SB-0770, As Passed Senate, June 7, 2012

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

SENATE BILL NO. 770

 

 

 

 

 

 

 

 

 

 

 

     A bill to amend 2005 PA 92, entitled

 

"School bond qualification, approval, and loan act,"

 

by amending sections 3, 4, 5, 6, 7, 8, 9, 11, 13, 16, and 18 (MCL

 

388.1923, 388.1924, 388.1925, 388.1926, 388.1927, 388.1928,

 

388.1929, 388.1931, 388.1933, 388.1936, and 388.1938), section 9 as

 

amended by 2009 PA 50.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 3. As used in this act:

 

     (a) "Computed millage" means the number of mills in any year,

 

not less than 7 mills and not more than 13 mills, determined on the

 

date of issuance of the order qualifying the bonds or on a later

 

date if requested by the school district and approved by the state

 

treasurer, that, if levied by the school district, will generate

 

sufficient annual proceeds to pay principal and interest on all the

 


school district's qualified bonds plus principal and interest on

 

all qualified loans related to those qualified bonds no later than

 

the final mandatory repayment date. specified in the note and

 

repayment agreement entered into by the school district under this

 

act.Based on changes of circumstances, including, but not limited

 

to, additional bond qualification, refundings, changes in qualified

 

loan interest rates, changes in taxable values, and assumptions

 

contained in any then currently effective guidelines issued by the

 

state treasurer pursuant to section 5(2)(c), the school district

 

shall not less than annually, beginning on October 1, 2012,

 

determine whether a higher or lower computed millage is necessary

 

to generate sufficient annual levy proceeds to pay principal and

 

interest on all of the school district's qualified bonds and

 

principal and interest on all qualified loans related to those

 

qualified bonds not later than the final mandatory repayment date.

 

If the school district determines that a higher or lower computed

 

millage is required, the school district shall promptly notify the

 

state treasurer in writing and the higher or lower millage shall

 

become the computed millage and the school district shall levy the

 

higher or lower computed millage rate or 13 mills, whichever is

 

less, provided that a lower computed millage shall not be

 

implemented if it would cause the computed millage rate to fall

 

below the computed millage established pursuant to the most recent

 

order qualifying bonds, and in no case below 7 mills, and provided

 

further that if the state treasurer reasonably determines that a

 

school district has failed to accurately redetermine its computed

 

millage as provided above, the state treasurer may make that

 


redetermination and in that case shall notify the school district

 

in writing of the computed millage determined by the state

 

treasurer and the redetermined computed millage shall be levied by

 

the school district.

 

     (b) "Final mandatory repayment date" means the final mandatory

 

repayment date determined by the state treasurer under section 9.

 

     (c) "Michigan finance authority" means the Michigan finance

 

authority created under Executive Reorganization Order No. 2010-2,

 

MCL 12.194.

 

     (d) (b) "Qualified bond" means a bond that is qualified under

 

this act for state loans as provided in section 16 of article IX of

 

the state constitution of 1963. A qualified bond includes the

 

interest amount required for payment of a school district's net

 

interest obligation under an interest rate exchange or swap, hedge,

 

or other agreement entered into pursuant to the revised municipal

 

finance act, 2001 PA 34, MCL 141.2101 to 141.2821, but does not

 

include a termination payment or similar payment related to the

 

termination or cancellation of an interest rate exchange or swap,

 

hedge, or other similar agreement. A qualified bond may include a

 

bond issued to refund loans owed to the state under this act.

 

     (e) (c) "Qualified loan" means a loan made under this act or

 

former 1961 PA 108 , MCL 388.951 to 388.963, from this state to a

 

school district to pay debt service on a qualified bond.

 

     (f) (d) "Revolving loan fund" means the school loan revolving

 

fund created under section 16c of the shared credit rating act,

 

1985 PA 227, MCL 141.1066c.

 

     (g) (e) "School district" means a general powers school

 


district organized under the revised school code, 1976 PA 451, MCL

 

380.1 to 380.1852, or a school district of the first class as

 

described in the revised school code, 1976 PA 451, MCL 380.1 to

 

380.1852, having the power to levy ad valorem property taxes.

