SENATE BILL No. 153

 

 

February 16, 2011, Introduced by Senators PAVLOV, BRANDENBURG, MARLEAU and PROOS and referred to the Committee on Education.

 

 

 

     A bill to safeguard the continued financial viability of units

 

of local government, including school districts; to preserve the

 

capacity of units of local government to provide necessary services

 

essential to the public health, safety, and welfare; to provide for

 

review, management, planning, and control of the financial

 

operation of units of local government, including school districts;

 

to provide criteria to be used in determining the financial

 

condition of units of local government, including school districts;

 

to permit a declaration of the existence of a local government

 

financial emergency and to prescribe the powers and duties of the

 

governor, other state departments, boards, agencies, officials, and

 

employees, and officials and employees of units of local

 

government, including school districts; to provide for placing

 

units of local government, including school districts, into state


 

receivership; to provide for a review and appeal process; to

 

provide for the appointment and to prescribe the powers and duties

 

of an emergency manager; to require the development of financial

 

plans to regulate expenditures and investments by units of local

 

government, including school districts, in a state of financial

 

stress or financial emergency; to provide for the modification or

 

termination of contracts under certain circumstances; to set forth

 

the conditions for termination of a local government financial

 

emergency; and to repeal acts and parts of acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1. This act shall be known and may be cited as the "local

 

government and school district fiscal accountability act".

 

     Sec. 3. The legislature hereby determines that the health,

 

safety, and welfare of the citizens of this state would be

 

materially and adversely affected by the insolvency of units of

 

local government, including certain school districts, and that the

 

survival and financial viability of units of local government is

 

vitally necessary to the interests of the citizens of this state to

 

assure the provision of necessary governmental services essential

 

to public health, safety, and welfare. The legislature further

 

determines that it is vitally necessary to protect the credit of

 

this state and its political subdivisions and that it is necessary

 

for the public good and it is a valid public purpose for this state

 

to take action and to assist a unit of local government in a

 

condition of financial stress or financial emergency so as to

 

remedy the stress or emergency by requiring prudent fiscal

 

management, permitting the restructuring of contractual


 

obligations, and prescribing the powers and duties of state and

 

local government officials and emergency managers. The legislature,

 

therefore, determines that the authority and powers conferred by

 

this act constitute a necessary program and serve a valid public

 

purpose.

 

     Sec. 5. As used in this act:

 

     (a) "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, the 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.

 

     (b) "Emergency manager" or "manager" means the emergency

 

manager appointed under section 15.

 

     (c) "Local government" means a municipal government or a

 

school district.

 

     (d) "Municipal government" means a city, a village, a


 

township, a charter township, a county, an authority established by

 

law, or a public utility owned by a city, village, township, or

 

county.

 

     (e) "Review team" means a review team designated under section

 

12.

 

     (f) "School board" means the governing body of a school

 

district.

 

     (g) "School district" means a school district or an

 

intermediate school district as those terms are defined in the

 

revised school code, 1976 PA 451, MCL 380.1 to 380.1852.

 

     (h) "State financial authority" means the following:

 

     (i) For a municipal government, the state treasurer.

 

     (ii) For a school district, the superintendent of public

 

instruction.

 

     Sec. 12. (1) The state financial authority of a local

 

government may conduct a preliminary review to determine the

 

existence of a local government financial problem if 1 or more of

 

the following occur:

 

     (a) The governing body or the chief administrative officer of

 

a local government requests a preliminary review under this act.

 

The request shall be in writing and shall identify the existing or

 

anticipated financial conditions or events that make the request

 

necessary.

 

     (b) The state financial authority receives a written request

 

from a creditor with an undisputed claim that remains unpaid 6

 

months after its due date against the local government that exceeds

 

the greater of $10,000.00 or 1% of the annual general fund budget


 

of the local government, provided that the creditor notifies the

 

local government in writing at least 30 days before his or her

 

request to the state financial authority of his or her intention to

 

submit a written request under this subdivision.

 

     (c) The state financial authority receives a petition

 

containing specific allegations of local government financial

 

distress signed by a number of registered electors residing within

 

the local government's jurisdiction equal to not less than 5% of

 

the total vote cast for all candidates for governor within the

 

local government's jurisdiction at the last preceding election at

 

which a governor was elected. Petitions shall not be filed under

 

this subdivision within 60 days before any election of the local

 

government.

 

     (d) The state financial authority receives written

 

notification that a local government has not timely deposited its

 

minimum obligation payment to the local government pension fund as

 

required by law.

 

     (e) The state financial authority receives written

 

notification that the local government has failed for a period of 7

 

days or more to pay wages and salaries or other compensation owed

 

to employees or benefits owed to retirees.

 

     (f) The state financial authority receives written

 

notification from a trustee, paying agent, bondholder, or auditor

 

engaged by the local government of a default in a bond or note

 

payment or a violation of 1 or more bond or note covenants.

 

     (g) The state financial authority of a local government

 

receives a resolution from either the senate or the house of


 

representatives requesting a preliminary review under this section.

 

     (h) The local government has violated a requirement of, or a

 

condition of an order issued pursuant to, former 1943 PA 202, the

 

revenue bond act of 1933, 1933 PA 94, MCL 141.101 to 141.140, the

 

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

 

141.2821, or any other law governing the issuance of bonds or

 

notes.

 

     (i) A municipal government has violated the conditions of an

 

order issued by the local emergency financial assistance loan board

 

pursuant to the emergency municipal loan act, 1980 PA 243, MCL

 

141.931 to 141.942.

 

     (j) The local government has violated a requirement of

 

sections 17 to 20 of the uniform budgeting and accounting act, 1968

 

PA 2, MCL 141.437 to 141.440.

 

     (k) The local government fails to timely file an annual

 

financial report or audit that conforms with the minimum procedures

 

and standards of the state financial authority and is required for

 

local governments under the uniform budgeting and accounting act,

 

1968 PA 2, MCL 141.421 to 141.440a, or 1919 PA 71, MCL 21.41 to

 

21.55. In addition, if the local government is a school district,

 

the school district fails to provide an annual financial report or

 

audit that conforms with the minimum procedures and standards of

 

the superintendent of public instruction and is required under the

 

revised school code, 1976 PA 451, MCL 380.1 to 380.1852, and the

 

state school aid act of 1979, 1979 PA 94, MCL 388.1601 to 388.1772.

 

     (l) A municipal government is delinquent in the distribution of

 

tax revenues, as required by law, that it has collected for another


 

taxing jurisdiction, and that taxing jurisdiction requests a

 

preliminary review.

 

     (m) A local government is in breach of its obligations under a

 

deficit elimination plan or an agreement entered into pursuant to a

 

deficit elimination plan.

 

     (n) A court has ordered an additional tax levy without the

 

prior approval of the governing body of the local government.

 

     (o) A municipal government has ended a fiscal year in a

 

deficit condition as defined in section 21 of the Glenn Steil state

 

revenue sharing act of 1971, 1971 PA 140, MCL 141.921, or has

 

failed to comply with the requirements of that section for filing

 

or instituting a financial plan to correct the deficit condition.

