HomeMy WebLinkAboutCouncil Workshop Minutes 06.24.2008MINUTES
COUNCIL WORKSHOP
JUNE 24, 2008 6:30 P.M.
COUNCIL CHAMBERS
A Council Workshop was held in the Council Chambers and called to order by Mayor Ken Olson at
6:30 p.m. on June 24, 2008.
COUNCIL MEMBERS PRESENT:
x_ Emelie Eaton
_ Kate Hart
_x Gay Easton
Alex Willcins
_x Doug Poehls
_x_ Mazk Mace
_x Chuck Dickerson
_x Norm Stamper
OTHERS PRESENT:
Sam Painter
Mary Embleton
Bill Sheridan
James Caniglia
Rick Musson
Jan Fought
Public Input. (three-minute limit):
Citizens may address the Council regarding any item of City business not on the agenda. The duration for an individual
speaking under Public Input is limited to three minutes. While all comments are welcome, the Council will not take action
on any item not on the agenda.
There was no public input.
Fire Departments
• Appointments -Kurt Markegazd and John Woody
Mayor Olson stated that the appointments would be on the July 1 ~` council agenda.
• Resolution - Cenex Fire Contract
Mayor Olson removed the resolution from the agenda. Council Member Poehls stated that Cenex has
agreed to pay the $9,500 for the fire district, but the final agreement is still in progress and would not
be ready for the July 15t council agenda.
Public Works Department:
• Resolution -Amendment No. 1 to Task Order No. 3 with Great West Engineering
Bill Sheridan stated that the original agreement with Great West far storm water improvements on
South First Avenue included storm water improvements on Southeast Fourth Street and additional
roadways. Because of the substantial improvements to South First Avenue, it was determined to do
the storm water system and a sanitary sewer line in South First Avenue and not go forwazd with
additional storm water improvements at this time. As a result, the original task order with Great West
far $282,371 has been reduced to $216,182, which is a reduction for storm water engineering on
South First Street. The resolution will be on the July 1 S` council agenda.
At this time, Mayor Olson spoke regarding the Fire Department appointments of John Woody and
Kurt Mazkegard. He stated that the city has had a standing commitment regarding city employees and
their response to the fire department. He wrote a letter to the fire department indicating that, should
Council Workshop Minutes of June 24, 200$
they select Kurt as a member, he would be able to respond to structure fires during work hours but not
to grass or vehicle fires. The same letter was penned by preceding mayors in regards to fire
inspector/building inspector Gary Colley and as far back as public works superintendent Dick
Metzger. The city has kept the obligation of its employees as their primary interest.
Clerk/Treasurer:
• Resolutions -Financial transfers
Mary Embleton stated that resolutions are needed to establish the funding for two projects that need to
be completed. The first resolution transfers funds from the Building Department to the City Hall
Capital Projects Fund. This is for the HVAC system proposal for installation to fix the heating and
cooling problems in the two-story portion of city hall. There was not enough funding in the General
Fund to complete the project and there were some le$over funds from last year's capital projects.
Mary's recommendation was to utilize those monies left over from equipment purchases of two copy
machines and the phone system. There was a savings of about $19,000 from the equipment
purchases. She stated that the Building Fund has monies that were appropriated for no particular
reason, and the city needs to spend some money in order to comply with regulations on the Building
Fund. The cost of the project is about $38,000 and there are excess monies of about $19,000, leaving
a shortage of about $20,000. Because the upstairs houses the Building Department, it is appropriate
for the Building Department to contribute to the project as it will help the work environment. The
proposal is to transfer $20,000 from the Building Department Fund to the Capital Projects Fund and
then pay for the whole project out of the Capital Projects Fund. Mary asked the council to approve
the transfers in order to pay for the project. The resolution will be on the July 13t council agenda.
Mary explained the second resolution, which transfers funds to the Library Capital Projects Fund. A
year ago, the city appropriated $30,000 for the library parking lot. At that time, it was probably
adequate funding, but due to the delays and increases in the price of asphalt, it is about $5,000 short
for this project. Mary explained the proposal for the library to contribute $2,500 of donation money
and the City Parking Fund to contribute $2,500 for the project. The City Parking Fund has $17,000 to
use for parking lots for the city. The monies would be transferred to the capital projects fixnds in
order to complete the funding. The resolution will be on the July 13` council agenda.
