AL Code § 41-16A-5 (2021)
2021 Code of Alabama|Title 41 - State Government.|Chapter 16A - Governmental Leasing.|Section 41-16A-5 - Permissible Contract Provisions; General and Limited Obligation Distinction May Be Made; Allowable Pledge Payment Sources; Classification of Entity's Contracting and Contracts.

Section 41-16A-5Permissible contract provisions; general and limited obligation distinction may be made; allowable pledge payment sources; classification of entity's contracting and contracts. (a) Alternative financing contracts may be for such term, provide for such renewal or extension options, provide for such terminating events, provide for the payment of such rentals, purchase installments, purchase price, and other amounts, and contain such other terms, provisions, and conditions as the governmental entity shall deem appropriate, and without limitation to the generality of the foregoing, may contain terms and conditions substantially similar to any one or more of the following: (1) Provisions for the automatic renewal of the alternative financing contract for one or more successive periods unless affirmative action is taken by the governmental entity to terminate such alternative financing contract, and, if desired, specifying the nature of such affirmative action sufficient to terminate such alternative financing contract; (2) Provisions for the payment by the governmental entity of interest at such fixed or variable rates of interest as such governmental entity shall deem appropriate or for the allocation of a portion of specified rentals or other payments to interest (which such allocation shall be deemed conclusively correct in the absence of bad faith); (3) Provisions specifying the rights, remedies, obligations, and other liabilities of the parties in the event of a default or other failure to comply with the provisions of the alternative financing contract; (4) Provisions designating whether the rights and/or obligations of the respective parties under the alternative financing contract shall be subject to assignment and/or delegation or specifying the terms and conditions under which such assignment and/or delegation shall be permitted; provided that, notwithstanding any other statute or law of the state to the contrary, in the absence of an express provision of an alternative financing contract prohibiting the assignment and/or delegation by the grantor party, such grantor party shall be permitted to assign its rights and/or delegate its obligations under such alternative financing contract without the consent or approval of the governmental entity; (5) Provisions establishing which party to the alternative financing contract will retain title to the subject property and which party to the alternative financing contract will bear the risk of loss with respect to the subject property and provisions establishing the circumstances in which title to and/or risk of loss with respect to the subject property shall be transferred (including, without limitation, provisions establishing any applicable purchase price or formula for computing such purchase price); (6) Provisions specifying the consequences of theft, casualty loss, destruction, condemnation of, or other loss affecting the subject property (in whole or in part), which provisions may specify that in the event of such a theft, casualty loss, destruction, condemnation, or other loss the governmental entity shall be required to pay a stipulated amount to the grantor party and that, upon payment of such stipulated amount, title to that subject property (if not already held by the governmental entity) will pass to the governmental entity; (7) Provisions requiring the governmental entity or the grantor party to maintain casualty insurance with respect to the subject property and/or to maintain liability, workmen's compensation, and/or other insurance coverages during the term of the alternative financing contract and specifying the application of the proceeds of such insurance; (8) If required by the grantor party or its assignee, covenants precluding or limiting the right of the governmental entity to acquire property comparable to the subject property within a specified time (not to exceed five years) after early cancellation or termination of the alternative financing contract or the failure of the governmental entity to exercise all available optional renewals or extensions on the basis of a failure to appropriate funds for payment of amounts due under such alternative financing contract; (9) Covenants of the governmental entity to indemnify, hold harmless, and/or defend the grantor party with respect to any or all of the transactions contemplated by the alternative financing contract and/or in connection with the subject property; (10) Provisions allocating responsibility for taxes, duties, assessments, and other impositions applicable to the alternative financing contract, any transactions contemplated by the alternative financing contract and/or the subject property; (11) At the option of the governmental entity, a stipulation that such alternative financing contract shall terminate without further monetary obligation on the part of such governmental entity at the close of any fiscal year of such governmental entity in the event sufficient funds shall not have been appropriated or otherwise lawfully set aside to permit the governmental entity to satisfy its obligations under the alternative financing contract during the next succeeding fiscal year of such governmental entity, including during any renewal term under such alternative financing contract; and (12) Provisions concerning the disposition of the subject property in the event of the expiration, cancellation, or termination of an alternative financing contract for any reason (including, without limitation, default by the governmental entity thereunder); including, without limitation, stipulations that upon any such expiration, cancellation, or termination of an alternative financing contract under the terms of which either (A) the governmental entity does not have an option to purchase or otherwise to acquire title to the subject property