Florida Senate - 2005 COMMITTEE AMENDMENT
Bill No. SB 2184
Barcode 604100
CHAMBER ACTION
Senate House
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11 The Committee on Banking and Insurance (Baker) recommended the
12 following amendment:
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14 Senate Amendment (with title amendment)
15 On page 2, line 28, through
16 page 13, line 1, delete those lines
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18 and insert:
19 Section 1. Paragraph (f) is added to subsection (2) of
20 section 631.181, Florida Statutes, to read:
21 631.181 Filing and proof of claim.--
22 (2)
23 (f) The signed statement required by this section
24 shall not be required on claims for which adequate claims file
25 documentation exists within the records of the insolvent
26 insurer. Claims for payment of unearned premium shall not be
27 required to use the signed statement required by this section
28 if the receiver certifies to the guaranty fund that the
29 records of the insolvent insurer are sufficient to determine
30 the amount of unearned premium owed to each policyholder of
31 the insured and such information is remitted to the guaranty
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1 fund by the receiver in electronic or other mutually agreed
2 upon format.
3 Section 2. Section 631.1915, Florida Statutes, is
4 created to read:
5 631.1915 Policyholder collateral; deductible
6 reimbursements; other policyholder obligations.--
7 (1) Any collateral held by or for the benefit of, or
8 assigned to, the insurer or subsequently the receiver in order
9 to secure the obligations of a policyholder under a deductible
10 agreement shall not be considered an asset of the estate and
11 shall be maintained and administered by the receiver as
12 provided in this section, notwithstanding any other provision
13 of law or contract to the contrary.
14 (2) If the collateral is being held by or for the
15 benefit of, or assigned to, the insurer or subsequently the
16 receiver to secure obligations under a deductible agreement
17 with a policyholder subject to the provisions of this section,
18 the collateral shall be used to secure the policyholder's
19 obligation to fund or reimburse claims payments within the
20 agreed deductible amount.
21 (3) If a claim is subject to a deductible agreement
22 and secured by collateral and is not covered by any guaranty
23 association, the receiver shall adjust and pay the noncovered
24 claim using the collateral, but only to the extent of the
25 available collateral. A claim against the collateral by a
26 third-party claimant is not a claim against the insolvent
27 insurer's estate for purposes of s. 631.193. If the collateral
28 is exhausted and the insured is not able to provide funds to
29 pay the remaining claims within the deductible, the remaining
30 claims shall be claims against the insurer's estate subject to
31 complying with other provisions in this part for the filing
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1 and allowance of such claims.
2 (4) To the extent the receiver is holding collateral
3 provided by a policyholder that was obtained to secure a
4 deductible agreement and to secure other obligations of the
5 policyholder, the receiver shall equitably allocate the
6 collateral among such obligations and administer the
7 collateral allocated to the deductible agreement pursuant to
8 this section. The receiver shall inform the guaranty
9 associations of the method and details of all the foregoing
10 allocations.
11 (5) Regardless of whether there is collateral, if the
12 insurer has contractually agreed to allow the policyholder to
13 fund its own claims within the deductible amount pursuant to a
14 deductible agreement, through the policyholder's own
15 administration of its claims or through the policyholder
16 providing funds directly to a third-party administrator who
17 administers the claims, the receiver may allow such funding
18 arrangement to continue and, where applicable, shall enforce
19 such arrangements. The funding of such claims by the
20 policyholder within the deductible amount acts as a bar to any
21 claim for such amount in the liquidation proceeding,
22 including, but not limited to, any such claim by the
23 policyholder or the third-party claimant. The funding
24 extinguishes both the obligation, if any, of any guaranty
25 association to pay such claims within the deductible amount
26 and the obligations, if any, of the policyholder or
27 third-party administrator to reimburse the guaranty
28 association. No charge of any kind shall be made against any
29 guaranty association on the basis of the policyholder's
30 funding of claims payment made pursuant to the mechanism set
31 forth in this subsection.
