Bill Text: MI SB1129 | 2011-2012 | 96th Legislature | Engrossed
Bill Title: State financing and management; bonds; certain types of bonds; provide for. Amends secs. 103, 305 & 503 of 2001 PA 34 (MCL 141.2103 et seq.) & adds sec. 518.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2012-10-17 - Assigned Pa 0329'12 With Immediate Effect [SB1129 Detail]
Download: Michigan-2011-SB1129-Engrossed.html
SB-1129, As Passed Senate, June 14, 2012
SUBSTITUTE FOR
SENATE BILL NO. 1129
A bill to amend 2001 PA 34, entitled
"Revised municipal finance act,"
by amending sections 103, 305, and 503 (MCL 141.2103, 141.2305, and
141.2503) and by adding section 518.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 103. As used in this act:
(a) "Assessed value", "assessed valuation", "valuation as
assessed", and "valuation as shown by the last preceding tax
assessment roll", or similar terms, used in this act, any statute,
or charter as a basis for computing limitations upon the taxing or
borrowing power of any municipality, mean the state equalized
valuation as determined under the general property tax act, 1893 PA
206,
MCL 211.1 to 211.157.211.155.
(b) "Chief administrative officer" means that term as defined
in section 2b of the uniform budgeting and accounting act, 1968 PA
2, MCL 141.422b.
(c) "Debt" means all borrowed money, loans, and other
indebtedness, including principal and interest, evidenced by bonds,
obligations, refunding obligations, notes, contracts, securities,
refunding securities, municipal securities, or certificates of
indebtedness that are lawfully issued or assumed, in whole or in
part, by a municipality, or will be evidenced by a judgment or
decree against the municipality.
(d) "Debt retirement fund" means a segregated account or group
of accounts used to account for the payment of, interest on, or
principal and interest on a municipal security.
(e) "Deficit" means a situation for any fund of a municipality
in which, at the end of a fiscal year, total expenditures,
including an accrued deficit, exceeded total revenues for the
fiscal year, including any surplus carried forward.
(f) "Defined benefit plan" means a retirement program other
than a defined contribution plan.
(g) "Defined contribution plan" means a retirement program
that provides for an individual account for each participant and
for benefits based solely upon the amount contributed to the
participant's account, and any income, expenses, gains, and losses
credited or charged to the account, and any forfeitures of accounts
of other participants that may be allocated to the participant's
account.
(h) (f)
"Department" means the
department of treasury.
(i) (g)
"Fiscal year" means a
12-month period fixed by
statute, charter, or ordinance, or if not so fixed, then as
determined by the department.
(j) (h)
"Governing body" means
the county board of
commissioners of a county; the township board of a township; the
council, common council, or commission of a city; the council,
commission, or board of trustees of a village; the board of
education or district board of a school district; the board of an
intermediate school district; the board of trustees of a community
college district; the county drain commissioner or drainage board
of a drainage district; the board of the district library; the
legislative body of a metropolitan district; the port commission of
a port district; and, in the case of another governmental authority
or agency, that official or official body having general governing
powers over the authority or agency.
(k) (i)
"Municipal security"
means a security that when issued
was
not exempt from this act or the municipal finance act, former
1943
PA 202 , MCL 131.1 to 139.3, by the provisions of this act or
by
the provisions of the municipal finance act, former 1943
PA 202
,
MCL 131.1 to 139.3, or by the provisions
of the law authorizing
its issuance and that is payable from or secured by any of the
following:
(i) Ad valorem real and personal property taxes.
(ii) Special assessments.
(iii) The limited or unlimited full faith and credit pledge of
the municipality.
(iv) Other sources of revenue described in this act for debt or
securities authorized by this act.
(l) (j)
"Municipality" means a
county, township, city, village,
school district, intermediate school district, community college
district, metropolitan district, port district, drainage district,
district library, or another governmental authority or agency in
this state that has the power to issue a security. Municipality
does not include this state or any authority, agency, fund,
commission, board, or department of this state.