 

     (h) (f) "State treasurer" means the state treasurer or his or

 

her duly authorized designee.

 

     (g) "Superintendent of public instruction" means the

 

superintendent of public instruction appointed under section 3 of

 

article VIII of the state constitution of 1963.

 

     (i) (h) "Taxable value" means the value determined under

 

section 27a of the general property tax act, 1893 PA 206, MCL 211.1

 

to 211.157.211.27a.

 

     Sec. 4. (1) A school district may issue and market bonds as

 

qualified bonds if the state treasurer has issued an order granting

 

qualification under this act.

 

     (2) Except with regard to qualification of new bonds, nothing

 

in this act shall be construed to alter the terms and conditions

 

applicable to outstanding qualified bonds issued in accordance with

 

former 1961 PA 108. , MCL 388.951 to 388.963, and the loans

 

associated with those qualified bonds. Unless otherwise amended as

 

permitted by this act, outstanding qualified loans incurred in

 

association with outstanding qualified bonds described in this

 

subsection shall continue to bear interest and as provided in

 

section 9(8) but otherwise shall be due and payable as provided in

 

the repayment agreements entered into between the school district

 

and the state before the effective date of this act.

 

     (3) The state treasurer may qualify bonds for which the state

 


treasurer has received an application for prequalification on or

 

before May 25, 2005 without regard to the requirements of section

 

5(2)(f) if the electors of the school district approve the bonds at

 

an election held during 2005.

 

     Sec. 5. (1) A school district may apply to the state treasurer

 

for preliminary qualification of a proposed school bond issue by

 

filing an application in the form and containing the information

 

required by this act.

 

     (2) An application for preliminary qualification of a school

 

bond shall contain all of the following information:

 

     (a) The proposed ballot language to be submitted to the

 

electors.

 

     (b) A description of the project or projects proposed to be

 

financed.

 

     (c) A pro forma debt service projection showing the estimated

 

mills the school district will levy to provide revenue the school

 

district will use to pay the qualified bonds, any outstanding

 

qualified bonds, and any outstanding or projected qualified loans

 

of the school district. For the purpose of the pro forma debt

 

service projection, the school district may assume for the first 5

 

years following the date of the application the average growth or

 

decline in taxable value for the 5 years or such other period of

 

time requested by the school district if approved by the state

 

treasurer preceding the date of the application and the lesser of

 

that average growth or decline rate or 3% for the 20 years

 

immediately preceeding the date of the application but not more

 

than 3% or less than 0% growth rate, for the remaining term of the

 


Senate Bill No. 770 as amended June 7, 2012

 

proposed bonds<<.

 

 

 

 

 

                     >>

 

     (d) Evidence that the rate of utilization of each project to

 

be financed will be at least 85% for new buildings and 60% for

 

renovated facilities. If the projected enrollment of the district

 

would not otherwise support utilization at the rates described in

 

this subsection, the school district may include an explanation of

 

the actions the school district intends to take to address the

 

underutilization, including, if applicable, actions to close school

 

buildings or other actions designed to assure continued assured use

 

of the facilities being financed.

 

     (e) Evidence that the cost per square foot of the project or

 

projects will be reasonable in light of economic conditions

 

applicable to the geographic area in which the school district is

 

located.

 

     (f) Evidence that the school district will repay all

 

outstanding qualified bonds, the proposed qualified bonds, all

 

outstanding qualified loans, at the times described in section

 

9.and all qualified loans expected to be incurred with respect to

 

all qualified bonds of the school district, including the proposed

 

qualified bond issue, not later than the applicable final mandatory

 

repayment date.

 

     (g) The weighted average age of all school buildings in the

 

school district based on square footage.

 

     (g) (h) The overall utilization rate of all school buildings

 


in the school district, excluding special education purposes.

 

     (i) The taxable value per pupil.

 

     (h) (j) The total bonded debt outstanding of the school

 

district and the total taxable value of property in the school

 

district for the school district fiscal year in which the

 

application is filed.

 

     (i) (k) A statement describing any environmental or usability

 

problems to be addressed by the project or projects.

 

     (j) (l) An architect's analysis of the overall condition of the

 

facilities to be renovated or replaced as a part of the project or

 

projects.

