May 8, 2014, Introduced by Rep. Walsh and referred to the Committee on Detroit's Recovery and Michigan's Future.
A bill to create the oversight commission act; to provide for
the operation of certain commissions; to create funds and accounts;
to prescribe the powers and duties of certain commissions, the
state treasurer, certain other state officials and state employees,
and certain local officials; to provide for the dissolution of
certain commissions; and to make certain appropriations.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"oversight commission act".
Sec. 2. The legislature finds and declares the following:
(a) It is the public policy of this state to exercise its
sovereign powers with regard to debt issuance and matters of
statewide concern in a manner calculated to foster the fiscal
integrity of all municipal governments to assure that those
municipalities provide for the health, safety, and welfare of their
citizens; pay principal and interest owed on debt obligations when
due; meet financial obligations to their existing and former
employees, vendors, and suppliers; and provide for proper financial
planning procedures and budgeting practices. The inability of a
municipal government to provide essential services to its citizens
as a result of fiscal emergencies is determined to affect adversely
the health, safety, and welfare of not only that municipality's
citizens, but also other citizens of this state.
(b) The police and fire retirement system of certain qualified
cities and the general retirement system of certain qualified
cities are currently underfunded, causing communities across the
state to face higher costs to borrow and invest funds, and have
caused bondholders, bond insurers, and financial institutions
anxiety over the financial health of not only certain qualified
cities, but communities across this state.
(c) Absent prospective state oversight over certain qualified
municipalities, there exists a threat of increased costs in
borrowing, reductions in credit or bond ratings, reduced faith from
existing creditors of municipalities and of this state, and dire
financial circumstances from which this state and its political
subdivisions may never fully recover.
(d) There are numerous residents of this state who have
accrued pension benefits from a qualified city's pension systems,
and those pensioners reside throughout this state. The settlement
of certain municipal bankruptcy cases will have a substantial
positive impact statewide.
(e) Establishing the commission and execution by the
commission of its powers granted under this act fulfill in all
respects a public and governmental purpose for the benefit of the
people of this state.
(f) Ongoing fiscal oversight over certain qualified cities is
a reasonable and sufficiently narrow regulation and serves a
significant and legitimate public purpose because it inures to the
benefit of all of this state's residents and aids in the remedy of
a broad and general social problem.
(g) Fiscal oversight over certain qualified cities will ensure
that those cities do not engage in the financial practices that led
to financial emergencies and insolvency, and ultimately, entry into
receivership and bankruptcy, which will ensure that those cities
can provide basic and essential municipal services to their
residents.
Sec. 3. As used in this act:
(a) "Applicable contract" means a contract for goods or
services proposed or entered into by a qualified city or retirement
system that either exceeds $750,000.00 or is for a term exceeding 2
years. Applicable contract also includes multiple contracts for
less than $750,000.00 with 1 entity that, in the aggregate, exceed
$750,000.00 within a 12-month period.
(b) "Commission" or "oversight commission" means the oversight
commission created in section 4.
(c) "Federal bankruptcy code" means the federal bankruptcy
code, 11 USC 101 to 1330.
(d) "Operating expenses" means the reasonable operating
expenses of the commission, including without limitation the cost
of preparing accounting and other reports, costs of commission
meetings or other required activities of the commission, counsel
fees, including fees of the attorney general, and fees and expenses
incurred for consultants and fiduciaries required to carry out the
purposes of this act.
(e) "Person" means an individual, corporation, limited or
general partnership, association, joint venture, limited liability
company, a governmental entity, including this state.
(f) "Plan for adjustment" means the plan for the adjustment of
debts of a qualified city approved and entered by a United States
bankruptcy court under chapter 9 of title 11 of the United States
Code, 11 USC 901 to 946.
(g) "Professional services" means services that require a high
degree of intellectual skill, an advanced degree, or professional
licensing or certification. Those providing the professional
services are distinguished based on their specialized knowledge,
experience, and expertise. Professional services include, but are
not limited to, accounting, actuarial, appraisal, auditing,
investment advisor, and legal services.
(h) "Qualified city" means a city with a population of more
than 600,000 for which a plan for adjustment was approved and
entered by a United States bankruptcy court.
