SENATE BILL No. 927

 

 

October 20, 2009, Introduced by Senators JANSEN, HARDIMAN and KAHN and referred to the Committee on Appropriations.

 

 

 

     A bill to amend 2001 PA 34, entitled

 

"Revised municipal finance act,"

 

by amending section 103 (MCL 141.2103) and by adding section 518.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 103. As used in this act:

 

     (a) "Assessed value", "assessed valuation", "valuation as

 

assessed", and "valuation as shown by the last preceding tax

 

assessment roll", or similar terms, used in this act, any statute,

 

or charter as a basis for computing limitations upon the taxing or

 

borrowing power of any municipality, mean the state equalized

 

valuation as determined under the general property tax act, 1893 PA

 

206, MCL 211.1 to 211.157 211.155.

 

     (b) "Chief administrative officer" means that term as defined

 

in section 2b of the uniform budgeting and accounting act, 1968 PA


 

2, MCL 141.422b.

 

     (c) "Debt" means all borrowed money, loans, and other

 

indebtedness, including principal and interest, evidenced by bonds,

 

obligations, refunding obligations, notes, contracts, securities,

 

refunding securities, municipal securities, or certificates of

 

indebtedness that are lawfully issued or assumed, in whole or in

 

part, by a municipality, or will be evidenced by a judgment or

 

decree against the municipality.

 

     (d) "Debt retirement fund" means a segregated account or group

 

of accounts used to account for the payment of, interest on, or

 

principal and interest on a municipal security.

 

     (e) "Deficit" means a situation for any fund of a municipality

 

in which, at the end of a fiscal year, total expenditures,

 

including an accrued deficit, exceeded total revenues for the

 

fiscal year, including any surplus carried forward.

 

     (f) "Department" means the department of treasury.

 

     (g) "Fiscal year" means a 12-month period fixed by statute,

 

charter, or ordinance, or if not so fixed, then as determined by

 

the department.

 

     (h) "Governing body" means the county board of commissioners

 

of a county; the township board of a township; the council, common

 

council, or commission of a city; the council, commission, or board

 

of trustees of a village; the board of education or district board

 

of a school district; the board of an intermediate school district;

 

the board of trustees of a community college district; the county

 

drain commissioner or drainage board of a drainage district; the

 

board of the district library; the legislative body of a


 

metropolitan district; the port commission of a port district; and,

 

in the case of another governmental authority or agency, that

 

official or official body having general governing powers over the

 

authority or agency.

 

     (i) "Health care trust fund" means a trust or fund created in

 

accordance with the public employee health care fund investment

 

act, 1999 PA 149, MCL 38.1211 to 38.1216, or other state or federal

 

statute, and used exclusively to provide funding for postemployment

 

health care benefits for public employee retirees of a county,

 

city, village, or township. A health care trust fund also includes

 

the retiree health fund vehicle administered by the municipal

 

employees retirement system described in the municipal employees

 

retirement act of 1984, 1984 PA 427, MCL 38.1501 to 38.1555, for a

 

county, city, village, or township that has adopted the municipal

 

employee retirement system to provide funding for postemployment

 

health care benefits for public employee retirees.

 

     (j) (i) "Municipal security" means a security that when issued

 

was not exempt from this act or the municipal finance act, former

 

1943 PA 202, MCL 131.1 to 139.3, by the provisions of this act or

 

by the provisions of the municipal finance act, former 1943 PA 202,

 

MCL 131.1 to 139.3, or by the provisions of the law authorizing its

 

issuance and that is payable from or secured by any of the

 

following:

 

     (i) Ad valorem real and personal property taxes.

 

     (ii) Special assessments.

 

     (iii) The limited or unlimited full faith and credit pledge of

 

the municipality.


 

     (iv) Other sources of revenue described in this act for debt or

 

securities authorized by this act.

 

     (k) (j) "Municipality" means a county, township, city,

 

village, school district, intermediate school district, community

 

college district, metropolitan district, port district, drainage

 

district, district library, or another governmental authority or

 

agency in this state that has the power to issue a security.

 

Municipality does not include this state or any authority, agency,

 

fund, commission, board, or department of this state.

 

     (l) (k) "Outstanding security" means a security that has been

 

issued, but not defeased or repaid, including a security that when

 

issued was exempt from this act or the municipal finance act,

 

former 1943 PA 202, MCL 131.1 to 139.3, by the provisions of this

 

act or by the provisions of the municipal finance act, former 1943

 

PA 202, MCL 131.1 to 139.3, or by the provisions of the law

 

authorizing its issuance.

 

     (m) (l) "Qualified status" means a municipality that has filed

 

a qualifying statement under section 303 and has been determined by

 

the department to be qualified to issue municipal securities

 

without further approval by the department.

 

     (n) (m) "Refunding security" means a municipal security issued

 

to refund an outstanding security.

 

     (o) (n) "Security" means an evidence of debt such as a bond,

 

note, contract, obligation, refunding obligation, certificate of

 

indebtedness, or other similar instrument issued by a municipality,

 

which pledges payment of the debt by the municipality from an

 

identified source of revenue.


 

     (p) (o) "Sinking fund" means a fund for the payment of

 

principal only of a mandatory redemption security.