• Proposed funding options for fire hall
Mary previously distributed information regarding general obligation bonds. She stated that there are
costs associated with the process. The city looked for other funding alternatives and was contacted by
Government Capital, which is a municipal leasing company. She distributed information to the
council at this meeting and explained the advantages and disadvantages of both programs. General
obligation bonds are the traditional funding method for high ticket items like a fire hall or a
swimming pool. The last time the city had a GO bond was for storm water. With the recent passage
of legislation to increase the bonding capacity from 1.5 percent to 2.5 percent of the city's taxable
value, the city has more flexibility to issue debt and ask the taxpayers to help pay back the debt. Mary
stated that the other option is a lease program, which would also need taxpayer support to fund the
project.
The pros and cons are listed in the information Mary distributed, and a copy is attached to these
original minutes. If the city asks the taxpayers to support the leasing program, the company would
not have to take a lien on the building. They would take a reserve pledge, so there would be no
closing costs with a capital lease. There would be no bond counsel fees, which would probably be
$10,000 to $12,000 or more. There would be no annual maintenance fees or any other upfront costs
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Council Workshop Minutes of June 24, 2008
as there would be with selling bonds. The interest rates aze in the range of 4 to S percent and aze
competitive right now, but it is a bit of a moving target. The rates aze tied to the U.S. Treasury and
not necessarily to the Fed. If the city pledges an ad valorem tax, the interest rate will be fixed so there
would not be a floating interest rate. The rate for a GO bond is also fixed, so they aze comparable
there. The company's list of Montana clients includes Gallatin Gateway, Bayneville, Wolf Point,
School Districts, and the Flathead County Fire Department.
One disadvantage is that the city would not necessarily own the building until the end of the lease.
Even though the company would not take a lien an it, the city would still lease it. At the end of the
term, the city would own the building. The city would have to insure it and book it as an owned asset.
From a purely accounting standpoint, both options aze about the same as far as how the city's books
show that there is long-term debt and that there will be taxpayer support to pay it back. A general
obligation bond is familiaz to taxpayers. If the voters are asked for a permissive levy, they might not
be as comfortable with that. Education of the public would be paramount. It appears that there aze
less upfront costs with a capital lease program versus a general obligation bond program. General
obligation bonds would have bond counsel costs and broker fees, it would take two to three months to
sell the bonds after approval by the voters, and the interest rate on bonds has not been good. Aaron
Rudio, of D.A. Davidson, prepared same helpful information. The average interest rate has been
about 6 percent since 1988. The most current has been 4.32 percent, which is competitive to what the
other company is offering. The high has been 7.97 percent and the low 4.03 percent, so it has been
declining. There are not as many buyers for bonds as there used to be.
The overall costs, the site and building have to be determined, and then the city would ask the
taxpayers for support for whichever method the council chooses. The approach would be the same as
faz as public education. August 19~ is the last date for the council to pass a resolution of intent to
meet the 75-day requirement to get an issue on the ballot.
There was discussion regazding the Federal government's use of lease/purchase options and typical
lease agreements. The city does not have any general obligation bond issues right now. If the city
issues a general obligation bond, the $4 million mark will take up most of the city's bonding capacity.
If another project came along, the city would not have as much bonding capacity left. One advantage
of the lease program is that it does not count toward bonding capacity and the city would still have the
bonding capacity far something else such as a pool, a fire truck, or whatever. Sam has reviewed the
information. Both options would require taxpayer approval and additional mills on property taxes.
The impact on property taxes for the $4 million debt is that the property owner of a $100,000 house
would pay an additional $11 b per year for atwenty-year term
There was discussion regarding education ofthe public. The timeline will be developed after the hard
cost figures for the site and building are determined. A resolution of intent and public hearin~s will
be scheduled. The resolution of intent would need to be approved by the council by August 19 .