(i) "State treasurer" means the treasurer of this state or his
or her designee who shall be designated by a written instrument
signed by the state treasurer and maintained in a permanent file
and whose signature shall have the same force and effect as the
signature of the state treasurer for all purposes under this act.
Sec. 4. The oversight commission is created within the
department of treasury to carry out the purposes and intent of this
act. The commission shall exercise its duties, rights, and
responsibilities independent of the state treasurer. The staffing,
budgeting, procurement, and related administrative functions of the
commission shall be performed under the direction and supervision
of the state treasurer, and the department of treasury shall
provide the commission with its necessary operating expenses.
Sec. 5. (1) The commission shall consist of the following 7
members:
(a) The governor, or his or her designee, who shall serve for
the duration of his or her term of office.
(b) The state treasurer, who shall serve for the duration of
his or her term of office.
(c) The director of the department of technology, management,
and budget or successor agency, or his or her designee, who shall
serve for the duration of his or her term of office.
(d) One member appointed by the governor, who has knowledge,
skill, or experience in the field of business or finance, including
relevant actuarial expertise, and who is a resident of a qualified
city.
(e) The mayor or chief executive officer of a qualified city,
or his or her designee, who shall serve for the duration of his or
her term of office.
(f) One member appointed by the governor from a list of 3 or
more individuals nominated by the senate majority leader who have
knowledge, skill, or experience in the field of business or
finance, including relevant actuarial expertise, and 1 of whom is a
resident of a qualified city.
(g) One member appointed by the governor from a list of 3 or
more individuals nominated by the speaker of the house of
representatives who have knowledge, skill, or experience in the
field of business or finance, including relevant actuarial
expertise, and 1 of whom is a resident of a qualified city.
(2) The appointed members shall serve for a term of 4 years,
except that of the 3 members first appointed, the appointee of the
governor shall serve a term of 1 year, the appointee of the
governor who was nominated by the speaker of the house of
representatives shall serve a term of 2 years, and the appointee of
the governor who was nominated by the senate majority leader shall
serve a term of 3 years. Appointed members serve at the pleasure
of, and may be removed by, their respective appointing official.
(3) Members of the commission shall serve without compensation
but may receive reasonable reimbursement for necessary travel and
expenses incurred in the discharge of their official duties.
(4) The governor or his or her designee shall serve as
chairperson of the commission.
(5) A majority of the members of the commission shall
constitute a quorum of the commission for the transaction of
business. The commission shall meet no less than monthly and at
times and places designated by the chairperson. Actions of the
commission shall be approved by a majority of the members.
(6) The commission shall conduct its business at public
meetings in compliance with the open meetings act, 1976 PA 267, MCL
15.261 to 15.275. However, members of the commission may attend and
participate in a meeting of the commission by the use of
telecommunication or other electronic equipment if their attendance
and participation by the use of telecommunication or other
electronic equipment is authorized by the bylaws of the commission
and that meeting is otherwise conducted in compliance with the open
meetings act, 1976 PA 267, MCL 15.261 to 15.275.
(7) A writing prepared, owned, used, in the possession of, or
retained by the commission in the performance of an official
function is subject to the freedom of information act, 1976 PA 442,
MCL 15.231 to 15.246.
(8) The commission shall adopt bylaws for governance of the
commission, which shall, at a minimum, address the procedures for
conducting meetings, including voting procedures, and the
requirements of its members to attend meetings. Procedural rules
required by this section are not subject to the administrative
procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.
(9) The commission may contract for professional services, as
it requires, and shall determine the qualifications it considers
necessary. Notwithstanding any other provision of law to the
contrary, the commission is not required to competitively bid
contracts for professional services.
(10) The members of the commission and contractors or agents
of the commission are subject to 1968 PA 317, MCL 15.321 to 15.330,
and 1968 PA 318, MCL 15.301 to 15.310.
(11) A member of the commission, and any person the commission
contracts with, shall discharge the duties of his or her position
in a nonpartisan manner, with good faith, and with that degree of
diligence, care, and skill that an ordinarily prudent person would
exercise under similar circumstances in a like position. The
commission shall adopt an ethics policy governing the conduct of
commission members and officers and employees of the commission.
