Bill Text: MI SB0078 | 2011-2012 | 96th Legislature | Introduced

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Bill Title: Local government; bonds; provision related to issuance of fiscal stabilization bonds; modify. Amends secs. 3, 4, 5 & 9 of 1981 PA 80 (MCL 141.1003 et seq.) & adds sec. 4a.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2011-01-27 - Referred To Committee On Local Government And Elections [SB0078 Detail]

Download: Michigan-2011-SB0078-Introduced.html

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SENATE BILL No. 78

 

 

January 27, 2011, Introduced by Senator GREGORY and referred to the Committee on Local Government and Elections.

 

 

 

     A bill to amend 1981 PA 80, entitled

 

"Fiscal stabilization act,"

 

by amending sections 3, 4, 5, and 9 (MCL 141.1003, 141.1004,

 

141.1005, and 141.1009), sections 3, 4, and 9 as amended by 2010 PA

 

4 and section 5 as amended by 1987 PA 279, and by adding section

 

4a.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 3. A city or county that meets the applicable conditions

 

described in section 4 may borrow money and issue its bonds or

 

obligations either for funding an operating deficit for a past

 

fiscal year or years or for funding a projected operating deficit

 

in the current fiscal year, or for funding both. A city or county

 

that meets the applicable conditions described in section 4a may

 

borrow money and issue its bonds or obligations either for funding

 

an operating deficit for a past fiscal year or years or for funding

 

a projected operating deficit in the current fiscal year or in a

 

future fiscal year or years. The bonds or obligations may be issued

 

as general obligation bonds or obligations, as bonds or obligations

 

payable solely from a specified source or sources of revenues

 

lawfully available to the city or county, or as a combination of

 

general obligation bonds or obligations and bonds or obligations

 

payable from a specified source or sources of revenues. The

 

authority granted by this act is in addition to any power granted

 

to a city or county by its charter or any other provision of law.

 

     Sec. 4. (1) Before a city may make application to the board

 

for approval to issue bonds or obligations under this act, section,

 

the legislative body of the city shall determine by resolution that

 

all of the following conditions exist:

 

     (a) The city had an accumulated operating deficit as of the

 

end of the last completed fiscal year or is projected to have an

 

accumulated operating deficit at the end of the current fiscal

 

year. The determination of the existence of an accumulated

 

operating deficit or a projected accumulated operating deficit

 

shall be made in accordance with generally accepted accounting

 

principles.

 

     (b) The amount of the deficit exceeds the amount that the city

 

may borrow from the emergency municipal loan fund pursuant to the

 

emergency municipal loan act, 1980 PA 243, MCL 141.931 to 141.942.

 

     (c) The amount of the deficit is more than the city can fund

 

by issuing tax anticipation notes under the revised municipal

 

finance act, 2001 PA 34, MCL 141.2101 to 141.2821.

 

     (2) Before a county may make application to the board for

 

approval to issue bonds or obligations under this act, section, the

 

legislative body of the county shall determine by resolution that

 

the county had an accumulated operating deficit as of the end of

 

the last completed fiscal year or is projected to have an

 

accumulated operating deficit at the end of the current fiscal

 

year. The determination of the existence of an accumulated

 

operating deficit or a projected accumulated operating deficit

 

shall be made in accordance with generally accepted accounting

 

principles.

 

     (3) If the legislative body of a city or county determines

 

that all of the conditions described in subsection (1) or (2)

 

exist, respectively, it shall also in the same resolution make the

 

following determinations:

 

     (a) The amount of the accumulated operating deficit that was

 

incurred or is projected to exist at the end of the current fiscal

 

year.

 

     (b) The maximum amount of bonds or obligations necessary to

 

fund the deficit and provide funds for the purposes described in

 

section 5.

 

     (4) Before adopting a resolution authorizing the issuance of

 

the bonds or obligations pursuant to an application under this

 

section, the city or county shall apply to the secretary of the

 

board for an order approving issuance of the bonds or obligations

 

by the city or county and shall attach to the application a copy of

 

the resolution described in this section.

