CHAPTER 137a

MUNICIPAL HOUSING FINANCE ASSISTANCE ACT

Table of Contents

Sec. 8-300. Short title.

Sec. 8-301. Declaration of policy.

Sec. 8-302. Definitions.

Sec. 8-303. Municipal powers for purposes of this chapter.

Sec. 8-304. Adoption of a housing finance assistance plan. Provisions.

Sec. 8-305. Municipal powers under housing finance assistance plan.

Sec. 8-306. Municipal power to issue bonds and notes for purposes of a housing finance assistance plan.

Sec. 8-307. Capital reserve fund to secure bonds and notes issued under this chapter.

Sec. 8-308. Bonds to be special obligations payable only from certain pledged revenue.

Sec. 8-309. Separate accounts to be established for purposes of this chapter.

Sec. 8-310. Appointment of trustee to represent holders of bonds or notes in event of default.

Sec. 8-311. Bonds and notes issued under this chapter are securities for investment purposes.

Sec. 8-312. Bonds and notes under this chapter free from state or municipal taxes except estate and gift taxes.

Sec. 8-313. State pledge not to prevent municipalities from fulfilling agreements with holders of bonds and notes.

Sec. 8-314. Authorization of bonds and notes.

Sec. 8-315. Discrimination prohibited in housing financed under this chapter.

Secs. 8-316 to 8-335. Reserved


Sec. 8-300. Short title. This chapter may be known and cited as the “Municipal Housing Finance Assistance Act”.

(P.A. 79-596, S. 1, 17.)

Sec. 8-301. Declaration of policy. (a) It is hereby found that as a result of the continuing increases in construction and rehabilitation costs, municipal taxes, heating and electricity expenses, maintenance and repair expenses and the cost of land, low and moderate income families and persons in many municipalities within the state, including municipalities which contained formerly stable neighborhoods, are unable to purchase, rehabilitate and maintain decent, safe and sanitary housing which provides an opportunity for home ownership either directly or through a condominium or cooperative form of ownership. The inability of such families and persons to purchase and hold housing in such municipalities results in the decline of new housing and in the decay of the existing housing stock and of existing neighborhoods with attendant increases in municipal costs for welfare, police and fire protection. The decline in new housing, together with the decay of existing housing stock, has produced a critical shortage of adequate housing in these municipalities adversely affecting the economy of the state and its municipalities and the well-being of their residents. Private enterprise, without the assistance contemplated by this chapter, cannot achieve the construction or rehabilitation of sufficient housing for low and moderate income families and persons and the alternative of forcing such families and persons to live in substandard housing is undesirable since it tends to decrease the interest of such families and persons in their communities, the maintenance of their property and the preservation of their neighborhoods.

(b) It is further found and declared that unless the supply of housing and the ability of low and moderate income families and persons to obtain mortgage financing is increased significantly and expeditiously, a large number of residents of many of the state’s municipalities will be compelled to live in unsanitary, overcrowded and unsafe conditions to the detriment of the health, welfare and well-being of these persons and of the whole community of which they are a part. By increasing the housing supply of the state and the ability of low and moderate income families and persons to obtain mortgage financing, the clearance, replanning, development and redevelopment of blighted areas will be aided, and the critical shortage of adequate housing will be ameliorated.

(c) It is further found and declared that the cost of mortgage financing is a major factor materially affecting the supply and cost of housing and that, notwithstanding the past and present efforts of government agencies and instrumentalities both state and federal, there continues to exist a serious shortage of low interest mortgage financing available to low and moderate income families and persons in the state. It is therefore necessary and appropriate that municipalities take steps on a local level to reduce the cost of such financing and thereby promote the purchase of decent, safe and sanitary housing and the rehabilitation of existing substandard housing by low and moderate income families and persons.

(d) It is further found and declared that the provision by municipalities of financial assistance for housing for low and moderate income families and persons through the making and purchase of mortgage loans to such families and persons for the purpose of purchasing and of rehabilitating housing, are public purposes and purposes for which public money may be expended by a municipality for the public benefit and good.

(P.A. 79-596, S. 2, 17.)