Executive review:
• Resolution -Small Services Contract with Miral Gamradt to develop administrative charges
Mayor Olson stated that the draft resolution indicates Miral Garmradt's proposed services. The city
has received continued remarks from the auditors regarding the administrative chazges. Through
association with Miral during the development of the Capital Improvements Plan, Mayor Olson asked
if he would be available for consulting on this issue. Miral submitted a contract outlining the service
that he would perform for the city. The resolution will be on the July 1 ~` council agenda.
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Council Workshop Minutes of June 24, 2008
• Resolution -Adopt Capital Improvements Plan
Mayor Olson stated that a public hearing for the CIP will be held on July 1st to provide an opportunity
for education to the community. Miral Gamradt will present the CIP at the public heazing. The
resolution adopting the CIP will be on the July 15th council agenda.
• Resolution -Adopting the Chief Administrative Officer contract
Mayor Olson stated that, as required by the adoption of the charter, the city's next step is to fill the
CAO position. When Mayor Olson put out an in-house opportunity, Public Works Director Bill
Sheridan applied. Mayor Olson has met with Bill several times over the last couple weeks, and he
stated that Bill certainly meets and exceeds the qualifications for the position. A contract has been
developed for the council's consideration next week. Mayor Olson stated that Bill currently lives out
of the city limits but is working diligently to become a Laurel resident, as required in item #14 of the
proposed contract.
Doug asked i~ upon approval of the contract, the city would look for a new public works director.
Mayor Olson stated that he would present the option of filling the public works director position to
the council after the CAO position is filled.
• Council Issues:
o Update on the Master Plan for the City of Laurel's Cemetery (Norm Stamper)
Norm Stamper distributed two copies of the four proposed Laurel Cemetery Master Flan Concepts for
the council to review. This is the first step for a Master Plan for the cemetery. The engineers
provided four proposals for the Cemetery Commission to review and the Commission unanimously
selected Master Plan Concept A, for which he showed an enlarged concept map. Master Plan
Concept A had a large blank area. The landscape architect had old information that showed Laurel
did not own that section, but it will be included in the master plan. Norm explained the Cemetery
Commission's discussion regarding the following: a maintenance shop will be built on the east side
of the property; maintenance roads will be built around the property on the south and east sides to
drive machinery and equipment without driving through the cemetery itself; dirt piles will be located
in the shop azea with landscaping and/or fencing to hide it from view; a columbarium is a possibility;
a central area for funerals or ceremonies; and the pauper's area in the cemetery with a lot of unmarked
graves. Ground penetration radaz could be used to design a map before proceeding with any
construction. Norm stated that this plan can be built in phases when funding is available or there is a
need to expand. This plan currently provides for over 7,000 graves and will last the city for quite
some time. There was also discussion regarding water issues at last week's Cemetery Commission
meeting. With the city's existing water rights, the city can legally pump water out of the Yellowstone
into the Big Ditch to the High Ditch and have more water than is technically needed. Bill Enright is
designing the water system to water both the Veterans' Cemetery and the city's cemetery. Bill thinks
there will be enough capacity to water each cemetery three days a week. Kurt had mentioned that the
capacity would be so much higher that we could actually water more than is being done currently.
Norm stated that the water issue is looking good and is a big important step that was a concern. There
was discussion regarding a letter from Howard Guenthener about a pine tree in the veterans' section.
The current veterans' section of the city's cemetery will remain open. The city owns and maintains
the Catholic section of the cemetery. Norm stated that the drawing shows an entrance off Laurel
Airport Road. The Cemetery Commission discussed it and agreed that it may not be wanted as it
could become a cutoff for people to drive through the cemetery.
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Council Workshop Minutes of June 24, 2008
Mayor Olson stated appreciation for Norm and Chuck's service on the Cemetery Commission. Norm
stated that it is an exciting time and there is a lot of support and pride.
Mayor Olson asked if there was further discussion regarding the CAO position. At this time, Emelie,
Gay, Chuck, and Norm clearly expressed support of Bill Sheridan as the chief administrative officer
for the City of Laurel.
