Bill Text: MI HB5626 | 2009-2010 | 95th Legislature | Engrossed
Bill Title: Local government; bonds; provisions relating to issuance of fiscal stabilization bonds; modify. Amends title & secs. 3, 4, 8 & 9 of 1981 PA 80 (MCL 141.1003 et seq.).
Spectrum: Partisan Bill (Democrat 10-0)
Status: (Passed) 2010-02-09 - Assigned Pa 4'10 With Immediate Effect [HB5626 Detail]
Download: Michigan-2009-HB5626-Engrossed.html
HB-5626, As Passed House, December 10, 2009
SUBSTITUTE FOR
HOUSE BILL NO. 5626
A bill to amend 1981 PA 80, entitled
"Fiscal stabilization act,"
by amending the title and sections 3, 4, 8, and 9 (MCL 141.1003,
141.1004, 141.1008, and 141.1009), the title and sections 3, 8, and
9 as amended by 1987 PA 279 and section 4 as amended by 2002 PA
444.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An act to authorize certain cities and counties to issue
general
obligation bonds or obligations to
fund an operating
deficit or projected operating deficit; to prescribe the powers and
duties of the state administrative board; to provide for the levy
of ad valorem property taxes to pay the principal and interest on
the bonds or obligations; to prescribe certain conditions related
to the bonds or obligations; and to provide remedies for
enforcement of this act.
Sec. 3. A city or county that meets the applicable conditions
described in section 4 may borrow money and issue its general
obligation bonds or obligations either for funding an operating
deficit for a past fiscal year or years or for funding a projected
operating deficit in the current fiscal year, or for funding both.
The bonds or obligations may be issued as general obligation bonds
or obligations, as bonds or obligations payable solely from a
specified source or sources of revenues lawfully available to the
city or county, or as a combination of general obligation bonds or
obligations and bonds or obligations payable from a specified
source or sources of revenues. The authority granted by this act is
in addition to any power granted to a city or county by its charter
or any other provision of law.
Sec. 4. (1) Before a city may make application to the board
for approval to issue bonds or obligations under this act, the
legislative body of the city shall determine by resolution that all
of the following conditions exist:
(a) The city had an accumulated operating deficit as of the
end of the last completed fiscal year or is projected to have an
accumulated operating deficit at the end of the current fiscal
year. The determination of the existence of an accumulated
operating deficit or a projected accumulated operating deficit
shall be made in accordance with generally accepted accounting
principles.
(b) The amount of the deficit exceeds the amount that the city
may borrow from the emergency municipal loan fund pursuant to the
emergency municipal loan act, 1980 PA 243, MCL 141.931 to 141.942.
(c) The amount of the deficit is more than the city can fund
by issuing tax anticipation notes under the revised municipal
finance act, 2001 PA 34, MCL 141.2101 to 141.2821.
(2) Before a county may make application to the board for
approval to issue bonds or obligations under this act, the
legislative body of the county shall determine by resolution that
the county had an accumulated operating deficit as of the end of
the last completed fiscal year or is projected to have an
accumulated operating deficit at the end of the current fiscal
year. The determination of the existence of an accumulated
operating deficit or a projected accumulated operating deficit
shall be made in accordance with generally accepted accounting
principles.
(3) If the legislative body of a city or county determines
that all of the conditions described in subsection (1) or (2)
exist, respectively, it shall also in the same resolution make the
following determinations:
(a) The amount of the accumulated operating deficit that was
incurred or is projected to exist at the end of the current fiscal
year.
(b) The maximum amount of bonds or obligations necessary to
fund the deficit and provide funds for the purposes described in
section 5.
(4) Before adopting a resolution authorizing the issuance of
the bonds or obligations, the city or county shall apply to the
secretary of the board for an order approving issuance of the bonds
or obligations by the city or county and shall attach to the
application a copy of the resolution described in this section.
(5) The board shall require that the city or county provide
the board with a statement signed by the chief executive officer of
the city or county, if a charter county, or the chairperson of the
board of county commissioners, which statement indicates how the
city or county intends to avoid future deficits. The statement is a
condition that shall be met as part of the application by the city
or county to the board for issuance of bonds or obligations under
this act.
(6) Within 7 days after receipt of a full and complete
application as determined by the board, the board shall issue an
order approving issuance of bonds or obligations by the city or
county in an amount not exceeding the amount determined to be
necessary by the legislative body of the city or county under
subsection (3) or denying the application.
