HB-4716, As Passed House, September 7, 2011HB-4716, As Passed Senate, September 7, 2011
June 9, 2011, Introduced by Rep. Olumba and referred to the Committee on Local, Intergovernmental, and Regional Affairs.
A bill to amend 1909 PA 279, entitled
"The home rule city act,"
by amending section 36a (MCL 117.36a), as amended by 2011 PA 36.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 36a. (1) Except as otherwise provided under this section,
if a financial emergency exists under the local government and
school district fiscal accountability act, 2011 PA 4, MCL 141.1501
to 141.1531, a city may issue financial recovery bonds in amounts
greater than the limitations established by the city charter or
this act.
(2) Any financial recovery bonds issued under this section are
subject to the terms and conditions approved by the local emergency
financial assistance loan board created under the emergency
municipal loan act, 1980 PA 243, MCL 141.931 to 141.942.
(3) Any financial recovery bonds issued under this section are
not subject to section 5(g).
(4) Notwithstanding subsection (1), the net indebtedness of a
city, reduced by any amounts excluded under section 4a(4), shall
not exceed 20% of the assessed value of the city.
(5) Notwithstanding subsection (4), the net indebtedness of a
city that issues financial recovery bonds under subsection (6),
reduced by any amounts excluded under section 4a(4), shall not
exceed 12% of the assessed value of the city, adjusted for
additions as provided under section 4a(9).
(6) If financial recovery bonds are issued under this
subsection by a city with a population of less than 10,000
according to the latest federal decennial census and located in a
county organized under 1966 PA 293, MCL 45.501 to 45.521, the city
may provide in the order authorizing the issuance of the bonds for
the deposit of revenues generated from taxes levied by the city,
including a tax levied by the city to pay a judgment or comply with
a court order, into an escrow account to be used for the purpose of
paying principal of and interest on the bonds and the
administrative costs associated with issuing the bonds, and the tax
revenues may be pledged by the city for the payment of the bonds
issued under this section. Bonds issued under this subsection shall
be limited in amount to that necessary to pay court-ordered
judgments
against the city existing on the effective date of the
amendatory
act that added this subsection May
25, 2011 and
administrative costs associated with issuing the bonds. If the city
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 city treasurer, the
agreement shall also provide for the direct payment of all tax
revenues pledged for payment of bonds issued pursuant to this
section 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 the bonds. If the city and a
third-party tax collector enter into an agreement providing for the
direct payment of taxes to a trustee, a statutory lien and trust is
created applicable to those 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 issued pursuant to this
section shall be subject to a lien and trust, which is 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 issued pursuant to this section and any
other bonds subsequently issued by the city sharing a parity or
subordinate pledge of those tax revenues. The lien and trust
created under this subsection for the benefit of bondholders 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 issued pursuant to
this section and are exempt from being levied upon, taken,
sequestered, or applied toward paying the debts or liabilities of
the city other than for payment of debt service on the bonds to
which the lien applies. As used in this subsection, "third-party
tax collector" means a party that is not the city treasurer or
other elected or appointed city official with whom the city 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 city treasurer.
(7) A city that issues financial recovery bonds under this
section subsequently may refund all or a portion of those bonds
subject to the terms and conditions approved by the local emergency
financial assistance loan board. However, the local emergency
financial assistance loan board shall not approve any term or
condition under this subsection that materially alters any existing
term, condition, lien, or priority that applied to the bonds before
the refunding if the approval would constitute an impermissible
contract impairment. If financial recovery bonds are or have been
issued by a city under this section, the city may provide
additional security for the prior bonds pursuant to this subsection
and may issue financial recovery bonds pursuant to this subsection
to be sold to the Michigan finance authority for the purpose of
refunding all or a portion of the prior bonds, or other obligations
of the city, and for such other purposes as approved by the local
emergency financial assistance loan board. A city may by resolution
or order provide for the deposit of revenues pledged for the
payment of prior bonds or bonds issued pursuant to this subsection
into a separate account for the purpose of paying principal and
interest on those obligations, the administrative costs associated
with those obligations, and any other obligations issued by the
city that are secured by those revenues. For purposes of this
subsection, principal and interest may include termination fees and
credit enhancement fees, if any. If the city enters into an
agreement with a third party that has a duty or obligation under
the agreement or under state law to collect for, pay, remit,
disburse, or distribute to the city all or a portion of the
revenues pledged by the city for the payment of principal and
interest on prior bonds or bonds issued pursuant to this
subsection, the agreement shall also provide for the direct payment
of the revenues that the third party has a duty or obligation to
collect for, pay, remit, disburse, or distribute to the city, and
that the city has pledged for payment of the prior bonds or bonds
issued pursuant to this subsection, to a trustee to be deposited
into an escrow account and used for the sole purpose of paying
principal of and interest on the prior bonds or bonds issued
pursuant to this subsection and related administrative costs and
any other obligations issued by the city that are secured by those
revenues. The agreement shall be authorized by resolution or order
of the city and approved by the local emergency financial
assistance loan board. If the city and a third party enter into an
agreement providing for the direct payment of the revenues pledged
by the city for the payment of prior bonds or bonds issued pursuant
to this subsection to a trustee, a statutory lien and trust is
created applicable to those revenues received or to be received
from the third party by the trustee, and the revenues paid or to be
paid to a trustee for the purpose of paying the principal and
interest on prior bonds or bonds issued pursuant to this subsection
shall be subject to a lien and trust that is 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 and interest
on the prior bonds of the city or bonds of the city issued pursuant
to this subsection and related administrative costs and any other
obligations issued by the city that are secured by those revenues.
The lien and trust created under this subsection is perfected
without delivery, recording, or notice. The revenues held or to be
held by a trustee pursuant to an agreement shall be held in trust
pursuant to this subsection and are exempt from being levied upon,
taken, sequestered, or applied toward paying the debts or
liabilities of the city other than for payment of debt service on
the obligations and related administrative costs to which the lien
applies. A statutory lien and trust created by this subsection
applicable to distributable aid received or to be received from the
state treasurer by a paying agent, escrow agent, or trustee, shall
apply only to the distributable aid, as that term is defined in
section 9 of the fiscal stabilization act, 1981 PA 80, MCL
141.1009, after it has been appropriated and shall be subject to
any subsequent reduction of that appropriation by operation of law
or executive order. Nothing in this subsection shall abridge or
reduce the ability of the state treasurer to withhold distributable
aid from a city as provided by the Glenn Steil state revenue
sharing act of 1971, 1971 PA 140, MCL 141.901 to 141.921. Financial
recovery bonds issued pursuant to this subsection are not subject
to subsection (4). This subsection shall not be construed to do any
of the following:
(a) Create or constitute state indebtedness.
(b) Require the state to continue to impose and collect taxes
from which distributable aid is paid or to make payments of
distributable aid.
(c) Limit or prohibit the state from repealing or amending a
law enacted for the distributable aid, or for the manner, time, or
amount of distributable aid.
(8) (7)
Financial recovery bonds issued
under this section are
not subject to the revised municipal finance act, 2001 PA 34, MCL
141.2101 to 141.2821.