Sec. 8-302. Definitions. The following terms shall have the following meanings unless the context clearly indicates another meaning and intent:

(a) “Bonds”, “notes” or “other obligations” means any bonds, notes or other evidences of indebtedness, respectively, issued by the municipality pursuant to this chapter, and “bonds” or “notes” includes other obligations;

(b) “Capital reserve fund” means any capital reserve fund established by the municipality in accordance with section 8-307;

(c) “Housing” means any structure which is to be purchased or rehabilitated by a low or moderate income family or person with the assistance provided for in this chapter. Such structure shall contain no less than one and no more than six dwelling units, at least one of which shall be occupied by the low or moderate income family or person purchasing or rehabilitating the structure;

(d) “Housing finance assistance plan” means any plan for the provision of municipal assistance to families or persons of low or moderate income which is adopted by the legislative body of the municipality pursuant to section 8-304;

(e) “Legislative body” means the legislative body of a municipality as defined in subsection (m) of section 1-1;

(f) “Lending institution” means any bank, trust company, savings bank, savings and loan association or credit union, whether chartered by the United States of America or this state, and any insurance company authorized to do business in this state, and any mortgage banking firm approved by the municipality;

(g) “Low and moderate income families and persons” means families and persons who lack the amount of income necessary, as determined by the municipality, to purchase or rehabilitate safe and adequate housing without financial assistance under this chapter. The income limits for families and persons assisted under this chapter shall be established by the municipality, provided such limits shall not be set at a level which is (1) higher than one hundred twenty per cent of the current median family income for a family of four in the Standard Metropolitan Statistical Area, as designated in the federal census, within which the municipality is located or (2) with respect to distressed portions of the municipality, higher than two hundred per cent of the current median family income for a family of four in such Standard Metropolitan Statistical Area and provided further, up to fifteen per cent of the total financial assistance under any housing finance assistance plan may be provided notwithstanding subdivisions (1) and (2) of this subsection upon a finding by the legislative body that a public purpose is served thereby in encouraging the development of a balanced community of all income levels in the urban areas of the municipality;

(h) “Mandatory capital reserve fund requirement” applies only to bonds secured by a capital reserve fund and means, as of any particular date of computation, an amount of money equal to the largest amount, for the then current or any future fiscal year of the municipality, of annual debt service secured by a capital reserve fund of the municipality, such annual debt service being the amount of money equal to the aggregate of (1) all interest payable during such fiscal year on all such bonds of the municipality outstanding on said date of computation, plus (2) the principal amount of all such bonds of the municipality outstanding on said date of computation which mature during such fiscal year, plus (3) the amount of all annual sinking fund payments payable during such fiscal year with respect to any such bonds of the municipality outstanding on said date of computation;

(i) “Mortgage” means a mortgage deed, deed of trust, or other instrument which shall constitute a lien, whether first or second, on real estate or on a leasehold under a lease having a remaining term, at the time such mortgage is acquired, which does not expire for at least that number of years beyond the maturity date of the obligation secured by such mortgage as is equal to the number of years remaining until the maturity date of such obligation;

(j) “Mortgagee” means the original lender under the mortgage or participants therein, and their successors and assigns;

(k) “Mortgage payments” means periodic payments called for by a mortgage, and may include, but is not limited to, interest, installments of principal, taxes and assessments, mortgage insurance premiums and hazard insurance premiums;

(l) “Municipality” means any city, town, consolidated town and city or consolidated town and borough in the state, and “the municipality” means each municipality which shall by resolution make the findings and determinations required and exercise the powers granted under this chapter;

(m) “Person” means any individual;

(n) “Plan administrator” means the person appointed by the legislative body to carry out the provisions of the housing finance assistance plan pursuant to section 8-304;

(o) “Rents”, “rentals” or “carrying charges” means the charges, excluding any security deposits and down payments, paid for occupancy of housing financed or assisted under this chapter, whether such housing is owned or operated on a landlord-tenant or home ownership basis or as a condominium or a cooperative;

(p) “State” means the state of Connecticut.

(P.A. 79-596, S. 3, 17.)

