SENATE BILL No. 965

December 13, 2001, Introduced by Senator EMMONS and referred to the Committee on

Finance.

A bill to amend 1933 PA 94, entitled

"The revenue bond act of 1933,"

by amending sections 3, 12, 16, 22, 24, 26, 27, 28, and 30 (MCL

141.103, 141.112, 141.116, 141.122, 141.124, 141.126, 141.127,

141.128, and 141.130), section 3 as amended by 1992 PA 305, sec-

tions 12 and 27 as amended by 1985 PA 26, sections 16, 28, and 30

as amended by 1983 PA 76, and section 24 as amended by 1988 PA

228.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 3. As used in this act:

2 (a) "Public corporation" means a county, city, village,

3 township, school district, port district, or metropolitan dis-

4 trict of the state or a combination thereof OF THESE if

5 authorized by law to act jointly; an authority created by or

6 under an act of the legislature; or a municipal health facilities

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1 corporation or subsidiary municipal health facilities corporation

2 incorporated as provided in the municipal health facilities cor-

3 porations act, Act No. 230 of the Public Acts of 1987, being

4 sections 331.1101 to 331.1507 of the Michigan Compiled Laws 1987

5 PA 230, MCL 331.1101 TO 331.1507.

6 (b) "Public improvements" means only the following

7 improvements: housing facilities; garbage disposal plants; rub-

8 bish disposal plants; incinerators; transportation systems,

9 including plants, works, instrumentalities, and properties used

10 or useful in connection with those systems; sewage disposal sys-

11 tems, including sanitary sewers, combined sanitary and storm

12 sewers, plants, works, instrumentalities, and properties used or

13 useful in connection with the collection, treatment, or disposal

14 of sewage or industrial wastes; storm water systems, including

15 storm sewers, plants, works, instrumentalities, and properties

16 used or useful in connection with the collection, treatment, or

17 disposal of storm water; water supply systems, including plants,

18 works, instrumentalities, and properties used or useful in con-

19 nection with obtaining a water supply, the treatment of water, or

20 the distribution of water; utility systems for supplying light,

21 heat, or power, including plants, works, instrumentalities, and

22 properties used or useful in connection with those systems;

23 approved cable television systems, approved cable communication

24 systems, or telephone systems, including plants, works, instru-

25 mentalities, and properties used or useful in connection with

26 those systems; automobile parking facilities, including within or

27 as part of the facilities areas or buildings that may be rented

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1 or leased to private enterprises serving the public; yacht

2 basins; harbors; docks; wharves; terminal facilities; elevated

3 highways; bridges over, tunnels under, and ferries across bodies

4 of water; community buildings; public wholesale markets for farm

5 and food products; stadiums; convention halls; auditoriums; dor-

6 mitories; hospitals and other health care facilities; buildings

7 devoted to public use; museums; parks; recreational facilities;

8 reforestation projects; aeronautical facilities; and marine rail-

9 ways; or any right or interest in or equipment for these

10 improvements. The term "public improvement" means the whole or a

11 part of any of these improvements or of any combination of these

12 improvements or any interest or participation in these improve-

13 ments, as determined by the governing body. The definition con-

14 tained in this subdivision does not broaden or enlarge the extent

15 of a particular public improvement made by a public corporation.

16 (c) "Borrower" means a public corporation exercising the

17 power to issue bonds as provided in this act.

18 (d) "Governing body" means for a county, the board of com-

19 missioners; for a city, the body having legislative powers; for a

20 village, the body having legislative powers; for a township, the

21 township board; for a school district, the board of education;

22 for a port district, the port commission; for a metropolitan dis-

23 trict, the legislative body of the district; for a municipal

24 health facilities corporation, the board of trustees; for a non-

25 profit subsidiary municipal health facilities corporation, the

26 nonprofit subsidiary board; and for an authority, the body in

27 which is lodged general governing powers. If the charter of a

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1 public corporation or applicable law provides that a separate

2 board has general management over a public improvement,

3 "governing body" means, with respect to that public improvement,

4 the separate board, subject to review by the legislative body of

5 the public corporation as the charter or law may provide. Unless

6 the charter or law specifically provides otherwise, the separate

7 board shall adopt the bond authorizing ordinance, but shall not

8 pledge full faith and credit.

9 (e) "Rates" means the charges, fees, rentals, and rates that

10 may be fixed and imposed for the services, facilities, and com-

11 modities furnished by a public improvement.

12 (f) "Revenues" means the income derived from the rates

13 charged for the services, facilities, and commodities furnished

14 by a public improvement. Revenues include, to the extent pro-

15 vided in the authorizing ordinance, earnings on investment of

16 funds of the public improvement and other revenues derived from

17 or pledged to operation of the public improvement.

18 (g) "Net revenues" means the revenues of a public improve-

19 ment remaining after deducting the reasonable expenses of admin-

20 istration, operation, and maintenance of the public improvement.

21 (h) "Project cost" or "costs" means the costs of purchasing,

22 acquiring, constructing, improving, enlarging, extending, or

23 repairing a public improvement, including any engineering, archi-

24 tectural, legal, accounting, financial, and other expenses inci-

25 dent to the public improvement. Project costs include interest

26 on the bonds, and other obligations of the borrower issued to pay

27 project costs, during the period of construction and until full

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1 revenues are developed. Project costs include a reserve or

2 addition to a reserve for payment of principal and interest on

3 the bonds and the amount required for operation and maintenance

4 until sufficient revenues have developed.