 

     (p) A school district ended its most recently completed fiscal

 

year with a deficit in 1 or more of its funds and the school

 

district has not submitted a deficit elimination plan to the state

 

financial authority within 3 months after the district's deadline

 

for submission of its annual financial statement.

 

     (q) A local government has been assigned a long-term debt

 

rating within or below the BBB category or its equivalent by 1 or

 

more nationally recognized credit rating agencies.

 

     (r) The existence of other facts or circumstances that in the

 

state treasurer's sole discretion for a municipal government are

 

indicative of municipal financial stress, or, that in the

 

superintendent of public instruction's sole discretion for a school

 

district are indicative of school district financial stress.

 

     (2) If the state financial authority determines that a

 

preliminary review is appropriate under this section, before


 

commencing the preliminary review the state financial authority

 

shall give the local government specific written notification of

 

the review. The preliminary review shall be completed within 30

 

days following its commencement. Elected and appointed officials of

 

a local government shall promptly and fully provide the assistance

 

and information requested by the state financial authority for that

 

local government in conducting the preliminary review.

 

     (3) If a finding of probable financial stress is made for a

 

municipal government under subsection (2), the governor shall

 

appoint a review team for that municipal government consisting of

 

the state treasurer or his or her designee, the director of the

 

department of technology, management, and budget or his or her

 

designee, a nominee of the senate majority leader, and a nominee of

 

the speaker of the house of representatives. The governor may

 

appoint other state officials or other persons with relevant

 

professional experience to serve on a review team to undertake a

 

municipal financial management review.

 

     (4) If a finding of probable financial stress is made for a

 

school district under subsection (2), the governor shall appoint a

 

review team for that school district consisting of the state

 

treasurer or his or her designee, the superintendent of public

 

instruction or his or her designee, the director of the department

 

of technology, management, and budget or his or her designee, a

 

nominee of the senate majority leader, and a nominee of the speaker

 

of the house of representatives. The governor may appoint other

 

state officials or other persons with relevant professional

 

experience to serve on a review team to undertake a school district


 

financial management review.

 

     (5) The department of treasury shall provide staff support to

 

each review team.

 

     (6) A review team appointed under former 1988 PA 101 or former

 

1990 PA 72 and serving on the effective date of this act shall

 

continue under this act to fulfill their powers and duties. All

 

proceedings and actions taken by the governor, the state treasurer,

 

or a review team under former 1988 PA 101 or former 1990 PA 72

 

before the effective date of this act are ratified and are

 

enforceable as if the proceedings and actions were taken under this

 

act, and a consent agreement entered into under former 1988 PA 101

 

or 1990 PA 72 is ratified and is binding and enforceable under this

 

act.

 

     Sec. 13. (1) The review team shall have full power in its

 

review to perform all of the following functions:

 

     (a) Examine the books and records of the local government.

 

     (b) Utilize the services of other state agencies and

 

employees.

 

     (c) Negotiate and sign a consent agreement with the chief

 

administrative officer of the local government. The consent

 

agreement may provide for remedial measures considered necessary to

 

address the local financial problem and provide for the financial

 

stability of the local government and may include either a

 

continuing operations plan or recovery plan as described in section

 

14a. The consent agreement may utilize state financial management

 

and technical assistance as necessary in order to alleviate the

 

local financial problem. The consent agreement shall also provide


 

for periodic financial status reports to the state financial

 

authority. In order for the consent agreement to go into effect, it

 

shall be approved, by resolution, by the governing body of the

 

local government and shall be approved and executed by the state

 

financial authority. A consent agreement shall provide that in the

 

event of a material uncured breach of the consent agreement, the

 

state treasurer, with the concurrence of the superintendent of

 

public instruction if the local government is a school district, is

 

authorized to place the local government in receivership as

 

provided under section 15.

 

     (2) The review team shall meet with the local government as

 

part of its review. At this meeting, the review team shall receive,

 

discuss, and consider information provided by the local government

 

concerning the financial condition of the local government.

 

     (3) The review team shall report its findings to the governor,

 

with a copy to the state financial authority, within 60 days

 

following the appointment of the review team under section 12 or

 

earlier if required by the governor or the state financial

 

authority. Upon request, the governor may grant one 30-day

 

extension of this 60-day time limit. A copy of the report shall be

 

forwarded by the state treasurer to the chief administrative

 

officer and the governing body of the local government, the speaker

 

of the house of representatives, the senate majority leader, and

 

the superintendent of public instruction if the local government is

 

a school district. The report shall include the existence, or an

 

indication of the likely occurrence, of any of the following:

 

     (a) A default in the payment of principal or interest upon


 

bonded obligations, notes, or other municipal securities for which

 

no funds or insufficient funds are on hand and, if required,

 

segregated in a special trust fund.

 

     (b) Failure for a period of 30 days or more beyond the due

 

date to transfer 1 or more of the following to the appropriate

 

agency:

 

     (i) Taxes withheld on the income of employees.

 

     (ii) For a municipal government, taxes collected by the

 

municipal government as agent for another governmental unit, school

 

district, or other entity or taxing authority.

 

     (iii) Any contribution required by a pension, retirement, or

 

benefit plan.

 

     (c) Failure for a period of 7 days or more to pay wages and

 

salaries or other compensation owed to employees or benefits owed

 

to retirees.

 

     (d) The total amount of accounts payable for the current

 

fiscal year, as determined by the state financial authority's

 

uniform chart of accounts, is in excess of 10% of the total

 

expenditures of the local government in that fiscal year.

 

     (e) Failure to eliminate an existing deficit in any fund of

 

the local government within the 2-year period preceding the end of

 

the local government's fiscal year during which the review team

 

report is received.

 

     (f) Projection of a deficit in the general fund of the local

 

government for the current fiscal year in excess of 5% of the

 

budgeted revenues for the general fund.

 

     (g) Failure to comply in all material respects with the terms


 

of an approved deficit elimination plan or an agreement entered

 

into pursuant to a deficit elimination plan.

 

     (h) Existence of material loans to the general fund from other

 

local government funds.

 

     (i) Existence of material recurring unbudgeted subsidies from

 

the general fund to other major funds as defined under government

 

accounting standards board principles.

 

     (j) Existence of a structural operating deficit.

 

     (k) Use of restricted revenues for purposes not authorized by

 

law.

 

     (l) Any other facts and circumstances indicative of local

 

government financial stress or financial emergency.

 

     (4) The review team shall include 1 of the following

 

conclusions in its report:

 

     (a) The local government is not in financial stress or is in a

 

condition of mild financial stress as provided in section 14.

 

     (b) The local government is in a condition of severe financial

 

stress as provided in section 14, but a consent agreement

 

containing a plan to resolve the problem has been adopted pursuant

 

to subsection (1)(c).

 

     (c) The local government is in a condition of severe financial

 

stress as provided in section 14, and a consent agreement has not

 

been adopted pursuant to subsection (1)(c).

 

     (d) A financial emergency exists as provided in section 14 and

 

no satisfactory plan exists to resolve the emergency.

