Bill Text: MI HB5299 | 2017-2018 | 99th Legislature | Introduced
Bill Title: Local government; financing; creation of a financial management team under certain circumstances; provide for, and provide for other general amendments. Amends title & sec. 2 of 2012 PA 436 (MCL 141.1542) & adds secs. 9a & 9b.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2017-12-13 - Re-referred To Committee On Michigan Competitiveness [HB5299 Detail]
Download: Michigan-2017-HB5299-Introduced.html
HOUSE BILL No. 5299
November 30, 2017, Introduced by Reps. Lower, Leutheuser, Albert and Crawford and referred to the Committee on Michigan Competitiveness.
A bill to amend 2012 PA 436, entitled
"Local financial stability and choice act,"
by amending the title and section 2 (MCL 141.1542), section 2 as
amended by 2015 PA 110, and by adding sections 9a and 9b.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An act to safeguard and assure the financial accountability of
local units of government and school districts; to preserve the
capacity of local units of government and school districts to
provide or cause to be provided necessary services essential to the
public health, safety, and welfare; to provide for review,
management, planning, and control of the financial operation of
local units of government and school districts and the provision of
services by local units of government and school districts; to
provide criteria to be used in determining the financial condition
of local units of government and school districts; to authorize a
declaration of the existence of a financial emergency within a
local unit of government or school district; to prescribe remedial
measures to address a financial emergency within a local unit of
government or school district; to provide for a review and appeal
process; to provide for the appointment and to prescribe the powers
and duties of an emergency manager for a local unit of government
or school district; to provide for the appointment and to prescribe
the powers and duties of a financial management team for a local
unit of government; to provide for the modification or termination
of contracts under certain circumstances; to provide for the
termination of a financial emergency within a local unit of
government or school district; to provide a process by which a
local unit of government or school district may file for
bankruptcy; to prescribe the powers and duties of certain state
agencies and officials and officials within local units of
government and school districts; to provide for appropriations; and
to repeal acts and parts of acts.
Sec. 2. As used in this act:
(a) "Chapter 9" means chapter 9 of title 11 of the United
States Code, 11 USC 901 to 946.
(b) "Chief administrative officer" means any of the following:
(i) The manager of a village or, if a village does not employ
a manager, the president of the village.
(ii) The city manager of a city or, if a city does not employ
a city manager, the mayor of the city.
(iii) The manager of a township or the manager or
superintendent of a charter township or, if the township does not
employ a manager or superintendent, the supervisor of the township.
(iv) The elected county executive or appointed county manager
of a county or, if the county has not adopted the provisions of
either 1973 PA 139, MCL 45.551 to 45.573, or 1966 PA 293, MCL
45.501 to 45.521, the county's chairperson of the county board of
commissioners.
(v) The chief operating officer of an authority or of a public
utility owned by a city, village, township, or county.
(vi) The superintendent of a school district.
(c) "Creditor" means either of the following:
(i) An entity that has a noncontingent claim against a local
government that arose at the time of or before the commencement of
the neutral evaluation process and whose claim represents at least
$5,000,000.00 or comprises more than 5% of the local government's
debt or obligations, whichever is less.
(ii) An entity that would have a noncontingent claim against
the local government upon the rejection of an executory contract or
unexpired lease in a chapter 9 case and whose claim would represent
at least $5,000,000.00 or would comprise more than 5% of the local
government's debt or obligations, whichever is less.
(d) "Debtor" means a local government that is authorized to
proceed under chapter 9 by this act and that meets the requirements
of chapter 9.
(e) "Emergency manager" means an emergency manager appointed
under section 9. An emergency manager includes an emergency
financial manager appointed under former 1988 PA 101 or former 1990
PA 72 who was acting in that capacity on March 28, 2013. For
purposes of section 9a, an emergency manager includes a financial
management team as provided under section 9a.
(f) "Entity" means a partnership, nonprofit or business
corporation, limited liability company, labor organization, or any
other association, corporation, trust, or other legal entity.
(g) "Financial and operating plan" means a written financial
and operating plan for a local government under section 11,
including an educational plan for a school district.
(h) "Good faith" means participation by an interested party or
a local government representative in the neutral evaluation process
with the intent to negotiate a resolution of the issues that are
the subject of the neutral evaluation process, including the timely
provision of complete and accurate information to provide the
relevant participants through the neutral evaluation process with
sufficient information, in a confidential manner, to negotiate the
readjustment of the local government's debt.