Sec. 8-303. Municipal powers for purposes of this chapter. In furtherance of the purposes of this chapter, which are hereby deemed to be municipal purposes, for which municipal funds may be expended, a municipality shall, in addition to those powers otherwise conferred by any general statute, special act or municipal charter or ordinance, have the following powers, except as otherwise limited by this chapter and provided the exercise of such powers by the municipality shall be in accordance with the procedures established by this chapter:

(a) To make loans to lending institutions under terms and conditions requiring the proceeds thereof to be used by such institutions for the making of mortgage loans for the purchase and for the rehabilitation of housing by low and moderate income families and persons, subject to the provisions of section 8-305;

(b) To invest in, purchase, acquire and take from mortgagees assignments of notes and mortgages evidencing loans for the purchase and for the rehabilitation of housing by low and moderate income families and persons, subject to the provisions of section 8-305;

(c) To make and enter into agreements or other transactions with any state or federal agency or instrumentality and to make and enter into all contracts and agreements, including contracts or agreements with lending institutions for the servicing and processing of mortgages, necessary or incidental to the execution of its powers under this chapter;

(d) To acquire, or contract to acquire, by purchase, grant, foreclosure or otherwise and to use, hold and dispose of real or personal property, or interests therein, within the municipality;

(e) To undertake commitments to make mortgage loans; to sell mortgages at public or private sale, with or without bidding; to foreclose on any mortgage or commence any action to protect or enforce any right conferred upon the municipality by law, mortgage, contract or other agreement, and to bid for and purchase property which was the subject of such mortgage, at any foreclosure or at any other sale; to release or relinquish any right, title, claim, interest on demand, however acquired, including any equity or right of redemption, in property foreclosed by it; to acquire and take possession of any such property, and in such event to complete, administer, pay the principal and interest or any obligation incurred in connection with such property, dispose of, and otherwise deal with, such property in such manner as may be necessary or desirable to protect the interests of the municipality therein;

(f) To issue bonds, bond anticipation notes and other obligations of the municipality in order to exercise the powers and effectuate the purposes set forth in this chapter; to fund and refund said obligations and to provide for the rights of the holders thereof; and to secure the municipal obligations issued hereunder by the pledge of revenues and of notes and mortgages of others;

(g) To appoint, employ or retain attorneys, accountants, architectural, engineering and financial consultants, assistants, agents and other employees as it may deem necessary or desirable and to fix their compensation;

(h) To invest any funds not needed for immediate use or disbursement, including any funds held in reserve, in obligations issued or guaranteed by the United States of America or the state and in other obligations which are legal investments for savings banks in this state and in time deposits or certificates of deposit or other similar banking arrangements secured in such manner as the municipality determines;

(i) To procure insurance against any loss in connection with its property and other assets, including mortgages and mortgage loans, in such amounts and from such insurers as it deems desirable;

(j) To the extent permitted under its contract with the holders of bonds, notes and other obligations of the municipality, to consent to any modification with respect to rate of interest, time and payment of any installment of principal or interest, security or any other term of any mortgage, mortgage loan, mortgage loan commitment, contract or agreement of any kind to which the municipality is a party;

(k) To the extent permitted under its contract with the holders of bonds, notes and other obligations, to enter into contracts with any mortgagor containing provisions enabling such mortgagor to reduce the rental or carrying charges to families or persons unable to pay the regular schedule of charges where, by reason of other income or payment from any department, agency or instrumentality of the United States of America or this state, such reductions can be made without jeopardizing the economic stability of housing being financed;

(l) Where by reason of the financing plan a review of the application for financing the proposed housing is required by or on behalf of any department, agency or instrumentality of the United States of America or this state, to provide, contract or arrange for consolidated processing of any such application to avoid duplication thereof by either undertaking the processing in whole or in part for any such department, agency or instrumentality or, in the alternative, delegating the processing in whole or in part to any such department, agency or instrumentality;

(m) To participate with any department, agency or instrumentality of the United States or the state or with any lending institution in the making of mortgage loans to low and moderate income families and persons, which mortgage loans are secured by a single participation mortgage or by separate mortgages, the interest of each mortgagee having equal priority as to lien in proportion to the amount of the loan so secured, but not necessarily equal as to interest rate, time or rate of amortization or otherwise;

(n) To make loans which may or may not be secured by a mortgage on real property for the rehabilitation of one to four family residential housing for occupancy by families and persons of low and moderate income, in amounts not to exceed ten thousand dollars in the case of each loan, on such terms and conditions as the municipality may determine, provided any such loan which is not secured by a mortgage shall be insured or guaranteed by a department, agency or instrumentality of the United States of America, or by such other entity as the municipality shall determine is financially able to insure or guarantee repayment in the event of default by the borrower, or coinsured to the maximum extent permitted by a department, agency or instrumentality of the United States of America;

(o) To do any and all acts or things necessary or appropriate in order to effectuate the purposes of this chapter or to exercise any of the powers granted to municipalities by this chapter.

(P.A. 79-596, S. 4, 17; P.A. 10-32, S. 22.)

