HB 49: Ohio Water Improvement District Creation

Executive Summary:

Ohio House Bill 49 proposes the enactment of new sections within the Revised Code to allow for the creation of “water improvement districts” by county commissioners. These districts would be bodies corporate and politic with the authority to facilitate, coordinate, fund, finance, construct, reconstruct, or repair water projects (wastewater and water management facilities). The bill outlines the governance structure, powers, and financing mechanisms for these districts, including the ability to issue bonds and levy special assessments. A key component of the bill is the establishment of a Water Improvement District Appeals Board with exclusive original jurisdiction over actions related to wastewater and water management facilities within the county.

Main Themes and Important Ideas/Facts:

1. Purpose and Creation of Water Improvement Districts:

• Facilitation of Water Projects: The primary purpose of these districts is to streamline the development and improvement of water infrastructure. They are intended to facilitate, coordinate, fund, finance, construct, reconstruct, or repair “water projects” which encompass both wastewater and water management facilities.
• “A water improvement district may be created by the board of county commissioners of a county by resolution for the purpose of facilitating, coordinating, funding, financing, constructing, reconstructing, or repairing water projects or engaging in any combination of those activities.” (Sec. 6120.02(A))
• Intergovernmental Agreements: A crucial aspect of project implementation is the requirement for an intergovernmental agreement between the district’s board of trustees and one or more governmental agencies that will operate and maintain the completed project. All parties must agree to the terms before the district board approves the project.
• “In furtherance of such purposes, the board of trustees of the district shall enter into an intergovernmental agreement with one or more governmental agencies that specifies that such governmental agency or agencies shall operate and maintain the project under such terms as specified in the agreement. All parties shall agree to such terms before the water improvement district’s board of trustees approve a project.” (Sec. 6120.02(A))
• Body Corporate and Politic: The bill establishes water improvement districts as independent legal entities with governmental functions.
• “A water improvement district is a body both corporate and politic, and the exercise by it of the powers conferred by this chapter in facilitating, coordinating, funding, financing, constructing, reconstructing, or repairing a water project are essential governmental functions.” (Sec. 6120.02(B))

2. Governance Structure (Board of Trustees):

• Membership: The board will consist of five voting members and one nonvoting member, with potential for up to six additional nonvoting members.
• Voting members include the county sanitary engineer (or county engineer if no sanitary engineer), four members with relevant experience appointed by the county commissioners.
• The nonvoting member is appointed by the regional planning commission.
• Additional nonvoting members can be appointed by the county commissioners to represent governmental entities within the district.
• “Subject to division (C)(2) of this section, a water improvement district shall be governed by a board of trustees consisting of five voting members and one nonvoting member…” (Sec. 6120.02(C)(1))
• Terms and Compensation: Appointed members serve two-year terms and can be reappointed. They receive no compensation but are reimbursed for expenses.
• “Each appointed member of the board shall hold office for a term of two years, subject to removal by the appointing authority only for malfeasance. Members may be reappointed. … Each member of the board shall serve without compensation but shall be reimbursed for all actual and necessary expenses incurred in the performance of official duties.” (Sec. 6120.02(D), (C)(3))
• Officers and Quorum: The voting members elect a chairperson, vice-chairperson, and secretary-treasurer. A majority of voting members constitutes a quorum.
• “The voting members of the board shall elect from the entire board membership a chairperson, vice-chairperson, and secretary-treasurer. A majority of the voting members of the board constitutes a quorum, the affirmative vote of which is necessary for any action of the district.” (Sec. 6120.02(E))

3. Powers of the Water Improvement District:

• The bill grants a wide range of powers to the district, including:
• Adopting bylaws and an official seal. (Sec. 6120.03(A)(1)-(2))
• Suing and being sued. (Sec. 6120.03(A)(3))
• Facilitating, coordinating, funding, financing, constructing, reconstructing, or repairing projects. (Sec. 6120.03(A)(4))
• Issuing revenue bonds and potentially general obligation bonds under the Ohio Constitution. (Sec. 6120.03(A)(5))
• “(5) Issue either or both of the following for the purpose of providing funds to pay the costs of any project or part thereof: (a) Water improvement district revenue bonds; (b) Bonds pursuant to Section 13 of Article VIII, Ohio Constitution.”
• Maintaining necessary funds. (Sec. 6120.03(A)(6))
• Conducting surveys and examinations with written notice. (Sec. 6120.03(A)(7))
• Entering into contracts and intergovernmental agreements. (Sec. 6120.03(A)(8))
• Employing necessary personnel and consultants. (Sec. 6120.03(A)(9))
• Receiving and accepting loans, grants, and contributions. (Sec. 6120.03(A)(10))
• Acquiring, holding, and disposing of property. (Sec. 6120.03(A)(11))
• Entering into agreements with contiguous county commissioners to extend their powers. (Sec. 6120.03(A)(12)-(14))
• Exemption from Certain Laws: Contracts and projects of the district are exempt from Chapters 123 and 124 of the Revised Code (related to public works and civil service).
• “(B) Chapters 123. and 124. of the Revised Code do not apply to contracts or projects of a water improvement district.” (Sec. 6120.03(B))

4. Financing Mechanisms:

• Revenue Bonds: The district is authorized to issue revenue bonds, with bond service charges payable solely from pledged revenues. The bill details various aspects of bond issuance, including interest rates, maturity, form, sale, and security.
• “The bond service charges shall be payable solely from pledged revenues pledged for such payment pursuant to the applicable bond proceedings.” (Sec. 6120.06(A))
• Special Assessments: The board can levy special assessments on properties benefiting from public improvements (construction, reconstruction, or repair of wastewater or water management facilities).
• “(B) The board of trustees of a water improvement district may provide for a public improvement and levy special assessments, if the board determines that the public improvement will benefit the area where it will be constructed, reconstructed, or repaired.” (Sec. 6120.031(B))
• The process for conducting hearings, determining benefited areas, and calculating assessments is outlined. Assessments are capped at ten percent of the assessable value.
• Appropriations and Fees: County commissioners, municipal corporations, and township trustees can make appropriations to the district. The district board can also establish fees for its services. (Sec. 6120.02(F))