 

     (5) The board shall require that the city or county filing an

 

application under this section provide the board with a statement

 

signed by the chief executive officer of the city or county, if a

 

charter county, or the chairperson of the board of county

 

commissioners, which statement indicates how the city or county

 

intends to avoid future deficits. The statement is a condition that

 

shall be met as part of the application under this section by the

 

city or county to the board for issuance of bonds or obligations

 

under this act.

 

     (6) Within 7 days after receipt of a full and complete

 

application under this section as determined by the board, the

 

board shall issue an order approving issuance of bonds or

 

obligations by the city or county in an amount not exceeding the

 

amount determined to be necessary by the legislative body of the

 

city or county under subsection (3) or denying the application.

 

     (7) After approval of the board, the determinations and

 

findings made by the legislative body of the city or county

 

pursuant to this section are conclusive.

 

     (8) The maximum amount of bonds or obligations that are

 

unlimited or limited tax bonds or obligations that may be issued by

 

a city or county under this act section shall not exceed 3% of the

 

state equalized valuation of real and personal property located

 

within the territorial boundaries of the city or county,

 

respectively, or the maximum principal amount of all bonds or

 

obligations that may be issued by a city or county under this act

 

section shall not exceed $125,000,000.00, or for bonds or

 

obligations issued by a city under this act section after January

 

1, 2010 and before September 1, 2010, the maximum principal amount

 

of all bonds or obligations issued by a city shall not exceed

 

$250,000,000.00. The limitations provided by this subsection do not

 

include bonds or obligations or portions of bonds or obligations

 

used to pay for any of the following:

 

     (a) Amounts set aside for a reserve for payment of principal,

 

interest, and redemption premiums.

 

     (b) Expected costs of issuance of the bonds or obligations.

 

     (c) The amount of any discount.

 

     (d) Bonds or obligations issued to refund outstanding bonds or

 

obligations.

 

     (9) Except as provided in section 7, the issuance of bonds or

 

obligations under this act are not subject to the revised municipal

 

finance act, 2001 PA 34, MCL 141.2101 to 141.2821. The issuance of

 

bonds or obligations described in this subsection is subject to the

 

agency financing reporting act, 2002 PA 470, MCL 129.171 to

 

129.177.

 

     Sec. 4a. (1) A city with a population of not less than 50,000

 

or a county may make application to the board under this section

 

for approval to issue 1 or more series of bonds or obligations

 

under this act.

 

     (2) Before a city or county may make application to the board

 

under this section for approval to issue bonds or obligations under

 

this act, the legislative body of the city or county shall

 

determine by resolution that all of the following conditions exist:

 

     (a) The city or county had an accumulated operating deficit as

 

of the end of the last completed fiscal year or is projected to

 

have an accumulated operating deficit either at the end of the

 

current fiscal year or at the end of 1 or more of the next 5 fiscal

 

years. The determination of the existence of an accumulated

 

operating deficit or a projected accumulated operating deficit

 

shall be made in accordance with generally accepted accounting

 

principles, and for a city making application to issue bonds under

 

this section, the determination of the existence of an accumulated

 

or projected accumulated operating deficit shall be net of amounts

 

appropriated for the repayment of advances made by the county to

 

the city pursuant to sections 87 to 87c of the general property tax

 

act, 1893 PA 206, MCL 211.87 to 211.87c, for delinquent tax

 

collections claimed by the city.

 

     (b) The amount of the accumulated operating deficit or

 

projected accumulated operating deficit is more than the city or

 

county can reasonably fund by issuing tax anticipation notes under

 

the revised municipal finance act, 2001 PA 34, MCL 141.2101 to

 

141.2821, or funding the accumulated operating deficit or projected

 

accumulated operating deficit will require 2 or more consecutive

 

years of issuing tax anticipation notes.

 

     (c) The city or county maintained a reasonable general fund

 

balance reserve in an amount not less than 10% of the operating

 

revenues of the city or county for the most recently completed

 

fiscal year.

 

     (3) If the legislative body of a city or county determines

 

that all of the conditions described in subsection (2) exist, it

 

shall also in the same resolution make the following

 

determinations:

 

     (a) The amount of the accumulated operating deficit that was

 

incurred or is projected to exist at the end of the fiscal year or

 

years in which the deficit is projected to exist.

 

     (b) The maximum amount of bonds or obligations necessary to

 

fund the deficit and provide funds for the purposes described in

 

section 5.