History: P.A. 10-32 made a technical change in Subdiv. (1), effective May 10, 2010.

Sec. 8-304. Adoption of a housing finance assistance plan. Provisions. (a) The powers granted to municipalities under the provisions of this chapter may be exercised by the legislative body of the municipality, but such powers or any of them shall be exercised only upon the adoption of a general resolution containing findings and determinations substantially in accordance with section 8-301, which findings or determinations shall specifically state that an adequate amount of mortgage financing is unavailable from lending institutions at a rate which is low enough to permit low and moderate income families and persons to finance safe, decent and sanitary housing within the municipality.

(b) Upon the adoption of a resolution making the findings or determinations as set forth in subsection (a) of this section, the legislative body of the municipality may by resolution authorize and adopt a housing finance assistance plan which may provide for (1) the issuance of notes and bonds of the municipality in accordance with sections 8-306, 8-307 and 8-314; (2) the establishment of a capital reserve fund and of such other funds as the legislative body may determine are necessary or appropriate for the protection of holders of the municipality’s notes and bonds; (3) the financing of mortgage loans to low and moderate income persons and families for the purposes of the purchase and the rehabilitation of housing within the boundaries of the municipality under such rules and regulations and pursuant to such contracts or agreements with lending institutions as the legislative body may prescribe; and (4) the appointment of a plan administrator who shall have primary responsibility for the effectuation of such plan and who may be a municipal officer or any other person designated by the legislative body.

(c) Any housing finance assistance plan adopted pursuant to subsection (b) of this section shall require that (1) the difference between the interest rate on any mortgage loan made pursuant to such plan and the interest rate on bonds issued under such plan shall be limited to the extent necessary to prevent such bonds from becoming arbitrage bonds under the regulations of the Department of the Treasury under Section 103 of the Internal Revenue Code, as from time to time amended; (2) any contract or agreement with a lending institution for the origination of mortgage loans pursuant to such plan shall require that such lending institution utilize its normal underwriting criteria in any determination made with respect to such mortgage loans; (3) the legislative body shall find and determine that all contractual agreements with lending institutions and any other parties involved in the origination, servicing and insuring of mortgages made or financed pursuant to the housing finance assistance plan are fair and reasonable; (4) the legislative body shall find and determine that all contractual agreements with respect to the provision of services by financial advisors, investment bankers, bond counsel and any other party involved in the issuance of bonds under this chapter are fair and reasonable; (5) the legislative body shall establish, and review semiannually, eligibility limits with respect to the plan, including limits on the maximum amount of any mortgage loan made or financed thereunder and the maximum income of the family or person assisted thereunder; and (6) the legislative body shall receive and review at least once every six months during which the plan is in effect a report from the plan administrator summarizing the actions taken pursuant to the plan.

(d) The legislative body may adopt one or more housing finance assistance plans pursuant to this chapter and may, in its discretion, amend any housing finance assistance plan from time to time.

(P.A. 79-596, S. 5, 17; P.A. 80-483, S. 30, 186.)

History: P.A. 80-483 made technical changes.

Sec. 8-305. Municipal powers under housing finance assistance plan. (a) In order to provide for low interest mortgage loans to low and moderate income families and persons, the municipality may, pursuant to the housing finance assistance plan, (1) make commitments to purchase, and purchase, service and sell mortgages or any interest therein and (2) make loans to lending institutions for the purpose of making any such mortgage loans, provided that any such mortgage shall be a mortgage of realty located within the boundaries of the municipality, and provided further that the aggregate amount of mortgages purchased or loans made hereunder, excluding those insured or guaranteed by any department, agency or instrumentality of the United States of America, a public corporation chartered by Congress, any department, agency or instrumentality of the state, or a provider of private mortgage insurance, shall not at any one time exceed two per cent of the municipality’s most recent grand list.

(b) The municipality shall exercise the powers conferred in this section only to provide assistance in the financing of bona fide housing purchase transactions, and it shall take, or shall cause to be taken, all steps necessary to insure that no refinancing of an existing mortgage loan is accomplished either directly or indirectly with the assistance provided for in this chapter.

(P.A. 79-596, S. 6, 17.)

