2020 -- H 7304

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LC003969

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2020

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A N   A C T

RELATING TO TOWNS AND CITIES

     Introduced By: Representatives Morin, O'Brien, Vella-Wilkinson, Amore, and McEntee

     Date Introduced: January 24, 2020

     Referred To: House Corporations

     (by request)

It is enacted by the General Assembly as follows:

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

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

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

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

management program.

     (a) Cities and town councils, school committees, water and fire districts may, through

passage of a resolution, establish agreements between two (2) or more cities, town councils,

school committees, and water and fire districts for obtaining for obtaining or effecting insurance

by self insurance, for obtaining or effecting insurance from any insurer authorized to transact

insurance in the state, or for obtaining and effecting insurance secured in accordance with any

other method provided by law, or by combination and of the provisions of this section for

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

pooling of self insurance reserves, risks, claims and losses, and of administrative expenses

associated with the same, among local government units.

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

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

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

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

pursuant to the provisions of this section.

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

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

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

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

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

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

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

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

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

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

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

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

management program developed and administered by the corporations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

determines.

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

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

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

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

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

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

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

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

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

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

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

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

her reasonable expenses incurred in carrying out their duties.

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

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

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

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

corporations.

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

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

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

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

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

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

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

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

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

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

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

entity under the contract.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

recorded or filed by it or on its behalf.

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

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

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

     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

***

     This act would provide that municipal insurance corporations would be subject to the

provisions of the general laws regulating insurance companies, and would be regulated by the

Rhode Island department of business regulation.

     This act would take effect upon passage.

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