 

     (5) The review team may appoint an individual or firm to carry

 

out the review and submit a report to the review team for approval.


 

The department of treasury may enter into a contract with the

 

individual or firm respecting the terms and conditions of the

 

appointment.

 

     Sec. 14. (1) For purposes of this act, a local government is

 

considered to be in a condition of no financial stress or mild

 

financial stress if the report required in section 13 concludes

 

that none of the factors in section 13(3) exist or are likely to

 

occur within the current or next succeeding fiscal year or, if they

 

occur, do not threaten the local government's capability to provide

 

necessary governmental services essential to public health, safety,

 

and welfare.

 

     (2) For purposes of this act, a local government is considered

 

to be in a condition of severe financial stress if either of the

 

following occurs:

 

     (a) The report required in section 13 concludes that 1 or more

 

of the factors in section 13(3) exist or are likely to occur within

 

the current or next succeeding fiscal year and, if left

 

unaddressed, may threaten the local government's future capability

 

to provide necessary governmental services essential to the public

 

health, safety, and welfare.

 

     (b) The chief administrative officer of the local government

 

recommends that the local government be considered in severe

 

financial stress.

 

     (3) For purposes of this act, a local government is considered

 

to be in a condition of financial emergency if any of the following

 

occur:

 

     (a) The report required in section 13 concludes that 2 or more


 

of the factors in section 13(3) exist or are likely to occur within

 

the current fiscal year and threaten the local government's current

 

and future capability to provide necessary governmental services

 

essential to the public health, safety, and welfare.

 

     (b) The local government has failed to provide timely and

 

accurate information enabling the review team to complete its

 

report under section 13.

 

     (c) The local government has failed to comply in all material

 

respects with a continuing operations plan or recovery plan, as

 

provided in section 14a, or with the terms of an approved deficit

 

elimination plan or an agreement entered into pursuant to a deficit

 

elimination plan.

 

     (d) The local government is in material breach of a consent

 

agreement entered into under section 13(1)(c).

 

     (e) The local government is in a condition of severe financial

 

stress as provided in subsection (2), and a consent agreement has

 

not been adopted pursuant to section 13(1)(c).

 

     (f) The chief administrative officer of the local government,

 

based upon the existence or likely occurrence of 1 or more of the

 

factors in section 13(3), recommends that a financial emergency be

 

declared and the state financial authority concurs with the

 

recommendation.

 

     Sec. 14a. (1) A consent agreement as provided in section

 

13(1)(c) may require a continuing operations plan or a recovery

 

plan if required by the state financial authority.

 

     (2) If the state financial authority requires that a consent

 

agreement include a continuing operations plan, the local


 

government shall prepare and file the continuing operations plan

 

with the state financial authority as provided for in the consent

 

agreement. The state financial authority shall approve or reject

 

the initial continuing operations plan within 14 days of receiving

 

it from the local government. If a plan is rejected, the local

 

government shall refile an amended plan within 30 days of the

 

rejection addressing any concerns raised by the state financial

 

authority. If the amended plan is rejected, then the local

 

government is considered to be in material breach of the consent

 

agreement. The local government is required to file annual updates

 

to its continuing operations plan. The annual updates shall be

 

included with the annual filing of the local government's audit

 

report with the state financial authority as long as the continuing

 

operations plan remains in effect.

 

     (3) The continuing operations plan shall be in a form

 

prescribed by the state financial authority, but shall, at a

 

minimum, include all of the following:

 

     (a) A detailed projected budget of revenues and expenditures

 

over not less than 3 fiscal years which demonstrates that the local

 

government's expenditures will not exceed its revenues and that any

 

existing deficits will be eliminated during the projected budget

 

period.

 

     (b) A cash flow projection for the budget period.

 

     (c) An operating plan for the budget period that ensures

 

continued viability for the local government.

 

     (d) A plan showing reasonable and necessary maintenance and

 

capital expenditures so as to ensure the local government's


 

continued viability.

 

     (e) An evaluation of the costs associated with pension and

 

health care for which the local government is responsible and a

 

plan for how those costs will be addressed within the budget

 

period.

 

     (f) A provision for submitting quarterly compliance reports to

 

the state financial authority demonstrating compliance with the

 

continuing operations plan.

 

     (4) If a continuing operations plan is approved for a local

 

government, the local government shall amend the budget and general

 

appropriations ordinance adopted by the local government under the

 

uniform budgeting and accounting act, 1968 PA 2, MCL 141.421 to

 

141.440a, to the extent necessary or advisable to give full effect

 

to the continuing operations plan. The chief administrative

 

officer, the chief financial officer, the governing body, and other

 

officials of the local government shall take and direct such

 

actions as may be necessary or advisable to maintain the local

 

government's operations in compliance with the continuing

 

operations plan.

 

     (5) If the state financial authority requires that a consent

 

agreement include a recovery plan, the state financial authority

 

shall develop and adopt, in consultation with the review team if

 

desired by the state financial authority, a recovery plan. If a

 

recovery plan is developed and adopted for the local government,

 

the local government thereafter is required to file annual updates

 

to its recovery plan. The annual updates shall be included with the

 

annual filing of the local government's audit report with the state


 

financial authority as long as the recovery plan remains in effect.

 

     (6) A recovery plan may include terms and provisions as may be

 

approved in the discretion of the state treasurer, including, but

 

not limited to, any 1 or more of the following:

 

     (a) A detailed projected budget of revenues and expenditures

 

over not less than 3 fiscal years which demonstrates that the local

 

government's expenditures will not exceed its revenues and that any

 

existing deficits will be eliminated during the projected budget

 

period.

 

     (b) A cash flow projection for the budget period.

 

     (c) An operating plan for the budget period that ensures

 

continued viability for the local government.

 

     (d) A plan showing reasonable and necessary maintenance and

 

capital expenditures so as to ensure the local government's

 

continued viability.

 

     (e) An evaluation of legacy costs for which the local

 

government is responsible and a plan for how those costs will be

 

addressed within the budget period.

 

     (f) Procedures for cash control and cash management,

 

including, but not limited to, procedures for timely collection,

 

securing, depositing, balancing, and expending of cash, and may

 

include the designation of appropriate fiduciaries.

 

     (g) A provision for submitting quarterly compliance reports to

 

the state financial authority and the chief administrative officer

 

of the local government that demonstrates compliance with the

 

recovery plan.

 

     (7) The recovery plan may include the appointment of a local


 

auditor or local inspector, or both, in accordance with section

 

19(1)(o).

 

     (8) If a recovery plan is developed and adopted by the state

 

financial authority for a local government, the recovery plan shall

 

supersede the budget and general appropriations ordinance adopted

 

by the local government under the uniform budgeting and accounting

 

act, 1968 PA 2, MCL 141.421 to 141.440a, and the budget and general

 

appropriations ordinance is considered amended to the extent

 

necessary or advisable to give full effect to the recovery plan. In

 

the event of any inconsistency between the recovery plan and the

 

budget or general appropriations ordinance, the recovery plan shall

 

control. The chief administrative officer, the chief financial

 

officer, the governing body, and other officers of the local

 

government shall take and direct actions as may be necessary or

 

advisable to bring and maintain the local government's operations

 

in compliance with the recovery plan.

