North Carolina § 160A-20 - Security interests.

§ 160A-20. Security interests.

Purchase. - A unit of local government may purchase, or finance or refinance the purchase of, real or personal property by installment contracts that create in some or all of the property purchased a security interest to secure payment of the purchase price to the seller or to an individual or entity advancing moneys or supplying financing for the purchase transaction. Improvements. - A unit of local government may finance or refinance the construction or repair of fixtures or improvements on real property by contracts that create in some or all of the fixtures or improvements, or in all or some portion of the property on which the fixtures or improvements are located, or in both, a security interest to secure repayment of moneys advanced or made available for the construction or repair. Accounts. - A unit of local government may use escrow accounts in connection with the advance funding of transactions authorized by this section, whereby the proceeds of the advance funding are invested pending disbursement. A unit of local government may also use other accounts, such as debt service payment accounts and debt service reserve accounts, to facilitate transactions authorized by this section. To secure transactions authorized by this section, a unit of local government may also create security interests in these accounts. Nonsubstitution. - No contract entered into under this section may contain a nonsubstitution clause that restricts the right of a unit of local government to: Continue to provide a service or activity; or Replace or provide a substitute for any fixture, improvement, project, or property financed, refinanced, or purchased pursuant to the contract. Oversight. - A contract entered into under this section is subject to approval by the Local Government Commission under Article 8 of Chapter 159 of the General Statutes if it: 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 Is not exempted from the provisions of that Article by one of the exemptions contained in G.S. 159-148(b). Public Hospitals. - A nonprofit entity operating or leasing a public hospital may enter into a contract pursuant to this section only if the nonprofit entity will have an ownership interest in the property being financed or refinanced, including a leasehold interest. The security interest granted in the property shall be only to the extent of the nonprofit entity's property interest. In addition, any contract entered into by a nonprofit entity operating or leasing a public hospital pursuant to this section is subject to the approval of the city, county, hospital district, or hospital authority that owns the hospital. Approval of the city, county, hospital district, or hospital authority may be withheld only under one or more of the following circumstances: The contract would cause the city, county, hospital district, or hospital authority to breach or violate any covenant in an existing financing instrument entered into by the nonprofit entity. The contract would restrict the ability of the city, county, hospital district, or hospital authority to incur anticipated bank-eligible indebtedness under federal tax laws. The entering into of the contract would have a material, adverse impact on the credit ratings of the city, county, hospital district, or hospital authority or would otherwise materially interfere with an anticipated financing by the nonprofit entity. Limit of Security. - No deficiency judgment may be rendered against any unit of local government in any action for breach of a contractual obligation authorized by this section. The taxing power of a unit of local government is not and may not be pledged directly or indirectly to secure any moneys due under a contract authorized by this section. Public Hearing. - Before entering into a contract under this section involving real property, a unit of local government shall hold a public hearing on the contract. A notice of the public hearing shall be published once at least 10 days before the date fixed for the hearing. Local Government Defined. - As used in this section, the term "unit of local government" means any of the following: A county. A city. A water and sewer authority created under Article 1 of Chapter 162A of the General Statutes. A metropolitan sewerage district created under Article 5 of Chapter 162A of the General Statutes. A sanitary district created under Part 2 of Article 2 of Chapter 130A of the General Statutes. A county water and sewer district created under Article 6 of Chapter 162A of the General Statutes. A metropolitan water district created under Article 4 of Chapter 162A of the General Statutes. A metropolitan water and sewerage district created under Article 5A of Chapter 162A of the General Statutes. An airport authority whose situs is entirely within a county that has (i) a population of over 120,000 according to the most recent federal decennial census and (ii) an area of less than 200 square miles. An airport authority in a county in which there are two incorporated municipalities with a population of more than 65,000 according to the most recent federal decennial census. An airport board or commission authorized by agreement between two cities pursuant to G.S. 63-56, one of which is located partially but not wholly in the county in which the jointly owned airport is located, and where the board or commission provided water and wastewater services off the airport premises before January 1, 1995, except that the authority granted by this subdivision may be exercised by such a board or commission with respect to water and wastewater systems or improvements only. A local airport authority that was created pursuant to a local act of the General Assembly. A local school administrative unit whose board of education is authorized to levy a school tax. Any other local school administrative unit, but only for the purpose of financing energy conservation measures acquired pursuant to Part 2 of Article 3B of Chapter 143 of the General Statutes. A community college, but only for the purpose of financing energy conservation measures acquired pursuant to Part 2 of Article 3B of Chapter 143 of the General Statutes. An