 

     (c) The approval of a multiyear fiscal transition plan, or an

 

amendment to an existing fiscal transition plan, which shall, at a

 

minimum, include all of the following:

 

     (i) Operating expenditure data for the 3 most recently

 

completed fiscal years and estimated expenditures for each of the

 

fiscal years covered by the fiscal transition plan.

 

     (ii) Revenue data for the 3 most recently completed fiscal

 

years and estimated revenues, by source of revenue, for each of the

 

fiscal years covered by the fiscal transition plan.

 

     (iii) The amount of operating surplus or deficit that has

 

accumulated from prior fiscal years, together with an estimate of

 

the amount of operating surplus or deficit expected in each of the

 

fiscal years covered by the fiscal transition plan, net of any

 

proceeds from bonds or obligations issued pursuant to this section

 

to fund the accumulated operating deficit or projected accumulated

 

operating deficit, and net of a reasonable general fund balance

 

reserve in an amount not to exceed 20% of the operating revenues of

 

the city or county for the most recently completed fiscal year.

 

     (iv) Specific goals, policies, objectives, and actions for the

 

reduction of operating expenses and the restructuring of government

 

to reflect anticipated actual operating revenues over the life of

 

the fiscal transition plan and a structural operating surplus by

 

the end of the last fiscal year covered by the fiscal transition

 

plan.

 

     (v) That the assessed value of the taxable property in the

 

city or county has declined during 2 of the last 3 completed fiscal

 

years.

 

     (vi) Other data relating to fiscal conditions of the city or

 

county that the city or county considers relevant to the fiscal

 

transition plan.

 

     (d) The city or county shall review the fiscal transition plan

 

not less than annually and shall modify the fiscal transition plan

 

to reflect actual operating results over the fiscal years covered

 

by the fiscal transition plan, and a city or county shall submit

 

when modified, and in any event not less than annually, a copy of

 

the modified fiscal transition plan to the board.

 

     (e) The fiscal transition plan shall be prepared in accordance

 

with generally accepted accounting principles.

 

     (4) Before adopting a resolution authorizing the issuance of

 

the bonds or obligations pursuant to an application under this

 

section, the city or county shall apply to the secretary of the

 

board for an order approving issuance of the bonds or obligations

 

by the city or county and shall attach to the application a copy of

 

the resolution described in this section.

 

     (5) The board shall require that the city or county filing an

 

application under this section provide the board with a statement

 

signed by the chief executive officer of the city or county, if a

 

charter county, or the chairperson of the board of county

 

commissioners, which statement indicates how the city or county

 

intends to implement the fiscal transition plan so as to avoid

 

future deficits. The statement is a condition that shall be met as

 

part of the application under this section by the city or county to

 

the board for issuance of bonds or obligations under this act.

 

     (6) Within 7 days after receipt of a full and complete

 

application under this section as determined by the board, the

 

board shall issue an order approving the issuance of bonds or

 

obligations by the city or county in an amount not exceeding the

 

amount determined to be necessary by the legislative body of the

 

city or county under subsection (3) or denying the application.

 

     (7) After approval of the board, the determinations and

 

findings made by the legislative body of the city or county

 

pursuant to this section are conclusive.

 

     (8) The maximum amount of bonds or obligations that are

 

unlimited or limited tax bonds or obligations that may be issued by

 

a city or county under this section shall not exceed 3% of the

 

state equalized valuation of real and personal property located

 

within the territorial boundaries of the city or county,

 

respectively. The limitations provided by this subsection do not

 

include bonds or obligations or portions of bonds or obligations

 

used to pay for any of the following:

 

     (a) Amounts set aside for a reserve for payment of principal,

 

interest, and redemption premiums.

 

     (b) Expected costs of issuance of the bonds or obligations.

 

     (c) The amount of any discount.

 

     (d) Bonds or obligations issued to refund outstanding bonds or

 

obligations.

 

     (9) Except as provided in section 7, the issuance of bonds or

 

obligations under this act is not subject to the revised municipal

 

finance act, 2001 PA 34, MCL 141.2101 to 141.2821. The issuance of

 

bonds or obligations described in this subsection is subject to the

 

agency financing reporting act, 2002 PA 470, MCL 129.171 to

 

129.177.

