Amends TCA Title 7, Chapter 82, Part 7.

This bill revises the Utility District Law to change the process by which the utility management review board may address financially distressed utility districts by merger or consolidation. This bill also creates a fund to be administered by the board to provide grants to utility districts that have merged or consolidated to mitigate the financial impact of the merger or consolidation. Under present law: (1) When a utility district is financially distressed or is financially unable to expand the amount or type of service or services described in its petition for creation, the utility management review board may consider the consolidation of the utility district with another utility district or districts, municipal utility system or county utility system to restore financial stability and to ensure continued operations for the benefit of the public being served by the utility district; (2) The utility management review board may initiate and participate in negotiations among the utility district, any other utility district, or municipal or county utility system with whom the utility district may consolidate and any other affected parties concerning a consolidation; (3) In the event the utility management review board determines that such a consolidation is in the best interest of the public being served by the utility district and the utility management review board is able to negotiate an agreement among all affected parties for the consolidation, the utility management review board must enter an order approving the consolidation agreement and require the utility district to enter into the consolidation agreement; (4) If the utility management review board determines that the utility district, any other utility district, or, municipal or county utility system with whom the utility district may consolidate, or any other affected party, has refused or failed to enter into good faith negotiations on a consolidation, then the utility management review board must petition the chancery court in a jurisdiction in which the utility district is operating to require the party or parties to engage in good faith negotiations concerning a consolidation; and (5) The commissioners of each utility district must cause an audited annual financial report to be made of the books and records of their district. The comptroller of the treasury is responsible for determining that such audits are prepared in accordance with generally accepted governmental auditing standards and meet the standards prescribed by the comptroller of the treasury. This bill revises the process by which the utility management review board may address financially distressed utility districts by merger or consolidation. Under this bill: (1) After reviewing the audited annual financial report and operations of the financially distressed utility district, the board may order the financially distressed utility district to obtain a study from a qualified expert on the feasibility and benefit of the financially distressed district merging or consolidating with another utility district. After the results of the study are submitted to the board or the board's staff, and if the results favor a merger or consolidation, then a representative of the board must hold a public hearing within the service area of the financially distressed district to notify the customers of the potential merger or consolidation; (2) After the public hearing, the board must conduct an informal hearing on the question of whether it is in the best interest of the public being served by the financially distressed utility district that the financially distressed utility district should be merged or consolidated with another utility district and whether the merger or consolidation harms the public being served by the utility district with which the financially distressed district may consolidate or merge. This bill specifies information the board must consider in making the determination; (3) If the utility management review board determines that it is in the best interest of the public being served by the financially distressed utility district that the financially distressed utility district merge or consolidate with another utility district, and that it is not harmful to the public being served by the utility district with which the financially distressed utility district should merge or consolidate, then the board must order the districts to develop a merger or consolidation agreement between the districts. This bill sets out in detail information that must be included in the agreement. This bill also sets out the process by which the board will review the proposed agreement, request amendments, and seek judicial intervention if the districts are not negotiating in good faith; (4) A merger or consolidation approved by the utility management review board under this bill will not be subject to the petition, public hearing, or mayoral order requirements of the Utility District Law, and the merger or consolidation will not be subject to approval by a county legislative body; (5) After the utility management review board has ordered the utility districts to enter into the merger or consolidation agreement, and after the utility districts have entered into the agreement, the utility management review board will issue an order consistent with the orders issued under present law by a mayor for merger or consolidation of non-financially distressed districts. After the board issues the order, a party to the agreement may secure judicial review of the decision by filing a petition for judicial review in the appropriate venue; and (6) The utility districts may agree to expand the size of the board of commissioners of the surviving district. This bill sets out in detail the requirements for such action; Under present law, the utility management review board is authorized to develop a plan of mitigation payments in order to mitigate any negative financial impact of the consolidation on a utility district or system agreeing to consolidate with a financially distressed utility district or system. Also, under present law, the utility management review board must contract with a resulting consolidated utility system to provide for the repayment of any mitigation payments over a period of time as may be agreed upon by the board and the consolidated utility system. Any repayments that may be received by the board must be deposited into and become part of the utility district revitalization fund. This provision is the only provision of present law that mentions such a fund. This bill removes the requirement for the utility management review board to contract with the consolidated utility system to provide for the repayment of any mitigation payments as referenced above and specifically provides for the creation of the utility district revitalization fund within the state treasury. This bill specifies that the utility management review board will administer the fund for grants to utility districts that have merged or consolidated to mitigate the financial impact of the merger or consolidation and sets out other requirements for the fund. This bill requires the utility management review board to annually report to the commissioner of finance and administration the status of the appropriations for the fund. The board must transmit a copy of each report to the house and senate speakers, the state treasurer, the comptroller, the office of legislative budget analysis, and the secretary of state. Under this bill, the utility management review board will determine the appropriate amount of each grant based on criteria set out in present law, as modified by this bill, which includes, among other items, amounts to offset increased administrative costs relating to the merger or consolidation, amounts necessary to cure a default on indebtedness, and other payments that may be necessary. Utility districts that are recipients of grants must submit quarterly reports on a form approved by the utility management review board.