(m) (k)
"Outstanding security"
means a security that has been
issued, but not defeased or repaid, including a security that when
issued
was exempt from this act or the municipal finance act,
former
1943 PA 202, MCL 131.1 to 139.3, by
the provisions of this
act
or by the provisions of the municipal finance act, former 1943
PA
202 , MCL 131.1 to 139.3, or by the provisions of the law
authorizing its issuance.
(n) (l) "Qualified
status" means a municipality that has filed
a qualifying statement under section 303 and has been determined by
the department to be qualified to issue municipal securities
without further approval by the department.
(o) (m)
"Refunding security"
means a municipal security issued
to refund an outstanding security.
(p) "Retirement program" means a program of rights and
obligations which a municipality establishes, maintains, or
participates in and which, by its express terms or as a result of
surrounding circumstances, does 1 or more of the following:
(i) Provides retirement income to participants.
(ii) Results in a deferral of income for periods extending to
the termination of covered employment or beyond.
(q) (n)
"Security" means an
evidence of debt such as a bond,
note, contract, obligation, refunding obligation, certificate of
indebtedness, or other similar instrument issued by a municipality,
which pledges payment of the debt by the municipality from an
identified source of revenue.
(r) (o)
"Sinking fund" means a
fund for the payment of
principal only of a mandatory redemption security.
(s) (p)
"Taxable value" means the
taxable value of the
property as determined under section 27a of the general property
tax act, 1893 PA 206, MCL 211.27a.
(t) "Unfunded pension liability" means the amount a defined
benefit plan's liabilities exceed its assets according to the most
recent governmental accounting standards board's applicable
standards.
Sec. 305. (1) A municipal security authorized by law to be
issued by a municipality may, notwithstanding the provisions of a
charter, bear no interest as provided in this section or a rate of
interest not to exceed a maximum rate established by the governing
body of the issuing municipality as set forth in its resolution or
ordinance authorizing the issuance of the municipal security, which
rate shall not exceed 18% per annum or a per annum rate determined
by the department at the request of the municipality, whichever is
higher. In making its determination, the department shall establish
a rate that shall bear a reasonable relationship to 80% of the
adjusted prime rate determined by the department under section 23
of 1941 PA 122, MCL 205.23. Except as otherwise provided in this
section, the rate determined by the department shall be conclusive
as to the maximum rate of interest permitted for a municipal
security issued under this act.
(2) Except as provided in subsection (3), a municipal security
issued under this act shall not be sold at a discount exceeding 10%
of the principal amount of the municipal security. The amortization
of the discount shall be considered interest and shall be within
the interest rate limitation set forth in subsection (1).
(3) A municipal security may be sold at a discount exceeding
10% of the principal amount of the municipal security only if 1 or
more of the following conditions apply, as determined by the
department:
(a) The sale will result in the more even distribution for the
municipality of total debt service on proposed and outstanding
municipal securities.
(b) The sale will result in an interest cost savings when
compared to the best available alternative that does not include a
municipal security being sold at a discount exceeding 10% of the
principal amount.
(c) The issuance is based on the availability of specific
revenues previously pledged for another purpose and lawfully
available for this purpose.
(d) The municipal security is issued to this state or the
federal government to secure a loan or agreement.
(e) The municipal security is issued pursuant to section 518.
(4) A municipal security issued in accordance with subsection
(3)(a), (b), or (c) shall be rated investment grade by a nationally
recognized rating agency or have insurance for payment of the
principal and interest on the municipal security to the holders of
the municipal security.
(5) Notwithstanding any other provision of this section, a
municipal security meeting the requirements of subsection (3) that
is a refunding security shall not have a maturity that exceeds the
maturity of the existing municipal security.
(6) Not more than 25% of the total principal amount of any
authorized issue of a municipal security shall meet the
qualifications under subsection (3)(a), (b), and (c).
(7) A municipal security may bear no interest if sold in
accordance with a federal program by which the holder of the
municipal security, as a result of holding the municipal security,
may declare a credit against a federal tax.
(8) A municipal security may bear no interest and appreciate
as to principal amount if it meets the requirements of subsections
(3), (4), and (6). The accreted principal amount of a municipal
security shall be considered interest and shall be within the
interest rate limitations provided in subsection (1).
