I. INTRODUCTION
In 2000, the Legislature passed and the Governor signed LB 929 into law. Sections 17 through 22 of the bill contained provisions of the “Nebraska Governmental Unit Security Interest Act” (the “Act”) that are codified in Neb.Rev.Stat. §§ 10-1101 to 10-1106.
Nebraska Uniform Commercial Code (UCC) § 9-109(c)(2) provides that the scope of UCC Article 9 (the “secured transactions” article) does not apply to the extent that “another statute of this state expressly governs the creation, perfection, priority, or enforcement of a security interest created by this state or a governmental unit of this state.” Accordingly, while the Act states that it governs the perfection, priority and enforcement of all security interests created by governmental units (and therefore is outside of the scope of UCC Article 9), the Act also provides specifically that the creation of security interests and pledges by governmental units is controlled by other provisions of law, e.g., the UCC.
II. TERMS DEFINED
For purposes of the Nebraska Governmental Unit Security Interest Act, the following definitions are given:
III. PERFECTION, PRIORITY AND ENFORCEMENT
Any security interest created by a governmental unit pursuant to an authorizing statute is perfected by the adoption of the measure or measures from the date on which the measure takes effect without the need for any physical delivery, filing or recording in any office.
The priority of any security interest created by a governmental unit is governed by the contractual terms set forth in the measure or measures, including the terms of any indenture or any other agreement approved by the measure or measures, adopted by the governmental unit. The law further provides that a security interest having priority over an existing security interest may not be created in violation of the terms of an existing measure governing outstanding bonds.
The terms of any applicable authorizing statute governs the enforcement of any security interest to the extent that the authorizing statute contains express provisions relating to enforcement or authorizes a governmental unit to contract with respect to enforcement. In the absence of any such express provisions in an authorizing statute, the following provisions apply:
IV. CONCLUSION
From time to time, the NBA fields questions from bankers regarding the creation, perfection, priority and enforcement of security interests in political subdivision or governmental unit bonds or other debt instruments. Quite often, the terms of the measure producing the debt instrument or agreement are essential in sorting out the issues of perfection, priority and enforcement. A bank would be well-advised to refer these issues to the bank’s legal counsel for review and advice. The Act discussed above should not however, be overlooked in this regard.