 

     (k) (m) An amortization schedule demonstrating that the

 

weighted average maturity of the qualified bond issue does not

 

exceed 120% of the average reasonably expected useful life of the

 

facilities, excluding land and site improvements, being financed or

 

refinanced with the proceeds of the qualified bonds, determined as

 

of the later of the date on which the qualified bonds will be

 

issued or the date on which each facility is expected to be placed

 

in service.

 

     (l) An agreement that the school district will keep books and

 

records detailing the investment and expenditure of the proceeds of

 

the qualified bonds and, at the request of the state treasurer, the

 

school district will promptly, but not later than the date

 

specified in the request, which date shall be not less than 5

 

business days after the date of the request, submit information

 

requested by the state treasurer related to the detailed

 

information maintained by the school district as to the investment

 


Senate Bill No. 770 as amended June 7, 2012

 

and expenditure of the proceeds of its qualified bonds.

 

     Sec. 6. The state treasurer shall prequalify bonds of a school

 

district if the state treasurer determines all of the following:

 

     (a) The issuance of additional qualified bonds will not

 

prevent the school district from repaying its outstanding qualified

 

bonds, the proposed bonds, all outstanding qualified loans, on the

 

earlier of the dates described in section 9.and all qualified loans

 

expected to be incurred with respect to all qualified bonds of the

 

school district, including the proposed bond issue, not later than

 

the applicable final mandatory repayment date.

 

     (b) The form and language of the ballot <<

 

>> conforms with the requirements of this act.

 

     (c) The school district has filed an application complying

 

with the requirements of section 5.

 

     (d) If the proposed bond issue is approved by the voters after

 

September 30, 2012 and will result in additional qualified loans,

 

the outstanding balance of all qualified loans on the most recent

 

May 1 or November 1 did not exceed $1,800,000,000.00.

 

     (e) The issuance of additional qualified bonds approved by

 

voters after September 30, 2012 will not have an adverse financial

 

impact on the school district, this state, or the school loan

 

revolving fund. In making this determination, the state treasurer

 

shall consider relevant factors, including, but not limited to,

 

whether the issuance of the proposed bond issue will cause the

 

aggregate outstanding amount of qualified and nonqualified bonds,

 

including the proposed bond issue, and currently outstanding

 

qualified loans of the school district to exceed 25% of the taxable

 


value of the school district at the time the proposed bonds are

 

issued.

 

     Sec. 7. (1) The state treasurer shall qualify bonds of a

 

school district if the state treasurer determines all of the

 

following:

 

     (a) A majority of the school district electors have approved

 

the bonds.

 

     (b) The terms of the bond issue comply with applicable

 

provisions of the revised school code, 1976 PA 451, MCL 380.1 to

 

380.1852.

 

     (c) The school district is in compliance with the revised

 

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

 

     (d) The weighted average maturity of the qualified bond issue

 

does not exceed 120% of the average reasonably expected useful life

 

of the facilities, excluding land and site improvements, being

 

financed or refinanced with the proceeds of the bonds, determined

 

as of the later of the date on which the qualified bonds will be

 

issued or the date on which each facility is expected to be placed

 

in service.

 

     (e) The school district has filed any information necessary to

 

update the contents of the original application to reflect changes

 

in any of the information approved in the preliminary qualification

 

process.

 

     (f) The school district has paid a qualification fee of not

 

less than $3,000.00 or the amount determined by the state

 

treasurer, which shall be approximately equal to the amount

 

required to pay the estimated administrative expenses incurred

 


under this act for the fiscal year in which the state treasurer

 

imposes the fee.The school district has agreed that the school

 

district will keep books and records detailing the investment and

 

expenditure of the proceeds of the qualified bonds and, at the

 

request of the state treasurer, the school district will promptly,

 

but not later than the date specified in the request, which date

 

shall be not less than 5 business days after the date of the

 

request, submit information requested by the state treasurer

 

related to the detailed information maintained by the school

 

district as to the investment and expenditure of the proceeds of

 

its qualified bonds.

