Bill Text: IN SB0105 | 2011 | Regular Session | Engrossed
Bill Title: Adjustments of debt of a political subdivision.
Spectrum: Slight Partisan Bill (Republican 8-5)
Status: (Enrolled - Dead) 2011-04-26 - Senator Randolph added as advisor [SB0105 Detail]
Download: Indiana-2011-SB0105-Engrossed.html
Citations Affected: IC 5-1; IC 5-1.5; IC 6-1.1; IC 20-48; noncode.
Effective: July 1, 2011.
(HOUSE SPONSORS _ SOLIDAY, FOLEY)
January 5, 2011, read first time and referred to Committee on Judiciary.
January 27, 2011, amended, reported favorably _ Do Pass.
February 7, 2011, read second time, amended, ordered engrossed.
February 8, 2011, engrossed. Read third time, passed. Yeas 43, nays 6.
March 28, 2011, read first time and referred to Committee on Local Government.
March 30, 2011, reassigned to Committee on Judiciary.
April 18, 2011, amended, reported _ Do Pass.
April 20, 2011, read second time, amended, call withdrawn. Re-read second time, amended, ordered engrossed.
Digest Continued
manager for the distressed political subdivision. Provides that an emergency manager of a distressed political subdivision has broad powers to effect the financial rehabilitation of the distressed political subdivision. Provides that the board may authorize a distressed political subdivision to file a petition for bankruptcy under the United States Bankruptcy Code. Reduces the number of members on the board to three: the director of the office of management and budget, the commissioner of the department of local government finance, and the state examiner of the state board of accounts. Specifies additional circumstances under which the pledge of revenues for the repayment of an obligation creates a statutory lien, and prohibits an issuer from changing the provisions of an obligation without the consent of 100% of the owners of all outstanding obligations.
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
(1) the issuer has the necessary statutory authority to issue obligations, pay lease rentals, or make contractual payments for
any project or purpose for which the pledge or mortgage is made;
(2) the revenues, money, or property is legally available, under
federal, state, and local laws, to pay or secure debt service, lease
rentals, or contractual payments; and
(3) the pledge or mortgage does not purport to create an
obligation in violation of any statutory or constitutional limitation
to which the issuer is subject.
(b) Notwithstanding any other law, a pledge of revenues or
other money or property made by any issuer to secure the
repayment of an obligation, regardless of when made, is binding
from the time the pledge is, or was, made and the pledge as of the
date the pledge is or was made, creates a statutory lien upon the
revenues or other money or property of the issuer pledged at the
time the pledge is or was made. Revenues or other money, or
property pledged and thereafter received by the issuer, or that may
thereafter be held, possessed, maintained, or controlled by, or
otherwise in the custody of, the state or any other political
subdivision, or any department, agency or instrumentality thereof,
under any other law, is immediately subject to the statutory lien of
the pledge, with this statutory lien immediately and automatically
attaching thereto, without any further act, and the statutory lien of
a pledge is binding against all parties having claims of any kind in
tort, contract, or otherwise against the issuer, regardless of
whether the parties have notice of any lien. No resolution,
ordinance, indenture, or any other instrument by which a pledge
is created must be filed or recorded except in the records of the
issuer.
(c) Notwithstanding any other law, to the extent that an issuer
has pledged any revenues or other money or property to secure the
repayment of an obligation, the following provisions apply:
(1) Any revenues or other money or property pledged and
thereafter received by the issuer, or which may thereafter be
held, possessed, maintained, or controlled by, or otherwise in
the custody of, the state or any other political subdivision, or
any department, agency, or instrumentality thereof, under
any other law, up to an amount necessary to pay debt service
on or to maintain a reserve fund or any required coverage
ratio in any calendar year or bond year with respect to the
obligation, must be used for the repayment of the obligation
and for no other purpose until the obligation for the calendar
year or bond year is fully paid in accordance with its terms.
(2) An issuer may not consent to or permit, and may not be
construed as consenting to or permitting, without the consent
of one hundred percent (100%) of the owners of all
obligations then outstanding, the use of these pledged
revenues for any purpose except as described in subdivision
(1).
