued partly for the purpose of refunding these outstanding bonds and partly for any other purpose authorized under this Article.  Special obligation bonds issued to refund these outstanding bonds shall be issued under this Article and not under any other law.
Special obligation refunding bonds may be issued at any time before the final maturity of the special obligation bonds, general obligation bonds, or revenue bonds to be refunded.  The proceeds from the sale of any special obligation refunding bonds shall be applied only either: (i)	to the immediate payment and retirement of the bonds being refunded or (ii) if not required for the immediate payment of the bonds being refunded, to a trust account to provide for the payment and retirement of the bonds being refunded and to pay any expenses incurred in connection with the refunding, but provision may be made for the pledging and disposition of any amounts in excess of the amounts required for these purposes, including provision for the pledging of the excess to the payment of the principal of and interest on any issue or series of refunding bonds issued pursuant to G.S. 159-78.  Money in such a trust account may be invested: (i) in direct obligations of the United States government, (ii) in obligations, the principal of and interest on which are guaranteed by the United States government, (iii) to the extent then permitted by law, in obligations of any agency or instrumentality of the United States government, or (iv) in certificates of deposit issued by a bank or trust company located in this State if the certificates are secured by a pledge of any of the obligations described in (i), (ii), or (iii) having an aggregate market value, exclusive of accrued interest, equal at least to the principal amount of the certificates secured.  This section does not limit the duration of any deposit in trust for the retirement of bonds being refunded but which have not matured and which are not presently redeemable or, if presently redeemable, have not been called for redemption.
The principal amount of refunding bonds issued pursuant to this section, together with the principal amount of refunding bonds, if any, issued under G.S. 159-78 in conjunction with refunding bonds issued pursuant to this section, shall not exceed the amount set forth in G. S. 159-78.
"§ 159-116.  Application to Commission for approval of special obligation bond issue; preliminary conference; acceptance of application.
(a)	A municipality may not issue special obligation bonds under this Article unless the issue is approved by the Commission.  The governing board of the issuing municipality, or its duly authorized agent, shall file an application for Commission approval of the issue with the secretary of the Commission.  The application shall state such facts and have attached to it such documents concerning the proposed special obligation bonds, the revenue sources that may be pledged for the payment of the bonds, and the financial condition of the issuing municipality as the secretary may require.  The Commission may prescribe the form of the application.
(b)	Before accepting the application, the secretary may require the governing board or its representatives to attend a preliminary conference at which time the secretary and the secretary's deputies may informally discuss the proposed issue and the timing of the steps taken in issuing the special obligation bonds.
(c)	After an application in proper form and order has been filed, and after a preliminary conference, if one is required, the secretary shall notify the municipality in writing that the application has been filed and accepted for submission to the Commission.  The secretary's statement shall be conclusive evidence that the municipality has complied with this section.
"§ 159-117.  Approval of application by Commission.
(a)	In determining whether a proposed special obligation bond issue shall be approved, the Commission may consider:
(1)	Whether the municipal purpose to be financed from the proceeds of the special obligation bond issue is necessary or expedient.
(2)	Whether the proposed municipal purpose is feasible.
(3)	The municipality's debt management procedures and policies.
(4)	Whether the municipality is in default in any of its debt service obligations.
(5)	Whether the revenue sources to be pledged for the payment of the proposed special obligation bonds will be sufficient to service the bonds.
(6)	The ability of the Commission to market the proposed special obligation bonds at reasonable rates of interest.
The Commission may inquire into and give consideration to any other matters that it believes have a bearing on whether the issue should be approved.
(b)	The Commission shall approve the application if, upon the information and evidence it receives, it determines:
(1)	That the proposed special obligation bond issue is necessary or expedient.
(2)	That the amount proposed is adequate and not excessive for the proposed municipal purpose of the issue.
(3)	That the proposed municipal purpose is feasible.