 

     Sec. 5. Subject to the limitation limitations of section

 

sections 4(8) and 4a(8), the amount of bonds or obligations issued

 

pursuant to this act may include the amount necessary to fund the

 

accumulated operating deficit of the city or county or projected

 

accumulated operating deficit of the city or county as determined

 

pursuant to section 4 or 4a, respectively, a reserve to secure

 

payment of principal or interest on the bonds or obligations in an

 

amount not exceeding the maximum amount of principal and interest

 

becoming due on the bonds or obligations in any fiscal year, a

 

discount of not to exceed 10% of the principal amount of the bonds

 

or obligations, and an amount sufficient to pay all legal,

 

financial, accounting, letter of credit, bond insurance, financial

 

guaranty, surety, or other credit enhancement fees, election,

 

printing, and other expenses related to the issuance of the bonds

 

or obligations.

 

     Sec. 9. (1) All bonds or obligations issued pursuant to this

 

act before April 11, 1988 are subject to the requirements of former

 

1981 PA 97.

 

     (2) Unless otherwise provided by the city or county in the

 

resolution required by section 4, bonds or obligations issued

 

pursuant to this act on or after April 11, 1988 and before January

 

1, 2010 are not subject to the requirements of former 1981 PA 97,

 

notwithstanding that distributable aid is pledged or assigned to

 

secure bonds or obligations under this act.

 

     (3) In the resolution authorizing the bonds or obligations,

 

the legislative body of the city or county may provide for

 

appointment of a trustee, escrow agent, or other person to hold

 

funds or reserves for payment of the bonds or obligations and to

 

perform other duties as the city or county determines, may provide

 

for the vesting in the trustee, escrow agent, or other designated

 

person the property, rights, powers, and remedies as the city or

 

county determines, may pledge and create a lien upon any

 

unencumbered revenues or taxes of the city or county, and may

 

provide for payment of pledged revenues or taxes directly to a

 

paying agent, trustee, escrow agent, the state treasurer, or other

 

person to be held and used solely for payment of principal and

 

interest on the bonds or obligations. A pledge pursuant to this act

 

for benefit of bondholders or others is perfected without delivery,

 

recording, or notice. The resolution authorizing the bonds or

 

obligations also may provide for covenants and promises with

 

respect to fiscal, budget, and accounting matters that are

 

considered necessary or appropriate in the judgment of the city or

 

county to sell the bonds or obligations to the best advantage of

 

the city or county.

 

     (4) In the resolution authorizing the bonds or obligations for

 

the payment of the bonds or obligations, the city or county may

 

provide for the payment of the bonds or obligations with

 

distributable aid received or to be received by the city or county

 

derived from the imposition of taxes by the state and returned or

 

to be returned to the city or county as provided by law except for

 

money that the state constitution of 1963 prohibits for use for

 

such a pledge. The city or county and the state treasurer may enter

 

into an agreement providing for the direct payment of distributable

 

aid to a paying agent, trustee, escrow agent, or other person to be

 

used for the sole purpose of paying principal or interest on bonds

 

or obligations issued pursuant to this act, and that money may be

 

pledged by the city or county for the payment of bonds or

 

obligations issued under this act. If the city or county and the

 

state treasurer enter into such an agreement, notwithstanding any

 

other provision of this act to the contrary, for bonds or

 

obligations issued after the effective date of the 2010 amendatory

 

act that amended this subsection February 5, 2010 and made payable

 

from distributable aid in the resolution authorizing those bonds or

 

obligations a statutory lien and trust is created applicable to

 

distributable aid received or to be received from the state

 

treasurer by a paying agent, escrow agent, or a trustee, after the

 

distributable aid has been appropriated but subject to any

 

subsequent reduction of that appropriation by operation of law or

 

executive order. The distributable aid paid or to be paid to a

 

paying agent, trustee, escrow agent, or other person for the

 

purpose of paying the principal of and interest on the bonds or

 

obligations issued pursuant to this act shall be subject to a lien

 

and trust, which for bonds or obligations issued pursuant to this

 

act after the effective date of the 2010 amendatory act that

 

amended this subsection February 5, 2010 and after bonds are issued

 

subject to the statutory lien created by this subsection, is hereby

 