or (B) at the time of such cancellation or termination the governmental entity has not paid in full all amounts specified in such alternative financing contract in order to entitle the governmental entity to title to or transfer of title to the subject property, (i) such governmental entity shall no longer be entitled to claim any title or interest in the subject property as against the grantor party or any person claiming by, through or under the grantor party and the governmental entity shall, at its sole expense, deliver the subject property to the grantor party at the location specified in or pursuant to the alternative financing contract and in such condition as is specified in the alternative financing contract, (ii) in the event the governmental entity shall fail to return the subject property to the grantor party as described in clause (i), the grantor party shall have the right to take possession of the subject property, (iii) in taking possession of the subject property, a grantor party may proceed without judicial process if this can be done without breach of the peace or may proceed by action, and/or (iv) without removal, the grantor party may render subject property constituting personal property or fixtures unusable and may dispose of the same on the governmental entity's premises. (b) If an alternative financing contract contains the terms contained in subdivision (a)(11) hereof, such alternative financing contract shall be deemed to obligate the governmental entity thereunder only for those sums payable during the then current fiscal year of such governmental entity, including in the case of a renewable alternative financing contract for those sums payable in the individual fiscal year renewal term, and, if and to the extent any constitutional or statutory debt limit is applicable to such governmental entity, such alternative financing contract shall not be deemed to create a debt of such governmental entity within the meaning of any constitutional or statutory provision. Notwithstanding the foregoing, nothing in this section shall diminish the obligation of a governmental entity to pay all sums payable under such alternative financing contract during the then current fiscal year and to satisfy and discharge all obligations required to be performed under the alternative financing contract during the then current fiscal year of the governmental entity, including in the case of a renewable alternative financing contract those sums payable in the then applicable renewal term and those obligations required to be performed in the then applicable renewal term. (c) Unless otherwise prohibited by the constitution or statutes of the state, a governmental entity may specify that its obligations under any alternative financing contract shall be a general obligation of such governmental entity or that such obligations shall be payable solely from specified sources. A governmental entity may assign and specifically pledge for the payment of any of its alternative financing contracts constituting general obligations (as additional security therefor) or for the payment of any of its alternative financing contracts constituting limited obligations (as the sole source for the payment thereof), as the case may be, all or any portion of the funds derived from any one or more of the following sources that are not subject to previous pledges or covenants which would prevent the assignment and pledge hereby authorized, that are not required by the laws and constitution of the state to be devoted to other purposes: (1) The proceeds from any tax (including any ad valorem tax and any occupational, privilege, license, or excise tax) that such governmental entity is authorized to levy at the time of execution of such alternative financing contract; (2) Any payments in lieu of taxes paid or payable to such governmental entity by other governmental units or by private persons or companies pursuant to contractual arrangements or laws in effect at the time of the execution of such alternative financing contract; (3) The portion of any tax levied and collected by any other governmental entity that shall be apportioned and paid to such governmental entity pursuant to laws in effect at the time of the execution of such alternative financing contract; (4) The income derived from the investment of moneys lawfully held by such governmental entity; and (5) The revenues from any revenue-producing properties owned, leased, or operated by such governmental entity, including, without limitation thereto, any water system, sewer system, electric distribution system, or other utility. The pledge of any pledged funds for the obligations of a governmental entity under an alternative financing contract pursuant to this chapter, together with any covenants of such governmental entity relating to such pledge, shall have the force of contract between such governmental entity and the grantor party or anyone claiming by, through, or under the grantor party. To the extent necessary, such pledged funds shall constitute a trust fund or funds which shall be impressed with a lien in favor of the grantor party and any person claiming by, through, or under the grantor party. In the event that more than one pledge should be made with respect to any pledged funds, then such pledges shall take precedence in the order in which they are made unless the proceedings making such pledge shall expressly provide that such pledge shall be on a parity with or subordinate to a subsequent pledge of such pledged funds. All alternative financing contracts for which any pledge authorized by this chapter may be made shall constitute preferred claims against that portion of the pledged funds so pledged, and shall have preference over any claims for any other purpose whatsoever. (d) The execution of and performance under an alternative financing contract by a governmental entity shall constitute the exercise of the borrowing power of the governmental entity. Alternative financing contracts shall constitute "other evidences of indebtedness" within the meaning and usage of Section 8-8-7, as amended. (Acts 1993, No. 93-261, p. 389, §5.)