Sec. 8-306. Municipal power to issue bonds and notes for purposes of a housing finance assistance plan. (a) Subject to the provisions of section 8-307 and any general statute, special act or municipal charter or ordinance, a municipality shall have the power and is hereby authorized to issue, from time to time, but in no case later than October 1, 1982, notes and bonds in such principal amounts as the legislative body shall determine to be necessary to provide sufficient funds for achieving the purposes of this chapter, including the making of mortgage loans and loans to lending institutions, the establishment of reserves to secure such notes and bonds, interest on such notes and bonds, and the payment of expenses incident to or necessary for operation of the housing finance assistance plan.

(b) A municipality shall have the power, from time to time, to issue (1) notes to renew notes and (2) bonds to pay notes, including the interest thereon and, whenever it deems refunding expedient, to refund any bonds by the issuance of new bonds, whether the bonds to be refunded have or have not matured, and to issue bonds partly to refund bonds then outstanding and partly for any of the purposes of this chapter. The refunding bonds may be exchanged for the bonds to be refunded or sold and the proceeds applied to the purchase, redemption or payment of such bonds.

(c) The notes and bonds shall be authorized by resolution of the legislative body, shall bear such date or dates and shall mature at such time or times not exceeding thirty years from the date thereof as such resolution may provide. The legislative body may designate an official or group of officials of the municipality to determine form, rates of interest and other particulars of the notes and bonds issued hereunder. The notes and bonds shall bear interest at such rate or rates, be in such denominations, be in such form, either bearer or registered, carry such exchange, transfer and registration privileges, be executed in such manner, be payable in such medium of payment, at such place or places, be subject to such terms of redemption, and to such other terms and particulars as the resolution may provide or as the municipal official or officials designated by the legislative body may determine. The notes and bonds may be sold at public or private sale, provided if the bonds are sold at a private sale the municipality shall retain a financial advisor, which shall be a nationally recognized investment banking firm and ineligible to purchase the bonds, to review the proposed financing. The bonds may be sold at such price or prices as the legislative body or such official or officials as it designates shall determine, but the timing of such sale shall first be coordinated with the State Treasurer in order to avoid conflicts with bond sale scheduled by the state or any state agency or instrumentality.

(d) Any resolution or resolutions authorizing the issuance of bonds, notes or other obligations may contain provisions, except as expressly limited in this chapter and except as otherwise limited by existing agreements with the holders of bonds, notes or other obligations, which shall be a part of the contract with the holders thereof, as to the following: (1) The pledging of all or any part of the moneys received by the municipality in payment of mortgage loans and interest thereon, and other moneys received or to be received, to secure the payment of the principal of and interest on any bonds, notes or other obligations or of any issue thereof; (2) the pledging of all or any part of the assets acquired by the municipality pursuant to the housing finance assistance plan, including but not limited to mortgages and other obligations securing the same, to secure the payment of the principal and interest on any bonds, notes or other obligations or of any issue thereof; (3) the use and disposition of the gross income from, and the payments of principal received by the municipality on, mortgages held by the municipality; (4) the establishment of reserves or sinking funds, the making of charges and fees to provide for the same, and the regulation and disposition thereof; (5) limitations on the purpose to which the proceeds of sale of bonds, notes or other obligations may be applied and pledging such proceeds to secure the payment of the bonds, notes or other obligations, or of any issue thereof; (6) limitations on the issuance of additional bonds, notes or other obligations; the terms upon which additional bonds, notes or other obligations may be issued and secured; and the refunding or purchase of outstanding bonds, notes or other obligations; (7) the procedure, if any, by which the terms of any contract with the holders of any bonds, notes or other obligations may be amended or abrogated, the amount of bonds, notes or other obligations the holders of which must consent thereto, and the manner in which such consent may be given; (8) limitations on the amount of moneys to be expended by the municipality for operating, administrative or other expenses of the housing finance assistance plan; (9) the vesting in a trustee or trustees of such property, rights, powers and duties in trust as the municipality may determine, which may include any or all of the rights, powers and duties of any trustee appointed by the holders of any bonds, notes or other obligations of the municipality to appoint a trustee under this chapter or limiting the rights, powers and duties of any trustee appointed such trustee; (10) covenants to do or refrain from doing such acts and things as may be necessary or convenient or desirable in order to better secure any bonds, notes or other obligations of the municipality, or which, in the discretion of the municipality, will tend to make any bonds, notes or other obligations to be issued more marketable notwithstanding that such covenants, acts or things may not be enumerated herein; and (11) any other matters of like or different character, which in any way affect the security or protection of the bonds, notes or other obligations.