(i) "Interested party" means a trustee, a committee of
creditors, an affected creditor, an indenture trustee, a pension
fund, a bondholder, a union that under its collective bargaining
agreements has standing to initiate contract negotiations with the
local government, or a representative selected by an association of
retired employees of the public entity who receive income or
benefits from the public entity. A local government may invite
holders of contingent claims to participate as interested parties
in the neutral evaluation process if the local government
determines that the contingency is likely to occur and the claim
may represent at least $5,000,000.00 or comprise more than 5% of
the local government's debt or obligations, whichever is less.
(j) "Local emergency financial assistance loan board" means
the local emergency financial assistance loan board created under
section 2 of the emergency municipal loan act, 1980 PA 243, MCL
141.932.
(k) "Local government" means a municipal government or a
school district.
(l) "Local government representative" means the person or
persons designated by the governing body of the local government
with authority to make recommendations and to attend the neutral
evaluation process on behalf of the governing body of the local
government.
(m) "Local inspector" means a certified forensic accountant,
certified public accountant, attorney, or similarly credentialed
person whose responsibility it is to determine the existence of
proper internal and management controls, fraud, criminal activity,
or any other accounting or management deficiencies.
(n) "Municipal government" means a city, a village, a
township, a charter township, a county, a department of county
government if the county has an elected county executive under 1966
PA 293, MCL 45.501 to 45.521, an authority established by law, or a
public utility owned by a city, village, township, or county. For
purposes of sections 9a and 9b, municipal government also includes
an underfunded local unit of government as that term is defined in
section 3 of the protecting local government retirement and
benefits act.
(o) "Neutral evaluation process" means a form of alternative
dispute resolution or mediation between a local government and
interested parties as provided for in section 25.
(p) "Neutral evaluator" means an impartial, unbiased person or
entity, commonly known as a mediator, who assists local governments
and interested parties in reaching their own settlement of issues
under this act, who is not aligned with any party, and who has no
authoritative decision-making power.
(q) "Receivership" means the process under this act by which a
financial emergency is addressed through the appointment of an
emergency manager under section 9. Receivership does not include
chapter 9 or any provision under federal bankruptcy law.
(r) "Review team" means a review team appointed under section
4.
(s) "School board" means the governing body of a school
district.
(t) "School district" means a school district as that term is
defined in section 6 of the revised school code, 1976 PA 451, MCL
380.6, or an intermediate school district as that term is defined
in section 4 of the revised school code, 1976 PA 451, MCL 380.4.
(u) "State financial authority" means the following:
(i) For a municipal government, the state treasurer.
(ii) Except as otherwise provided in subparagraph (iii), for a
school district, the superintendent of public instruction.
(iii) For a school district subject to a deficit elimination
plan under section 1220 of the revised school code, 1976 PA 451,
MCL 380.1220, the state treasurer.
(v) "Strong mayor" means a mayor who has been granted veto
power for any purpose under the charter of that local government.
(w) "Strong mayor approval" means approval of a resolution
under 1 of the following conditions:
(i) The strong mayor approves the resolution.
(ii) The resolution is approved by the governing body with
sufficient votes to override a veto by the strong mayor.
(iii) The strong mayor vetoes the resolution and the governing
body overrides the veto.
Sec. 9a. (1) If the state treasurer declares under section 11
of the protecting local government retirement and benefits act that
a financial emergency exists within a municipal government for
purposes of this section, a financial management team must be
created in the department of treasury as the emergency manager for
that municipal government to address the underfunded status of the
municipal government.
(2) Notwithstanding any other provision of this act, a
financial management team only has those powers as provided under
this section.
(3) Not less than 45 days after the state treasurer declares a
financial emergency exists as provided under subsection (1), the
governor shall appoint 3 members for the financial management team.
The financial management team must include all of the following:
(a) An individual with a minimum of 5 years' experience and
demonstrable expertise in financial matters.
(b) An individual with a minimum of 5 years' experience
working in local units of government.
(c) An individual who has been a resident of the municipal
government for at least 5 years and is not an employee or an
elected or appointed officer of the municipal government. The
governing body of the municipal government may submit a list of not
less than 3 residents of the municipal government as a
recommendation for the appointment under this subdivision.
(4) The governor shall appoint 1 of the members of the
financial management team appointed under subsection (3) as
chairperson of the financial management team. An individual
appointed under subsection (3)(a) or (b) may serve on more than 1
financial management team.