(4)	That the municipality's debt management procedures and policies are good or that reasonable assurances have been given that its debt will henceforth be managed in strict compliance with law.
(5)	That the proposed special obligation bonds can be marketed at a reasonable interest cost to the municipality.
"§ 159-118. Order approving or denying the application.
(a)	After considering an application the Commission shall enter its order either approving or denying the application.  An order approving an issue shall not be regarded as an approval of the legality of the special obligation bonds in any respect.
(b)	If the Commission enters an order denying the application, the proceedings under this Article are at an end.
"§ 159-118.1.  Adoption of special obligation bond order.
(a)	At any time after the Commission approves an application for the issuance of special obligation bonds and following the hearing required by subsection (c) of this section, the governing board of the municipality may adopt a special obligation bond order pursuant to this Article.  The specific sources of payment pledged by a municipality shall be specifically identified in the proceedings of the governing board authorizing the municipality to issue the special obligation bonds.
(b)	Notwithstanding any other provision of law, a special obligation bond order may be introduced at any regular or special meeting of the governing board of a municipality and adopted by a simple majority of those present and voting if a quorum is present, and need not be published or subjected to any procedural requirements governing the adoption of ordinances or resolutions by the governing board other than the procedures set out in this Article.  Special obligation bond orders are not subject to the provisions of any city charter or law concerning initiative or referendum.
(c)	When the bond order is introduced, the board shall fix the time and place for a public hearing on the order.  On the date fixed for the public hearing, which shall not be earlier than six days after the introduction of the special obligation bond order, the board shall hear anyone who wishes to be heard on the question of the validity of the order or the advisability of issuing the bonds.  The hearing may be adjourned from time to time.
"§ 159-118.2.  Special covenants.
A special obligation bond order or a trust agreement authorizing or securing special obligation bonds and special obligation bond anticipation notes may contain covenants as to:
(1)	The use of all or any part of the revenue source or sources to be pledged for the payment of the special obligation bonds and special obligation bond anticipation notes.
(2)	Rates, fees, rentals, tolls, or other charges to be established, maintained, and collected and the use and disposal of revenues, gifts, grants, and funds received or to be received.
(3)	The setting aside of debt service reserves and the regulation and disposition of the reserves.
(4)	The custody, collection, securing, investment, and payment of any moneys held for the payment of special obligation bonds and special obligation bond anticipation notes.
(5)	Limitations or restrictions on the purposes to which the proceeds of sale of special obligation bonds and special obligation bond anticipation notes then or thereafter to be issued may be applied.
(6)	Limitations or restrictions on the issuance of additional special obligation bonds, special obligation bond anticipation notes, or other obligations; the terms upon which additional special obligation bonds, special obligation bond anticipation notes, or other obligations may be issued and secured; or the refunding of outstanding special obligation bonds, special obligation bond anticipation notes, or other bonds or notes.
(7)	The procedure, if any, by which the terms of any contract with owners of special obligation bonds may be amended or abrogated, the percentage of special obligation bonds the owners of which must consent to the amendment or abrogation, and the manner in which this consent may be given.
(8)	Events of default and the rights and liabilities arising upon default, the terms and conditions upon which special obligation bonds and special obligation bond anticipation notes shall become or may be declared due before maturity, and the terms and conditions upon which such a declaration and its consequences may be waived.
(9)	The preparation and maintenance of a budget with respect to the revenues and expenses of the municipality, including the sources of revenues that may be pledged for the payment of the special obligation bonds and special obligation bond anticipation notes.
(10)	The retention or employment of consulting engineers, independent auditors, and other technical consultants in connection with a project constituting a municipal purpose.
(11)	Limitations on or the prohibition of free service by a project constituting a municipal purpose and a source of revenues that may be pledged for the payment of special obligation bonds and special obligation bond anticipation notes to any person, firm, or corporation, public or private.
(12)	The acquisition and disposal of property for a project constituting a municipal bond purpose.