Other items:
• Resolution -Change order for bathroom remodeling at the FAP
Bill Sheridan stated that the original contract for the remodel was for $8,234.25. The contractor
originally determined that the shower head and the faucet handle needed to be replaced at a cost of
$133.50. The contractor asked Bill to look at the shower stall, which is not an acceptable shower stall
for a variety of reasons. The contractor then provided the city with a return of the $133.50 and
presented a change order in the amount of $1,350 to replace the shower stall and install new
plumbing. Bill asked the council to consider the change order. He stated that the contractor has done
a good job on the project and the city would like the work to continue. The resolution will be on the
July 1 ~` council agenda.
• Resolution -Small Services Contract with Becker Electric for purchase and replacement of
the UPS system, backup generator, and air conditioning unit at the FAP
Rick Musson stated that there was a major disaster at the FAP a couple weeks ago as the UPS system
crashed and is now dead. It needs to be replaced with a bigger UPS system and a larger generator.
Becker Electric gave a bid on a new generator. Rick stated that the room at the FAP containing the
UFS system and the 911 equipment is very hot, and the technicians that installed the equipment
recommended installation of air conditioning in that room. Becker Electric's bid is for about $35,000
and another higher bid was also received. Rick recommended entering into the contract with Becker
Electric to get this done as soon as possible. Norm stated that the proposal is dated May 22na and is
good for 20 days. Rick will check on that tomorrow. Rick explained that the funding for the project
will come out of the 911 Fund and has been approved by Helena.
The resolution will be on the July 13` council agenda.
• Resolutian -Declaring certain city items as surplus and available far donation to the Ryegate
Fire Department
Mayor Olson stated that the Ryegate Fire Department burned down recently. Chief Wilm brought this
issue to the department heads today and has requested the authority to donate up to six sets of surplus
bunker gear to the Ryegate Fire Department. Scott has been in contact with DES Coordinator Jim
Kraft regarding this issue. The resolution will be on the July 1 ~` council agenda.
• Resolution -- Small Services Contract with Winkler Excavating for the Library parking lot
project
Mayor Olson explained the contract with Winkler Excavating for the Library parking lot. The library
parking lot project was previously approved in the CIP for $30,000, but the costs are higher than
projected. An additional $2,500 from the City Parking Fund and $2,500 from Library donations are
needed to pay far the project. The City Parking Fund has approximately $17,000, which are monies
incurred by downtown businesses. Mayor Olson stated that the resolution read that, should there be
an opportunity for improvements to city parking lots, this fund would be available. Mayor Olson
asked for the council's consideration of the TIFD project that will come forward far the Laurel Main
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Council Workshop Minutes of June 24, 2008
Street. Bill stated that it has been difficult to find small contractors to do paving, and this contractor
did the path in Riverside Pazk. The resolution will be on the July 1St council agenda.
Mayor Olson asked Emelie Eaton to explain the next issue. Emelie stated that, Joyce Jensen, of the
Billings Preservation Society, recently asked the council if the city would like them to put a sign at
Riverside Park documenting some of the history of the park. Last Thursday, Emelie was informed
that the bids for the sign had been received and the total cost would be $3,000, which was over twice
the expected cost. The sign will not be mounted on the side of the building, but will be mounted on
4x4's. Joyce asked Emelie if the city is willing to donate the time and effort of city employees to help
mount the sign and if there would be sources for private funding. Joyce will approach Cenex and
Wal-Mart in Laurel for private funding, and MRL could be another source. This item will be on the
July 8th council workshop for further discussion and input, and Joyce Jensen will attend that meeting.
Review of draft council agenda for July 1., 2008:
• Public Heazings:
o Ordinance No. 008-06: Ordinance deleting a section of the "Laurel Vehicles and
Traffic Ordinance" located at Chapter 10 of the Laurel Municipal Code. (First reading
- 06/02/2008)
o Ordinance No. 008-07: An ordinance of the City of Laurel, to repeal Chapter 15.50 of
the Laurel Municipal Code and to replace it with new Chapter 15.50 that provides for
the City's adoption of the 2006 Edition of the International Fire Code and certain
amendments. (First reading - 06/02/2008)
Mayor Olson stated that the public hearing for the CIP will also be on the July 1st council agenda.