(12) Commission members shall take and subscribe to the
constitutional oath of office under section 1 of article XI of the
state constitution of 1963. The oath shall be filed with the
secretary of state.
Sec. 6. (1) The commission shall provide oversight for a
qualified city beginning on the effective date of the plan for
adjustment or of this act, whichever is later.
(2) The commission shall ensure that a qualified city is
complying with the terms and conditions of this act and of the plan
for adjustment, if applicable. Except as otherwise provided in
section 8, the commission shall by October 1 each year certify that
a qualified city is in substantial compliance with the provisions
of this act.
(3) The commission shall ensure that, where applicable, a
qualified city complies with the provisions of all of the following
and may request verification of compliance:
(a) Section 8 of the publicly funded health insurance
contribution act, 2011 PA 152, MCL 15.568.
(b) Sections 4i, 4p, 4s, and 4t of the home rule city act,
1909 PA 279, MCL 117.4i, 117.4p, 117.4s, and 117.4t.
(c) The revised municipal finance act, 2001 PA 34, MCL
141.2101 to 141.2821.
(d) The uniform budgeting and accounting act, 1968 PA 2, MCL
141.421 to 141.440a.
(4) During the period of oversight, the commission shall
review and approve the qualified city's 4-year financial plan
required by section 4t of the home rule city act, 1909 PA 279, MCL
117.4t. The commission may require adjustments to the financial
plan to modify expenditures to satisfy debt service, adjust
projected revenues to comply with financial controls or accounting
practices, and reduce expenditures to conform to consensus revenue
estimates if required in section 7 to comply with the provisions of
section 4t of the home rule city act, 1909 PA 279, MCL 117.4t. If
the qualified city fails to submit an acceptable financial plan,
the commission may adopt and impose upon the qualified city a
financial plan satisfying the requirements of this act and section
4t of the home rule city act, 1909 PA 279, MCL 117.4t, until that
time as the qualified city submits an acceptable financial plan.
(5) The commission shall establish and maintain programs and
requirements for the responsible fiscal management of a qualified
city. The commission's programs and requirements shall include all
of the following:
(a) Increased managerial accountability.
(b) The streamlining of the provision of city services.
(c) Improved collection of outstanding tax revenues.
(d) Revisions to the procurement practices including
competitive bidding procedures.
(e) Review of the compensation and benefits of city employees
and recommendation of adjustments where necessary.
(6) Notwithstanding any charter provision or local ordinance
to the contrary, all applicable contracts are subject to review and
approval by the commission. Only applicable contracts that are
first approved by the governing body and mayor of a qualified city
as required by law, charter, ordinance, or policy may be approved
by the commission. If an applicable contract is not approved by the
commission within 45 days of it submission, that contract is
rejected and must be resubmitted for commission approval.
(7) A qualified city, when required by the commission, shall
present written reports regarding its financial stability and shall
permit the commission to audit or inspect financial statements,
actuarial reports, revenue estimates, and any and all other
documents, data, reports, or findings that the commission considers
necessary to carry out its purpose under this act.
(8) The commission shall, on June 1 and December 1 of each
year in which the commission has oversight over a qualified city,
has oversight over compliance with the terms and conditions of this
act, or has oversight over the plan for adjustment providing for
the state's contribution, file a written report with the governor.
A copy of the report shall be submitted to the senate majority
leader and the speaker of the house of representatives.
(9) The commission shall approve all collective bargaining
agreements to which a qualified city is a party after approval by
the governing body and mayor of the qualified city as required by
charter or law. The commission shall approve or reject collective
bargaining agreements submitted to it within 45 days of submission.
Collective bargaining agreements submitted to the commission shall
not be executed unless and until the commission approves those
agreements.
(10) A decision of an arbitration panel pursuant to 1969 PA
312, MCL 423.231 to 423.247, to which a qualified city is a party
shall not be effective unless approved by the commission. The
commission's approval shall be in addition to any other
requirements provided by law. When determining whether to approve
or reject a decision under this subsection, the commission shall
consider whether the qualified city has the financial ability,
within its 4-year financial plan, to comply with that decision.
