SB-0160, As Passed Senate, March 18, 2015

SUBSTITUTE FOR

SENATE BILL NO. 160

     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 143.

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, local financial stability and choice act, 2012 PA 436,

MCL 141.1541 to 141.1575, 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 that is

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 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 a trust 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) If a city with a population of more than 600,000 that is

located in a county organized under 1966 PA 293, MCL 45.501 to

45.521, issues or has issued financial recovery bonds pursuant to

subsection (7), and the city, as a specified condition of the

issuance, has entered into an agreement with a trustee for the

deposit of revenues pledged by the city into a trust account as

provided in subsection (7) that is established for the sole purpose

of paying principal of and interest on those bonds and related

administrative expenses, and the city has received the approval of

the state treasurer, then, at all times after the issuance of the

bonds and before the deposit of the revenues of the city into that

trust account, the revenues of the city to be deposited are held in

trust for the benefit of the trustee and the bonds by any party

that comes into possession of the revenues. The revenues are held

in trust for the benefit of the trustee and the bonds regardless of

whether the city directly collects the revenues, a third party

collects the revenues on the city's behalf, or any other person

comes into possession of the revenues, and the revenues remain

subject to the trust regardless of subsequent transfer or transfers

of the revenues until such time as the revenues are deposited into

that trust account. To the extent that the city or any other person

holds a residual or other interest in the revenues held in trust

and to be deposited with the trustee in the trust account, the

interest is subordinate to a lien in the revenues in favor of the

trustee for the purpose of ensuring delivery of the revenues to the

trust account. This lien arises by operation of law and without

further act or notice of any kind at the earliest time that the

city has or acquires any rights in the revenues pledged pursuant to

the agreement, is and will remain paramount and superior to all

other liens and interests of any kind, and is perfected without

delivery, recording, or notice. The revenues held in trust and to

be deposited into the trust account pursuant to this subsection are

exempt from being levied upon, taken, sequestered, or applied

toward paying the debts or liabilities of the city other than those

expressly specified in the agreement described in this subsection

and subsection (7).

(9) (8) 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.