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1 (6) If the insurer has not contractually agreed to
2 allow the policyholder to fund the policyholder's own claims
3 within the deductible amount, to the extent a guaranty
4 association is required by applicable state law to pay any
5 claims for which the insurer would have been entitled to
6 reimbursement from the policyholder under the terms of the
7 deductible agreement and to the extent the claims have not
8 been paid by a policyholder or third party, the guaranty
9 association shall bill the policyholder for such reimbursement
10 and the policyholder is obligated to pay such amount to the
11 guaranty association for the benefit of the guaranty
12 associations who paid such claims. Neither the insolvency of
13 the insurer nor its inability to perform any of its
14 obligations under the deductible agreement shall be a defense
15 to the policyholder's reimbursement obligation under the
16 deductible agreement. If the policyholder fails to pay the
17 amounts due within 60 days after the bill for such
18 reimbursements is due, the receiver shall use the collateral
19 to the extent necessary to reimburse the guaranty association
20 and, at the same time, the guaranty association may pursue
21 other collection efforts against the policyholder. If more
22 than one guaranty association has a claim against the same
23 collateral and the available collateral, after allocation
24 under subsection (4), together with billing and collection
25 efforts, are together insufficient to pay each guaranty
26 association in full, the receiver shall prorate payments to
27 each guaranty association based upon the relationship the
28 amount of claims each guaranty association has paid bears to
29 the total of all claims paid by such guaranty associations.
30 (7)(a) The guaranty association is entitled to deduct
31 from collateral to be returned to a policyholder reasonable
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1 actual expenses incurred in fulfilling the responsibilities
2 under this provision.
3 (b) With respect to claims payments made by any
4 guaranty association, the guaranty association shall provide
5 any other guaranty associations and the receiver with a
6 complete accounting of the guaranty association's deductible
7 billing and collection activities, including copies of the
8 policyholder billings when rendered and the reimbursements
9 collected. The cost of reports required pursuant to this
10 subsection shall be considered part of the expenses of the
11 guaranty association.
12 (c) The guaranty association may contract with the
13 receiver for the direct collection from the policyholders on
14 the same basis as the guaranty association and with the same
15 rights and remedies. If so assigned, the receiver shall report
16 any amounts so collected from each policyholder to the
17 guaranty association.
18 (d) To the extent that guaranty associations pay
19 claims within the deductible amount but are not reimbursed by
20 the receiver under this section or by policyholder payments
21 from the guaranty associations' own collection efforts, the
22 guaranty association shall have a claim on the insolvent
23 insurer's estate for such unreimbursed claims payments. The
24 priority of such claim shall depend upon the nature of the
25 payment that should have been reimbursed.
26 (e) Periodically, but not more than annually, the
27 receiver shall adjust the collateral being held pursuant to
28 the deductible agreement. The receiver shall maintain adequate
29 collateral to secure 110 percent of the entire estimated
30 obligation of the policyholder. The receiver shall provide a
31 copy of its collateral review to any obligated guaranty
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1 association. Once all claims covered by the collateral have
2 been paid and the receiver is satisfied that no new claims can
3 be presented, the receiver may release any remaining
4 collateral.
5 (8) The state court that has jurisdiction over the
6 liquidation proceedings shall have jurisdiction to resolve
7 disputes arising under this section.
8 (9) Nothing in this section limits or adversely
9 affects any right the guaranty associations may have under
10 applicable state law to obtain reimbursement from certain
11 classes of policyholders for claims payments made by such
12 guaranty associations under policies of the insolvent insurer
13 or for related expenses the guaranty associations incur.
14 (10) This section applies to all liquidations for
15 which an order is entered after July 1, 2005.
16 (11) For purposes of this section, the term:
17 (a) "Deductible agreement" means any combination of
18 one or more policies, endorsements, contracts, or security
19 agreements that provide for the policyholder to bear the risk
20 of loss within a specified amount per claim or occurrence
21 covered under a policy of insurance, and that may be subject
22 to aggregate limit of policyholder reimbursement obligations.
23 (b) "Noncovered claim" means a claim that is subject
24 to a deductible agreement, may be secured by collateral, and
25 is not covered by a guaranty association.
26 (12) This section does not apply to first-party
27 claims.