 

     (2) An order qualifying bonds shall specify the principal and

 

interest payment dates for all the bonds, the maximum principal

 

amount of and maximum interest rate on the bonds, the computed

 

millage, if any, the final mandatory repayment date, for any loans

 

made with respect to those bonds, and other matters as the state

 

treasurer shall determine or as are required by this act.

 

     (3) If the application for prequalification demonstrates that

 

the school district will borrow from this state in accordance with

 

this act, the state treasurer and the school district shall enter

 

into a loan agreement setting forth the terms and conditions of any

 

qualified loans to be made to the school district under this act.

 

     (4) If a school district does not issue its qualified bonds

 

within 180 days after the date of the order qualifying bonds, the

 

order shall no longer be effective. However, the school district

 

may reapply for qualification by filing an application and

 

information necessary to update the contents of the original

 


application for prequalification or qualification.

 

     (5) The state treasurer shall qualify refunding bonds issued

 

to refund qualified loans or qualified bonds if the state treasurer

 

finds that the all of the following are met:

 

     (a) The refunding bonds comply with the provisions of the

 

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

 

141.2821.

 

     (b) That the school district will repay all outstanding

 

qualified bonds, the proposed qualified bonds, all outstanding

 

qualified loans, and all qualified loans expected to be incurred

 

with respect to all qualified bonds of the school district,

 

including the proposed qualified bond issue, not later than the

 

applicable final mandatory repayment date.

 

     (c) That the refunding will be financially beneficial to this

 

state.

 

     Sec. 8. A ballot submitted to the school electors of a school

 

district after November 8, 2005 requesting authorization to issue

 

unlimited tax general obligations that will be guaranteed by this

 

state in accordance with section 16 of article IX of the state

 

constitution of 1963 shall inform the electors that if the school

 

district borrows expects to borrow from this state to pay debt

 

service on the bonds, the school district may be required to

 

continue to levy mills beyond the term of the bonds to repay this

 

state.the estimated total amount of the principal of that borrowing

 

and the interest to be paid on that borrowing, the estimated

 

duration of the millage levy, and the estimated computed millage

 

rate for that levy. The ballot shall also inform the electors that

 


Senate Bill No. 770 as amended June 7, 2012

 

the estimated computed millage rate may change based on changes in

 

certain circumstances.

 

     Sec. 9. (1) Except as otherwise provided in this act, a school

 

district may borrow from the state an amount not greater than the

 

difference between the proceeds of the school district's computed

 

millage and the amount necessary to pay principal and interest on

 

its qualified bonds, including any necessary allowances for

 

estimated tax delinquencies.

 

     (2) For school districts having qualified loans outstanding as

 

of July 20, 2005, the state treasurer shall review information

 

relating to each school district regarding the taxable value of the

 

school district and the actual debt service of outstanding

 

qualified bonds as of July 20, 2005 and shall issue an order

 

establishing the payment date for all those outstanding qualified

 

loans and any additional qualified loans expected to be incurred by

 

those school districts related to qualified bonds issued before

 

July 20, 2005. The payment date shall be not later than 72 months

 

after the date on which the qualified bonds most recently issued by

 

the school district are due and payable. The payment date

 

established pursuant to this subsection for a school district is a

 

final mandatory repayment date.

 

     (3) For qualified loans related to qualified bonds issued

 

after July 20, 2005, the qualified loans shall be due <<

 

not later than>> 72 months

 

after the date on which the qualified bonds for which the school

 

borrowed from this state are due and payable. The due date

 

determined pursuant to this subsection for a school district is a

 


final mandatory repayment date. This section does not preclude

 

early repayment of qualified bonds or qualified loans.

 

     (4) Except with regard to qualified loans described in

 

subsection (2), each loan made or considered made to a school

 

district under this act shall be for debt service on only a

 

specific qualified bond issue. The state treasurer shall maintain

 

separate accounts for each school district on the books and

 

accounts of this state noting the qualified bond, the related

 

qualified loans, the final payment date of the bonds, the final

 

payment mandatory repayment date of the qualified loans, and the

 

interest rate accrued on the loans.

 

     (5) For qualified loans relating to qualified bonds issued

 

after July 20, 2005, a school district shall continue to levy the

 

computed mills millage until it has completely repaid all principal

 

and interest on its qualified loans.