Sec. 7. The commission may do 1 or more of the following:
(a) Review and approve the qualified city's consensus revenue
estimate under section 4t of the home rule city act, 1909 PA 279,
MCL 117.4t. The commission may also, after consultation with the
qualified city, revise a revenue estimate prepared in connection
with a budget, budget modification, financial plan, or financial
plan modification, if the commission determines that the revenue
estimate was not based on assumptions and methods of estimation
reasonable and appropriate under the circumstances and in view of
the objectives and purposes of this act. After consultation with
the city, the commission may determine the estimated revenues for
the qualified city, but any revenue estimate adopted by the
commission shall be based on the same requirements as the city's
initial revenue estimate.
(b) Require a qualified city to submit the 4-year financial
plan required in section 4t of the home rule city act 1909 PA 279,
MCL 117.4t, in a form and manner the commission considers
appropriate. The requirement to submit a 4-year financial plan is
not subject to waiver under section 8.
(c) Review and approve proposed and amended operational
budgets of a qualified city. A proposed budget or budget amendment
does not take effect unless approved by the commission.
(d) Require the chief financial officer of the qualified city
to provide the commission with information it requests related to
the qualified city's finances. The commission may also require the
chief financial officer to attend commission meetings. If the chief
financial officer fails to comply with the provisions of this
subdivision, the commission may require the qualified city to
remove the chief financial officer and appoint a successor.
(e) Review and approve requests by a qualified city to issue
debt under 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. The commission may develop rules for the issuance
of debt, including limitations that are greater than those provided
in sections 401 to 405 of the revised municipal finance act, 2001
PA 34, MCL 141.2401 to 141.2405. The debt described in this
subdivision may not be issued unless and until approved by the
commission and the commission's approval shall be in addition to
any approval of the department of treasury as required by law.
(f) Require a qualified city to solicit competitive bids, in a
manner not inconsistent with article 2 of the management and budget
act, 1984 PA 431, MCL 18.1201 to 18.1299, wherever practicable to
efficiently and effectively meet the qualified city's need for the
procurement of goods and services.
(g) Review compliance by a qualified city with a deficit
elimination plan submitted under section 21 of the Glenn Steil
state revenue sharing act of 1971, 1971 PA 140, MCL 141.921.
(h) Approve the appointment of a qualified city's chief
financial officer. If that appointment is not approved by the
commission within 45 days of written submission of the appointment
by the qualified city, the appointment is denied. The commission
may require that any effort to terminate the chief financial
officer be subject to commission review and approval.
(i) Require the development and implementation of financial
best practices for a qualified city.
(j) Recommend the adoption or amendment of certain charter
provisions, bylaws, ordinances, policies, or operating procedures
for a qualified city.
(k) Require the pursuit of financial or managerial training to
ensure the proper discharge of duties for a qualified city.
(l) Make and execute contracts necessary to carry out the
purposes of this act.
(m) Sue or be sued. The commission may retain legal counsel to
enforce any provisions of this act.
(n) Require a qualified city and the employees or agents of a
qualified city to timely produce and share all information and
documents, and provide access to all information on assets,
services, records, and any other materials or documents the
commission determines are necessary to carry out its
responsibilities under this act. The commission may require the
officers or employees of the qualified city to attend commission
meetings for any purpose necessary to carry out its
responsibilities under this act.
(o) Perform any duty provided by law that a receivership
transition advisory board as described in section 23 of the local
financial stability and choice act, 2012 PA 436, MCL 141.1563, may
perform.
(p) Perform any other duties assigned by the governor that are
not inconsistent with the purposes of this act.
Sec. 8. (1) Notwithstanding section 6, the commission may, by
resolution, waive 1 or more of the requirements designated in
sections 6 and 7 as provided in subsection (2).
(2) The commission may grant a waiver under this section if
all of the following conditions are met:
(a) The commission certifies that a qualified city has adopted
and adhered to deficit-free budgets for 3 consecutive years that
comply with generally accepted accounting principles and are in
accordance with the uniform budgeting and accounting act, 1968 PA
2, MCL 141.421 to 141.440a.
