Bill Text: MI HB5423 | 2015-2016 | 98th Legislature | Introduced
Bill Title: Water; quality; replacement of residential lead pipe service lines; provide for financing on water supply bills. Creates new act.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2016-03-03 - Bill Electronically Reproduced 03/02/2016 [HB5423 Detail]
Download: Michigan-2015-HB5423-Introduced.html
HOUSE BILL No. 5423
March 2, 2016, Introduced by Rep. Price and referred to the Committee on Local Government.
A bill to authorize political subdivisions to adopt programs
for water utility customers to replace certain lead water service
lines; to provide for the financing of those programs through
commercial lending, loans by nonprofit corporations, water utility
bill charges, and other means; to authorize political subdivisions
to issue bonds, notes, and other evidences of indebtedness to pay
the cost of lead service line replacements; to provide for the
repayment of bonds, notes, and other evidences of indebtedness; to
authorize fees; to prescribe the powers and duties of certain
governmental officers and entities; and to provide for remedies.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "lead
service line replacement financing act".
Sec. 3. As used in this act:
(a) "Customer service line" means that portion of a service
line that is owned by the record owner of the property served by
the service line.
(b) "Customer site piping" means an underground piping system
owned or controlled by the customer that conveys water from the
customer service line to building plumbing systems and other points
of use on lands owned or controlled by the customer. Customer site
piping does not include any system that incorporates treatment to
protect public health.
(c) "Lead customer service line" means a customer service line
composed in whole or part of lead.
(d) "Lead customer service line replacement program" or
"program" means an undertaking as described in section 5.
(e) "Political subdivision" means a city, village, township,
charter township, county, district, authority, or combination
thereof.
(f) "Property" means privately owned residential real property
located within a public water supply utility's service territory.
(g) "Public water supply" means a waterworks system that
provides water for drinking or household purposes to persons other
than the supplier of the water, and does not include either of the
following:
(i) A waterworks system that supplies water to only 1 dwelling
unit.
(ii) A waterworks system that consists solely of customer site
piping.
(h) "Record owner" means the person or persons possessed of
the most recent fee title or land contract vendee's interest in
property as shown by the records of the county register of deeds.
(i) "Service line" means a direct pipe from a distribution
water main to a living unit or other site to provide water for
drinking or household purposes.
Sec. 5. (1) Pursuant to section 7, a political subdivision
that owns or operates a public water supply utility may establish a
program under which it may contract with the record owners of
properties within the public water supply service area or 1 or more
districts thereof to finance or refinance the replacement of lead
customer service lines on those properties.
(2) The financing or refinancing may include the cost of
materials and labor necessary for the customer lead service line
replacement, permit fees, inspection fees, application and
administrative fees, bank fees, and all other fees that may be
incurred by a record owner for the replacement on a specific or pro
rata basis, as determined by the political subdivision.
Sec. 7. (1) To establish a lead customer service line
replacement program, the governing body of a political subdivision
shall take the following actions in the following order:
(a) Adopt a resolution of intent that includes all of the
following:
(i) A finding that the financing of customer lead service line
replacement is a valid public purpose.
(ii) A statement of intent to provide funds for financing lead
customer service line replacement, which may be repaid by charges
on the water bills for the properties benefited, with the agreement
of the record owners.
(iii) A description of the proposed arrangements for financing
the program.
(iv) Reference to a report on the proposed program as
described in section 11 and the Internet address and office
location where the report is available under section 11(2).
(v) The time, date, and place for a public hearing on the
proposed program.
(b) Hold a public hearing on the proposed program, including
the report described in section 11.
(c) Adopt a resolution or ordinance establishing the program
and setting forth its terms and conditions, including all of the
following:
(i) Matters required by section 11 to be included in the
report. For this purpose, the resolution may incorporate the report
or an amended version thereof by reference.
(ii) If the program is established by a resolution, a
description of which aspects of the program may be amended without
a new public hearing and which aspects may be amended only after a
holding a new public hearing.
(2) A lead customer service line replacement program
established by resolution or ordinance may be amended by resolution
of the governing body or ordinance, respectively. Before the
governing body adopts an amendment by resolution, the governing
body shall conduct a public hearing if required pursuant to
subsection (1)(c)(ii).