(5) Upon appointment, a member of a financial management team
shall take and file with the secretary of state the oath of office
required under section 1 of article XI of the state constitution of
1963. A member of a financial management team shall serve at the
pleasure of the governor. A vacancy on a financial management team
must be filled in the same manner as an original appointment.
(6) A member of a financial management team shall discharge
the duties of the position in a manner faithful to the oath of
office required under section 1 of article XI of the state
constitution of 1963, in a nonpartisan manner, in the best
interests of the municipal government, and with the degree of
diligence, care, and skill that an ordinarily prudent person would
exercise under similar circumstances in a like position. A member
of a financial management team shall not make or participate in
making a decision, or in any way attempt to use his or her position
as a member of the financial management team to influence a
decision, on a matter before the financial management team in which
the member is directly or indirectly interested. A member of a
financial management team shall not be interested directly or
indirectly in any contract with a financial management team, the
department of treasury, or the municipal government that would
cause a substantial conflict of interest. A member of a financial
management team is subject to the applicable provisions of all of
the following:
(a) 1978 PA 472, MCL 4.411 to 4.431.
(b) 1968 PA 318, MCL 15.301 to 15.310.
(c) 1968 PA 317, MCL 15.321 to 15.330.
(d) 1973 PA 196, MCL 15.341 to 15.348.
(7) A member of a financial management team is a civil officer
subject to impeachment and conviction under section 7 of article XI
of the state constitution of 1963.
(8) The state treasurer shall call the initial meeting of a
financial management team not less than 30 days after the
appointment of the initial members of the financial management
team. After the first meeting, the financial management team shall
meet quarterly, or more frequently at the call of the chairperson
or if requested by 2 or more members of the financial management
team. A financial management team may act only by the affirmative
vote of 2 or more of its members at a meeting of the financial
management team.
(9) A writing prepared, owned, used, in the possession of, or
retained by a financial management team in the performance of an
official function is not subject to the freedom of information act,
1976 PA 442, MCL 15.231 to 15.246.
(10) A financial management team shall exercise its powers,
duties, and functions, including any rule-making and adjudication,
independently of the state treasurer. The budgeting, procurement,
and related management functions of a financial management team are
subject to the direction and supervision of the state treasurer.
The department of treasury may provide staff support for a
financial management team. Each member of a financial management
team must be paid for his or her service as a member and the
compensation must be set forth in a contract with the department of
treasury as approved by the state treasurer. Each contract must be
posted on the department of treasury's website within 7 days after
the contract is approved by the state treasurer.
(11) A financial management team is granted broad powers to
rectify the underfunded status of a municipal government while
preserving the fiscal stability of the municipal government and its
capacity to provide or cause to be provided necessary governmental
services essential to the public health, safety, and welfare.
Notwithstanding any charter provision or ordinance to the contrary,
a financial management team may take 1 or more of the following
additional actions with respect to the municipal government for
which it was created to rectify the underfunded status of the
municipal government:
(a) Analyze factors and circumstances contributing to the
underfunded status of the municipal government and require the
municipal government to take measures to correct the underfunded
status, including, but not limited to, corrective options described
in section 10 of the protecting local government retirement and
benefits act.
(b) Require the municipal government to amend, revise,
approve, or disapprove its proposed budget or general
appropriations act, including, but not limited to, requiring the
municipal government to include specified amounts of money for
specified purposes, to restrict specified payments of money for
specified purposes in a budget or general appropriations act of the
municipal government, to revise a budget or general appropriations
act of the municipal government, or to transfer a fund balance of
the municipal government.
(c) Require the municipal government to employ or contract
for, at the expense of the municipal government, auditors,
actuaries, and other technical personnel necessary to address the
underfunded status of the municipal government.
(d) Require the municipal government to sell, lease, assign,
or otherwise use or transfer the assets or liabilities of the
municipal government.
(e) Require the municipal government to take any other action
relating to the operation of the municipal government, its
employment of personnel, or its expenditure of money necessary to
address the underfunded status of the municipal government.
(12) A financial management team may not require a municipal
government to act or refrain from an act under subsection (11) if
the financial management team determines that the act or refraining
from the act would directly endanger the health, safety, or welfare
of the residents of the municipal government or unconstitutionally
impair a bond, note, security, or uncontested legal obligation of
the municipal government.