(13)	Provisions for insurance and for accounting reports and the inspection and audit of the reports.
(14)	The continuing operation and maintenance of a project constituting a municipal purpose or the utility or enterprise of which it is to become a part.
"§ 159-118.3.  Limitations on details of special obligation bonds; additional provisions.
(a)	In fixing the details of special obligation bonds or special obligation bond anticipation notes, the issuing municipality is subject to the following restrictions and directions:
(1)	The maturity dates may not exceed the maximum maturity periods prescribed by the Commission for general obligation bonds pursuant to G.S. 159-122.
(2)	Any bond or note may be made subject to redemption prior to maturity, including redemption on demand of the owner, with or without premium, on such notice and at such time or times and with such redemption provisions as may be stated.  When the bond or note has been validly called for redemption and provision has been made for the payment of (i) the principal of the bond or note, (ii) any redemption premium, and (iii) the interest on the bond or note accrued to the date of redemption, then interest on the bond or note shall cease.
(3)	The bonds or notes may bear interest at such rate or rates, payable semiannually or otherwise, may be in such denominations, and may be payable in such kind of money and in such place or places within or without this State, as the issuing municipality may determine.
(4)	No agreement or covenant shall contain a nonsubstitution clause that restricts the right of a municipality to replace or provide a substitute for any project financed pursuant to this Article.
(b)	In addition to the foregoing provisions of this section, in fixing the details of special obligation bonds and special obligation bond anticipation notes, the issuing municipality may provide that the bonds or notes:
(1)	May be made payable from time to time on demand or tender for purchase by the owner if a Credit Facility supports the bonds or notes, unless the Commission specifically determines that the absence of a Credit Facility will not materially and adversely affect the financial position of the municipality and the marketing of the bonds and notes at a reasonable interest cost to the municipality.
(2)	May be additionally supported by a Credit Facility.
(3)	May be made subject to redemption prior to maturity, with or without premium, on such notice, at such time or times, at such price or prices and with such other redemption provisions as may be stated in the bond order or trust agreement authorizing or securing the bonds or notes or with such variations as may be permitted in connection with a Par Formula provided in the bond order or trust agreement.
(4)	May bear interest, notwithstanding the provisions of G.S. 159-125(a), at a rate or rates that may vary as permitted pursuant to a Par Formula and for such period or periods of time, all as may be provided in the bond order or trust agreement.
(5)	May be made subject of a remarketing agreement by which an attempt is made to remarket the bonds or notes to new purchasers prior to their presentment for payment to the provider of the Credit Facility or to the issuing municipality.
No Credit Facility, repayment agreement, Par Formula, or remarketing agreement shall become effective without the approval of the Commission.
(c)	The following definitions apply in subsection (b) of this section:
(1)	Credit Facility.  An agreement entered into by an issuing municipality with a bank, a savings and loan association, another banking institution, an insurance company, a reinsurance company, a surety company, another insurance institution, a corporation, an investment banking firm, another investment institution, or any financial institution providing for prompt payment of all or any part of the principal (whether at maturity, presentment or tender for purchase, redemption, or acceleration), redemption premium, if any, and interest on any such bonds or notes payable on demand or tender by the owner issued in accordance with this subsection, in consideration of the issuing municipality agreeing to repay the provider of the Credit Facility in accordance with the terms and provisions of the repayment agreement, provided, that any such repayment agreement shall provide that the obligation of the issuing municipality shall have only such sources of payment as are permitted for the payment of bonds or notes issued under this Article.  A bank may include a foreign bank or branch or agency of a foreign bank the obligations of which bear the highest rating of at least one nationally recognized rating service and do not bear a rating below the highest rating of any nationally recognized rating service which rates such particular obligations.