 

     (6) For qualified loans relating to qualified bonds issued

 

before July 20, 2005, a school district shall continue to comply

 

with the levy and repayment requirements imposed before July 20,

 

2005. Not less than 90 days after July 20, 2005, the state

 

treasurer and the school district shall enter into amended and

 

restated repayment agreements to incorporate the levy and repayment

 

requirements applicable to qualified loans issued before July 20,

 

2005.

 

     (7) Upon the request of a school district made before June 1

 

of any year, the state treasurer annually may waive all or a

 

portion of the millage required to be levied by a school district

 

to pay principal and interest on its qualified bonds or qualified

 


loans under this section if the state treasurer finds all of the

 

following:

 

     (a) The school board of the school district has applied to the

 

state treasurer for permission to levy less than the millage

 

required to be levied to pay the principal and interest on its

 

qualified bonds or qualified loans under subsection (1).

 

     (b) The application specifies the number of mills the school

 

district requests permission to levy.

 

     (c) The waiver will be financially beneficial to this state,

 

the school district, or both.

 

     (d) The waiver will not reduce the millage levied by the

 

school district to pay principal and interest on qualified bonds or

 

qualified loans under this act to less than 7 mills.

 

     (e) The board of the school district, by resolution, has

 

agreed to comply with all conditions that the state treasurer

 

considers necessary.

 

     (8) Except as otherwise provided in this act, All qualified

 

loans shall bear interest at 1 of the following rates:

 

     (a) The greater of 3% or the average annual cost of funds used

 

to make qualified loans plus 0.125%, but not less than the cost of

 

funds on outstanding qualified notes and bonds issued by the

 

Michigan finance authority to finance loans computed by the state

 

treasurer not less often than annually. on the basis of 1 of the

 

following:

 

     (i) All notes or bonds issued by the Michigan municipal bond

 

authority to fund qualified loans or refinance those notes or bonds

 

plus 0.125%.

 


     (ii) If no bonds or notes issued by the Michigan municipal bond

 

authority are outstanding, all bonds or notes issued by this state

 

under sections 15 and 16 of article IX of the state constitution of

 

1963 plus 0.125%.

 

     (b) A lesser rate determined by the state treasurer to be

 

necessary to maintain the exemption from federal income tax of

 

interest on any qualified loans.bonds or notes issued to fund

 

qualified loans.

 

     (c) A higher rate determined by the state treasurer to be

 

necessary to prevent the impairment of any contract of this state

 

or the Michigan finance authority in existence on the effective

 

date of the amendatory act that added this subdivision.

 

     (9) A payment date determined under subsection (2) or a due

 

date determined under subsection (3) is a final mandatory repayment

 

date. Once established for a school district as provided in this

 

section, a final mandatory repayment date shall apply to all

 

qualified loans of the school district, whenever made, until 30

 

days after the date the school district has no outstanding

 

qualified bonds or qualified loans and no outstanding debt incurred

 

to refund qualified bonds or qualified loans. Notwithstanding this

 

subsection, the state treasurer may determine a later mandatory

 

repayment date for a school district that agrees to levy a higher

 

millage, acceptable to the state treasurer, not to exceed 13 mills,

 

than its existing computed millage.

 

     Sec. 11. The state treasurer shall may promulgate rules to

 

implement this act pursuant to the administrative procedures act of

 

1969, 1969 PA 306, MCL 24.201 to 24.328, and may issue bulletins as

 


authorized by this act.

 

     Sec. 13. (1) If a school district owes a balance due to the

 

revolving loan fund or has been identified as a potential borrower,

 

the school district shall file an annual loan activity application

 

with the state treasurer no less than 60 days before certifying its

 

annual tax levy. The annual loan activity application shall be

 

submitted in a format prescribed by the state treasurer and shall

 

provide the taxable value, debt service, and any other information

 

necessary to determine the proper required millage levy required

 

under this act. The application shall contain a resolution passed

 

by the local school board authorizing a designated school district

 

official to complete all necessary documents to obtain a loan from

 

the revolving loan fund or for making repayment to the revolving

 

loan fund for the year.