Sec. 9. (1) A lead customer service line replacement program
may be administered by a nonprofit corporation, including, but not
limited to, a nonprofit corporation formed under section 4o of the
home rule city act, 1909 PA 279, MCL 117.4o. The nonprofit
corporation's administration of the program may be funded by money
appropriated by the political subdivision establishing the program,
transferred from the political subdivision's public water supply
utility, or provided by private sources.
(2) A lead customer service line replacement program may
provide for financing lead customer service line replacement
through loans made to property owners by the public water supply
utility, by a nonprofit corporation described in subsection (1), or
by commercial lenders. Loans by commercial lenders may be
facilitated by the nonprofit corporation.
(3) If a nonprofit corporation makes loans to owners of
property under subsection (2), all of the following apply:
(a) Interest shall be charged on the unpaid balance at a rate
of not more than the adjusted prime rate as determined under
section 23 of 1941 PA 122, MCL 205.23, plus 4%.
(b) A loan shall be repaid in monthly installments, subject to
section 11(1)(j).
(c) The lender shall comply with all state and federal laws
applicable to the extension of credit for home improvements.
(4) The lead customer service line replacement program may
provide for billing customers of the public water supply utility
any fees under section 11(1)(h)(ii) and the monthly installment
payments as charges on the customer's water bill. The program
charges shall be considered part of the charges for water supply
services to the property for purposes of enforcement in the same
manner as provided under section 21 of the revenue bond act of
1933, 1933 PA 94, MCL 141.121.
(5) Water supply service may be shut off for nonpayment of the
program charges under subsection (4) in the same manner and
pursuant to the same procedures as used to enforce nonpayment of
other charges for water supply service. If notice of a loan under
the program is recorded with the register of deeds for the county
in which the property is located, the obligation to pay the program
charges runs with the land and is binding on future customers
contracting for water supply service to the property.
Sec. 11. (1) The report on the proposed lead customer service
line replacement program required under section 7 shall include all
of the following:
(a) A form of contract between the political subdivision and
record owner governing the terms and conditions of financing under
the program.
(b) Identification of an official authorized to enter into a
program contract on behalf of the political subdivision.
(c) A maximum aggregate annual dollar amount for all financing
to be provided by the political subdivision under the program.
(d) An application process and eligibility requirements for
financing lead customer service line replacement under the program,
including the classes of property eligible.
(e) Subject to section 9(3), a method for determining interest
rates on loan installments, repayment periods, and the maximum
amount of a loan.
(f) An explanation of how monthly installment payments on
loans will be billed and collected under section 9(4) or otherwise.
(g) A plan for raising capital to finance improvements under
the program. The plan may include any of the following:
(i) The sale of bonds or notes, subject to the revised
municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821.
(ii) Appropriations by the political subdivision of funds
available to it from any other source.
(iii) Owner-arranged financing from a commercial lender
whether or not facilitated by a nonprofit corporation under section
9(2). Under owner-arranged financing, a public water supply utility
may collect monthly installment payments on the public water supply
utility bills pursuant to section 9(4) and forward payments to the
commercial lender or the record owner may pay the commercial lender
directly.
(h) Information regarding all of the following, to the extent
known, or procedures to determine the following in the future:
(i) Any debt service reserve fund or funds to be used as
security for bonds or notes described in subdivision (g).
(ii) Any application, administration, or other program fees to
be charged to a record owner participating in the program. The fees
shall be used to pay costs incurred by the political subdivision as
a result of the record owner's participation.
(i) Provisions for an adequate debt service fund to be used to
repay bonds or notes described in subdivision (g).
(j) A requirement that the term for repayment of a loan to a
property owner as described in section 9(2) not exceed 180 months.
(k) Provisions for marketing and participant education.
(l) Quality assurance and antifraud measures.
(m) A requirement that, when a lead customer service line
replacement project is completed, the political subdivision obtain
verification that the project was properly performed.
(2) The political subdivision shall post the report under
subsection (1) on the political subdivision's website, if any, and
make the report available for review at the office of the clerk or
the official authorized to enter contracts on behalf of the
political subdivision under the lead customer service line
replacement program.
Enacting section 1. This act takes effect 90 days after the
date it is enacted into law.