 

     (9) The consent agreement may include a grant to the chief

 

administrative officer, the chief financial officer, the governing

 

body, or other officers of the local government by the state

 

financial authority of 1 or more of the powers prescribed for

 

emergency managers in section 19 for such periods and upon such

 

terms and conditions as the state financial authority considers

 

necessary or convenient, in the state financial authority's sole

 

discretion, to enable the local government to achieve the goals and

 

objectives of the consent agreement.

 

     (10) The consent agreement may provide for the required

 

retention by the local government of a turnaround consultant for


 

the purpose of assisting the local government to achieve the goals

 

and objectives of the consent agreement.

 

     (11) A local government is released from the requirements

 

under this section upon compliance with the consent agreement as

 

determined by the state financial authority.

 

     Sec. 15. (1) Within 10 days after receipt of the report

 

provided for in section 13, the governor shall make 1 of the

 

following determinations:

 

     (a) The local government is not in a condition of severe

 

financial stress.

 

     (b) The local government is in a condition of severe financial

 

stress as provided in section 14, but a consent agreement

 

containing a plan to resolve the financial stress has been adopted

 

under this act.

 

     (c) A local government financial emergency exists

 

as provided in section 14 and no satisfactory plan exists to

 

resolve the emergency.

 

     (2) If the governor determines pursuant to subsection (1) that

 

a financial emergency exists, the governor shall provide the

 

governing body and chief administrative officer of the local

 

government with a written notification of the determination,

 

findings of fact utilized as the basis upon which this

 

determination was made, a concise and explicit statement of the

 

underlying facts supporting the factual findings, and notice that

 

the chief administrative officer or the governing body of the local

 

government has 7 days after the date of the notification to request

 

a hearing conducted by the state financial authority or the state


 

financial authority's designee. Following the hearing, or if no

 

hearing is requested following the expiration of the deadline by

 

which a hearing may be requested, the governor, in his or her sole

 

discretion based upon the record, shall either confirm or revoke,

 

in writing, the determination of the existence of a financial

 

emergency. If confirmed, the governor shall provide a written

 

report to the governing body and chief administrative officer of

 

the local government of the findings of fact of the continuing or

 

newly developed conditions or events providing a basis for the

 

confirmation of a financial emergency, and a concise and explicit

 

statement of the underlying facts supporting these factual

 

findings.

 

     (3) A local government for which a financial emergency

 

determination under this section has been confirmed to exist may,

 

by resolution adopted by a vote of 2/3 of the members of its

 

governing body elected and serving, appeal this determination to

 

the Ingham county circuit court. The court shall not set aside a

 

determination of financial emergency by the governor unless it

 

finds that the determination is either of the following:

 

     (a) Not supported by competent, material, and substantial

 

evidence on the whole record.

 

     (b) Arbitrary, capricious, or clearly an abuse or unwarranted

 

exercise of discretion.

 

     (4) Upon the confirmation of a finding of a financial

 

emergency, the state treasurer, with the concurrence of the

 

superintendent of public instruction if the local government is a

 

school district, shall declare the local government in receivership


 

and shall appoint an emergency manager to act for and in the place

 

and stead of the governing body and the office of chief

 

administrative officer of the local government. The emergency

 

manager shall have broad powers in receivership to rectify the

 

financial emergency and to preserve the local government's capacity

 

to provide necessary governmental services essential to the public

 

health, safety, and welfare. Upon the declaration of receivership

 

and during the pendency of receivership, the governing body and the

 

chief administrative officer of the local government may not

 

exercise any of the powers of those offices except as may be

 

specifically authorized in writing by the emergency manager and are

 

subject to any conditions required by the emergency manager.

 

     (5) All of the following apply to an emergency manager:

 

     (a) The emergency manager shall be chosen on the basis of

 

competence.

 

     (b) The emergency manager may but need not be a resident of

 

the local government.

 

     (c) The emergency manager may be an individual or firm.

 

     (d) The emergency manager shall serve at the pleasure of the

 

state treasurer, with the concurrence of the superintendent of

 

public instruction if the local government is a school district.

 

     (e) The emergency manager's compensation and reimbursement for

 

actual and necessary expenses shall be paid by the local government

 

and shall be set forth in a contract approved by the state

 

treasurer.

 

     (6) In addition to staff otherwise authorized by law, an

 

emergency manager shall appoint additional staff and secure


 

professional assistance as the emergency manager considers

 

necessary to fulfill his or her appointment.

 

     (7) The emergency manager shall make quarterly reports to the

 

state treasurer with respect to the financial condition of the

 

local government in receivership, with a copy to the superintendent

 

of public instruction if the local government is a school district.

 

     (8) The emergency manager shall continue in this capacity

 

until removed or replaced by the state treasurer, with the

 

concurrence of the superintendent of public instruction if the

 

local government is a school district, or until the financial

 

emergency is rectified.

 

     (9) A local government shall be removed from receivership when

 

the financial conditions are corrected in a sustainable fashion as

 

determined by the state treasurer, with the concurrence of the

 

superintendent of public instruction if the local government is a

 

school district, in accordance with this act.

 

     (10) The governor may delegate his or her duties under this

 

section to the state treasurer, with the concurrence of the

 

superintendent of public instruction if the local government is a

 

school district.

 

     Sec. 16. An emergency financial manager appointed under former

 

1988 PA 101 or former 1990 PA 72, and serving on the effective date

 

of this act, shall continue under this act to fulfill his or her

 

powers and duties.

 

     Sec. 17. (1) The emergency manager shall issue to the

 

appropriate officials or employees of the local government the

 

orders the manager considers necessary to accomplish the purposes


 

of this act, including, but not limited to, orders for the timely

 

and satisfactory implementation of a financial and operating plan

 

developed pursuant to section 18, including an academic plan for a

 

school district, or to take actions, or refrain from taking

 

actions, to enable the orderly accomplishment of the financial and

 

operating plan. An order issued under this section is binding on

 

the local officials or employees to whom it is issued.

 

     (2) If an order of the emergency manager to officials or

 

employees of the local government under subsection (1) is not

 

reasonably carried out and the failure to carry out an order is

 

disrupting the emergency manager's ability to manage the local

 

government, the emergency manager, in addition to other remedies

 

provided in this act, may prohibit the official or employee from

 

access to the local government's office facilities, electronic

 

mail, and internal information systems.

 

     Sec. 18. (1) The emergency manager shall develop and may amend

 

a written financial and operating plan for the local government.

 

The plan shall have the objectives of ensuring that the local

 

government is able to provide necessary governmental services

 

essential to the public health, safety, and welfare on an ongoing

 

and sustainable basis, and protecting the continued financial

 

viability of the local government. The financial and operating plan

 

shall provide for all of the following:

 

     (a) Conducting all aspects of the operations of the local

 

government within the resources available according to the

 

emergency manager's revenue estimate.