(d) Notwithstanding any other law, to the extent that an issuer
has pledged any revenues or other money or property to secure the
repayment of an obligation, the following provisions apply:
(1) Any revenues or other money or property that may
thereafter be held, possessed, maintained, or controlled by, or
otherwise in the custody of, the state or any department,
agency, or instrumentality thereof, under any other law and
that would otherwise be available for distribution to such
issuer, is automatically subject to a statutory lien for purposes
of IC 5-1.5-8-5.1, IC 6-1.1-20.3-6.5, IC 6-1.1-20.6-10, or
IC 20-48-1-11, whether or not such revenues, money, or
property has been pledged by the issuer to secure these
obligations.
(2) An issuer is prohibited from consenting to or permitting,
and may not be construed as consenting to or permitting, the
use of any revenues or other money or property reduced
under IC 5-1.5-8-5.1, IC 6-1.1-20.3-6.5, IC 6-1.1-20.6-10, or
IC 20-48-1-11 for any other purpose other than the purposes
described in IC 5-1.5-8-5.1, IC 6-1.1-20.6-10, or IC 20-48-1-11,
respectively.
(e) This section shall be liberally construed so that the state and
any distressed political subdivision (as defined in IC 6-1.1-20.3-2)
shall, to the extent legally permitted under Indiana law, ensure that
all bonds, all lease rental payments, and all warrants of each
distressed political subdivision are paid when due in accordance
with the original terms thereof irrespective of any other state or
federal law. However, this chapter may not be construed to create
a debt of the state.
(b) Notwithstanding any other law, any issuer of an obligation is prohibited from consenting to or permitting, and may not be construed as consenting to or permitting, without the consent of
one hundred percent (100%) of the owners of all obligations then
outstanding:
(1) an extension of the stated maturity or a reduction in the
principal amount of, or a reduction in the rate or an extension
of the time of payment of interest on, any obligations;
(2) the creation of any lien on the revenues or other money or
property pledged to the obligations that is senior or prior to
the lien upon the obligations;
(3) a reduction in the aggregate principal amount of the
obligations;
(4) the granting of a privilege, priority, or preference to any
of the obligations over any other of the obligations; or
(5) any amendment or modification of the powers, remedies,
rights, duties, privileges, or immunities of the owners of the
obligations.
(c) This section shall be liberally construed so that the state and
any distressed political subdivision (as defined in IC 6-1.1-20.3-2)
shall, to the extent legally permitted under Indiana law, ensure that
all bonds, all lease rental payments, and all warrants of each
distressed political subdivision are paid when due in accordance
with the original terms thereof irrespective of any other state or
federal law. However, this chapter may not be construed to create
a debt of the state.
(1) reduce the amount of any revenues or other money or property held, possessed, maintained or controlled by, or otherwise in the custody of, the state, or any department, agency or instrumentality thereof, which would otherwise be available for distribution to the qualified entity under any other law, by an amount equal to the amount of the qualified entity's unpaid securities;
(2) pay the amount by which the revenues or other money or property are reduced under subdivision (1) to the bank for the purpose of paying principal of and interest on bonds or other obligations of the bank; and
(3) notify the qualified entity that these revenues or other
money or property, which would otherwise be available for
distribution to the qualified entity, have been reduced by an
amount necessary to satisfy all or a portion of the qualified
entity's unpaid securities to the bank.
(b) A reduction under subsection (a) must be made:
(1) first, from distributions of county adjusted gross income
tax distributions under IC 6-3.5-1.1, county option income tax
distributions under IC 6-3.5-6, or county economic
development income tax distributions under IC 6-3.5-7 that
would otherwise be distributed to the county under the
schedule in IC 6-3.5-1.1-10, IC 6-3.5-1.1-21.1, IC 6-3.5-6-16,
IC 6-3.5-6-17.3, IC 6-3.5-7-17, and IC 6-3.5-7-17.3; and
(2) second, from any other revenues or other money or
property held, possessed, maintained or controlled by, or
otherwise in the custody of, the state, or any department,
agency or instrumentality of the state, which would otherwise
be available for distribution to the qualified entity under any
other law.
