Bill Text: MI HB4331 | 2015-2016 | 98th Legislature | Engrossed
Bill Title: Local government; financing; emergency municipal loan act; increase cap on emergency loans. Amends secs. 2, 3, 4, 6 & 7 of 1980 PA 243 (MCL 141.932 et seq.). TIE BAR WITH: HB 4325'15, HB 4326'15
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2015-07-14 - Assigned Pa 115'15 With Immediate Effect [HB4331 Detail]
Download: Michigan-2015-HB4331-Engrossed.html
HB-4331, As Passed House, April 23, 2015
SUBSTITUTE FOR
HOUSE BILL NO. 4331
(as amended April 23, 2015)
[A bill to amend 1980 PA 243, entitled
"Emergency municipal loan act,"
by amending sections 2, 3, 4, 6, and 7 (MCL 141.932, 141.933, 141.934,
141.936, and 141.937), as amended by 2012 PA 284.]
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
[Sec. 2. (1) There is created a local emergency financial
assistance loan board within the department of treasury. This board shall consist of the state treasurer, the director of the department of licensing and regulatory affairs, and the director of the department of technology, management, and budget. Except for budgeting, procurement, and related functions of the board that shall be performed under the direction and supervision of the state treasurer, the board shall exercise its prescribed statutory powers, duties, and functions independently of the department of treasury.
(2) The board has the powers necessary to carry out and effectuate the purposes and provisions of this act, and powers vested in the board under other laws of this state, including, but not limited to, all of the following powers:
(a) To act by an order issued in the name of the board and signed by the members of the board. The signature of the designee of a member, when the designee is acting for his or her principal, has the same force and effect as the signature of the member.
(b) To authorize and make loans; to renegotiate the terms of outstanding loans; and to make, execute, and deliver contracts and other instruments necessary or convenient to the exercise of its powers.
(c) To aid, advise, and consult with a municipality with respect to House Bill No. 4331 as amended April 23, 2015 (2 of 3)
fiscal questions arising from and relating to its proposed or outstanding loans.
(d) To promulgate rules under the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, that it considers necessary.
(e) To examine the books and records of a municipality applying for or receiving a loan under this act for the purpose of ascertaining if the municipality is complying, in relation to a loan under this act, with the requirements of the board, the laws of this state, and the charter, ordinances, and resolutions of the municipality. Additionally, for effectuating this purpose, the board may require sworn statements from any officer or employee of the municipality and may require the municipality to furnish a statement of its financial condition. The board has full power, in furtherance of its investigations, to examine witnesses on oath, to compel the attendance of witnesses, to compel the giving of testimony, and to compel the production of books, papers, and records. Witnesses may be summoned by the board by its process upon the payment of the same fees as are allowed to witnesses attending in the circuit court for the county in which a hearing is held. A person duly subpoenaed under this section who fails to attend or testify at the place named in the subpoena served for that purpose is guilty of a misdemeanor.
(f) To serve notice upon a municipality of an order relating to the municipality issued by the board. A municipality has prima facie notice of and is bound by an order of the board if notice has been served upon it by registered mail addressed to any officer of the municipality upon whom legal process may be served.
(g) To enforce compliance with its orders; with the terms of outstanding loans; with any provision of this act; or, in relation to a loan under this act, with any law of this state or with the charter, ordinances, or resolutions of a municipality that received a loan under this act. As 1 method to enforce compliance, the board may institute appropriate proceedings in the courts of this state, including proceedings for writs of mandamus and injunctions.