Attendance at the July 1st council meet
All present will attend.
Announcements:
Mazk will contact the company that has agreed to install a billboard about the Centennial Celebration
in Laurel.
Mazk stated that a resident contacted him regarding an incident with a dog and a cat. He explained
the situation and stated that the city's ordinance is lenient and should be reviewed. Discussion of
LMC 6.16.030 will be on the July 8t council workshop agenda.
Chuck stated that the Centennial Committee will meet on Monday, June 30th, at 6:00 p.m
Emelie stated that the Yellowstone Historic Preservation Board will meet on Tuesday, July 15th, at
8:00 a.m at the Western Heritage Center. The meetings aze being held in different locations each
month and aze open to the public.
Mayor Olson stated that the lack of picnic tables in the shelter at Thomson Park needs to be
addressed. The staff is aware and is reviewing this.
Mazk contacted Commissioner Reno regarding the footbridge on 12th Street after receiving a
complaint from a citizen. The County Fublic Works Director informed Mark that there have been
problems with the utilities and the bridge should be open in a couple weeks. Chuck stated that the old
footbridge was removed today.
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Council Workshop Minutes of June 24, 2008
Mary will attend the League of Cities and Towns Executive Board Meeting in Helena in Thursday.
There will be a joint meeting with the MMIA Board on Thursday afternoon. Mary wi11 present a
report to the council at the July 8~' council workshop.
The council workshop adjourned at 8:08 p.m.
Respectfully submitted,
~~
Cindy A11en
Council Secretary
NOTE: This meeting is open to the public. This meeting is for information and discussion of
the Council for the listed workshop agenda items.
7
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1=ro~na The Off"ece of
1{I~IKE IA/~LTiER
13329 Co. Road 334
Savannah, MO. 64485
816.324-0338
816-324-0337 fax
CORPORATE OFFICE
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Southlake, TX, 76092
800 883.1199
817488-8477 fax
~U'LI!1_CEPITRAL
REGION
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Austin, TX, 78731
512 34B-9980
512 346f565 fax
4842 Sunshine Drive
Sugar Land, TX. 77479
281565-8545
281 491-782Dfax
23&4 Highway 59 East
B®eville, TX. 78102
3fi1 ssz-a~6o
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SOUT6IEAST REGION
303 Hwy 51 South
Brookhaven, MS. 39801
800 561-0481
601 823009 fax
Date: May 30, 2008
To: Jesse Holzemer -Morton Buildings -Sheridan, Wyoming.
From: Mike Walter -Public Finance Division
Re: Bond vs. Lease Purchase Financing
Good Afternoon Jesse;
Bands do have their place...there are things that HAVE to be financed via a band by state
statute such as street and road improvements, sewers etc...but for the things that do not
have to be financed via a bond...there is no reason to incur the of up front costs, and
annual maintenance expenses of a bond that do not exist in a lease purchase financing
structure. In most cases the net cast difference is in the ten's of thousands of dollars.
1 wanted to take a moment to point out a few differences between the two financing
instruments and show you that using a lease purchase option can be less expensive, even
though the "rate" is lower on a bond.
Bond Lease Purchase
Issuance costs:
Bond Counsel to prepare the official A single attorney's opinion on the lease
statement or "bond book" and secure the purchase document.
Attorney General's approval
Trustee: The trustee is the entity that Ida Annual INaintenance Fee
maintains disbursement of the funds to the
bond investors during the entire life of the
band and charges an ANldl1AL FEE ranging
between $1,000 and $2,500
Call Restrictions: Your ability to pay off a Limited or No early pay off restriction
bond earl is normally restricted
Two Payments per year: A bond normally Single Annual Payment with a level
requires two payments per year. principal and interest reduction.
Qne is an "interest only" payment and the You may choose asemi-annual payment
second is a Principal and Interest payment. mode as well...and both payments will be
reducing principal and interest equally..