made a statutory lien and trust paramount and superior to all other

 

liens and interests of any kind, for the sole purpose of paying the

 

principal of and interest on bonds and obligations issued pursuant

 

to this act and any other bonds subsequently issued by the city or

 

county sharing a parity or subordinate pledge of such distributable

 

aid. The lien created under this subsection for the benefit of

 

bondholders or others is perfected without delivery, recording, or

 

notice. The distributable aid held or to be held by a paying agent,

 

trustee, escrow agent, or other person shall be held in trust for

 

the sole benefit of the holders of the bonds or obligations issued

 

pursuant to this act and any other bonds subsequently issued by the

 

city or county sharing a parity or subordinate pledge of such

 

distributable aid shall be exempt from being levied upon, taken,

 

sequestered, or applied toward paying the debts or liabilities of

 

the city or county other than for payment of debt service on the

 

bonds or obligations to which the lien applies and the holders of

 

bonds or obligations issued pursuant to this act after January 1,

 

2010, but before September 1, 2010, after January 1, 2010 shall

 

have a first priority lien that is paramount and superior to all

 

other liens and interests of any kind that arise or are created

 

after the effective date of the 2010 amendatory act that amended

 

this subsection February 5, 2010 and after bonds are issued subject

 

to the statutory lien created by this subsection. However, nothing

 

in the February 5, 2010 amendatory act that amended this subsection

 

shall abridge or reduce the ability of the state treasurer to

 

withhold distributable aid from a city or county as provided by the

 

Glenn Steil state revenue sharing act of 1971, 1971 PA 140, MCL

 

141.901 to 141.921. For bonds or obligations issued pursuant to

 

this act after January 1, 2010 and before September 1, 2010, the

 

maximum principal and interest becoming due on the bonds or

 

obligations in any fiscal year shall not exceed the amount of

 

shared revenues received by the city for the state fiscal year

 

ending September 30, 2009 as provided for in the Glenn Steil state

 

revenue sharing act of 1971, 1971 PA 140, MCL 141.901 to 141.921,

 

and as provided in the state constitution of 1963. This subsection

 

shall not be construed to do any of the following:

 

     (a) Create or constitute state indebtedness.

 

     (b) Require the state to continue to impose and collect taxes

 

from which distributable aid is paid or to make payments of

 

distributable aid.

 

     (c) Limit or prohibit the state from repealing or amending a

 

law enacted for the imposition of taxes from which distributable

 

aid is paid, for the payment or apportionment of distributable aid,

 

or for the manner, time, or amount of distributable aid.

 

     (5) With respect to bonds or obligations issued on or before

 

September 30, 1988, in the resolution authorizing the bonds or

 

obligations, the legislative body of the city or county may provide

 

that, from each collection of ad valorem property taxes after the

 

issuance of the bonds or obligations, there shall be set aside in a

 

special fund, to be used for the payment of principal and interest

 

on the bonds or obligations, an amount equal to the total amount of

 

the collection multiplied by a fraction determined as follows:

 

     (a) The numerator of the fraction is 125% of the amount of

 

principal and interest coming due on the bonds or obligations in

 

the current fiscal year.

 

     (b) The denominator of the fraction is the total amount of the

 

tax levied for the current fiscal year multiplied by a fraction,

 

the numerator of which is the total of the taxes collected during

 

the 5 prior fiscal years and the denominator of which is the total

 

of taxes levied during the 5 prior fiscal years.

 

     (6) An authorizing resolution under subsection (4) or (5) may

 

provide that all or any portion of the taxes collected and set

 

aside as provided in subsection (5) shall not be used for any other

 

purpose.

 

     (7) As used in this section, "distributable aid" means state

 

shared revenues provided for in the Glenn Steil state revenue

 

sharing act of 1971, 1971 PA 140, MCL 141.901 to 141.921, any other

 

law providing for distribution of state shared revenues which are

 

derived from the same taxes distributed under the Glenn Steil state

 

revenue sharing act of 1971, 1971 PA 140, MCL 141.901 to 141.921,

 

and any law providing reimbursement to a municipality under the

 

state constitution of 1963 as reimbursement for revenue which would

 

otherwise be collected from taxes imposed by the municipality.