(2)	Par Formula.  A provision or formula adopted by the issuing municipality to provide for the adjustment, from time to time, of the interest rate or rates borne by the bonds or notes including:
a.	A provision providing for adjustment so that the purchase price of the bonds or notes in the open market would be as close to par as possible;
b.	A provision providing for adjustment based upon percentages of a prime rate or base rate, which percentages may vary or be applied for different periods of time; or
c.	Any other provisions that the municipality may determine are consistent with this Article and do not materially and adversely affect the financial position of the municipality and the marketing of the bonds or notes at a reasonable interest cost to the municipality.
(d)	No bond order shall be adopted under this Article if the issuance of the bonds under the order causes the net debt of the municipality to exceed eight percent (8%) of the appraised value of property subject to taxation by the issuing municipality; such calculation to be made in accordance with G.S. 159-55(a)(1).
(e)	Special obligation bonds and special obligation bond anticipation notes issued pursuant to this Article shall be included in the calculation of gross debt under G.S. 159-55(a)(i).
"§ 159-118.4.  Lien of special obligation bonds and notes.
(a)	All special obligation bonds and special obligation bond anticipation notes issued under this Article shall be equally and ratably secured by a pledge and a lien upon the sources of revenues that may be pledged for their payment as provided in the bond order or trust agreement authorizing or securing the bonds or notes, without priority by reason of number, or of dates of bonds or notes, execution, or delivery, in accordance with the provisions of this Article and of the bond order or trust agreement; except that a municipality may provide in the bond order or trust agreement that special obligation bonds or special obligation bond anticipation notes issued pursuant thereto shall to the extent and in the manner prescribed in the bond order or trust agreement be subordinated and junior in standing, with respect to the payment of principal, interest, and any premium and the security therefor, to any other special obligation bonds or special obligation bond anticipation notes.
(b)	The pledge of a municipality with respect to the sources of payment identified in a bond order or trust agreement pursuant to this Article shall be valid and binding upon the issuance of any special obligation bonds or special obligation bond anticipation notes under the bond order or trust agreement.  The sources of payment so pledged and then held or thereafter received by a municipality or any fiduciary shall immediately be subject to the lien of the pledge without any physical delivery or further act, and the lien shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the municipality without regard to whether the parties have notice of the lien.  The bond order or trust agreement or any other document or action by which the pledge is created need not be filed or recorded in any manner other than as provided in this Article.
"§ 159-118.5.  Status of special obligation bonds under Uniform Commercial Code.
Whether or not the special obligation bonds are investment securities under Article 8 of Chapter 25 of the General Statutes, all special obligation bonds represented by instruments issued under this Article shall be treated as investment securities within the meaning of and for all the purposes of Article 8 of Chapter 25 of the General Statutes.
"§ 159-118.6.  Limited liability.
Special obligation bonds and special obligation bond anticipation notes shall be special obligations of the municipality issuing them.  The principal of and interest and any premium on special obligation bonds and special obligation bond anticipation notes shall be secured solely by any sources of payment pledged in the bond order or trust agreement under which they are authorized or secured, unless the use of the sources will constitute a pledge of the faith and credit of the municipality, or a legal or equitable pledge, charge, lien, or encumbrance upon any of its property, except as permitted by G.S. 159-114(a)(5), other than the sources or upon any other income, receipts, or revenues except to the extent that special obligation bond anticipation notes are payable from the proceeds of the special obligation bonds in anticipation of which they are issued.  Neither the faith and credit nor the taxing power of the municipality is pledged for the payment of the principal of or interest or any premium on any special obligation bonds or special obligation bond anticipation notes, and no owner of special obligation bonds or special obligation bond anticipation notes has the right to compel the exercise of the taxing power by the municipality or the forfeiture of any of its property, except as permitted by G.S. 159-114(a)(5), in connection with any default on the bonds or notes.  Every special obligation bond and special obligation bond anticipation note shall recite in substance that the principal of and interest and any premium on the bond or note are secured solely by the sources of payment specified in the bond order or trust agreement under which it is authorized or secured, provided that any such use of such sources will not constitute a pledge of the faith and credit of the municipality, and that the municipality is not obligated to pay the principal or interest or any premium except from the specified sources.  A municipality may, in its sole discretion, use tax proceeds to pay the principal of or interest or premium on the bonds or notes, but shall not pledge or agree to do so.