28 Section 3. Subsection (3) of section 631.54, Florida
29 Statutes, is amended to read:
30 631.54 Definitions.--As used in this part:
31 (3) "Covered claim" means an unpaid claim, including
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1 one of unearned premiums, which arises out of, and is within
2 the coverage, and not in excess of, the applicable limits of
3 an insurance policy to which this part applies, issued by an
4 insurer, if such insurer becomes an insolvent insurer and the
5 claimant or insured is a resident of this state at the time of
6 the insured event or the property from which the claim arises
7 is permanently located in this state. For entities other than
8 an individual, the residence of a claimant, insured, or
9 policyholder is the state in which the entity's principal
10 place of business is located at the time of the insured event.
11 "Covered claim" shall not include:
12 (a) Any amount due any reinsurer, insurer, insurance
13 pool, or underwriting association, sought directly or
14 indirectly through a third party, as subrogation,
15 contribution, indemnification, or otherwise; or
16 (b) Any claim that would otherwise be a covered claim
17 under this part that has been rejected by any other state
18 guaranty fund on the grounds that an insured's net worth is
19 greater than that allowed under that state's guaranty law.
20 Member insurers shall have no right of subrogation,
21 contribution, indemnification, or otherwise, sought directly
22 or indirectly through a third party, against the insured of
23 any insolvent member.
24 Section 4. Paragraph (a) of subsection (1), paragraph
25 (d) of subsection (2), and paragraph (a) of subsection (3) of
26 section 631.57, Florida Statutes, are amended to read:
27 631.57 Powers and duties of the association.--
28 (1) The association shall:
29 (a)1. Be obligated to the extent of the covered claims
30 existing:
31 a. Prior to adjudication of insolvency and arising
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1 within 30 days after the determination of insolvency;
2 b. Before the policy expiration date if less than 30
3 days after the determination; or
4 c. Before the insured replaces the policy or causes
5 its cancellation, if she or he does so within 30 days of the
6 determination.
7 2.a. The obligation under subparagraph 1. shall
8 include only that amount of each covered claim which is in
9 excess of $100 and is less than $300,000, except with respect
10 to policies covering condominium associations or homeowners'
11 associations, which associations have a responsibility to
12 provide insurance coverage on residential units within the
13 association, the obligation shall include that amount of each
14 covered property insurance claim which is less than $100,000
15 multiplied by the number of condominium units or other
16 residential units; however, as to homeowners' associations,
17 this sub-subparagraph subparagraph applies only to claims for
18 damage or loss to residential units and structures attached to
19 residential units.
20 b. Notwithstanding sub-subparagraph a., the
21 association has no obligation to pay covered claims that are
22 to be paid from the proceeds of bonds issued under s. 631.695.
23 However, the association shall assign and pledge the first
24 available moneys from all or part of the assessments
25 authorized in paragraph (3)(a) to or on behalf of the issuer
26 of such bonds for the benefit of the holders of such bonds.
27 The association shall administer any such covered claims and
28 present valid covered claims for payment in accordance with
29 the provisions of the assistance program in connection with
30 which such bonds have been issued.
31 3. In no event shall the association be obligated to a
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1 policyholder or claimant in an amount in excess of the
2 obligation of the insolvent insurer under the policy from
3 which the claim arises.
4 (2) The association may:
5 (d) Negotiate and become a party to such contracts as
6 are necessary to carry out the purpose of this part.
7 Additionally, the association may enter into such contracts
8 with a municipality or county or such legal entity created
9 pursuant to s. 163.01(7)(g) as are necessary in order for the
10 municipality or county or such legal entity to issue bonds
11 under s. 631.695. In connection with the issuance of any such
12 bonds and the entering into of any such necessary contracts,
13 the association may agree to such terms and conditions as the
14 association deems necessary and proper.