(c) Any reductions under subsection (a) may be used only for the
purpose of paying principal of and interest on the debt service
obligations of the qualified entity which the qualified entity has
failed to pay to the bank and for no other purpose.
(d) However, the reduction of payment from the qualified entity
and payment to the bank under this section may not adversely
affect the validity of the security in default.
(e) This section shall be interpreted liberally so that the state
shall, to the extent permitted by law, ensure that the debt service
obligations of each qualified entity are paid when due. However,
this section does not create a debt of the state or any political
subdivision.
board is established.
(b) The distressed unit appeal board consists of the following
members:
(1) The director of the office of management and budget or the
director's designee. The director or the director's designee shall
serve as chairperson of the distressed unit appeal board.
(2) The commissioner of the department of local government
finance or the commissioner's designee.
(3) The commissioner of the department of state revenue or the
commissioner's designee.
(4) (3) The state examiner of the state board of accounts or the
state examiner's designee.
(5) The following members appointed by the governor:
(A) One (1) member appointed from nominees submitted by
the Indiana Association of Cities and Towns.
(B) One (1) member appointed from nominees submitted by
the Association of Indiana Counties.
(C) One (1) member appointed from nominees submitted by
the Indiana Association of School Superintendents.
A member nominated and appointed under this subdivision must
be an elected official of a political subdivision.
(6) One (1) member appointed by the governor (in addition to
members appointed under subdivision (5)).
(7) One (1) member appointed by the speaker of the house of
representatives. A member appointed under this subdivision
serves a term of four (4) years.
(c) The members appointed under subsection (b)(5) and subsection
(b)(6) serve at the pleasure of the governor.
(d) (c) Each member of the commission is entitled to reimbursement
for:
(1) traveling expenses as provided under IC 4-13-1-4; and
(2) other expenses actually incurred in connection with the
member's duties as provided in the state policies and procedures
established by the Indiana department of administration and
approved by the budget agency.
board seeking to have the political subdivision designated as a
distressed political subdivision under this chapter. However, if the
political subdivision is a school corporation, the school board may
file a petition under this chapter.
(b) A petition under subsection (a) must include a proposed
financial plan for the distressed political subdivision. The proposed
financial plan must include the following:
(1) Proposed budgets that would enable the distressed political
subdivision to cease being a distressed political subdivision.
(2) Proposed efficiencies, consolidations, cost reductions, uses of
alternative or additional revenues, or other actions that would
enable the distressed political subdivision to cease being a
distressed political subdivision.
(3) Proposed increases, if any, in the percentage thresholds
(specified as a percentage of gross assessed value) at which the
credit under IC 6-1.1-20.6 will apply, including any varying
percentages for different classes of property.
(4) Proposed reductions, if any, to the credits under IC 6-1.1-20.6
(by percentages), including any varying percentage reductions for
different classes of property.
(c) (b) The board may adopt procedures governing the timing and
required content of a petition under subsection (a).
(1) The political subdivision has defaulted in payment of principal or interest on any of its bonds or notes.
(2) The political subdivision has missed a payroll for thirty (30) days or two (2) consecutive payrolls.
(3) The political subdivision has failed to make required payments to judgment creditors for sixty (60) days beyond the date of the recording of the judgment.
(4) The political subdivision, for at least thirty (30) days beyond the due date, has failed to do any of the following:
(A) Forward taxes withheld on the incomes of employees.
(B) Failed to transfer employer or employee contributions due under the Federal Insurance Contributions Act (FICA).
(C) Failed to deposit its minimum obligation payment to a pension fund.
(5) The political subdivision has accumulated a deficit equal to eight percent (8%) or more of its revenues. For purposes of this subdivision, "deficit" means a negative fund balance calculated as a percentage of revenues at the end of a budget year for any governmental or proprietary fund. The calculation must be presented on an accrual basis according to generally accepted accounting principles.