Counts against the District's Statutory debt Does NOT count against your debt limitation
Limitation because it i5 a lease until the $1.00 buyout
at the end of the chosen term
Time: You have to allow a significant for all To put a lease purchase in place, we need a
of the legal preparation and an election (in resolution from the district board that
most cases) after the approval of the city, approves the project and the utilization of
county or fire district board to proceed. financing.
If your customer insists upon using a bond (and some will), we can help with that as
well. Government Capital Securities Division can assist your customer in putting a bond
in place to finance their building.
If you have any questions please feel free to give me a call at 816-324-0336.
Mike Walter
Public Finance Division
MONTANA
Counties
Counties' qualify as tax-exempt issuers for purposes of federal income tax law due to their tax,Z
eminent domain' and police powers.' A county may "purchase and hold lands within its limitss5 and may
"make such contracts and purchase and hold such personal property as may be necessary to the exercise
of its powers."~ Counties have the "power ... to purchase ... or lease any real or personal property
necessary for the use of the county."'
"lf a county ... establishes or maintains [an] ambulance service it may ... buy, rent, lease or
otherwise contract for vehicles, equipment, [or] facilities."~ "A city and a county may, by contract ...
purchase, or lease ... acity-county building to house the offices of city government and county
government."9
When the amount to be paid as the purchase price for any vehicle or road machinery of any kind, for any
other machinery, apparatus, appliance, or equipment, ... exceeds $4,000, the county ... may provide for the payment of
the purchase price in installments extending over a period of not more than ten years, provided that at the time of
entering into the agreement for the purchase, there is an unexpended balance of appropriation in the budget for the
then-current fiscal year available and sufficient to meet and take care of the portion of the purchase price as is payable
during the then-current fiscal year and the budget for each following year in which any portion of the purchase price is
to be paid contains appropriation for the purpose of paying the purchase price.'
County commissioners are authorized to "sell, trade, or exchange any real or personal property,""
and may "lease ... county property ... which is not necessary to the conduct of the county's business.s1z
Counties may build single jurisdiction or multijurisdictional detention centers." Section 7-32-
2231 declares that it is the purpose of sections 7-32-2231 through 7-32-2234 "to allow multijurisdictional
or single jurisdictional detention centers to be built by private industry and leased to the participating
local government or governments for operation by the local government, collectively by participating
local governments, or by a private entity with the concurrence of the local governments involved."'°
' Counties may adopt a charter fgrm of government. Mont. Const. ark XI, § 5.
z Mont. Code Ann. § 7-I-2103(5) (1999).
~ !d. § § 7-16-2 l 05(1), 7- 14-2107.
a Id. § 7-21-2101.
s Id_ § 7-1-2103(2).
6 /d. § 7-i-2103(3).
~ Id. § 7-8-2201,
$ !d. § 7-34-103.
9 Id. § 7-8-201.
'~ Id. 7-5-2306. Ev contract for the rental of machine
§ ery ry, equipment, apparatus, appliances, materials or supplies whereby
the county acquires ownership after payment of the rental payments "shall be deemed and construed to be a contract for sale of
such property." !d. § 7-5-2307. Public bidding is required for installment contracts and lease-purchase agreements under § 7-5-
2301. 38 Op. Att'y Gen. 101 (Mont. 1980).
" Mont. Code Ann. 7-8-2211 1999). Pro e
§ ( p rty with a value in excess of $2,500 must be sold at public auction. /d. § 7-8-
2212.
'Z /d. § 7-8-223 L The lease period may not exceed ten years, and all property leased is subject to sale by the board. Id.
13 Id. § 7-32-2201,
14 Id. § 7-32-2231, The attorney general has opined that Montana Code §§ 7-32-2231 to -2233 do not conflict with statutes
regulating county contracts (title 7, ch. 5, pt. 23). 42 Op. Att'y Gen. 8l (Mont. 1988).
MONTANA 2000 - 1
Municipalities
Municipalities15 qualify as tax-exempt issuers for purposes of federal income tax law due to their
tax,16 eminent domains' and police powers."' Municipalities may "buy, sell, mortgage, rent, lease, hold,
manage, or dispose of any interest in real or personal property."19
Municipalities have the power to:
(I) ... enter into or incur an obligation for any purpose authorized by law, including the
purposes set forth in 7-7-4101. An obligation may be in the form of ... alease, alease-purchase agreement,
an installment purchase contract, or other legal form. An obligation constitutes a general obligation of the
municipality but is not secured by a pledge of the taxing power of the municipality.