(e) If the resolution of a municipality authorizing the issuance of bonds or notes so states and if such resolution is published in a newspaper having general circulation in the municipality within twenty-one days after passage, the validity of such bonds or notes may be contested only if an action, suit or proceeding contesting such validity is commenced within thirty days after the date of publication of such resolution.

(f) Any pledge made by the municipality shall be valid and binding from the time when the pledge is made, and the revenues or property so pledged and thereafter received by the municipality shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act. The lien of any such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the municipality, irrespective of whether such parties have notice thereof. Neither the resolution nor any other instrument by which a pledge is created need be recorded.

(g) Neither the officials nor members of the legislative body of the municipality nor any other authorized person executing such notes or bonds shall be subject to any personal liability by reason of the issuance thereof.

(h) The municipality, subject to such agreements with noteholders or bondholders as may then exist, shall have power, out of any funds available therefor, to purchase notes or bonds, which shall thereupon be cancelled, at a price not exceeding (1) if the notes or bonds are then redeemable, the redemption price then applicable plus accrued interest to the next interest payment date thereof, or (2) if the notes or bonds are not then redeemable, the redemption price applicable on the first date after such purchase upon which the notes or bonds become subject to redemption plus accrued interest to such date.

(i) In the discretion of the legislative body, the bonds may be secured by a trust indenture by and between the municipality and a corporate trustee, which may be any trust company or bank having the powers of a trust company within or without the state. Such trust indenture may contain such provisions for protecting and enforcing the rights and remedies of the bondholders as may be reasonable and proper and not in violation of law, including covenants setting forth the duties of the municipality in relation to the exercise of its powers pursuant to this chapter and the custody, safeguarding and application of all moneys. The municipality may provide by such trust indenture for the payment to the trustee under such trust indenture or to any other depository of the proceeds of the bonds and the revenues of the municipality under the housing finance assistance plan, and for the method of disbursement thereof, with such safeguards and restrictions as it may determine. All expenses incurred in carrying out such trust indenture may be treated as a part of the operating expenses of the housing finance assistance plan. If the bonds shall be secured by a trust indenture, the bondholders shall have no authority to appoint a separate trustee to represent them.

(j) Whether or not the notes and bonds are of such form and character as to be negotiable instruments under the terms of the Uniform Commercial Code, the notes and bonds are hereby made negotiable instruments within the meaning of and for all purposes of the Uniform Commercial Code, subject only to the provisions of the notes and bonds for registration.

(P.A. 79-596, S. 7, 17.)

Sec. 8-307. Capital reserve fund to secure bonds and notes issued under this chapter. (a)(1) In order to secure bonds and notes issued under this chapter, the legislative body of the municipality may create and establish a capital reserve fund and the municipality shall pay into such capital reserve fund (A) any moneys appropriated and made available by the municipality for the purpose of such fund, (B) any proceeds of sale of notes or bonds, to the extent provided in the resolution or resolutions of the legislative body authorizing the issuance thereof, and (C) any other moneys which may be made available to the municipality for the purpose of such fund from any other source. All moneys held in the capital reserve fund, except as hereinafter provided, shall be used, as required, solely for the payment of the principal of bonds secured by the capital reserve fund as the same mature or any annual sinking fund payments, the purchase or redemption of such bonds, the payment of interest on such bonds or the payment of any redemption premium required to be paid when such bonds are redeemed prior to maturity; provided moneys in such fund shall not be withdrawn therefrom at any time in such amount as would reduce the amount of such fund to less than the maximum capital reserve fund requirement, except for the purposes of paying interest on such bonds, principal of such bonds and any annual sinking fund payments, as the same become due and for the payment of which other moneys of the municipality are not available. Any income or interest earned by, or increment to, the capital reserve fund due to the investment thereof or any amount in excess of the maximum capital reserve fund requirement may be transferred by the municipality to other funds or accounts of the municipality established pursuant to this chapter to the extent that such transfer does not reduce the amount of the capital reserve fund below the maximum capital reserve fund requirement.

(2) A municipality shall not issue bonds secured by the capital reserve fund at any time if upon issuance the amount in the capital reserve fund will be less than the maximum capital reserve fund requirement, unless the municipality, at the time of issuance of such bonds, shall deposit in such fund from the proceeds of the bonds so to be issued, or otherwise, an amount which, together with the amount then in such fund, will not be less than the maximum capital reserve fund requirement.