(h) To subject a loan to the terms and conditions the board considers necessary to ensure compliance with the uniform budgeting and accounting act, 1968 PA 2, MCL 141.421 to 141.440a, and to ensure timely repayment of the loan, including, but not limited to, requiring the direct assignment for repayment of a loan of any state money appropriated to the municipality or, for a municipality that is a school district, other revenue or money that may be pledged by a school district under section 1211 of the revised school code, 1976 PA 451, MCL 380.1211, or other law. For a loan entered into after the effective date of the amendatory act that added this sentence, if a municipality does not make any scheduled repayment on a loan, the department of treasury shall require the direct assignment for repayment of the loan, in the amount equal to the minimum of the interest due on the loan and up to 5% of the loan, from any state money appropriated to the municipality or, for a municipality that is a school district, other revenue or money that may be pledged by a school district under section 1211 of the revised school code, 1976 PA 451, MCL 380.1211, or other law.
(i) To provide loan terms specifying conditions and events of default and remedies available upon default by a municipality.
(j) To impose loan terms upon the disbursement of a loan authorized to be made under section 3(2)(b) or (3).
(3) The board shall review each application for a loan from a House House Bill No. 4331 as amended April 23, 2015 (3 of 3)
municipality to determine if the municipality satisfies the requirements of this act. Except for loans authorized under section 3(2) or (3), upon determining those applications that satisfy the application eligibility requirements of section 4 and, for subsequent annual loans, section 8, the board may authorize an annual loan to 1 or more of those eligible applicants upon declaring that a local fiscal emergency exists in the municipality. For loans authorized under section 3(2) or (3), the board may authorize a loan upon determining that the municipality has satisfied the requirements of this act applicable to loans under section 3(2) or (3).
(4) All actions of the board shall be approved by all members of the board. All meetings of the board shall be conducted at a public meeting held in compliance with the open meetings act, 1976 PA 267, MCL 15.261 to 15.275.
(5) Subject to the requirements of this act, the board has the sole authority to determine all of the following:
(a) The amount of a loan.
(b) The rate or rates of interest on a loan.
(c) Any other condition related to a loan including, but not limited to, requiring that the proceeds of a loan be used for specified purposes.
(6) The department of treasury shall provide staff services to the board to carry out this act.
(7) A municipality may do 1 or more of the following:
(a) Borrow money under this act, and issue evidences of indebtedness for repayment of obligations, including, but not limited to, money advanced or previously advanced to a school district or approved or previously approved for advancement to a school district under section 15(2) of the state school aid act of 1979, 1979 PA 94, MCL 388.1615, or money borrowed by the school district under section 1225 of the revised school code, 1976 PA 451, MCL 380.1225.
(b) Enter into a loan agreement with the board.
(c) Issue its notes evidencing the loan.
(d) Assign and convey any revenues allocated to it for repayment of the loan.
(e) Take any other action necessary to receive, secure, or repay a loan under this act.]
Sec. 3. (1) For state fiscal years ending before October 1,
2011, the board may authorize loans under this act to
municipalities that total up to $5,000,000.00 in a state fiscal
year. For state fiscal years beginning after September 30, 2018,
the board may authorize loans under this act to municipalities that
total up to $10,000,000.00 in a state fiscal year, but a loan to a
single municipality shall not exceed $4,000,000.00 in a state
fiscal year. For the period beginning on October 1, 2011 and ending
House Bill No. 4331 as amended April 23, 2015
on September 30, 2018, the board may do all of the following:
(a) Authorize loans to municipalities other than school
districts
that total up to $35,000,000.00 [$48,000,000.00] during
the
period. Loans to a single municipality under this subdivision shall
not
total more than $20,000,000.00. The board shall not authorize a
loan
to a municipality under this subdivision until 30 days after
the
effective date of the amendatory act that added this
subdivision.
(b) Authorize loans to municipalities that are school
districts
that total up to $50,000,000.00 [$70,000,000.00] during
the period. Loans to a single school district under this
subdivision shall not total more than $20,000,000.00. [The board shall
not authorize a loan to a school district organized as a school district of the first class under part 6 of the revised school code, 1976 PA 451, MCL 380.401 to 380.485.]