"§ 159-118.7. Bonds and notes eligible for investment.
Bonds and notes issued under this Article are securities in which all public offices, agencies, and public bodies of the State and its political subdivisions, all insurance companies, trust companies, investment companies, banks, savings banks, building and loan associations, credit unions, pension or retirement funds, other financial institutions engaged in business in the State, executors, administrators, trustees, and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them.  Such bonds or notes are securities which may properly and legally be deposited with and received by any officer or agency of the State or political subdivision of the State for any purpose for which the deposit of bonds, notes, or obligations of the State or any political subdivision is now or may hereafter be authorized by law.
"§ 159-118.8. Tax exemption.
Bonds and notes authorized by this Article and the coupons, if any, appertaining thereto, and their transfer (including any profit made on their sale), shall be exempt from all State, county, and municipal taxation or assessment, direct or indirect, general or special, whether imposed for the purpose of general revenue or otherwise, excluding inheritance and gift taxes.  The interest on the bonds and notes shall not be subject to taxation as to income.  The bonds, notes, and coupons, if any, shall not be subject to taxation when constituting a part of the surplus of any bank, trust company, or other corporation."
Sec. 2. G.S. 159-78 reads as rewritten:
"§ 159-78. Special obligation refunding bonds.
In conjunction with the issuance of refunding bonds pursuant to G.S. 159-72, 159-84, or 159-115 a unit of local government may issue a series of refunding bonds which shall be payable from the excess of the amount required by a trust fund established pursuant to G.S. 159-72, 159-84, or 159-115 to provide for the payment and retirement of the obligations being retired and the amount required to pay any expenses incurred in connection with such refunding to the extent such expenses are payable from said trust fund.
Such refunding bonds shall be special obligations of the municipality issuing them. The principal of and interest on such refunding bonds shall not be payable from the general funds of the municipality, nor shall they constitute a legal or equitable pledge, charge, lien, or encumbrance upon any of its property or upon any of its income, receipts, or revenues, except the trust fund established pursuant to G.S. 159-72, 159-84, or 159-115 from which such refunding bonds are payable. Neither the credit nor the taxing power of the municipality is pledged for the payment of the principal or interest of such refunding bonds, and no holder of such refunding bonds has the right to compel the exercise of the taxing power of the municipality or the forfeiture of any of its property in connection with any default thereon. Every such refunding bond shall recite in substance that the principal of and interest on the bond is payable solely from  the trust fund established for its payment and that the municipality is not obligated to pay the principal or interest except from such trust fund.
Any refunding bonds issued under this section shall be issued in compliance with the procedure set forth in Article 5 or Article 6A of this Chapter.
The principal amount of any issue of refunding bonds issued pursuant to G.S. 159-72, 159-84, or 159-115 together with the principal amount of refunding bonds, if any, issued pursuant to this section in conjunction with a series of bonds issued under G.S. 159-72, 159-84, or 159-115 shall not exceed the sum of the following: (i)	the principal amount of the obligations being refinanced, (ii) applicable redemption premiums thereon, (iii) unpaid interest on such obligations to the date of delivery or exchange of the refunding bonds, (iv) in the event the proceeds from the sale of the refunding bonds are to be deposited  in trust as provided by G.S. 159-72, 159-84, or 159-115 interest to accrue on such obligations being refinanced from the date of delivery of the refunding bonds to the first or any subsequent available redemption date or dates selected, in its discretion, by the governing body of the unit of local government, or to the date or dates of maturity, whichever shall be determined by the governing body of the unit of local government to be most advantageous or necessary and (v) expenses, including bond discount, deemed by the governing body to be  necessary for the issuance of the refunding bonds."