area mental health, developmental disabilities, and substance abuse authority, acting in accordance with G.S. 122C-147. A consolidated city-county, as defined by G.S. 160B-2(1). Repealed by Session Laws 2001-414, s. 52, effective September 14, 2001. A regional natural gas district, as defined by Article 28 of this Chapter. A regional public transportation authority or a regional transportation authority created pursuant to Article 26 or Article 27 of this Chapter. A nonprofit corporation or association operating or leasing a public hospital as defined in G.S. 159-39. A public health authority created under Part 1B of Article 2 of Chapter 130A of the General Statutes. A special district created under Article 43 of Chapter 105 of the General Statutes. A Ferry Transportation Authority created pursuant to Article 29 of this Chapter. History (1979, c. 743; 1987 (Reg. Sess., 1988), c. 981, s. 1; 1989, c. 708; 1991, c. 741, s. 1; 1993 (Reg. Sess., 1994), c. 592, s. 2; 1995, c. 461, s. 6; 1995 (Reg. Sess., 1996), c. 644, s. 2; 1997-380, s. 3; 1997-426, s. 7; 1997-426, s. 7.1; 1998-70, s. 1; 1998-117, s. 1; 1999-386, ss. 1, 2; 2001-414, s. 52; 2002-161, s. 10; 2003-259, s. 1; 2003-388, s. 3; 2007-226, s. 1; 2007-229, s. 3; 2009-527, s. 2(g); 2015-207, s. 5(a); 2017-120, s. 4.) Editor's Note. - Session Laws 1989, c. 708, which amended this section, in ss. 2 and 3, provides: "Sec. 2. (a) Any contract made or entered into, prior to the date of ratification of this act, by a city, a county, or a water and sewer authority created under Article 1 of Chapter 162A of the General Statutes which would have been valid under G.S. 160A-20, subsections (a), (b), (c), and (f), as rewritten by this act, is hereby validated, ratified, and confirmed. Furthermore, such a contract may not be held invalid because it contains a nonsubstitution clause, or because no public hearing was advertised and held on the contract, or both. "(b) Any contract made or entered into, prior to the date of ratification of this act, by a city, a county, or a water and sewer authority created under Article 1 of Chapter 162A of the General Statutes which would have been valid under subsection (a) of this Section 2 or under G.S. 160A-20 as it existed prior to the ratification of this act or as rewritten by this act, except that the Local Government Commission did not approve the contract, is hereby validated, ratified, and confirmed. "Sec. 3. Nothing in this act shall be interpreted to limit or restrict the authority of cities, counties, or water and sewer authorities created under Article 1 of Chapter 162A of the General Statutes to purchase, improve, or finance the purchase or improvement of real or personal property pursuant to any other applicable law, whether general, special, or local." Session Laws 1997-426, s. 7.1, provided that if Ratified Senate Bill 389, 1997 Regular Session, became law, then subdivision (h)(9) was recodified as subdivision (h)(10) of this section. Senate Bill 389 became S.L.1997-380, which became law on August 7, 1997. Session Laws 1997-426, s. 10(a)-(c), provides that, insofar as the provisions of that act are not consistent with the provisions of any other law, public or private, the provisions of that act shall be controlling; that references in that act to specific sections or Chapters of the General Statutes are intended to be references to such sections or Chapters as they may be amended from time to time by the General Assembly; and that that act, being necessary for the health and welfare of the people of the State, shall be liberally construed to effect the purposes thereof. Session Laws 1997-426, s. 10(d), is a severability clause. Session Laws 1999-377, s. 4, effective August 4, 1999, provides that any hospital continuing to operate under Article 2 of Chapter 131 of the General Statutes pursuant to Section 3 of Chapter 775 of the 1983 Session Laws shall be considered to be a "public hospital" within the meaning of G.S. 159-39 and to be a "unit of local government" within the meaning of G.S. 160A-20. Session Laws 2002-161, s. 12, provides that nothing in the act limits the use of any method of contracting authorized by local law or other applicable laws. Session Laws 2003-388, provides in its preamble: "Whereas, the State Treasurer's Office formed a Public Finance Advisory Committee comprised of representative city and county governments, as well as the public finance bar and financial services sectors, to review and propose changes to the General Statutes dealing with public finance in an effort to strengthen, modernize, and provide for the most efficient method of issuing of public debt by local governments and other political subdivisions of the State; and "Whereas, the Public Finance Advisory Committee has developed, and the State Treasurer's Office has reviewed, a set of recommendations to the General Assembly for specific changes to relevant General Statutes around which there is consensus that the proposed changes are beneficial to local governments in their issuance of public debt; and "Whereas, the Local Government Commission remains the statutorily designated entity to which all proposed issuances must be submitted for approval, and these recommendations in no way lower or lessen the level of due diligence performed in determining the appropriateness of a specific issuance; and "Whereas, for these reasons, this legislation is submitted for consideration by the General Assembly on behalf of the State Treasurer, the staff of the Local Government Commission, and the Public Finance Advisory Committee; Now, therefore," Effect of Amendments. - Session Laws 2007-226, s. 1, effective July 18, 2007, added subdivision (h)(3c). Session Laws 2007-229, s. 3, effective July 18, 2007, added subdivision (h)(13). Session Laws 2009-527, s. 2(g), effective August 27, 2009, added subdivision (h)(14). Session Laws 2015-207, s. 5(a), effective August 11, 2015, added subdivisions (h)(3d) and (h)(3e). Session Laws 2017-120, s. 4, effective July 18, 2017, added subdivision (h)(15). Legal Periodicals. - For note, "Constitutional Expansion of Local Government Financing Alternatives: Wayne County Citizens Association v. Wayne County Board of Commissioners," see 70 N.C.L. Rev. 1947 (1992).