(13) A financial management team may enter into a consent
agreement with the municipal government. The consent agreement must
provide for remedial measures considered necessary to address the
underfunded status of the municipal government. The consent
agreement must provide for periodic status reports to the state
treasurer. In order for the consent agreement to go into effect,
the consent agreement must be approved by the governing body of the
municipal government, by resolution, and by the financial
management team, and must be approved and executed by the state
treasurer. Nothing in the consent agreement shall limit the ability
of the financial management team in its sole discretion to declare
a material breach of the consent agreement. The consent agreement
may include a grant to an officer of the municipal government of 1
or more of the powers vested in the financial management team under
subsection (11). The consent agreement may provide for the
retention by the municipal government of a consultant for the
purpose of assisting the municipal government to achieve the goals
and objectives of the consent agreement. The consent agreement must
provide for the release of the municipal government from the
consent agreement and the termination of the consent agreement.
(14) In addition to staff otherwise authorized by law, a
financial management team may appoint additional staff and secure
professional assistance as the financial management team considers
necessary to fulfill its duties under this section.
(15) A municipal government subject to this section must
comply with both of the following:
(a) Any budget, general appropriations act, or budget
amendment recommended under the uniform budgeting and accounting
act, 1968 PA 2, MCL 141.421 to 141.440a, must be consistent with
requirements imposed by the financial management team under
subsection (11) or required under a consent agreement under
subsection (13).
(b) Any budget, general appropriations act, or budget
amendment adopted under the uniform budgeting and accounting act,
1968 PA 2, MCL 141.421 to 141.440a, must be consistent with the
requirements imposed by the financial management team under
subsection (11) or required under a consent agreement under
subsection (13).
(16) Any action by a financial management team under this
section is binding on the municipal government and its officers,
employees, agents, and contractors. Officers, employees, agents,
and contractors of the municipal government shall take and direct
those actions that are necessary and advisable to maintain
compliance with requirements imposed by the financial management
team under subsection (11).
(17) If a financial management team determines both of the
following, the financial management team shall declare that a
financial emergency exists within the municipal government and the
governor shall appoint an emergency manager to address the
financial emergency within the municipal government under section
9:
(a) The municipal government has failed to comply with the
mandates or requirements under this section.
(b) The municipal government has failed to rectify its
noncompliance with the mandates or requirements of this section
within 30 days after receiving notification of its noncompliance
from the financial management team.
(18) A financial management team may issue to the appropriate
elected and appointed officers, and employees, agents, and
contractors of the municipal government the orders the financial
management team considers necessary to accomplish the purposes of
this section. An order issued under this section is binding on the
officers, employees, agents, and contractors of the municipal
government to whom it is issued.
(19) A financial management team shall submit quarterly
reports to the state treasurer regarding the underfunded status of
the municipal government. The state treasurer shall post copies of
the reports on a website maintained by the department of treasury.
(20) A financial management team continues in the capacity of
a financial management team for a municipal government until all of
the following occur:
(a) The financial management team determines that the
municipal government is no longer in underfunded status in a
sustainable fashion based upon the standards detailed in section
5(4)(a) and (b) of the protecting local government retirement and
benefits act.
(b) The financial management team notifies the state treasurer
of its determination under subdivision (a).
(c) The state treasurer concurs in the determination of the
financial management team under subdivision (a).
(d) The state treasurer notifies the financial management team
and the governing body of the municipal government of his or her
concurrence under subdivision (c).
(21) If a financial management team no longer continues in the
capacity of a financial management team for a municipal government
under subsection (20), the financial management team is dissolved
and this section does not apply to the municipal government.
(22) If a financial management team determines that a
municipal government has failed to comply with the mandates or
requirements under this section as provided under subsection (17)
and an emergency manager is appointed for that municipal government
under section 9, the financial management team is dissolved and
this section does not apply to the municipal government.
(23) For the fiscal year ending September 30, 2018,
$250,000.00 is appropriated from the general fund to the department
of treasury for the purpose of implementing this section and
section 9b.
(24) As used in this section, "underfunded status" means that
term as defined in section 3 of the protecting local government
retirement and benefits act.
Sec. 9b. Beginning 30 days after the effective date of the
amendatory act that added this section, the department of treasury
shall create and maintain a website that allows any resident of a
municipal government for which a financial management team is in
place under section 9a to submit input concerning that municipal
government.