(2) The board may authorize loans under this act to a county
within the following limitations:
(a) In the 1998-99 state fiscal year, the board may authorize
loans under this act to a county with a population greater than
1,500,000.
(b) For a state fiscal year in which the block grant
appropriated to a county with a population of more than 1,500,000
that is organized under 1966 PA 293, MCL 45.501 to 45.521, and that
is a county juvenile agency is less than the amount required to be
distributed to that county in that year under the social welfare
act, 1939 PA 280, MCL 400.1 to 400.119b, the board may authorize a
loan to that county in an amount not greater than the difference
between the amount of the block grant and the amount required to be
distributed to that county for that fiscal year under the social
welfare act, 1939 PA 280, MCL 400.1 to 400.119b. The board is not
required to authorize loans under this subdivision to a county for
more than 1 state fiscal year.
(3) If in a state fiscal year the block grant appropriated to
a county other than a county described in subsection (2) that is a
county juvenile agency is less than the amount required to be
distributed to that county in that year under the social welfare
act, 1939 PA 280, MCL 400.1 to 400.119b, the board may authorize a
loan to that county in an amount not greater than the difference
between the amount of the block grant and the amount required to be
distributed to that county under the social welfare act, 1939 PA
280, MCL 400.1 to 400.119b, in that state fiscal year.
(4) Sections 6(2), 7, and 8 and the conditions listed in
section 4(1) do not apply to a loan authorized under subsection (2)
or (3).
(5) The proceeds of a loan made under subsection (2) or (3)
shall be maintained in a separate account and shall not be
commingled with the county's general fund or any other special fund
or account.
(6) The state treasurer or his or her designee shall monitor
the expenditure of the proceeds of any loan made under subsection
(2) or (3).
(7) The proceeds of a loan made under subsection (2) or (3)
are
subject to the requirements of the county juvenile agency act,
1998 PA 518, MCL 45.621 to 45.631.
(8) Except as otherwise provided in this subsection, revenue
for loans made under this act shall be provided from the surplus
funds of this state under authorization granted under section 1 of
1855 PA 105, MCL 21.141. Alternatively, for a school district,
revenue for a loan made under this act may be provided from money
advanced to the school district by this state from money
appropriated from the state school aid fund established under
section 11 of article IX of the state constitution of 1963 and
payable to the school district under the state school aid act of
1979, 1979 PA 94, MCL 388.1601 to 388.1896.
(9) After September 30, 2012, the board may restructure
payments, but not the outstanding principal balance or interest, on
a loan to a municipality under subsection (1) if all of the
following apply:
(a)
For a municipality that is a school district, in a state
fiscal
year after the state fiscal year in which the loan to the
school
district was authorized by the board, the foundation
allowance
for the school district under the state school aid act of
1979,
1979 PA 94, MCL 388.1601 to 388.1896, is less than the
foundation
allowance for the school district in the state fiscal
year
in which the loan was authorized.
(b)
For a municipality other than a school district, in a
state
fiscal year after the state fiscal year in which the loan to
the
municipality was authorized by the board, statutory revenue
sharing
for the municipality under the Glenn Steil state revenue
sharing
act of 1971, 1971 PA 140, MCL 141.901 to 141.921, combined
with
any economic vitality incentive program money payable to the
municipality
is less than the statutory revenue sharing for the
municipality
combined with any economic vitality incentive program
money
payable to the municipality in the state fiscal year in which
the
loan was authorized.
(a) (c)
The municipality is in compliance
with the terms of
the loan and any other requirements applicable to the municipality
under this act.
(b) (d)
The municipality is in compliance
with any
requirements relating to a deficit elimination plan under state
law.
(c) (e)
The municipality is in compliance
with any applicable
consent
agreement or order of an emergency manager 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, or a successor statute.
(d) (f)
For a municipality that is a school
district, the
school district is in compliance with all requirements for receipt
of the foundation allowance and any other requirements applicable
to the school district under the state school aid act of 1979, 1979
PA 94, MCL 388.1601 to 388.1896.