(2) The obligation provided for in subsection (1) may be authorized by a resolution adopted
by the governing body of the municipality. The resolution must establish the terms, covenants, and
conditions of the obligation. It is not necessary to submit the question of incurring the obligation to the
electors of the municipality. The obligation may be incurred or sold at public or private sale, on terms and at
prices that the governing body determines to be advantageous. The obligation does not constitute
indebtedness for the purpose of statutory debt limitations.zo
The purposes set forth in § 7-7-4101 include acquiring land, erecting public buildings, purchasing
or leasing fire apparatus, street and other equipment, and personal property such as vehicles, telephone
systems, photocopy and office equipment, and computer hardware and software.
"If a ... city ... establishes or maintains [an] ambulance service it may ... buy, rent, lease or
otherwise contract for vehicles, equipment, [or] facilities.s21 "A city and a county may, by contract, ...
purchase or lease and manage acity-county building to house the offices of city government and county
government."zz
Use of installment purchase contract. When the amount to be paid under an installment purchase contract
exceeds $4,000, the council may provide for the payment of the amount in installments extending over a period of not
more than 10 years if at the time of entering into the contract, there is an unexpended balance of appropriation in the
budget for the then-curcent fiscal year available and sufficient to pay for the portion of the contract price payable during
the then-current fiscal year. The budget For each following year in which any portion of the purchase price is to be paid
must contain an appropriation for the purpose of paying that portion.~3
Municipalities "may acquire property in fee simple or lesser interest or estate by purchase, ...
lease, or lease with the privilege to purchase."za
Is Municipalities for purposes of this discussion are cities and towns. Mont. Code Ann. § 7-1-4101. Municipalities may adopt
bcharter form of government. Mont. Const. art. XI, § 5.
Mont. Code Ann. § 7-6-4401 (1999).
17 !d. § 7-1-4124(14).
ss Id. § 7-1-4123(2).
ie Id. § 7-I-4124(3).
zo Id. § 7-7-4104.
z' Id. § 7-34-103.
zz Id. § 7-8-201.
z3 Id. § 7-5-4306.
24 Id. 7-3-43131 1999
§ () ( ) (applies to municipalities with commission-manager form of government).
MONTANA 2000 - 2
Municipalities may "sell, dispose of, or lease any property belonging to the city or town."zS
School Districts
School districts qualify as tax-exempt issuers for purposes of federal income tax law due to their
tax26 and eminent domain powers?' School trustees may "acquire ... the real and personal property of the
district.sz$ "The trustees of a district may acquire real and personal property by an agreement to lease for
three years with an option to purchase. If real property is acquired, the trustees shall comply with 20-6-
603.'>29
The trustees of a district may purchase, build, exchange, or otherwise acquire, sell, or dispose of sites and
buildings of the district. Action may not be taken by the trustees without the approval of the qualified electors of the
district at an election called for the purpose of approval unless:
(a) a bond issue has been authorized for the purpose of constructing, purchasing, or acquiring the site
or building;
(b) an additional levy under the provisions of 20-9-353 has been approved for the purpose of
constructing, purchasing, or acquiring the site or building;
(c) the cost of constructing, purchasing, or acquiring the site or building is financed without exceeding
the maximum general fund budget amount for the district, and in the case of a site purchase, the site has been approved
under the provisions of 20-6-621; or
(d) money is otherwise available under the provisions of this title and the ballot for the site approval
for the building incorporated a description of the building to be located on the site.30
"When a district purchases a school bus, the trustees may purchase such school bus under an
installment contract which will be completely executed within three years from the date of the purchase.
The trustees may also purchase a school bus without advertising for bids under the provisions of 20-9-
204."" Trustees "may sell or otherwise dispose of real or personal property,"32 and may "rent, lease, or
let any buildings, land, or facilities of the district.""
zs !d. § 7-8-4201. If the property is held in trust then a majority vote of the electors is required. !d.
ze !d. § 20-9-142.