(b) The state treasurer and the qualified city's chief
financial officer, if applicable, certify that both of the
following are met:
(i) All municipal securities or debt obligations sold by or for
the benefit of that qualified city in the general public market
during the immediately preceding fiscal year and current fiscal
year satisfied the capital and other financial requirements of the
qualified city during that period.
(ii) There is a substantial likelihood that municipal
securities or debt obligations can be sold in the general public
market during the remainder of the current fiscal year and the
immediately succeeding fiscal year in amounts sufficient to
substantially satisfy all of the capital and other financial
requirements of the qualified city during those periods in
accordance with the qualified city's financial plan.
(c) The qualified city's financial plan projects a balanced
budget for the current and succeeding 3 fiscal years using
generally accepted accounting principles and in accordance with the
uniform budgeting and accounting act, 1968 PA 2, MCL 141.421 to
141.440a, and section 4t of the home rule city act, 1909 PA 279,
MCL 117.4t.
(d) The qualified city has been assigned a credit rating
within the category of A- or higher or the equivalent by at least 1
nationally recognized rating agency or has otherwise demonstrated
to the commission's satisfaction that the qualified city has
sufficient ability to borrow in the municipal securities market.
(e) The qualified city did not violate the plan for adjustment
in the immediately preceding fiscal year and is not in violation in
the current fiscal year.
(f) The state treasurer certifies that the qualified city is
in compliance with the uniform budgeting and accounting act, 1968
PA 2, MCL 141.421 to 141.440a.
(g) The commission certifies that the qualified city is in
substantial compliance with this act.
(3) The commission shall, by resolution, rescind its waiver
under subsection (2) if it certifies that any of the following,
where applicable, has occurred or that there is a substantial
likelihood that any of the following will imminently occur:
(a) The qualified city fails to pay principal of or interest
on any municipal securities when due or payable.
(b) The qualified city incurs a budget deficit in a fiscal
year equal to or more than 5% of the total expenditures in that
year based on generally accepted accounting principles.
(c) The qualified city issues municipal securities without the
authorization of the commission or in violation of the revised
municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821.
(d) The qualified city violates this act or any mandatory
financial controls in a manner that substantially impairs that
qualified city's ability to pay principal of and interest on
municipal securities when due and payable or its ability to adhere
to a balanced budget.
(e) The qualified city violates any provision of the plan for
adjustment, if applicable.
(f) The state treasurer and the qualified city's chief
financial officer, if applicable, fail to certify that the criteria
in subsection (2)(b) are met.
(g) If the qualified city's chief financial officer has
resigned, been terminated, or been removed, or the office has
otherwise become vacant and a successor has not been appointed
within 180 days of that vacancy.
(4) If the commission finds that the circumstances under which
it rescinded its waiver of 1 or more of the requirements of
sections 6 and 7 as provided in subsection (3) no longer exist, the
commission may reverse the rescission as provided in subsection
(2).
Sec. 10. The commission, and the carrying out of its
authorized purposes under this act, is in all respects a public and
governmental purpose for the benefit of the people of this state
and for the improvement of their health, safety, welfare, comfort,
and security. These purposes are public purposes, and the
commission will be performing an essential governmental function in
the exercise of the powers provided by this act.
Sec. 11. For the fiscal year ending September 30, 2014,
$900,000.00 is appropriated from the general fund/general purpose
to the department of treasury to be expended to provide the
commission with the resources to exercise its powers, duties, and
responsibilities under this act and as required by this state to
enforce this act and the plan for adjustment; to secure
professional services to assist in the implementation of this act;
and, any other purposes that the commission determines in its
discretion are necessary or implied to implement this act.
Sec. 12. If the commission has waived 1 or more of the
requirements of sections 6 and 7 under section 8 each year for the
immediately preceding 10 consecutive fiscal years, and the plan for
adjustment has expired, the commission may, by resolution, and with
the approval of the governing body and mayor of the qualified city,
dissolve itself. All property, funds, and assets of the commission,
if any, shall be transferred to and vested in this state.
Sec. 13. The commission is a state commission, and the members
are state officers for the purposes of section 6419 of the revised
judicature act of 1961, 1961 PA 236, MCL 600.6419. The court of
claims shall have exclusive jurisdiction over any and all actions
challenging the validity of this act.