(6) The political subdivision has sought to negotiate a resolution or an adjustment of claims that in aggregate:
(A) exceed thirty percent (30%) of the political subdivision's anticipated annual revenues; and
(B) are ninety (90) days or more past due.
(7) The state has intercepted money available for distribution to the political subdivision in order to pay unpaid debt service obligations of the political subdivision that are due, as authorized under IC 6-1.1-20.6-10 or any other law.
(8) The political subdivision has interfund loans for the benefit of the same fund carried over year end for two (2) successive years.
(b) If the board designates a political subdivision as distressed under subsection (a), the board shall review the designation annually to determine if the distressed political subdivision meets at least one (1) of the conditions listed in subsection (a).
(c) If the board designates a political subdivision as a distressed political subdivision under subsection (a), the board shall immediately notify:
(1) the treasurer of state; and
(2) the county auditor and county treasurer of each county in which the distressed political subdivision is wholly or partially located;
that the board has designated the political subdivision as a distressed political subdivision.
(d) Upon receiving a notice under subsection (c), the treasurer of state shall immediately and continuously distribute (after any reductions made under IC 5-1.5-8-5.1(a), IC 6-1.1-20.6-10(c), or IC 20-48-1-11(c)) to the board or the board's designee any revenue, other money, or property held, possessed, maintained, controlled, or otherwise in custody of the state, or any department, agency, or instrumentality of the state, that would otherwise be available for distribution to the distressed political subdivision under any other
law. The board or the board's designee shall do the following after
receiving any revenue, other money, or property from the
treasurer of state under this section:
(1) Reduce the amount of any revenue, other money, or
property received from the treasurer of state under this
section by an amount determined to be necessary by the board
or the board's designee to pay any of the distressed political
subdivision's unpaid obligations (as defined in IC 5-1-3-1(b)).
(2) Pay the amount by which the revenue, other money, or
property is reduced under subdivision (1) to the creditor to
whom the distressed political subdivision's obligations are due
and owing.
(3) Notify the distressed political subdivision that revenue,
other money, or property that would be otherwise available
for distribution to the distressed political subdivision, has
reduced under this section by an amount necessary to satisfy
all or part of the distressed political subdivision's unpaid
obligations.
(4) Distribute to the distressed political subdivision any
revenue, other money, or property remaining after the
reduction under subdivision (1).
This subsection continues to apply, irrespective of any other state
or federal law, until the board terminates control of the distressed
political subdivision under IC 6-1.1-20.3-14.
(b) The chairperson of the board shall appoint a subcommittee to oversee the activities of an emergency manager.
(c) The distressed political subdivision shall pay the emergency fiscal manager's compensation and reimburse the emergency fiscal manager for actual and necessary expenses.
(1) Assume and exercise the authority and responsibilities of both the executive and the fiscal body of the political subdivision concerning the adoption, amendment, and enforcement of ordinances and resolutions relating to or affecting the fiscal stability of the political subdivision. However, the emergency manager does not have the power to impose taxes or fees in addition to those taxes or fees authorized by the political subdivision before the political subdivision was designated a distressed political subdivision.
(2) Review the political subdivision's budget.
(3) Review salaries of the political subdivision's employees.
(4) Conduct a financial and compliance audit of the internal operations of the political subdivision.
(5) Develop a written financial plan in consultation with the officials of the political subdivision not later than six (6) months after appointment.
(6) Develop a plan for paying all of the political subdivision's outstanding obligations.
(7) Review existing labor contracts.
(8) Adopt a budget for the political subdivision for each calendar or fiscal year, as applicable, that the political subdivision remains a distressed political subdivision.
(9) Review payrolls and other claims against the political subdivision before payment.
(10) Make, approve, or disapprove the following:
(A) A contract.
(B) An expenditure.
(C) A loan.
(D) The creation of any new position.
(E) The filling of any vacant position.