 

     (2) If a school district is eligible to borrow for debt

 

service on qualified bonds, the school district shall file a draw

 

request with the state treasurer not less than 30 days before each

 

date on which the school district owes the debt service. The draw

 

request shall include all of the following:

 

     (a) A statement of the debt service owed in the next 6 months.

 

     (b) A copy of the most recent bank statement showing the

 

amount on hand in the debt service accounts for all qualified

 

bonds.

 

     (c) A statement of any revenue received for payment of the

 

debt service since the date of the bank statement.

 

     (d) A statement of any withdrawals made from the debt service

 

account since the date of the bank statement.

 


     (3) Not more than 7 days before the date established by the

 

state treasurer for making qualified loans, the school district

 

shall confirm in writing the final qualified loan amount to be

 

drawn on a certificate in the form prescribed by the state

 

treasurer.

 

     (4) Upon receipt of a qualified loan confirmation described in

 

subsection (3), the state treasurer shall determine the amount of

 

the draw, which shall be the difference between the funds on hand

 

in all debt service accounts and the amount of the debt service,

 

and shall make a qualified loan in that amount to the school

 

district no later than 6 days before the date the debt service is

 

due.

 

     (5) When a school district's computed millage is sufficient to

 

pay principal and interest on its qualified bonds, a school

 

district shall file a loan activity statement with the state

 

treasurer no later than 30 days before the date set for payment of

 

the qualified bonds setting forth all of the following:notify the

 

state treasurer in writing of no need to borrow no later than 30

 

days before the date set for payment of the qualified bonds.

 

     (a) A statement of the debt service owed in the next 6 months.

 

     (b) A copy of the most recent bank statement showing the

 

amount on hand in the debt service account for the qualified bonds.

 

     (c) A statement of any revenue received for payment of the

 

debt service since the date of the bank statement.

 

     (d) A statement of any withdrawals made from the debt service

 

account since the date of the bank statement.

 

     (6) Within 30 days after receipt of the loan annual activity

 


statement application under subsection (5) (1), the state treasurer

 

shall send an invoice to the school district for the amount of

 

repayment the school district owes on its outstanding qualified

 

loans, which shall be the difference between the debt service

 

payable or paid to bondholders and the funds on hand at the school

 

district, less a reasonable amount of funds on hand, as determined

 

by the state treasurer, to cover minimum balance requirements or

 

potential tax disputes. The school district shall remit the amount

 

specified in the invoice within 30 days after the dated date of the

 

invoice.

 

     Sec. 16. (1) The state treasurer may charge a prequalification

 

application fee, a qualification application fee, and an annual

 

loan activity fee in the amounts determined by the state treasurer

 

to be required to pay the estimated administrative expenses

 

incurred under this act for the fiscal year in which the state

 

treasurer imposes the fee.

 

     (2) The state treasurer shall deposit all fees collected under

 

this act into a separate fund established within the state

 

treasury, and shall use the proceeds of the fees solely for the

 

purpose of administering and enforcing this act. The unexpended and

 

unobligated balance of this fund at the end of each state fiscal

 

year shall be carried forward over to the succeeding state fiscal

 

year and shall not lapse to the general fund but shall be available

 

for reappropriation for the next state fiscal year.

 

     Sec. 18. If a school district has completed the projects

 

approved by the school electors of the school district to be funded

 

from proceeds of qualified bonds, a school district may use any

 


remaining proceeds of the qualified bonds as follows:

 

     (a) To pay for enhancements to the projects approved by the

 

school electors as described in the ballot proposing the qualified

 

bonds.

 

     (a) (b) To pay debt service on the qualified bonds.

 

     (b) (c) To repay this state.

 

     (c) If in the opinion of the school district's bond counsel

 

use of the remaining proceeds for the purposes described in

 

subdivisions (a) and (b) would adversely affect the federal tax

 

treatment of interest on the qualified bonds, to pay for

 

enhancements to the projects approved by the school electors as

 

described in the ballot language proposing the qualified bonds.

 

     Enacting section 1. This amendatory act does not take effect

 

unless all of the following bills of the 96th Legislature are

 

enacted into law:

 

     (a) Senate Bill No. 771.

 

     (b) Senate Bill No. 772.