15 (3)(a) To the extent necessary to secure the funds for
16 the respective accounts for the payment of covered claims, and
17 also to pay the reasonable costs to administer the same, and
18 to the extent necessary to retire indebtedness, including,
19 without limitation, the principal, redemption premium, if any,
20 and interest on, and related costs of issuance of, bonds
21 issued under s. 631.695 and the funding of any reserves and
22 other payments required under the bond resolution or trust
23 indenture pursuant to which such bonds have been issued, the
24 office, upon certification of the board of directors, shall
25 levy assessments in the proportion that each insurer's net
26 direct written premiums in this state in the classes protected
27 by the account bears to the total of said net direct written
28 premiums received in this state by all such insurers for the
29 preceding calendar year for the kinds of insurance included
30 within such account. Assessments shall be remitted to and
31 administered by the board of directors in the manner specified
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1 by the approved plan. Each insurer so assessed shall have at
2 least 30 days' written notice as to the date the assessment is
3 due and payable. Every assessment shall be made as a uniform
4 percentage applicable to the net direct written premiums of
5 each insurer in the kinds of insurance included within the
6 account in which the assessment is made. The assessments
7 levied against any insurer shall not exceed in any one year
8 more than 2 percent of that insurer's net direct written
9 premiums in this state for the kinds of insurance included
10 within such account during the calendar year next preceding
11 the date of such assessments.
12 Section 5. Section 631.695, Florida Statutes, is
13 created to read:
14 631.695 Revenue bond issuance through counties or
15 municipalities.--
16 (1) The Legislature finds:
17 (a) The potential for widespread and massive damage to
18 persons and property caused by hurricanes making landfall in
19 this state can generate insurance claims of such a number as
20 to render numerous insurers operating within this state
21 insolvent and therefore unable to satisfy covered claims.
22 (b) The inability of insureds within this state to
23 receive payment of covered claims or to receive such payment
24 timely creates financial and other hardships for such insureds
25 and places undue burdens on the state, the affected units of
26 local government, and the community at large.
27 (c) In addition, the failure of insurers to pay
28 covered claims or to pay such claims timely due to the
29 insolvency of such insurers can undermine the public's
30 confidence in insurers operating within this state, thereby
31 adversely affecting the stability of the insurance industry in
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1 this state.
2 (d) The state has previously taken action to address
3 these problems by adopting the Florida Insurance Guaranty
4 Association Act, which, among other things, provides a
5 mechanism for the payment of covered claims under certain
6 insurance policies to avoid excessive delay in payment and to
7 avoid financial loss to claimants or policyholders because of
8 the insolvency of an insurer.
9 (e) In the wake of the unprecedented destruction
10 caused by various hurricanes that have made landfall in this
11 state, the resultant covered claims, and the number of
12 insurers rendered insolvent thereby, it is evident that
13 alternative programs must be developed to allow the Florida
14 Insurance Guaranty Association, Inc., to more expeditiously
15 and effectively provide for the payment of covered claims.
16 (f) It is therefore determined to be in the best
17 interests of, and necessary for, the protection of the public
18 health, safety, and general welfare of the residents of this
19 state, and for the protection and preservation of the economic
20 stability of insurers operating in this state, and it is
21 declared to be an essential public purpose, to permit certain
22 municipalities and counties to take such actions as will
23 provide relief to claimants and policyholders having covered
24 claims against insolvent insurers operating in this state by
25 expediting the handling and payment of covered claims.
26 (g) To achieve the foregoing purposes, it is proper to
27 authorize municipalities and counties of this state
28 substantially affected by the landfall of a category 1 or
29 greater hurricane to issue bonds to assist the Florida
30 Insurance Guaranty Association, Inc., in expediting the
31 handling and payment of covered claims of insolvent insurers.
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1 (h) In order to avoid the needless and indiscriminate
2 proliferation, duplication, and fragmentation of such
3 assistance programs, it is in the best interests of the
4 residents of this state to authorize municipalities and
5 counties severely affected by a category 1 or greater
6 hurricane to provide for the payment of covered claims beyond
7 their territorial limits in the implementation of such
8 programs.
9 (i) It is a paramount public purpose for
10 municipalities and counties substantially affected by the
11 landfall of a category 1 or greater hurricane to be able to
12 issue bonds for the purposes described in this section. Such
13 issuance shall provide assistance to residents of those
14 municipalities and counties, as well as to other residents of
15 this state.