(11) Submit a written report to the board every three (3) months describing the work that has been done to remove the political subdivision from distressed status.
(12) Petition the board to terminate a political subdivision's status as a distressed political subdivision when the conditions found in section 6.5 of this chapter are no longer applicable to the political subdivision.
(b) An emergency manager of a distressed political subdivision appointed under section 7.5 of this chapter may do the following:
(1) Renegotiate existing labor contracts and act as an agent of the political subdivision in collective bargaining.
(2) Reduce or suspend salaries of the political subdivision's
employees.
(3) Enter into agreements with other political subdivisions for
the provision of services.
(c) An emergency manager of a distressed political subdivision
retains the powers and duties described in subsections (a) and (b)
until the political subdivision's status as a distressed political
subdivision is terminated under section 14 of this chapter.
(1) an emergency manager of a distressed political subdivision; or
(2) the petitioner who moved for designation of the political subdivision as a distressed political subdivision under section 6 of this chapter;
files a petition with the board for termination of the political subdivision's status as a distressed political subdivision, the board shall conduct a public hearing on the question of whether to terminate control of the distressed political subdivision.
(b) The board shall terminate control of a distressed political subdivision if the board finds that the conditions found in section
6.5 of this chapter are no longer applicable to the political subdivision.
(c) Notwithstanding any other section of this chapter, not later than ninety (90) days after taking office, a new executive of a distressed political subdivision may petition the board for suspension of the political subdivision's distressed status. The executive must include in its petition a written plan to resolve the applicable issues described in section 6.5 of this chapter. If the board approves the executive's written plan, the board may suspend the political subdivision's distressed status for one hundred eighty (180) days. Suspension under this chapter
terminates automatically upon expiration of the one hundred
eighty (180) day period. The board may consider a petition to
terminate the political subdivision's distressed status during a
period of suspension.
(1) the principal and interest payable during a calendar year on bonds, notes, or warrants; and
(2) lease rental payments payable during a calendar year on leases;
of a political subdivision payable from ad valorem property taxes.
(b) Political subdivisions are required by law to fully fund the payment of their debt obligations in an amount sufficient to pay any debt service or lease rentals on outstanding obligations, regardless of any reduction in property tax collections due to the application of tax credits granted under this chapter. Any reduction in collections must be applied to the other funds of the political subdivision after debt service or lease rentals have been fully funded.
(c) Upon receiving notice from any creditor that a political subdivision has failed to pay any of the political subdivision's debt service obligations during a calendar year when due, the treasurer of the state shall:
(1) reduce the amount of any revenues or other money or
property held, possessed, maintained or controlled by, or
otherwise in the custody of, the state, or any department,
agency, or instrumentality of the state, which would otherwise
be available for distribution to the political subdivision under
any other law, by an amount equal to the amount of the
political subdivision's unpaid debt service obligations;
(2) pay the amount by which these revenues or other money
or property are reduced under subdivision (1) to the creditor;
and
(3) notify the political subdivision that the revenues or other
money or property, which would otherwise be available for
distribution to the political subdivision, have been reduced by
an amount necessary to satisfy all or a portion of the political
subdivision's unpaid debt service obligations.
(d) A reduction under subsection (c) must be made:
(1) first, from distributions of county adjusted gross income
tax distributions under IC 6-3.5-1.1, county option income tax
distributions under IC 6-3.5-6, or county economic
development income tax distributions under IC 6-3.5-7 that
would otherwise be distributed to the county under the
schedule in IC 6-3.5-1.1-10, IC 6-3.5-1.1-21.1, IC 6-3.5-6-16,
IC 6-3.5-6-17.3, IC 6-3.5-7-17, and IC 6-3.5-7-17.3; and
(2) second, from any other revenues or other money or
property held, possessed, maintained or controlled by, or
otherwise in the custody of, the state, or any department,
agency or instrumentality thereof, which would otherwise be
available for distribution to the political subdivision under
any other law.
(e) Any reductions under subsection (c) must be used only for
the purpose of paying principal of and interest on the debt service
obligations of the political subdivision which the political
subdivision has failed to pay and for no other purpose.