(7) After approval of the board, the determinations and
findings made by the legislative body of the city or county
pursuant to this section are conclusive.
(8) The maximum amount of bonds or obligations that are
unlimited or limited tax bonds or obligations that may be issued by
a city or county under this act shall not exceed 3% of the state
equalized valuation of real and personal property located within
the territorial boundaries of the city or county, respectively, or
the maximum principal amount of all bonds or obligations that may
be issued by a city or county under this act shall not exceed
$125,000,000.00
$250,000,000.00. The limitations provided by this
subsection do not include bonds or obligations or portions of bonds
or obligations used to pay for any of the following:
(a) Amounts set aside for a reserve for payment of principal,
interest, and redemption premiums.
(b) Expected costs of issuance of the bonds or obligations.
(c) The amount of any discount.
(d) Bonds or obligations issued to refund outstanding bonds or
obligations.
(9) Except as provided in section 7, the issuance of bonds or
obligations under this act are not subject to the revised municipal
finance act, 2001 PA 34, MCL 141.2101 to 141.2821. The issuance of
bonds or obligations described in this subsection is subject to the
agency financing reporting act, 2002 PA 470, MCL 129.171 to
129.177.
Sec. 8. The bonds or obligations may be issued as limited tax
bonds or obligations by resolution of the legislative body of the
city or county without vote of the electors and without publication
of a notice of intent to issue bonds or obligations as required by
section
5(g) of Act No. 279 of the Public Acts of 1909, as amended,
being
section 117.5 of the Michigan Compiled Laws the home rule
city
act, 1909 PA 279, MCL 117.5. The
legislative body of the a
city or county may submit to the electors of the city or county the
question of issuing the bonds or obligations authorized by this
act. If the question is approved, the bonds or obligations may be
issued as unlimited tax bonds or obligations. If the question is
not submitted to or approved by the electors, the bonds or
obligations may be issued as limited tax bonds or obligations, as
bonds or obligations payable solely from a specified source or
sources of revenues lawfully available to the city or county, or as
a combination of limited tax bonds or obligations and bonds or
obligations payable solely from those specified revenue sources.
Any actions taken before July 15, 1981 to submit to the electors of
a city the question of issuing bonds or obligations similar to the
bonds or obligations authorized by this act or the question of
pledging the city's unlimited taxing power to bonds or obligations
described in this act are ratified and confirmed and are effective
with respect to bonds or obligations issued pursuant to this act.
Sec. 9. (1) All bonds or obligations issued pursuant to this
act before the effective date of the amendatory act that added
subsection (2) are subject to the requirements of the Michigan
municipal
distributable aid bond act, Act No. 97 of the Public Acts
of
1981, being sections 141.1021 to 141.1030 of the Michigan
Compiled
Laws 1981 PA 97, MCL 141.1021
to 141.1030.
(2) Unless otherwise provided by the city or county in the
resolution required by section 4, bonds or obligations issued
pursuant to this act on or after the effective date of the
amendatory act that added this subsection are not subject to the
requirements of the Michigan municipal distributable aid bond act,
Act
No. 97 of the Public Acts of 1981 1981
PA 97, MCL 141.1021 to
141.1030, notwithstanding that distributable aid is pledged or
assigned to secure bonds or obligations under this act.
(3) In the resolution authorizing the bonds or obligations,
the legislative body of the city or county may provide for
appointment of a trustee, escrow agent, or other person to hold
funds or reserves for payment of the bonds or obligations and to
perform other duties as the city or county determines, may provide
for the vesting in the trustee, escrow agent, or other designated
person the property, rights, powers, and remedies as the city or
county determines, may pledge and create a lien upon any
unencumbered revenues or taxes of the city or county, and may
provide for payment of pledged revenues or taxes directly to a
paying agent, trustee, escrow agent, the state treasurer, or other
person to be held and used solely for payment of principal and
interest on the bonds or obligations. A pledge pursuant to this act
for benefit of bondholders or others is perfected without delivery,
recording, or notice. The resolution authorizing the bonds or
obligations also may provide for covenants and promises with
respect to fiscal, budget, and accounting matters that are
considered necessary or appropriate in the judgment of the city or
county to sell the bonds or obligations to the best advantage of
the city or county.