16 (2) The governing body of any municipality or county
17 the residents of which have been substantially affected by a
18 category 1 or greater hurricane may issue bonds to fund an
19 assistance program in conjunction with, and with the consent
20 of, the Florida Insurance Guaranty Association, Inc., for the
21 purpose of paying claimants' or policyholders' covered claims
22 as defined in s. 631.54 arising through the insolvency of an
23 insurer, which insolvency is determined by the Florida
24 Insurance Guaranty Association, Inc., to have been a result of
25 a category 1 or greater hurricane, regardless of whether such
26 claimants or policyholders are residents of such municipality
27 or county or the property to which such claim relates is
28 located within or outside the territorial jurisdiction of such
29 municipality or county. The power of a municipality or county
30 to issue bonds as described in this section is in addition to
31 any powers granted by law and may not be abrogated or
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1 restricted by any provisions in such municipality's or
2 county's charter. A municipality or county issuing bonds for
3 this purpose shall enter into such contracts with the Florida
4 Insurance Guaranty Association, Inc., or any entity acting on
5 behalf of the Florida Insurance Guaranty Association, Inc., as
6 are necessary to implement the assistance program. Any bonds
7 issued by a municipality or county or combination thereof
8 under this subsection shall be payable from and secured by
9 moneys received by or on behalf of the municipality or county
10 from assessments levied under s. 631.57(3)(a) and assigned and
11 pledged to or on behalf of the municipality or county for the
12 benefit of the holders of such bonds in connection with such
13 assistance program. The funds, credit, property, and taxing
14 power of the state or any municipality or county shall not be
15 pledged for the payment of such bonds.
16 (3) The association shall issue an annual report on
17 the status of the use of bond proceeds as related to
18 insolvencies caused by hurricanes. The report must contain the
19 number and amount of claims paid. The association shall also
20 include an analysis of the revenue generated from the
21 assessment levied under s. 631.57(3)(a) to pay such bonds. The
22 association shall submit a copy of the report to the President
23 of the Senate, the Speaker of the House of Representatives,
24 and the Chief Financial Officer within 90 days after the end
25 of each calendar year in which bonds were outstanding.
26 (4) Bonds may be validated by such municipality or
27 county pursuant to chapter 75. The proceeds of such bonds may
28 be used to pay covered claims of insolvent insurers; to
29 refinance or replace previously existing borrowings or
30 financial arrangements; to pay interest on bonds; to fund
31 reserves for the bonds; to pay expenses incident to the
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1 issuance or sale of any bond issued under this section,
2 including costs of validating, printing, and delivering the
3 bonds, costs of printing the official statement, costs of
4 publishing notices of sale of the bonds, costs of obtaining
5 credit enhancement or liquidity support, and related
6 administrative expenses; or for such other purposes related to
7 the financial obligations of the fund as the association may
8 determine. The term of the bonds may not exceed 30 years.
9 (5) The state covenants with holders of bonds of the
10 assistance program that the state will not take any action
11 which will have a material adverse affect on such holders and
12 will not repeal or abrogate the power of the board of
13 directors of the association to direct the Office of Insurance
14 Regulation to levy the assessments and to collect the proceeds
15 of the revenues pledged to the payment of such bonds as long
16 as any such bonds remain outstanding unless adequate provision
17 has been made for the payment of such bonds pursuant to the
18 documents authorizing the issuance of such bonds.
19 (6) The accomplishment of the authorized purposes of
20 such municipality or county under this section is in all
21 respects for the benefit of the people of the state, for the
22 increase of their commerce and prosperity, and for the
23 improvement of their health and living conditions. Such
24 municipality or county, in performing essential governmental
25 functions in accomplishing its purposes, is not required to
26 pay any taxes or assessments of any kind whatsoever upon any
27 property acquired or used by the county or municipality for
28 such purposes or upon any revenues at any time received by the
29 county or municipality. The bonds, notes, and other
30 obligations of such municipality or county, and the transfer
31 of and income from such bonds, notes, and other obligations,
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1 including any profits made on the sale of such bonds, notes,
2 and other obligations, are exempt from taxation of any kind by
3 the state or by any political subdivision or other agency or
4 instrumentality of the state. The exemption granted in this
5 subsection is not applicable to any tax imposed by chapter 220
6 on interest, income, or profits on debt obligations owned by
7 corporations.