 

     (q) (p) "Taxable value" means the taxable value of the

 

property as determined under section 27a of the general property

 

tax act, 1893 PA 206, MCL 211.27a.

 

     (r) "Unfunded accrued liability" means the difference between

 

the assets and liabilities of a health care trust fund as

 

determined by an actuarial study conducted pursuant to Rule 43 or

 

45 of the governmental accounting standards board.

 

     Sec. 518. (1) Through September 30, 2014, a county, city,

 

village, or township may by ordinance or resolution of its

 

governing body, and without a vote of its electors, issue a

 

municipal security under this section to pay the costs of the

 

unfunded accrued liability provided that the amount of taxes

 

necessary to pay the principal and interest on that municipal

 

security, together with the taxes levied for the same year, shall

 

not exceed the limit authorized by law. Postemployment health care

 

benefits may be funded by the county, city, village, or township.

 

The funding of postemployment health care benefits by a county,

 

city, village, or township as provided in this act shall not

 

constitute a contract to pay the postemployment health care

 

benefits.

 

     (2) Before a county, city, village, or township issues a

 

municipal security under this section, the county, city, village,

 

or township shall publish a notice of intent to issue the municipal

 

security. The notice of intent and the rights of referendum shall

 

meet the requirements of section 517(2) except that petitioners


 

shall have 60 days after the publication of the notice of intent to

 

file a petition and the registered elector requirement shall be not

 

less than 5% or 10,000 registered electors, whichever is less.

 

     (3) A county, city, village, or township by resolution and

 

with a vote of its electors may issue a municipal security pledging

 

its unlimited taxes to pay the costs of an unfunded accrued

 

liability.

 

     (4) The proceeds of a municipal security issued under this

 

section may be used to pay the costs of issuance of the municipal

 

security. The proceeds of a municipal security issued under this

 

section shall be deposited in a health care trust fund; a trust

 

created by the issuer which has as its beneficiary a health care

 

trust fund; or for a county, city, village, or township, a

 

restricted fund within a trust that would only be used to retire

 

the municipal securities issued under subsection (1) or (3). A

 

county, city, village, or township shall have the power to create a

 

trust to carry out the purposes of this subsection. The trust

 

created under this subsection shall invest its funds in the same

 

manner as funds invested by a health care trust fund. The trust

 

created under this subsection shall comply with all of the

 

following:

 

     (a) Report its financial condition according to generally

 

accepted accounting principles.

 

     (b) Be tax exempt under the internal revenue code.

 

     (5) Before a county, city, village, or township issues a

 

municipal security under this section, the county, city, village,

 

or township shall prepare and make available to the public a


 

comprehensive financial plan that includes all of the following:

 

     (a) Evidence that the issuance of the municipal security

 

together with other funds lawfully available will be sufficient to

 

eliminate the unfunded accrued liability.

 

     (b) A debt service amortization schedule and a description of

 

actions required to satisfy the debt service amortization schedule.

 

     (c) A certification by the person preparing the plan that the

 

comprehensive financial plan is complete and accurate.

 

     (d) Documentation that the issuance of municipal securities

 

will result in projected present value savings regarding the

 

unfunded accrued liability.

 

     (e) A plan in place from the county, city, village, or

 

township to mitigate the increase in health care costs and may

 

include a wellness program that promotes the maintenance or

 

improvement of healthy behaviors.

 

     (6) Municipal securities issued under subsection (1) or (3) by

 

a county, city, village, or township, and currently outstanding,

 

shall not exceed 5% of the state equalized valuation of the

 

property assessed in that county, city, village, or township.

 

     (7) Municipal securities issued under subsection (1) or (3) by

 

a county, city, village, or township and the interest on and income

 

from the municipal securities are exempt from taxation by this

 

state or a political subdivision of this state.

 

     (8) A county, city, village, or township issuing municipal

 

securities under subsection (1) or (3) may enter into indentures or

 

other agreements with trustees and escrow agents for the issuance,

 

administration, or payment of the municipal securities.


 

     (9) Municipal securities issued under subsection (1) or (3) by

 

a county, city, village, or township shall not on a cumulative

 

basis exceed 75% of current unfunded accrued liabilities on

 

postemployment health care benefits owed to employees of the

 

county, city, village, or township that exist on the date of the

 

amendatory act that added this subsection.

 

     (10) A county, city, village, or township shall not issue a

 

municipal security under subsection (1) or (3) unless the county,

 

city, village, or township has been assigned a credit rating within

 

the category of A or higher by at least 1 nationally recognized

 

rating agency.

 

     (11) A county, city, village, or township shall not issue a

 

municipal security under subsection (1) or (3) unless the projected

 

difference between the assumed rate of return on the health care

 

trust fund investments and the projected actual interest rate paid

 

on the municipal securities issued under subsection (1) or (3) is

 

not less than 100 basis points.

 

     (12) Before a county, city, village, or township issues a

 

municipal security under this section, the county, city, village,

 

or township shall obtain the approval of the department of

 

treasury. The department of treasury shall review the proposed

 

issuance of municipal securities and if it verifies that the

 

county, city, village, or township meets the requirements of this

 

section, the department of treasury shall approve the issuance of

 

municipal securities under this section.