27 !d. § 70-30-102. This assumes that the school district itself may proceed with condemnation under this statute.
zs Id. § 20-3-324(15).
z9 Id. § 20-6-609.
3D /d. § 20-6-603(1).
31 /d. § 20-10-110.
sz !d. § 20-6-604. Property must be or about to be abandoned, obsolete, undesirable or unsuitable for school purposes. Section
20-6-603 is not applicable, but notice must be given. /d.
33 !d. § 20-6-607.
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Debt Limitations
Counties, municipalities and school districts are statutorily limited in the amount of
"indebtedness" they can incur "for any purpose." 34 State ex rel. Simmons v. City of Missoula35 involved a
transaction in which the city would sell real property to an individual who would then lease the property
as developed back to the city for a term of three years 36 The Montana Supreme Court stated that
[a] debt payable in the future is obviously no less a debt than if payable presently .... if a contract ...
contemplates, in any contingency, a liability to pay, when the contingency occurs, the liability is absolute, the debt
exists, --and it differs from a present, unqualified promise to pay only in the manner by which the indebtedness was
incurred 37
The constitutional provision construed in this decision has since been repealed.
Interest Rate Limitations
"Bonds of a political subdivision shall bear interest at such rate or rates as its governing body
shall determine." 38 "[These] provisions ... expressly supersede any other statutory limitation on the rate
of interest to be home by bonds of political subdivisions." J9
No other provisions were found relating to interest rate limitations.
Security Interest
This state has adopted, or may adopt, a revision of the Uniform Commercial Code which would
delete the exemption described here. See "GOVERNMENTAL LEASING: A FIFTY STATE
SURVEY OFLEGISLATIONAND CASE LAW - L Nature aJthe Survey - G. Security Interest "
Article 9 of the Montana Uniform Commercial Code does not apply "to a transfer by a
government or governmental subdivision or agency.s40
3a !d. §§ 7-7-2203 (counties), 7-7-4201(1) (municipalities). The incurrence by a county of "indebtedness or liability for any
single purpose to an amount exceeding $500,000" requires "approval of a majority of the electors of the county voting at an
election." /d. § 7-7-2101(2). [n construing § 7-7-2101(2) the attorney general has taken the position that a lease providing for a
total liability in excess of $40,000 (this was amended to $500,000 in 1981) must be approved by voters even though it provides
for (i) annual payments of less than $40,000, (ii) an option to purchase at the end for less than $40,000 and (iii) an option to
cancel at any time. 38 Gp. Att'y Gen. 56 (Mont. 1979). See also beiderichs v. Board of Trustees, 7 P.2d 543 (Mont. 1932) (debt
limitation did not apply to bar the expenditure in excess of $40,000 financed by cash specifically appropriated from then
available funds). Except for the purpose of refunding outstanding bonds, the wanly may not borrow money for any authorized
single purpose exceeding the limits based on the county's taxable value, as set forth in subsection (2) of § 7-7-2402. An
installment purchase contract may create indebtedness, but it is not borrowing under § 7-7-2402. 42 Gp. Att'y Gen. l3 (Mont.
1987).
35 395 P.2d 249, 251 (Mont. 1964) (citing State ex rel. Helena Water Works v. City of Helena, 63 P. 99 (Mont. 1900).
36 395 P.2d at 250.
37 /d. at 251 (quotdng State ex rel. Helena Water Works v. City of Helena, 63 P. 99 (Mont. 1900)). The court remanded the
case for a determination of whether the city was indebted beyond the constitutional debt limit at the time the resolution
authorizing the transaction was passed. 395 P.2d at 251.
3e Mont. Cade Ann. § 17-5-1020) (1999). "'Bonds' include bonds, notes, warrants, debentures, certificates of indebtedness...
and all instruments ar obligations evidencing or representing indebtedness ...." !d. § 17-5-101(1). "'Political subdivision'
includes a county, city, town [or] school district ...." !d. § 17-5-101(3)(a).
3e !d, § 17-5-102(2).
40 Id. § 30-9-104(5).
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