8 (7) Two or more municipalities or counties the
9
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12 And the title is amended as follows:
13 On page 1, line 2, through
14 page 2, line 23, delete those lines
15
16 and insert:
17 An act relating to insurer insolvency; amending
18 s. 631.181, F.S.; providing an exception to
19 certain requirements for a signed statement for
20 certain claims against an insolvent insurer;
21 providing requirements; creating s. 631.1915,
22 F.S.; providing requirements for policyholder
23 collateral, deductible reimbursements, and
24 other policyholder obligations; specifying that
25 certain collateral held by an insurer or a
26 receiver to secure policyholder obligations
27 under a deductible agreement are not an estate
28 asset; requiring use of such collateral to
29 secure policyholder obligations under such
30 agreement; requiring a receiver to use such
31 collateral to pay noncovered claims under
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1 certain circumstances; providing for certain
2 claims to be claims against an insurer's estate
3 under certain circumstances; requiring a
4 receiver to allocate collateral among certain
5 obligations and administer such collateral;
6 authorizing a receiver to continue and enforce
7 certain alternative policyholder claim funding
8 contractual agreements; specifying certain
9 actions as a bar to certain claims and an
10 extinguishment of certain obligations;
11 requiring a guaranty association to bill a
12 policyholder for certain reimbursement amounts
13 for certain claims; specifying policyholder
14 obligation for certain amounts; prohibiting
15 certain defenses; requiring a receiver to use
16 certain collateral for certain purposes;
17 requiring a receiver to prorate certain funds
18 of an estate under certain circumstances;
19 authorizing a guaranty association to deduct
20 certain expenses; requiring a guaranty
21 association to provide a complete accounting of
22 certain billing and collection activities;
23 authorizing a guaranty association to contract
24 for certain collections; providing for claims
25 against an insolvent insurer's estate for
26 certain unreimbursed claims payments; requiring
27 a receiver to annually adjust collateral held
28 pursuant to a deductible agreement; specifying
29 jurisdiction of a state court to resolve
30 disputes; preserving rights of a guaranty
31 association to reimbursement for certain
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1 claims; providing application to certain orders
2 of liquidation; providing definitions;
3 providing for nonapplication to certain claims;
4 amending s. 631.54, F.S.; redefining the term
5 "covered claim"; amending s. 631.57, F.S.;
6 providing requirements and limitations for the
7 Florida Insurance Guaranty Association, Inc.,
8 relating to assessments for covered claims
9 payable from revenue bonds issued by counties
10 or municipalities; authorizing the association
11 to contract with counties and municipalities to
12 issue revenue bonds for certain purposes;
13 providing requirements for use of bond
14 proceeds; creating s. 631.695, F.S.; providing
15 legislative findings and purposes; providing
16 for issuance of revenue bonds through counties
17 and municipalities to fund assistance programs
18 for paying covered claims for hurricane damage;
19 providing procedures, requirements, and
20 limitations for counties, municipalities, and
21 the Florida Insurance Guaranty Association,
22 Inc., relating to issuance and validation of
23 such bonds; providing for payments on and
24 retirement of such bonds from certain
25 assessments; prohibiting pledging the funds,
26 credit, property, and taxing power of the
27 state, counties, and municipalities for payment
28 of bonds; specifying authorized uses of bond
29 proceeds; limiting the term of bonds;
30 specifying a state covenant to protect
31 bondholders from adverse actions relating to
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1 such bonds; specifying exemptions for bonds,
2 notes, and other obligations of counties and
3 municipalities from certain taxes or
4 assessments on property and revenues;
5 authorizing counties and municipalities to
6 create a legal entity to exercise certain
7 powers; prohibiting repeal of certain
8 provisions relating to certain bonds under
9 certain circumstances; providing severability;
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