(e) (g)
For a municipality other than a
school district, the
municipality is in compliance with all conditions for economic
vitality incentive program money or statutory revenue sharing or
other requirements applicable to the municipality under the Glenn
Steil state revenue sharing act of 1971, 1971 PA 140, MCL 141.901
to 141.921.
(f) (h)
The restructuring of payments
complies with applicable
law.
(g) (i)
The loan has not been sold or
transferred under
section 6a.
(10) As used in this section, "county juvenile agency" means
that term as defined in section 2 of the county juvenile agency
act, 1998 PA 518, MCL 45.622.
Sec. 4. (1) If the governing body of a municipality desires to
request a loan, it shall provide by resolution for the submission
of an application to the board for a loan made under this act. The
municipality shall certify and substantiate all of the following
information and conditions to be eligible for consideration for a
loan authorization by the board:
(a) A deficit for the municipality's general fund is projected
for the current fiscal year.
(b) That 1 or both of the following have occurred within the
18 months immediately preceding the loan request:
(i) The municipality has issued tax anticipation notes or
revenue sharing notes under the revised municipal finance act, 2001
PA 34, MCL 141.2101 to 141.2821, or for a school district, issued
notes under section 1225 of the revised school code, 1976 PA 451,
MCL 380.1225.
(ii) The department of treasury has acted upon a request by
the municipality to issue tax anticipation notes or revenue sharing
notes under the revised municipal finance act, 2001 PA 34, MCL
141.2101 to 141.2821.
(c) The municipality meets 1 or more of the following
conditions:
(i) Its income tax revenue growth rate is .90 or less, or the
municipality has 2 or more emergency loans outstanding at the time
its application is submitted and its income tax revenue growth rate
is 1.3 or less.
(ii) Its local tax base growth rate is 75% or less of the
statewide tax base growth rate.
(iii) The state equalized valuation of real and personal
property within the municipality at the time the loan application
is made is less than the state equalized valuation of real and
personal property within the municipality in the immediately
preceding year.
(iv) The municipality is levying the maximum number of mills
it is authorized to levy as approved by the voters and has either
of the following:
(A) One or more delinquent special assessments.
(B) Outstanding bonds, notes, or other evidences of
indebtedness that were issued in anticipation of a contract
obligation with, or an assessment obligation against, another
municipality that has 1 or more delinquent special assessments that
were levied to satisfy, in whole or in part, the contract or
assessment obligation.
(v) For a school district, the department of treasury
determines that 1 or more of the following apply:
(A) The school district's membership under section 6 of the
state school aid act of 1979, 1979 PA 94, MCL 388.1606, at the time
the
loan application is made has declined over a the preceding
3-
state-fiscal-year
period by a total of 15% or more.
, as determined
by
the department of treasury.
(B) The loan will assist the school district in resolving a
financial emergency or fiscal stress within the school district.
(vi) The municipality is in receivership or is subject to a
consent
agreement 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, or a successor statute, and loan authorization by the
board is necessary to implement a financial and operating plan, a
consent agreement, or a continuing operations plan or recovery plan
for
the municipality 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, or a successor statute.
(vii) The municipality is a municipality for which a
financial
emergency
has been confirmed to exist and responsibilities for the
municipality
are vested in an emergency financial manager under
former
1990 PA 72 or is a municipality for which a consent
agreement,
including a plan to address a serious financial problem,
is
in place for the municipality under former 1990 PA 72. This
subparagraph
applies only if the local government and school
district
fiscal accountability act, 2011 PA 4, MCL 141.1501 to
141.1531,
is repealed or otherwise not effective and former 1990 PA
72
is again in effect or applicable.
(d) The municipality submits a 5-year plan, that has been
approved by the governing body of the municipality, and that will
balance future expenditures with anticipated revenues.
(2) If the board determines it necessary, the board may
inspect, copy, or audit the books and records of a municipality.