Sec. 503. (1) Municipal securities of a single issue may
mature serially or be subject to mandatory redemptions, or both,
with maturities as fixed by the governing body of the municipality.
In any case, the first maturity or mandatory redemption date shall
occur not later than 5 years after the date of issuance, and the
total principal amount maturing or subject to mandatory redemption
in any year after 4 years from the date of issuance shall not be
less than 1/5 of the total principal amount maturing or subject to
mandatory redemption in any subsequent year.
(2) In the resolution authorizing the issuance of a municipal
security, the governing body of the municipality may provide that
the municipality may purchase municipal securities in the open
market at a price not greater than that payable on the next
redemption date in order to satisfy all or part of the next
succeeding scheduled mandatory redemption.
(3) The governing body of the municipality may provide that
some or all of the principal amounts maturing in any year may be
redeemed at the option of the municipality at the times, on the
terms and conditions, and at the price as provided by resolution of
the governing body, except that a municipality shall not agree to
pay a premium exceeding 3% of the principal amount being redeemed.
(4) All outstanding and authorized municipal securities of a
school district payable out of taxes may be treated as a single
issue for the purpose of fixing maturities. Several series of
municipal securities issued under the same authorization may be
treated as a single issue for the purpose of fixing maturities.
(5) A municipal security issued by a school district that is
sold in accordance with a federal program in which the holder of
the municipal security, as a result of holding the municipal
security, may declare a credit against a federal tax is exempt from
the provisions of subsection (1) if the school district deposits in
trust payments to provide for the repayment of the municipal
security and the first required payment shall occur not later than
5 years after the date of issuance and each required payment in any
year after 4 years from the date of issuance shall not be less than
1/5 of the total required payment in any subsequent year.
(6) A municipal security issued by a municipality pursuant to
section 518 shall not be subject to the maturity and mandatory
redemption requirements of subsection (1).
Sec. 518. (1) In connection with the partial or complete
cessation of accruals to a defined benefit plan or the closure of
the defined benefit plan to new or existing employees, and the
implementation of a defined contribution plan, or to fund costs of
a municipality that has already ceased accruals to a defined
benefit plan, a municipality may by ordinance or resolution of its
governing body, and without a vote of its electors, issue a
municipal security under this section to pay all or part of the
costs of the unfunded pension liability for that retirement program
provided that the amount of taxes necessary to pay the principal
and interest on that municipal security, together with the taxes
levied for the same year, shall not exceed the limit authorized by
law.
(2) Before a municipality issues a municipal security under
this section, the municipality shall publish a notice of intent to
issue the municipal security. The notice of intent and the rights
of referendum shall meet the requirements of section 517(2).
(3) Before a municipality issues a municipal security under
this section, the municipality shall prepare and make available to
the public a comprehensive financial plan that includes all of the
following:
(a) An analysis of the current and future obligations of the
municipality with respect to each retirement program of the
municipality.
(b) Evidence that the issuance of the municipal security
together with other funds lawfully available will be sufficient to
eliminate the unfunded pension liability.
(c) A debt service amortization schedule and a description of
actions required to satisfy the debt service amortization schedule.
(d) A certification by the person preparing the plan that the
comprehensive financial plan is complete and accurate.
(4) Municipal securities issued under this section by a
municipality and the interest on and income from the municipal
securities are exempt from taxation by this state or a political
subdivision of this state.
(5) A municipality issuing municipal securities under this
section may enter into indentures or other agreements with trustees
and escrow agents for the issuance, administration, or payment of
the municipal securities.
(6) Before a municipality issues a municipal security under
this section, the municipality shall obtain the approval of the
department. The department shall review the proposed issuance of
municipal securities and if it verifies that the municipality meets
the requirements of this section, the department shall approve the
issuance of municipal securities under this section. If the
department does not respond within 60 days, the municipal
securities to be issued under this section are deemed to have been
approved.
(7) If a municipality has issued a municipal security under
this section, that municipality shall not change the benefit
structure of the defined benefit plan if the defined benefit plan
is undergoing the partial cessation of accruals. However, a
municipality may reduce benefits of the defined benefit plan for
years of service that accrue after the issuance of municipal
securities under this section.