(3) In computing the amount of the capital reserve fund for the purposes of this section, securities held as a part thereof shall be valued in the manner provided in the resolution or resolutions authorizing the issuance of bonds secured by the capital reserve fund.

(b) The municipality may create and establish such other fund or funds, including other capital reserve funds with the same force and effect and upon the same terms and conditions and subject to the same limitations as provided in this section, as may be necessary or desirable in furtherance of the purposes of this chapter.

(P.A. 79-596, S. 8, 17.)

Sec. 8-308. Bonds to be special obligations payable only from certain pledged revenue. Bonds and notes issued pursuant to this chapter shall be special obligations of the municipality and shall not be payable from nor charged upon any funds other than the revenues pledged to the payment thereof, nor shall the municipality issuing the same be subject to any liability thereon except to the extent of such pledged revenues. No holder of any bonds or notes shall have the right to compel any exercise of the taxing power of the municipality to pay any bonds or notes or the interest thereon, nor to enforce payment thereon against any property of the municipality except the property mortgaged or otherwise encumbered under the provisions and for the purposes of this chapter. The bonds and notes shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the municipality, except the property mortgaged or otherwise encumbered under the provisions and for the purposes of this chapter. The substance of such limitation shall be plainly stated on the face of each bond and note, with appropriate modification in the case of bonds and notes secured by the covenant and pledge of a municipality to restore the capital reserve funds to the maximum capital reserve fund requirement. Except as otherwise provided in subsection (c) of section 8-307, bonds and notes issued pursuant to this chapter shall not be subject to any statutory limitation on the indebtedness of the municipality and such bonds and notes when issued shall not be included in computing the aggregate indebtedness of the municipality in respect to and to the extent of any such limitation.

(P.A. 79-596, S. 9, 17.)

Sec. 8-309. Separate accounts to be established for purposes of this chapter. (a) All moneys of the municipality derived in furtherance of the purposes of this chapter, except as otherwise authorized or provided in this chapter, shall be deposited as soon as practicable in a separate account or accounts in banks or trust companies organized under the laws of the state or in national banking associations doing business in the state. The moneys in such accounts shall be paid out on checks signed by such officer or employee of the municipality as the legislative body shall authorize. Notwithstanding the provisions of this section, a municipality shall have power to contract with the holders of any of its notes or bonds as to the custody, collection, securing, investment and payment of any moneys of the municipality derived in furtherance of the purposes of this chapter and of any moneys held in a trust or otherwise for the payment of notes or bonds, and to carry out such contract.

(b) Subject to the provisions of any contract with noteholders and bondholders, the municipality issuing notes or bonds pursuant to this chapter shall prescribe a system of accounts. All such accounts shall be kept separate from other accounts of the municipality and shall be used for the purposes of this chapter and for no other purpose.

(c) Accounts of the municipality established in furtherance of the purposes of this chapter shall be annually audited in accordance with the provisions of sections 4-230 to 4-236, inclusive, by an independent auditor, as defined in section 4-230, who shall be designated in accordance with the provisions of section 4-232, and a report of such audit and the books and records of the municipality kept with respect to any action taken or account established under this chapter, including books and records pertaining to its receipts, disbursements, contracts, reserve funds, sinking funds and investment, shall be open to public inspection.

(P.A. 79-596, S. 10, 17; P.A. 91-401, S. 11, 20.)

History: P.A. 91-401 amended Subsec. (c) to require that audits be conducted in accordance with Secs. 4-230 to 4-236, inclusive, and by auditor instead of certified public accountant, effective July 1, 1993.

Sec. 8-310. Appointment of trustee to represent holders of bonds or notes in event of default. (a) In the event that bonds or notes are issued without appointment of a trustee under a trust indenture, then, in the event that the municipality defaults in the payment of principal of or interest on any issue of notes or bonds after the same shall become due, whether at maturity or upon call for redemption, and such default shall continue for a period of thirty days, or in the event that the municipality shall fail or refuse to comply with the provisions of this chapter, or shall default in any agreement made with the holders of any issue of notes or bonds, the holders of twenty-five per cent in aggregate principal amount of the notes or bonds of such issue then outstanding, by instrument or instruments filed in the office of the clerk of such municipality and proved or acknowledged in the same manner as a deed to be recorded, may appoint a trustee to represent the holders of such notes or bonds for the purposes herein provided.