 

     (b) The payment in full of the scheduled debt service


 

requirements on all bonds, notes, and municipal securities of the

 

local government and all other uncontested legal obligations.

 

     (c) The modification, rejection, termination, and

 

renegotiation of contracts pursuant to section 19.

 

     (d) The timely deposit of required payments to the pension

 

fund for the local government or in which the local government

 

participates.

 

     (e) For school districts, an academic plan.

 

     (f) Any other actions considered necessary by the emergency

 

manager in the emergency manager's discretion to achieve the

 

objectives of the financial and operating plan, alleviate the

 

financial emergency, and remove the local government from

 

receivership.

 

     (2) Within 45 days after the emergency manager's appointment,

 

the emergency manager shall submit the financial and operating plan

 

to the state treasurer, with a copy to the superintendent of public

 

instruction if the local government is a school district, and to

 

the chief administrative officer and governing body of the local

 

government. The plan shall be regularly reexamined by the emergency

 

manager and the state treasurer and may be modified from time to

 

time by the emergency manager. If the emergency manager reduces his

 

or her revenue estimates, the emergency manager shall modify the

 

plan to conform to the revised revenue estimates.

 

     (3) The financial and operating plan shall be in a form as

 

provided by the state financial authority and shall contain that

 

information for each year during which year the plan is in effect

 

that the emergency manager, in consultation with the state


 

financial authority, specifies. The financial and operating plan

 

may serve as a deficit elimination plan otherwise required by law

 

if so approved by the state financial authority.

 

     (4) The emergency manager, within 30 days of submitting the

 

financial and operating plan to the state financial authority,

 

shall conduct a public informational meeting on the plan and any

 

modifications to the plan. This subsection does not mean that the

 

emergency manager must receive public approval before he or she

 

implements the plan or any modification of the plan.

 

     Sec. 19. (1) An emergency manager may take 1 or more of the

 

following additional actions with respect to a local government

 

which is in receivership, notwithstanding any provisions of law or

 

charter to the contrary:

 

     (a) Analyze factors and circumstances contributing to the

 

financial emergency of the local government and initiate steps to

 

correct the condition.

 

     (b) Amend, revise, approve, or disapprove the budget of the

 

local government, and limit the total amount appropriated or

 

expended.

 

     (c) Receive and disburse on behalf of the local government all

 

federal, state, and local funds earmarked for the local government.

 

These funds may include, but are not limited to, funds for specific

 

programs and the retirement of debt.

 

     (d) Require and approve or disapprove, or amend or revise a

 

plan for paying all outstanding obligations of the local

 

government.

 

     (e) Require and prescribe the form of special reports to be


 

made by the finance officer of the local government to its

 

governing body, the creditors of the local government, the

 

emergency manager, or the public.

 

     (f) Examine all records and books of account, and require

 

under the procedures of the uniform budgeting and accounting act,

 

1968 PA 2, MCL 141.421 to 141.440a, or 1919 PA 71, MCL 21.41 to

 

21.55, or both, the attendance of witnesses and the production of

 

books, papers, contracts, and other documents relevant to an

 

analysis of the financial condition of the local government.

 

     (g) Make, approve, or disapprove any appropriation, contract,

 

expenditure, or loan, the creation of any new position, or the

 

filling of any vacancy in a permanent position by any appointing

 

authority.

 

     (h) Review payrolls or other claims against the local

 

government before payment.

 

     (i) Notwithstanding any minimum staffing level requirement

 

established by charter or contract, establish and implement

 

staffing levels for the local government.

 

     (j) Reject, modify, or terminate 1 or more terms and

 

conditions of an existing contract. After meeting and conferring

 

with the appropriate bargaining representative and, if in the

 

emergency manager's sole discretion and judgment, a prompt and

 

satisfactory resolution is unlikely to be obtained, reject, modify,

 

or terminate 1 or more terms and conditions of an existing

 

collective bargaining agreement. The rejection, modification, or

 

termination of 1 or more terms and conditions of an existing

 

collective bargaining agreement under this subdivision is a


 

legitimate exercise of the state's sovereign powers if the

 

emergency manager and state financial authority determine that all

 

of the following conditions are satisfied:

 

     (i) The financial emergency in the local government has created

 

a circumstance in which it is reasonable and necessary for the

 

state to intercede to serve a significant and legitimate public

 

purpose.

 

     (ii) Any plan involving the rejection, modification, or

 

termination of 1 or more terms and conditions of an existing

 

collective bargaining agreement is reasonable and necessary to deal

 

with a broad, generalized economic problem.

 

     (iii) Any plan involving the rejection, modification, or

 

termination of 1 or more terms and conditions of an existing

 

collective bargaining agreement is directly related to and designed

 

to address the financial emergency for the benefit of the public as

 

a whole.

 

     (iv) Any plan involving the rejection, modification, or

 

termination of 1 or more terms and conditions of an existing

 

collective bargaining agreement is temporary and does not target

 

specific classes of employees.

 

     (k) Act as sole agent of the local government in collective

 

bargaining with employees or representatives and

 

approve any contract or agreement.

 

     (l) For municipal governments, elect to have the municipal

 

government participate in the municipal employees retirement system

 

under the municipal employees retirement act of 1984, 1984 PA 427,

 

MCL 38.1501 to 38.1555.


 

     (m) Consolidate or eliminate departments of the local

 

government or transfer functions from 1 department to another and

 

appoint, supervise, and, at his or her discretion, remove

 

administrators, including heads of departments other than elected

 

officials.

 

     (n) Employ or contract for, at the expense of the local

 

government and with the approval of the state financial authority,

 

auditors and other technical personnel considered necessary to

 

implement this act.

 

     (o) Retain 1 or more persons or firms, which may be an

 

individual or firm selected from a list approved by the state

 

financial authority, to perform the duties of a local inspector or

 

a local auditor as described in this subdivision. The duties of a

 

local inspector are to ensure integrity, economy, efficiency, and

 

effectiveness in the operations of the local government by

 

conducting meaningful and accurate investigations and forensic

 

audits, and to detect and deter waste, fraud, and abuse. At least

 

annually, a report of the local inspector shall be submitted to the

 

emergency manager, the state treasurer, and the superintendent of

 

public instruction if the local government is a school district.

 

The duties of a local auditor are to ensure that internal controls

 

over local government operations are designed and operating

 

effectively to mitigate risks that hamper the achievement of the

 

emergency manager's financial plan, ensure that local government

 

operations are effective and efficient, ensure that financial

 

information is accurate, reliable, and timely, comply with

 

policies, regulations, and applicable laws, and ensure assets are


 

properly safeguarded. At least annually, a report of the local

 

auditor shall be submitted to the emergency manager, the state

 

treasurer, and the superintendent of public instruction if the

 

local government is a school district.

 

     (p) Require compliance with his or her orders by court action

 

if necessary.

 

     (q) If provided in the financial and operating plan, or

 

otherwise with the prior written approval of the state treasurer in

 

the case of a municipal government or the superintendent of public

 

instruction in the case of a school district, sell, lease, convey,

 

or otherwise use the assets of the local government to meet past or

 

current obligations, provided the use of assets for this purpose

 

does not endanger the health, safety, or welfare of residents of

 

the local government.