(d) (f) This section shall be interpreted liberally so that the state
shall to the extent legally valid permitted by law ensure that the debt
service obligations of each political subdivision are paid when due.
However, this section does not create a debt of the state or any
political subdivision.
(g) Notwithstanding this section, the payment of any reduction
under subsection (c) to a creditor may not adversely affect the
validity of the debt service obligations with respect to which the
creditor has notified the treasurer of the state under this section.
SECTION 525, IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2011]: Sec. 11. (a) As used in this section,
"debt service obligations" refers to the principal and interest payable
during a calendar year on a school corporation's general obligation
bonds under IC 20-48-1-1, IC 20-48-1-2, and a school corporation's
lease rentals under IC 20-47-2 and IC 20-47-3, and a school
corporations tax anticipation warrants under IC 30-48-1-9.
(b) Before the end of each calendar year, the department of local
government finance shall review the bond and lease rental levies, or
any levies that replace bond and lease rental levies, of each school
corporation that are payable in the next succeeding year and the
appropriations from the levies from which the school corporation is to
pay the amount, if any, of the school corporation's debt service
obligations. If the levies and appropriations of the school corporation
are not sufficient to pay the debt service obligations, the department of
local government finance shall establish for each school corporation:
(1) bond or lease rental levies, or any levies that replace the bond
and lease rental levies; and
(2) appropriations;
that are sufficient to pay the debt service obligations.
(c) Upon the failure of a school corporation to pay any of the school
corporation's debt service obligations during a calendar year when due,
the treasurer of state, upon being notified of the failure by a claimant,
shall pay the unpaid debt service obligations that are due from the
funds of the state only to the extent of the amounts appropriated by the
general assembly for the calendar year for distribution to the school
corporation from state funds, deducting the payment from the
appropriated amounts. A deduction under this subsection must be
made:
(1) first from all funds except state tuition support; and
(2) second from state tuition support.
(c) Upon receiving notice from any creditor that a school
corporation has failed to pay any of the political subdivision's debt
service obligations during a calendar year when due, the treasurer
of the state shall:
(1) reduce the amount of any revenues or other moneys or
property held, possessed, maintained or controlled by, or
otherwise in the custody of, the state, or any department,
agency or instrumentality of the state, which would otherwise
be available for distribution to the school corporation under
any other law, by an amount equal to the amount of the school
corporation's unpaid debt service obligations;
(2) pay the amount by which these revenues or other moneys
or property are reduced under subdivision (1) to the creditor;
and
(3) notify the school corporation that the revenues or other
moneys or property, which would otherwise be available for
distribution to the school corporation, have been reduced by
an amount necessary to satisfy all or a portion of the school
corporation's unpaid debt service obligations.
(d) A reduction under subsection (c) must be made:
(1) first, from any revenues or other moneys or property held,
possessed, maintained or controlled by, or otherwise in the
custody of, the state, or any department, agency or
instrumentality of the state, which would otherwise be
available for distribution to the school corporation under any
other law, except state tuition support; and
(2) second, from state tuition support.
(e) Any reductions under subsection (c) may be used only for the
purpose of paying principal of and interest on the debt service
obligations of the school corporation which the school corporation
has failed to pay and for no other purpose.
(d) (f) This section shall be interpreted liberally so that the state
shall to the extent legally valid permitted by law ensure that the debt
service obligations of each school corporation are paid. However, this
section does not create a debt of the state or any political subdivision.
(g) Notwithstanding this section, the payment of any reduction
under subsection (c) to a creditor may not adversely affect the
validity of the debt service obligations with respect to which the
creditor has notified the treasurer of the state pursuant to this
section.
; (11)ES0105.2.14. --> SECTION 14. THE FOLLOWING ARE REPEALED [EFFECTIVE JULY 1, 2011]: IC 5-1.5-8-5; IC 6-1.1-20.3-7; IC 6-1.1-20.3-8.
(b) This SECTION expires December 31, 2013.