(3) Subsection (1) does not apply to a loan authorized under
section 3(2) or (3).
Sec. 6. (1) A loan made under this act shall bear an annual
rate or rates of interest, if any, as established by the board
under section 2(5). The board may establish interest for a loan
under this act either at a rate or rates that are fixed for the
term of the loan or, if the formula is approved by the board at the
time the loan is made or renegotiated as authorized in section 2,
at a rate calculated upon a formula that varies the rate annually.
The board may provide that the interest rate or rates for a loan
under this act may adjust to an interest rate or rates determined
at the time of the sale or transfer by the state treasurer to be
sufficient to facilitate the sale of the loans under section 6a.
Except for loans sold or transferred under section 6a, if the
interest rate for a loan under this act is a single fixed rate, the
annual rate of interest for the term of a loan shall not be less
than the municipal 10-year rate as determined by the state
treasurer. The board may consider a higher interest rate based on
both the market interest rates and the risk of the municipality
requesting the loan. Except for loans sold or transferred under
section 6a, if the interest rate for a loan under this section is
not a single fixed rate, all of the following apply to the loan:
(a) The annual rate of interest for the loan shall not be less
than 2.5%, but the board may consider a higher interest rate based
on both the market interest rates and the risk of the municipality
requesting the loan.
(b) If the loan includes an interest-only repayment period,
the interest-only repayment period shall not be more than 60
months.
(2) Interest payments are due and payable as determined by the
board or the state treasurer under section 6a. Repayment of all of
the principal shall be made not more than 30 years from the date of
issuance determined by the board or state treasurer under section
6a, except as provided in subsection (5). This subsection, sections
7 and 8, and the conditions listed in section 4(1) do not apply to
a loan authorized under section 3(2) or (3).
(3) The loan agreement between the board and a county for a
loan authorized under section 3(2) or (3) shall establish the
schedule for payment of the principal of and interest on the loan,
the nature of the obligation of the county to repay a loan made
under this act, and any security for that loan. Payments of
principal and interest for a loan authorized by section 3(2) shall
be limited to revenues allocated to the county under the health and
safety fund act, 1987 PA 264, MCL 141.471 to 141.479, minus those
revenues authorized by the board in the loan agreement for use in
the payment of other county obligations.
(4) Unless other state appropriations to a municipality are
pledged or assigned in an amount sufficient for the municipality to
make a required principal or interest payment, if the
municipality's payment of required principal or interest is
delinquent, the state treasurer may withhold the amount of all
delinquent payments that are due on a loan issued under this act
from state payments to the municipality under the Glenn Steil state
revenue sharing act of 1971, 1971 PA 140, MCL 141.901 to 141.921.
(5) Except for loans sold or transferred under section 6a or
as otherwise determined by the board, notwithstanding the payment
schedules and methods established by this section or by the terms
of a loan agreement, a municipality may initiate repayment of all
or part of a loan made under this act at an earlier date or may
make repayment in fewer installment payments, or both. The board
shall not condition either eligibility for consideration for a loan
or the grant of a loan under this act on repayment schedules and
terms other than those required by subsections (1), (2), (3), and
(4). In addition, failure of a municipality to make repayments
under terms or a schedule it has instituted under this subsection
does not disqualify the municipality from eligibility for
consideration for loans in subsequent fiscal years.
(6) A loan issued under this act shall be a general obligation
of the municipality except that a loan issued under section 3(2)
shall not be a general obligation of the municipality and shall be
repaid solely from specific revenues pledged for repayment of the
loan.