 

     (r) Apply for a loan from the state on behalf of the local

 

government, subject to the conditions of the emergency municipal

 

loan act, 1980 PA 243, MCL 141.931 to 141.942, in a sufficient

 

amount to pay the expenses of the emergency manager and for other

 

lawful purposes.

 

     (s) Order, as necessary, 1 or more millage elections for the

 

local government consistent with the Michigan election law, 1954 PA

 

116, MCL 168.1 to 168.992, sections 6 and 25 through 34 of article

 

IX of the state constitution of 1963, and any other applicable

 

state law.

 

     (t) Authorize the borrowing of money by the local government

 

as provided by law.

 

     (u) Approve or disapprove of the issuance of obligations of


 

the local government on behalf of the local government under this

 

subdivision. An emergency manager may, with the prior approval of

 

the state treasurer, authorize the issuance of financial recovery

 

bonds or notes by the local government in amounts greater than the

 

limitations established otherwise by state law or charter. Any

 

financial recovery bonds or notes issued under this subdivision are

 

subject to the terms and conditions approved by the state

 

treasurer. Any financial recovery bonds or notes issued under this

 

subdivision are not subject to notice requirements established

 

otherwise by state law or charter. The net indebtedness of a local

 

government, reduced by any amounts excluded otherwise by law, shall

 

not exceed 10% of the state equalized value of the local

 

government. An emergency manager may provide in the order

 

authorizing the issuance of the bonds or notes for the deposit of

 

revenues generated from taxes levied by the local government into

 

an escrow account to be used for the sole purpose of paying

 

principal of and interest on the bonds or notes, and such tax

 

revenues may be pledged by the local government for the payment of

 

the bonds or notes issued under this subdivision. If the local

 

government enters into an agreement with a third-party tax

 

collector pursuant to which the third-party tax collector has the

 

duty to collect taxes that otherwise would be collected by the

 

treasurer for the local government, the agreement shall also

 

provide for the direct payment of pledged tax revenues collected by

 

the third-party tax collector to a trustee to be deposited into an

 

escrow account and used for the sole purpose of paying principal of

 

and interest on bonds or notes issued pursuant to this subdivision.


 

If the local government and a third-party tax collector enter into

 

such an agreement providing for the direct payment of taxes to a

 

trustee, a statutory lien and trust is created applicable to such

 

tax revenues received or to be received from the third-party tax

 

collector by the trustee. The tax revenues paid or to be paid to a

 

trustee for the purpose of paying the principal of and interest on

 

the bonds or notes issued pursuant to this subdivision shall be

 

subject to a lien and trust, which 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 or notes issued pursuant to this subdivision and

 

any other bonds or notes subsequently issued by the local

 

government sharing a parity or subordinate pledge of such tax

 

revenues. The lien and trust imposed by this subdivision with

 

respect to pledged tax revenues has a priority as established in

 

the agreement, except that the agreement shall not impair any

 

existing lien and trust previously created pursuant to this

 

subdivision. The lien created under this subdivision for the

 

benefit of holders of bonds or notes or others is perfected without

 

delivery, recording, or notice. The tax revenues held or to be held

 

by a trustee shall be held in trust for the sole benefit of the

 

holders of the bonds or notes issued pursuant to this subdivision

 

and shall be exempt from being levied upon, taken, sequestered, or

 

applied toward paying the debts or liabilities of the local

 

government other than for payment of debt service on the bonds or

 

notes to which the lien applies. Financial recovery bonds or notes

 

issued under this subdivision are not subject to the revised


 

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

 

used in this subdivision, "third-party tax collector" means a party

 

that is not the treasurer for the local government or other elected

 

or appointed local government official with whom the local

 

government has entered into a contractual agreement pursuant to

 

which the third-party tax collector agrees to collect taxes that

 

otherwise would be collected by the treasurer for the local

 

government.

 

     (v) Enter into agreements with creditors for the payment of

 

existing debts, including the settlement of claims by the

 

creditors.

 

     (w) Enter into agreements with creditors to restructure debt

 

on terms, at rates of interest, and with security as shall be

 

agreed among the parties, subject to approval by the state

 

treasurer.

 

     (x) To the extent applicable, set and approve all actuarial

 

assumptions for pension obligations of a municipal government to a

 

pension fund.

 

     (y) Enter into agreements with other local governments, or

 

with private entities to the extent provided by law, for the

 

provision of services.

 

     (z) For municipal governments, enter into agreements with

 

other units of government to transfer property of the municipal

 

government under 1984 PA 425, MCL 124.21 to 124.30, or as otherwise

 

provided by law, subject to approval by the state treasurer.

 

     (aa) Enter into agreements with 1 or more other municipal

 

governments for the consolidation of services. For a city, village,


 

or township, the emergency manager may recommend to the state

 

boundary commission that the municipal government consolidate with

 

1 or more other municipal governments, if the emergency manager

 

determines that consolidation would materially alleviate the

 

financial emergency of the municipal government and would not

 

materially and adversely affect the financial situation of the

 

government or governments with which the municipal government in

 

receivership is consolidated. Any consolidation under this

 

subdivision is not subject to sections 7 to 14 of 1968 PA 191, MCL

 

123.1007 to 123.1014, or other relevant law.

 

     (bb) For municipal governments, disincorporate or dissolve the

 

municipal government and assign its assets, debts, and liabilities

 

as provided by law.

 

     (cc) Exercise solely, for and on behalf of the local

 

government, all other authority and responsibilities of the chief

 

administrative officer and governing body concerning the adoption,

 

amendment, and enforcement of ordinances or resolutions of the

 

local government as provided in the following acts:

 

     (i) The home rule city act, 1909 PA 279, MCL 117.1 to 117.38.

 

     (ii) The fourth class city act, 1895 PA 215, MCL 81.1 to

 

113.20.

 

     (iii) The charter township act, 1947 PA 359, MCL 42.1 to 42.34.

 

     (iv) 1851 PA 156, MCL 46.1 to 46.32.

 

     (v) 1966 PA 293, MCL 45.501 to 45.521.

 

     (vi) The general law village act, 1895 PA 3, MCL 61.1 to 74.25.

 

     (vii) The home rule village act, 1909 PA 278, MCL 78.1 to

 

78.28.


 

     (viii) The revised school code, 1976 PA 451, MCL 380.1 to

 

380.1852.

 

     (dd) Replace the serving trustees and assume and exercise the

 

authority and responsibilities of a local pension board as sole

 

trustee of the pension fund of the municipal government if

 

appointed to that role by the state treasurer.

 

     (ee) Take any other action or exercise any power or authority

 

of any officer, employee, department, board, commission, or other

 

similar entity of the local government, whether elected or

 

appointed, relating to the operation of the local government. The

 

power of the emergency manager shall be superior to and supersede

 

the power of any of the foregoing entities.

 

     (ff) Remove, replace, appoint, or confirm the appointments to

 

any board, commission, authority, or other entity which is a

 

component unit of the local government.