(4) In the resolution authorizing the bonds or obligations for
the payment of the bonds or obligations, the city or county may
further
pledge money provide for the
payment of the bonds or
obligations with distributable aid received or to be received by
the city or county derived from the imposition of taxes by the
state and returned or to be returned to the city or county as
provided by law except for money that the state constitution of
1963 prohibits for use for such a pledge. The city or county and
the state treasurer may enter into an agreement providing for the
House Bill No. 5626 (H-2) as amended December 10, 2009
direct
payment of that money, which is derived from taxes that are
collected
by the state and returned to the city or county as
provided
by law, distributable aid to a paying
agent, trustee,
escrow agent, or other person to be used for the sole purpose of
paying principal or interest on bonds or obligations issued
pursuant to this act, and that money may be pledged by the city or
county for the payment of bonds or obligations issued under this
act. If the city or county and the state treasurer enter into such
an
agreement, the state treasurer shall pay the pledged money in
accordance
with the provisions of the agreement. notwithstanding
any other provision of this act to the contrary, for bonds or
obligations issued after the effective date of the 2009 amendatory
act that amended this subsection [and made payable from distributable aid
in the resolution authorizing those bonds or obligations] a statutory lien and trust is
created applicable to distributable aid received or to be received
from the state treasurer by [
] a paying agent, escrow agent, or
a trustee, after the distributable aid has been distributed by the
state treasurer. The lien created under this subsection for the
benefit of bondholders or others is perfected without delivery,
recording, or notice. The distributable aid held or to be held by a
paying agent, trustee, escrow agent, or other person shall be held
in trust for the sole benefit of the holders of the bonds or
obligations issued pursuant to this act and shall be exempt from
being levied upon, taken, sequestered, or applied toward paying the
debts or liabilities of the city or county other than for payment
of debt service on the bonds or obligations to which the lien
House Bill No. 5626 (H-2) as amended December 10, 2009
applies and the holders of bonds or obligations issued pursuant to
this act after January 1, 2010, but before July 1, 2010, [ ] shall
have a first priority lien that is paramount and superior to all
other liens and interests of any kind that arise or are created
after the effective date of the 2009 amendatory act that amended
this subsection and after bonds are issued subject to the statutory
lien created by this subsection. However, nothing in the 2009
amendatory act that amended this subsection shall abridge or reduce
the ability of the state treasurer to withhold distributable aid
from a city or county as provided by the Glenn Steil state revenue
sharing act of 1971, 1971 PA 140, MCL 141.901 to 141.921. 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 imposition of taxes from which distributable
aid is paid, for the payment or apportionment of distributable aid,
or for the manner, time, or amount of distributable aid.
(5) With respect to bonds or obligations issued on or before
September 30, 1988, in the resolution authorizing the bonds or
obligations, the legislative body of the city or county may provide
that, from each collection of ad valorem property taxes after the
issuance of the bonds or obligations, there shall be set aside in a
special fund, to be used for the payment of principal and interest
on the bonds or obligations, an amount equal to the total amount of
the collection multiplied by a fraction determined as follows:
(a) The numerator of the fraction is 125% of the amount of
principal and interest coming due on the bonds or obligations in
the current fiscal year.
(b) The denominator of the fraction is the total amount of the
tax levied for the current fiscal year multiplied by a fraction,
the numerator of which is the total of the taxes collected during
the 5 prior fiscal years and the denominator of which is the total
of taxes levied during the 5 prior fiscal years.
(6) An authorizing resolution under subsection (4) or (5) may
provide that all or any portion of the taxes collected and set
aside as provided in subsection (5) shall not be used for any other
purpose.
(7)
As used in this section, "distributable aid" means that
term
as defined in section 2 of the Michigan municipal
distributable
aid bond act, Act No. 97 of the Public Acts of 1981,
being
section 141.1022 of the Michigan Compiled Laws state shared
revenues provided for in the Glenn Steil state revenue sharing act
of 1971, 1971 PA 140, MCL 141.901 to 141.921, the Michigan business
tax act, 2007 PA 36, MCL 208.1101 to 208.1601, any other law
providing for distribution of state shared revenues which are
derived from the same taxes distributed under the Glenn Steil state
revenue sharing act of 1971, 1971 PA 140, MCL 141.901 to 141.921,
and any law providing reimbursement to a municipality under the
state constitution of 1963 as reimbursement for revenue which would
otherwise be collected from taxes imposed by the municipality.