(b) Such trustee may, and upon written request of the holders of twenty-five per cent in principal amount of such notes or bonds then outstanding shall, in his own name: (1) By suit, action or proceeding in accordance with the general statutes enforce all rights of the noteholders or bondholders, including the right to require the municipality to carry out any agreement with such holders and to perform its duties under this chapter; (2) bring suit upon such notes or bonds; (3) by action or suit, require the municipality to account as if it were the trustee of an express trust for the holders of such notes or bonds; (4) by action or suit, enjoin any acts or things which may be unlawful or in violation of the rights of the holders of such notes or bonds; (5) declare all such notes or bonds due and payable, and if all defaults shall be made good, then, with the consent of the holders of twenty-five per cent of the principal amount of such notes or bonds then outstanding, annul such declaration and its consequences.

(c) The Superior Court shall have jurisdiction of any suit, action or proceeding brought on behalf of such noteholders or bondholders by any trustee therefor, whether appointed by such holders or pursuant to a trust indenture. The venue of any such suit, action or proceeding shall be laid in the municipality against which any such remedy is sought.

(d) Before declaring the principal of notes or bonds due and payable, such trustee shall first give thirty days’ notice in writing to the municipality.

(P.A. 79-596, S. 11, 17.)

Sec. 8-311. Bonds and notes issued under this chapter are securities for investment purposes. The notes and bonds issued pursuant to this chapter are hereby made securities in which all public officers and bodies of this state and all municipalities and municipal subdivisions, all insurance companies and associations and other persons carrying on an insurance business, all banks, bankers, trust companies, savings banks and savings associations, including savings and loan associations, building and loan associations, investment companies and other persons carrying on a banking business, all administrators, guardians, executors, trustees and other fiduciaries, and all other persons whatsoever who are now or may hereafter be authorized to invest in bonds or in other obligations of the state, may properly and legally invest funds, including capital, in their control or belonging to them. The notes and bonds are also hereby made securities which may be deposited with and may be received by all public officers and bodies of the state and all municipalities for any purpose of which the deposit of bonds or other obligations of the state is now or may hereafter be authorized.

(P.A. 79-596, S. 12, 17.)

Sec. 8-312. Bonds and notes under this chapter free from state or municipal taxes except estate and gift taxes. It is hereby determined that the purposes of this chapter are public purposes and that the municipalities will be performing an essential governmental function in the exercise of the powers conferred upon them by this chapter. The state covenants with the purchasers and all subsequent holders and transferees of notes and bonds issued by the municipality, in consideration of the acceptance of and payment for the notes and bonds, that the principal and interest of notes and bonds of the municipality issued pursuant to this chapter shall at all times be free from taxation, except for estate and gift taxes, imposed by the state or by any political subdivision thereof. Municipalities are authorized to include this covenant of the state in any agreement with the holder of such notes or bonds.

(P.A. 79-596, S. 13, 17; P.A. 89-331, S. 9, 30.)

History: P.A. 89-331 clarified the exemption from taxation of the principal and interest of the bonds.

Sec. 8-313. State pledge not to prevent municipalities from fulfilling agreements with holders of bonds and notes. The state does hereby pledge to and agree with the holders of any notes or bonds that the state will not limit or alter the rights hereby vested in the municipality to fulfill the terms of any agreements made with said holder thereof, or in any way impair the rights and remedies of such holders until such notes and bonds, together with the interest thereon, with interest on any unpaid installments of interest, and all costs and expenses in connection with any action or proceeding by or on behalf of such holders, are fully met and discharged. Municipalities are authorized to include this pledge and agreement of the state in any agreement with the holders of such notes or bonds.

(P.A. 79-596, S. 14, 17.)

Sec. 8-314. Authorization of bonds and notes. The provisions of the general statutes, and of any applicable special act or municipal charter, shall govern the proceedings, notices and approvals required for the authorization of any bonds or notes or any instrument as security therefor, issued pursuant to this chapter.

(P.A. 79-596, S. 15, 17.)

Sec. 8-315. Discrimination prohibited in housing financed under this chapter. The municipality shall take all necessary steps to insure that occupancy of all housing financed or otherwise assisted pursuant to this chapter be open to all persons regardless of race, creed, color, national origin or ancestry, sex, gender identity or expression, age or physical disability.

(P.A. 79-596, S. 16, 17; P.A. 11-55, S. 7.)

History: P.A. 11-55 prohibited discrimination on basis of gender identity or expression.

Secs. 8-316 to 8-335. Reserved for future use.