 

     (2) Except as otherwise provided in this act, during the

 

pendency of the receivership, the authority of the chief

 

administrative officer and governing body to exercise power for and

 

on behalf of the local government under law and charter shall be

 

suspended.

 

     Sec. 19a. Immediately upon the local government being placed

 

in receivership under section 15 and during the pendency of the

 

receivership, the salary or other compensation, including the

 

accrual of postemployment benefits, and other benefits of the chief

 

administrative officer and members of the governing body of the

 

local government shall be eliminated. This section does not

 

authorize the impairment of vested retirement benefits. If an


 

emergency manager has reduced, suspended, or eliminated the salary

 

or other compensation of the chief administrative officer and

 

members of the governing body of a local government before the

 

effective date of this act, the reduction, suspension, or

 

elimination is valid to the same extent had it occurred after the

 

effective date of this act. The emergency manager may restore, in

 

whole or in part, any of the salary, other compensation, or

 

benefits of the chief administrative officer and members of the

 

governing body during the pendency of the receivership, for such

 

time and on such terms as the emergency manager considers

 

appropriate, to the extent that the manager finds that the

 

restoration of salary, compensation, or benefits is consistent with

 

the financial and operating plan.

 

     Sec. 20. In addition to the actions authorized in section 19,

 

an emergency manager for a school district may take 1 or more of

 

the following additional actions with respect to a school district

 

that is in receivership:

 

     (a) Negotiate, renegotiate, approve, and enter into contracts

 

on behalf of the school district.

 

     (b) Receive and disburse on behalf of the school district all

 

federal, state, and local funds earmarked for the school district.

 

These funds may include, but are not limited to, funds for specific

 

programs and the retirement of debt.

 

     (c) Seek approval from the superintendent of public

 

instruction for a reduced class schedule in accordance with

 

administrative rules governing the distribution of state school

 

aid.


 

     (d) Sell or otherwise use the assets of the school district to

 

meet past or current obligations, provided the use of assets for

 

this purpose does not impair the education of the pupils of the

 

school district.

 

     (e) Approve or disapprove of the issuance of obligations of

 

the school district.

 

     (f) Recommend to the governor, the legislature, and the

 

superintendent of public instruction that the school district be

 

reorganized with 1 or more contiguous school districts.

 

     (g) Exercise solely, for and on behalf of the school district,

 

all other authority and responsibilities affecting the school

 

district that are prescribed by law to the school board and

 

superintendent of the school district.

 

     Sec. 21. The emergency manager shall, on his or her own or

 

upon the advice of the local inspector if a local inspector has

 

been retained, make a determination as to whether possible criminal

 

conduct contributed to the financial situation resulting in the

 

local government's receivership status. If the emergency manager

 

determines that there is reason to believe that criminal conduct

 

has occurred, the manager shall refer the matter to the attorney

 

general and the local prosecuting attorney for investigation.

 

     Sec. 22. (1) An emergency manager appointed under this act

 

shall file with the governor, the senate majority leader, and the

 

speaker of the house of representatives, and shall post on the

 

internet on the website of the local government, a report that

 

contains all of the following:

 

     (a) A description of each expenditure made, approved, or


 

disapproved during the reporting period that has a cumulative value

 

of $10,000.00 or more and the source of the funds.

 

     (b) A list of each contract that the emergency manager awarded

 

or approved with a cumulative value of $10,000.00 or more, the

 

purpose of the contract, and the identity of the contractor.

 

     (c) A description of each loan sought, approved, or

 

disapproved during the reporting period that has a cumulative value

 

of $10,000.00 or more and the proposed use of the funds.

 

     (d) A description of any new position created or any vacancy

 

in a permanent position filled by the appointing authority.

 

     (e) A description of any position that has been eliminated or

 

from which an employee has been laid off.

 

     (2) The report required under this section shall be submitted

 

every 6 months, beginning 6 months after the emergency manager's

 

appointment.

 

     Sec. 23. (1) If, in the judgment of the emergency manager, no

 

reasonable alternative to rectifying the financial emergency of the

 

local government which is in receivership exists, then the

 

emergency manager may recommend to the governor and the state

 

treasurer that the local government be authorized to proceed under

 

title 11 of the United States Code, 11 USC 101 to 1532. If the

 

governor approves of the recommendation, the governor shall inform

 

the state treasurer and the emergency manager in writing of the

 

decision, with a copy to the superintendent of public instruction

 

if the local government is a school district. Upon receipt of the

 

written approval, the emergency manager is authorized to proceed

 

under title 11 of the United States Code, 11 USC 101 to 1532. This


 

section empowers the local government for which an emergency

 

manager has been appointed to become a debtor under title 11 of the

 

United States Code, 11 USC 101 to 1532, as required by section 109

 

of title 11 of the United States Code, 11 USC 109, and empowers the

 

emergency manager to act exclusively on the local government's

 

behalf in any such case under title 11 of the United States Code,

 

11 USC 101 to 1532.

 

     (2) The recommendation to the governor and the state treasurer

 

under subsection (1) shall include 1 of the following:

 

     (a) A determination by the emergency manager that no feasible

 

financial plan can be adopted that can satisfactorily rectify the

 

financial emergency of the local government in a timely manner.

 

     (b) A determination by the emergency manager that a plan, in

 

effect for at least 180 days, cannot be implemented as written or

 

as it might be amended in a manner that can satisfactorily rectify

 

the financial emergency in a timely manner.

 

     (3) The emergency manager shall provide a copy of the

 

recommendation as provided under subsection (1) to the

 

superintendent of public instruction if the local government is a

 

school district.

 

     Sec. 24. A local government that is in receivership is

 

considered to be in a condition of financial emergency until the

 

emergency manager declares the financial emergency to be rectified

 

in his or her quarterly report to the state treasurer required

 

under section 15, and is subject to the written concurrence of the

 

state treasurer, and the concurrence of the superintendent of

 

public instruction if the local government is a school district.


 

The declaration shall not be made until the financial conditions

 

have been addressed and rectified.

 

     Sec. 25. (1) An emergency manager is immune from liability as

 

provided in section 7(5) of 1964 PA 170, MCL 691.1407. A person

 

employed by an emergency manager is immune from liability as

 

provided in section 7(2) of 1964 PA 170, MCL 691.1407.

 

     (2) The attorney general shall defend any civil claim, demand,

 

or lawsuit which challenges any of the following:

 

     (a) The validity of this act.

 

     (b) The authority of a state official or officer acting under

 

this act.

 

     (c) The authority of an emergency manager if the emergency

 

manager is or was acting within the scope of authority for an

 

emergency manager under this act.

 

     (3) With respect to any aspect of a receivership under this

 

act, the costs incurred by the attorney general in carrying out the

 

responsibilities of subsection (2) for attorneys, experts, court

 

filing fees, and other reasonable and necessary expenses shall be

 

at the expense of the local government that is subject to that

 

receivership and shall be reimbursed to the attorney general by the

 

local government. The failure of the local government that is or

 

was in receivership to remit to the attorney general the costs

 

incurred by the attorney general within 30 days after written

 

notice to the local government from the attorney general of the

 

costs is a debt owed to this state and shall be recovered by the

 

state treasurer as provided in section 17a(5) of the Glenn Steil

 

state revenue sharing act of 1971, 1971 PA 140, MCL 141.917a.