Sec. 7. (1) A municipality that receives a loan under this act
shall perform all of the following:
(a) Except as otherwise provided in this subdivision, employ a
full-time professional administrator or contract with a person with
expertise in municipal finance and administration to direct or
participate directly in the management of the municipality's
operations until otherwise ordered by the board. If the
municipality
is in receivership 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, or a successor
statute, compensate the
emergency manager may perform the functions of the full-time
professional
administrator under this subdivision. for
the
municipality
and reimburse the emergency manager's actual and
necessary
expenses as provided under section 15(5)(e) of the local
government
and school district fiscal accountability act, 2011 PA
4,
MCL 141.1515, or a successor statute. If the municipality is
under
a consent agreement as provided under the local government
and
school district fiscal accountability act, 2011 PA 4, MCL
141.1501
to 141.1531, or a successor statute, compensate those
officials
who are required to be compensated under the consent
agreement
with the municipality and reimburse those officials'
actual
and necessary expenses as provided under the consent
agreement.
(b)
If the local government and school district fiscal
accountability
act, 2011 PA 4, MCL 141.1501 to 141.1531, is
repealed
or otherwise not effective and former 1990 PA 72 is again
in
effect or applicable and an emergency financial manager is in
place
for the municipality under former 1990 PA 72, compensate the
emergency
financial manager and reimburse the emergency financial
manager's
actual and necessary expenses. If the local government
and
school district fiscal accountability act, 2011 PA 4, MCL
141.1501
to 141.1531, is repealed or otherwise not effective and
former
1990 PA 72 is again in effect or applicable and a consent
agreement
is in place for the municipality under former 1990 PA 72,
compensate
those officials who are required to be compensated under
the
consent agreement with the municipality and reimburse those
officials'
actual and necessary expenses as provided under the
consent
agreement.
(b) (c)
Not more than 6 months after
receiving a loan and
semiannually after that date for the period the loan is
outstanding, submit to the board an evaluation of the performance
of the municipality against the 5-year plan submitted under section
4(1).
(c) (d)
Submit all of the following to the
board on a
quarterly basis:
(i) A statement of actual revenues received in the last
quarter and in the current fiscal year to date.
(ii) A statement of total revenues estimated to be received by
the municipality in the current fiscal year.
(iii) A statement of expenditures made and encumbrances
entered into by the municipality in the last quarter and in the
current fiscal year to date.
(iv) A statement of revenues that were estimated to be
received and expenditures that were estimated to be made during the
current fiscal year and through the end of the last quarter.
(v) A balance sheet indicating whether total estimated
expenditures for the current fiscal year and for the last quarter
exceed the total estimated revenues for the current fiscal year and
for the last quarter, respectively.
(d) (e)
Submit the general appropriations
act of the
municipality, and any amendments to that act, adopted under the
uniform budgeting and accounting act, 1968 PA 2, MCL 141.421 to
141.440a, or any equivalent report as may be required by the board
House Bill No. 4331 as amended April 23, 2015
if the municipality is not required to adopt a general
appropriations act.
(e) (f)
Submit any budget change in the
current fiscal year or
any amendment to the general appropriations act of the municipality
for the current fiscal year to the board before adoption.
(f) (g)
Submit any budget for the ensuing
fiscal year or the
general appropriations act of the municipality for the ensuing
fiscal year to the board before adoption.
(g) (h)
Certify that the municipality has
fully complied with
all statutory requirements concerning use of the uniform chart of
accounts and audits.
(2) If the state treasurer determines that a municipality is
not in compliance with all of the requirements under subsection (1)
and with the 5-year plan submitted under section 4(1), the state
treasurer may modify the terms of the loan to require a higher
interest rate or to accelerate the repayment of the loan.
(3) As used in this section, "expenditure" and "revenue" mean
those terms as defined in sections 2c and 2d of the uniform
budgeting and accounting act, 1968 PA 2, MCL 141.422c and 141.422d.
(4) Subsection (1) does not apply to a loan authorized under
section 3(2) or (3).
[
]
Enacting section [1]. This amendatory act does not take effect
unless all of the following bills of the 98th Legislature are
enacted into law:
(a) House Bill No. 4325.
(b) House Bill No. 4326.
