2014 -- H 8288

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LC005869

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO TOWNS AND CITIES

     

     Introduced By: Representatives Morin, Phillips, Casey, Shekarchi, and Kennedy

     Date Introduced: June 05, 2014

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 45-5-20.1 of the General Laws in Chapter 45-5 entitled "Councils

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and Governing Bodies" is hereby amended to read as follows:

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     45-5-20.1. Power of city and town councils and regional school districts to jointly

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establish an insurance corporation, to obtain insurance, and to enter into a cooperative risk

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management program. -- (a) Cities and town councils, school committees, water and fire

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districts may, through passage of a resolution, establish agreements between two (2) or more

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cities, town councils, school committees, and water and fire districts for obtaining for obtaining

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or effecting insurance by self insurance, for obtaining or effecting insurance from any insurer

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authorized to transact insurance in the state, or for obtaining and effecting insurance secured in

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accordance with any other method provided by law, or by combination and of the provisions of

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this section for obtaining and effecting insurance. Agreements made pursuant to this section may

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provide for pooling of self insurance reserves, risks, claims and losses, and of administrative

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expenses associated with the same, among local government units.

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      (b) For purposes of this section the term "Eligible Entities" shall mean any city, town,

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school committee, water or fire district, or other public or quasi-municipal authority, agency or

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entity, or organization that is an instrumentality of such cities or towns, or any group of such

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cities or towns, authorities, agencies or entities which is a member of the corporations created

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pursuant to the provisions of this section.

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      (c) To accomplish the purposes of this section any two (2) or more cities, towns, school

 

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committees, or water and fire districts, may authorize the creation of separate corporations (the

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"corporation") for the purpose of: (1) issuing to the eligible entities policies of insurance and

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reinsurance of all types and categories, including, without being limited to, the following types

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and categories: property, casualty, and life, accident, and health insurance, and (2) developing and

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administering an interlocal risk management program. The corporations, in addition, may have as

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their purposes reducing the risk of its members; safety engineering; distributing, sharing, and

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pooling risks; acquiring excess loss insurance; and processing and defending claims against the

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members of the corporations. Any contributions made to the corporations for the purpose of

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distributing, sharing, or pooling risks shall be made on actuarially sound basis, and the

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corporations shall have an audit performed annually, copies of which shall be provided to the

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members of the corporations, and the auditor general; discrete accounts shall be kept for each risk

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management program developed and administered by the corporations.

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      (d) The corporations shall not be considered an insurance company and shall not be

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subject to the provisions of the laws of the state of Rhode Island regulating insurance companies

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and therefore shall in no way be regulated by the Rhode Island department of business regulation.

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      (e) The corporations created pursuant to the provisions of this section will be created by

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filing articles of incorporation pursuant to chapter 6 of title 7 entitled Rhode Island Nonprofit

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Corporation Act and the articles of incorporation will be filed by an incorporator/incorporators

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designated by the city, town councils, school committees, or water or fire districts, authorizing the

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creation of the corporation. The articles of incorporation creating the corporations pursuant to the

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provisions of this section may contain provisions, not inconsistent with this section, that the

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incorporators determine to be desirable or useful in fulfilling the purposes set forth in this section.

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The corporations created pursuant to the provisions of this section will have the powers of a

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nonprofit corporation created under chapter 6 of title 7 entitled Rhode Island Nonprofit

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Corporation Act including, without being limited to, the power to issue bonds, notes, and other

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obligations in any amounts and upon any terms that the corporation's governing board

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determines.

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      (f) The corporations created pursuant to the provisions of this section, notwithstanding

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the filing of its articles of incorporation pursuant to chapter 6 of title 7 entitled Rhode Island

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Nonprofit Corporation Act, (1) will be deemed to be public corporations, instrumentality, and

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agency of the state of Rhode Island acting for the benefit of the municipalities which are members

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of the corporations and its eligible entities but will not constitute a department of the government

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of the state of Rhode Island, and (2) will be deemed to be exercising public and essential

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governmental functions of the state of Rhode Island. No part of the net earnings of the

 

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corporations created pursuant to the provisions of this section will be distributable to, or inure to

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the benefit of, any private person. The members of the governing board of the corporations

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created pursuant to the provisions of this section will consist solely of chief executives, chief

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elected officials, finance directors, or treasurers of municipalities, or any other municipal officials

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that may be provided for in the bylaws of the corporations, and the members shall receive no

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compensation for the performance of their duties but each member may be reimbursed for his or

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her reasonable expenses incurred in carrying out their duties.

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      (g) The bonds, notes, or other obligations issued by the corporations created pursuant to

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the provisions of this section will not be deemed to constitute a debt or liability or obligation of

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the state of Rhode Island or of any political subdivision of the state or of any municipality which

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is a member of the corporation but will be payable solely from the revenues or assets of the

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corporations.

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      (h) Notwithstanding any provision of this chapter or special or general law to the

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contrary, each eligible entity which is a member of the corporations created pursuant to the

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provisions of this section will be authorized to enter into contracts with the corporations with

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respect to, among other matters, the payment of premiums and other payments, for terms not

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exceeding twenty-five (25) years in duration. To the extent that the obligation to pay premiums or

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make other payments under any contract is deemed to constitute the incurring of indebtedness by

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an eligible entity the contract may nevertheless be entered into without obtaining the approval of

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the electors of the city or town notwithstanding the provisions of sections 45-12-19 and 45-12-20

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and notwithstanding any provisions of the city's or town's charter or any special or general law to

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the contrary. Any contract may be entered into by an eligible entity either prior to or subsequent

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to the making of any appropriations which may be needed to carry out the obligations of the

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eligible entity under the contract.

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      (i) The property and assets of the corporations created pursuant to the provisions of this

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section, the income of the corporations, and any bonds, notes, or other obligations issued by the

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corporation, their transfer, and the income from these (including any profits made on the sale

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thereof) will at all times be free from taxation by the state of Rhode Island or any political

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subdivision or other instrumentality of the state of Rhode Island, excepting inheritance, estate,

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and gift taxes with respect to the bonds, notes, or other obligations issued by the corporations.

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      (j) Whenever the governing board of the corporations created pursuant to the provisions

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of this section determines that the purposes for which the corporations were created have been

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substantially fulfilled and all bonds, notes, or other obligations of the corporations have been fully

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paid or adequate provision has been made for their payment, the corporations may be dissolved in

 

LC005869 - Page 3 of 5

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the manner provided for nonprofit corporations pursuant to chapter 6 of title 7 entitled Rhode

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Island Nonprofit Corporation Act and, upon the corporations' dissolution, title to all funds and

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assets of the corporation shall vest in and become the property of the members of the corporation

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in proportions that are provided for in the corporation's articles of incorporation.

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      (k) No corporations created pursuant to the provisions of this section shall be required to

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pay any recording or filing fee or any transfer tax of any kind on account of papers or instruments

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recorded or filed by it or on its behalf.

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      (l) No corporations created pursuant to the provisions of this section and no agent or

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broker acting on behalf of the corporations shall be required to pay a surplus line premium tax of

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any kind on premiums for any policies of insurance and reinsurance to or from the corporations.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TOWNS AND CITIES

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     This act would provide that certain corporations be regulated by the Rhode Island

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department of business regulations, removing such jurisdiction from the provisions of the general

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laws regulating insurance companies.

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     This act would take effect upon passage.

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