 

     (4) An emergency manager may procure and maintain, at the

 

expense of the local government for which the emergency manager is

 

appointed, worker's compensation, general liability, professional

 

liability, and motor vehicle insurance for the emergency manager

 

and any employee, agent, appointee, or contractor of the emergency

 

manager as may be provided to elected officials, appointed

 

officials, or employees of the local government. The insurance

 

procured and maintained by an emergency manager may extend to any

 

claim, demand, or lawsuit asserted or costs recovered against the

 

emergency manager and any employee, agent, appointee, or contractor

 

of the emergency manager from the date of appointment of the

 

emergency manager to the expiration of the applicable statute of

 

limitation if the claim, demand, or lawsuit asserted or costs

 

recovered against the emergency manager or any employee, agent,

 

appointee, or contractor of the emergency manager resulted from

 

conduct of the emergency manager or any employee, agent, appointee,

 

or contractor of the emergency manager taken in accordance with this

 

act during the emergency manager's term of service.

 

     (5) If, after the date that the service of an emergency

 

manager is concluded, the emergency manager or any employee, agent,

 

appointee, or contractor of the emergency manager is subject to a

 

claim, demand, or lawsuit arising from an action taken during the

 

service of that emergency manager, and not covered by a procured

 

worker's compensation, general liability, professional liability,

 

or motor vehicle insurance, litigation expenses of the emergency

 

manager or any employee, agent, appointee, or contractor of the

 

emergency manager, including attorney fees for civil and criminal


 

proceedings and preparation for reasonably anticipated proceedings,

 

and payments made in settlement of civil proceedings both filed and

 

anticipated, shall be paid out of the funds of the local government

 

that is or was subject to the receivership administered by that

 

emergency manager, provided that the litigation expenses are

 

approved by the state treasurer and that the state treasurer

 

determines that the conduct resulting in actual or threatened legal

 

proceedings that is the basis for the payment is based upon both of

 

the following:

 

     (a) The scope of authority of the person or entity seeking the

 

payment.

 

     (b) The conduct occurred on behalf of a local government while

 

it was in receivership under this act.

 

     (6) The failure of the local government to honor and remit the

 

legal expenses of a former emergency manager or any employee,

 

agent, appointee, or contractor of the emergency manager as

 

required by this section is a debt owed to this state and shall be

 

recovered by the state treasurer as provided in section 17a(5) of

 

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

 

141.917a.

 

     Sec. 26. (1) Elected and appointed officials of a local

 

government shall promptly and fully provide the assistance and

 

information necessary and properly requested by the state financial

 

authority, a review team, or the emergency manager in the

 

effectuation of their duties and powers and of the purposes of this

 

act. If the review team or emergency manager believes that an

 

official or employee of the local government is not answering


 

questions accurately or completely or is not furnishing information

 

requested, the review team or emergency manager may issue subpoenas

 

and administer oaths to the official or employee to furnish answers

 

to questions or to furnish documents or records, or both. If the

 

official or employee refuses, the review team or emergency manager

 

may bring an action in the circuit court in which the local

 

government is located or Ingham county circuit court, as determined

 

by the emergency manager, to compel testimony and furnish records

 

and documents. An action in mandamus may be used to enforce this

 

section.

 

     (2) Failure of a local government official to abide by this

 

act shall be considered gross neglect of duty, which the review

 

team or emergency manager may report to the state financial

 

authority and the attorney general. Following review and a hearing

 

with a local government elected official, the state financial

 

authority may recommend to the governor that the governor remove

 

the elected official from office. If the governor removes the

 

elected official from office, the resulting vacancy in office shall

 

be filled as prescribed by law.

 

     (3) An elected chief administrative officer or member of the

 

governing body of a local government serving and in office at the

 

time the local government is placed in receivership is not eligible

 

to be a candidate for election to public office for that local

 

government for a period of 10 years from the date the local

 

government is placed in receivership.

 

     (4) Subject to section 30(2), a local government placed in

 

receivership under this act is not subject to section 15 of 1947 PA


 

336, MCL 423.215, for a period of 5 years from the date the local

 

government is placed in receivership or until the time the

 

receivership is terminated, whichever occurs first.

 

     Sec. 27. (1) Before the termination of receivership and the

 

completion of the emergency manager's term, the manager shall

 

approve collective bargaining agreements and adopt and implement a

 

2-year budget for the local government commencing with the

 

termination of receivership.

 

     (2) After the completion of the emergency manager's term and

 

the termination of receivership, the governing body of the local

 

government shall not amend the collective bargaining agreement

 

approved under subsection (1) or the 2-year budget adopted under

 

subsection (1) without the approval of the state financial

 

authority, and shall not revise any ordinance implemented by the

 

emergency manager during his or her term prior to 1 year after the

 

termination of receivership.

 

     Sec. 28. This act is not construed to give the emergency

 

manager or the state financial authority the power to impose taxes,

 

over and above those already authorized by law, without the

 

approval at an election of a majority of the qualified electors

 

voting on the question.

 

     Sec. 29. The state financial authority is authorized and

 

directed to issue bulletins or adopt rules as necessary to carry

 

out the purposes of this act. A rule adopted under this section

 

shall be adopted in accordance with the administrative procedures

 

act of 1969, 1969 PA 306, MCL 24.201 to 24.328.

 

     Sec. 30. (1) An emergency financial manager appointed and


 

serving under state law prior to the effective date of this act

 

shall continue under this act as an emergency manager for the local

 

government and shall fulfill his or her duties and responsibilities

 

and exercise all of the powers granted under former 1988 PA 101 or

 

former 1990 PA 72. Except as provided in subsection (2), the

 

provisions of this act shall apply to any local government for

 

which an emergency financial manager is appointed and serving as of

 

the effective date of this act.

 

     (2) For a local government for which an emergency manager is

 

serving as of the effective date of this act, the provisions of

 

section 26(4) shall not become applicable until 60 days after the

 

effective date of this act.

 

     Sec. 31. If any portion of this act or the application of this

 

act to any person or circumstances is found to be invalid by a

 

court, the invalidity shall not affect the remaining portions or

 

applications of the act which can be given effect without the

 

invalid portion or application. The provisions of this act are

 

severable.

 

     Enacting section 1. The local government fiscal responsibility

 

act, 1990 PA 72, MCL 141.1201 to 141.1291, is repealed.

 

     Enacting section 2. This act does not take effect unless all

 

of the following bills of the 96th Legislature are enacted into

 

law:

 

     (a) Senate Bill No. 154.                                       

 

                

 

     (b) Senate Bill No. 155.                                       

 

               


 

     (c) Senate Bill No. 156.                                    

 

                  

 

     (d) Senate Bill No. 157.                                    

 

                 

 

     (e) Senate Bill No. 158.