Sec. 3.  G.S. 159-123(b)(3) reads as rewritten:
"(3)	Revenue bonds and special obligation bonds issued pursuant to Chapter 159I of the General Statutes or pursuant to Article 6A of this Chapter, including any refunding bonds issued pursuant to G.S. 159-84 and G.S. 159-115."
Sec. 4.  G.S. 159-148 reads as rewritten:
"§ 159-148.  Contracts subject to Article; exceptions.
(a)	Except as provided in subsection (b) of this section, this Article applies to any contract, agreement, memorandum of understanding, and any other transaction having the force and effect of a contract (other than agreements made in connection with the issuance of revenue bonds, special obligation bonds, or of general obligation bonds additionally secured by a pledge of revenues) made or entered into by a unit of local government (as defined by G.S. 159-7(b) or, in the case of a special obligation bond issued under Chapter 159I of the General Statutes, as defined in that Chapter), relating to the lease, acquisition, or construction of capital assets, which contract
(1)	Extends for five or more years from the date of the contract, including periods that may be added to the original term through the exercise of options to renew or extend, and
(2)	Obligates the unit to pay sums of money to another, without regard to whether the payee is a party to the contract, and
(3)	Obligates the unit over the full term of the contract, including periods that may be added to the original term through the exercise of options to renew or extend, to the extent of five hundred thousand dollars ($500,000) or a sum equal to one tenth of one percent (1/10 of 1%) of the assessed value of property subject to taxation by the contracting unit, whichever is less, and
(4)	Obligates the unit, expressly or by implication, to exercise its power to levy taxes either to make payments falling due under the contract, or to pay any judgment entered against the unit as a result of the unit's breach of the contract.
Contingent obligation shall be included in calculating the value of the contract.  Several contracts that are all related to the same undertaking shall be deemed a single contract for the purposes of this Article.  When several contracts are considered as a single contract, the term shall be that of the contract having the longest term, and the sums to fall due shall be the total of all sums to fall due under all single contracts in the group.
(b)	This Article shall not apply to:
(1)	Contracts between a unit of local government and the State of North Carolina or the United States of America (or any agency of either) entered into as a condition to the making of grants or loans to the unit of local government.
(2)	Contracts for the purchase, lease, or lease with option to purchase of motor vehicles or voting machines.
(3)	Loan agreements entered into by a unit of local government pursuant to the North Carolina Solid Waste Management Loan Program, Chapter 159I of the General Statutes."
Sec. 5.  G.S. 159-165(a) reads as rewritten:
"(a)	Bond anticipation notes of a municipality, including special obligation bond anticipation notes issued pursuant to Chapter 159I of the General Statutes or pursuant to Article 6A of this Chapter, shall be sold by the Commission at public or private sale according to such procedures as the Commission may prescribe.  Bond anticipation notes of the State shall be sold by the State Treasurer at public or private sale, upon such terms and conditions, and according to such procedures as the State Treasurer may prescribe."
Sec. 6.  Interpretation of act.  (a)	The foregoing sections of this act shall be deemed to provide an additional and alternative method for the doing of the things authorized by the act, shall be regarded as supplemental and additional to powers conferred by other laws, and shall not be regarded as in derogation of any powers now existing.
(b)	This act, being necessary for the health and welfare of the people of the State, shall be liberally construed to effect its purposes.
(c)	Insofar as the provisions of this act are inconsistent with the provisions of any general laws, or parts thereof, the provisions of this act shall be controlling.
(d)	Insofar as the provisions of this act are inconsistent with the provisions of any local, special, or private laws, the provisions of those laws are repealed to the extent of the conflict.
(e)  If any provisions of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the act that can be given effect without the invalid provisions or application, and to this end the provisions of this act are severable.
(f)  References in this act to specific sections of the General Statutes are intended to be references to those sections as they may be amended from time to time by the General Assembly.
Sec. 7.  This act is effective upon ratification.