5. Consistency with Water Management Plans and Environmental Standards:

• Water projects must be consistent with applicable comprehensive water management plans approved by the Director of Natural Resources and not inconsistent with the water quality standards set by the Environmental Protection Agency.
• “Any water project shall be determined by the board of trustees of the water improvement district to be consistent with any applicable comprehensive plan of water management approved by the director of natural resources or in the process of preparation by the director and to be not inconsistent with the standards set for the waters of the state affected thereby by the environmental protection agency.” (Sec. 6120.032)

6. Prevailing Wage:

• Generally, water projects undertaken by or under contract for a water improvement district are not considered “public improvements” for the purposes of prevailing wage laws (Sections 4115.03 to 4115.21 of the Revised Code).
• However, the district has the option to elect to apply these prevailing wage laws to their projects.
• “(A) Except as provided in division (B) of this section, notwithstanding any contrary provision in sections 4115.03 to 4115.21 and 4115.99 of the Revised Code, a water project undertaken by, or under contract for, a water improvement district is not a public improvement for purposes of section 4115.03 of the Revised Code.” (Sec. 6120.033(A))
• “(B) A water improvement district may elect to apply sections 4115.03 to 4115.21 and 4115.99 of the Revised Code to a water project undertaken by, or under contract for, the district.” (Sec. 6120.033(B))

7. Acquisition and Disposition of Property:

• The district can acquire necessary property through purchase, lease, lease-purchase, appropriation (eminent domain), or other means. Appropriation procedures follow Sections 163.01 to 163.22 of the Revised Code.
• “A water improvement district may acquire by purchase, lease, lease-purchase, lease with option to purchase, appropriation, or otherwise and in such manner and for such consideration as it considers proper, any public or private property necessary, convenient, or proper for the construction, reconstruction, or repair of a project.” (Sec. 6120.04(A))
• The district can acquire excess property and dispose of it, with specific rules for the sale of real property (generally at public auction and not less than two-thirds of appraised value). (Sec. 6120.05)

8. Water Improvement District Appeals Board:

• Creation and Jurisdiction: A Water Improvement District Appeals Board is to be created by the county commissioners within 30 days of the appointment of the district board. This appeals board has exclusive original jurisdiction over any action regarding wastewater or water management facilities within the county, including water projects undertaken by the district.
• “Not later than thirty days after the appointment of a water improvement district board under section 6120.02 of the Revised Code, a water improvement district appeals board shall be created by the board of county commissioners. The appeals board has exclusive original jurisdiction over any action regarding a waste water facility or water management facility located in the county in which the appeals board is located…” (Sec. 6120.16(A))
• Membership: The appeals board has eleven voting members and one nonvoting member, representing various stakeholders including the district’s board of trustees, municipal corporations, townships, regional water and sewer districts (or experts), the county engineer, and the regional planning commission. (Sec. 6120.16(B))
• Regulations and Procedures: The appeals board is required to adopt regulations governing its procedures for appeals, including timelines for filing, hearing procedures, and stay provisions (actions under appeal are stayed until a final decision). These regulations are filed with the Secretary of State but are not subject to Chapter 119 of the Revised Code (Administrative Procedure Act). (Sec. 6120.17)
• Appeals Process: Any person with an interest in an action can appeal to the appeals board within fifteen days of the action or the creation of the board. The appeals board must issue a final decision with reasons. (Sec. 6120.18)
• Further Appeal: Parties adversely affected by a final decision of the appeals board can appeal to the court of appeals in the county where the district is located. (Sec. 6120.19)

9. Bonds as Non-Debt of the State or Political Subdivisions:

• Bonds issued under this chapter do not constitute a debt or pledge of the faith and credit of the state or any political subdivision. This must be stated clearly on the face of the bonds. Expenses are payable solely from revenues generated under this chapter.
• “(A) The bonds do not constitute a debt, or a pledge of the faith and credit, of the state or of any political subdivision of the state. Bond service charges on outstanding bonds are payable solely from the pledged revenues pledged for their payment as authorized by this chapter and as provided in the bond proceedings. All bonds shall contain on their face a statement to that effect.” (Sec. 6120.09(A))

10. Trust Agreements for Bonds:

• The board may enter into trust agreements with corporate trustees to secure the bonds and manage funds. (Sec. 6120.10)

11. Pledge of Revenues:

• Bond proceedings can include the pledge of net revenues and special funds for the payment of bond service charges and credit enhancement facilities. These pledges are legally binding from the time they are made. (Sec. 6120.11)

12. Tax Exemption for Bonds:

• Bonds issued under this chapter, their transfer, and the income derived from them are exempt from taxation within the state. (Sec. 6120.14)

Conclusion:

House Bill 49 introduces a new framework for the creation and operation of water improvement districts in Ohio. These districts are designed to enhance the development and management of crucial water infrastructure through a dedicated governance structure, broad powers, and flexible financing options. The establishment of a specialized appeals board signifies an intent to provide a local mechanism for resolving disputes related to these water projects. The bill carefully delineates the financial obligations of the districts, ensuring they are self-funded through revenue generation and special assessments, without creating debt for the state or its political subdivisions. The potential exemption from prevailing wage requirements, unless elected by the district, could have significant implications for project costs. Overall, this legislation aims to provide counties with a new tool to address their water infrastructure needs.