5 (i) "Ordinance" means an ordinance, resolution, or other

6 appropriate legislative enactment of the governing body of a

7 public corporation.

8 (j) "Municipal finance commission" means the commission

9 created by the municipal finance act, Act No. 202 of the Public

10 Acts of 1943, as amended, being sections 131.1 to 139.3 of the

11 Michigan Compiled Laws.

12 (J) (k) "Approved cable television system" or "approved

13 cable communication system" means a cable television or communi-

14 cation system to which 1 of the following applies:

15 (i) A municipality acquires or establishes the system either

16 before January 1, 1987 or before a system is established in that

17 municipality by a private person.

18 (ii) A municipality acquires or establishes the system after

19 a system is established in that municipality by a private person

20 and after approval by a majority of the electors in the affected

21 area of that municipality voting on the question of the sale of

22 revenue bonds to finance the acquisition or establishment of the

23 municipal system.

24 Sec. 12. (1) Bonds issued under this act may be sold at a

25 discount but may not be sold at a price which THAT would make

26 the interest cost on the money borrowed after deducting any

27 premium or adding any discount exceed 10% per annum or the

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1 maximum rate permitted by the REVISED municipal finance act, Act

2 No. 202 of the Public Acts of 1943, as amended, being sections

3 131.1 to 139.3 of the Michigan Compiled Laws, 2001 PA 34, MCL

4 141.2101 TO 141.2821, whichever is greater, and may bear a stated

5 rate of interest or no rate of interest.

6 (2) Except as otherwise provided in this act, bonds of an

7 authorized issue of $50,000.00 or more shall not be sold except

8 at public sale, after notice by publication at least 14 days

9 before the sale in a publication printed in the English language

10 and circulated in this state, which carries as a part of its reg-

11 ular service notices of the sale of municipal bonds and which has

12 been approved by the department of treasury as a publication com-

13 plying with the foregoing qualifications. Approval of the publi-

14 cation by the department of treasury shall be considered conclu-

15 sive of the qualifications of the publication for the insertion

16 of the notice.

17 (3) If the public corporation receives a bid at the time

18 fixed for public sale, and the bid is rejected by the governing

19 body, the bonds may be sold at negotiated sale within 60 days

20 after the time fixed for the public sale at a price not less than

21 the highest bid received at the public offering. If the public

22 corporation offers the bonds at a public offering and does not

23 receive a bid, the bonds may be sold at negotiated sale within 60

24 days after the last public offering. During any period in which

25 the bonds may be sold at negotiated sale, the governing body of

26 the public corporation may enter into an agreement for the

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1 delivery of the bonds in payment of the cost of the particular

2 project for which the bonds are to be issued.

3 (4) Bonds may be sold to the federal or state government or

4 an agency of the federal or state government at a negotiated

5 sale. If the contract is for the sale of less than all of the

6 bonds authorized, a part shall not be delivered until the balance

7 of the bonds authorized has been sold in the manner provided in

8 this section.

9 (5) If the amount of bonds to be issued exceeds

10 $15,000,000.00 or if the bonds are to be issued in whole or in

11 part for refunding purposes pursuant to section 20, the bonds may

12 be sold at a public or negotiated sale.

13 (6) Bonds which are payable prior to maturity at the option

14 of the holder of the bonds may be sold at a negotiated sale.

15 (7) Bonds sold to the Michigan municipal bond authority cre-

16 ated under the shared credit rating act may be sold at a negoti-

17 ated sale if so determined by the governing body.

18 (2) A PUBLIC CORPORATION MAY SELL BONDS AT A COMPETITIVE

19 SALE OR A NEGOTIATED SALE AS DETERMINED IN THE AUTHORIZING

20 ORDINANCE. IF A PUBLIC CORPORATION DETERMINES TO SELL A BOND AT

21 A NEGOTIATED SALE, THE GOVERNING BODY SHALL EXPRESSLY STATE THE

22 METHOD AND REASONS FOR CHOOSING A NEGOTIATED SALE INSTEAD OF A

23 COMPETITIVE SALE IN THE RESOLUTION OR ORDINANCE AUTHORIZING THE

24 ISSUANCE OR SALE OF THE BONDS.

25 (3) BONDS SOLD AT PUBLIC SALE SHALL NOT BE SOLD UNTIL NOTICE

26 BY PUBLICATION AT LEAST 7 DAYS BEFORE THE SALE IN A PUBLICATION

27 PRINTED IN THE ENGLISH LANGUAGE AND CIRCULATED IN THIS STATE THAT

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1 CARRIES AS A PART OF ITS REGULAR SERVICE NOTICES OF THE SALE OF

2 MUNICIPAL BONDS AND THAT HAS BEEN APPROVED BY THE DEPARTMENT OF

3 TREASURY AS A PUBLICATION COMPLYING WITH THESE QUALIFICATIONS.

4 APPROVAL OF THE PUBLICATION BY THE DEPARTMENT OF TREASURY IS CON-

5 CLUSIVE OF THE QUALIFICATIONS OF THE PUBLICATION FOR THE INSER-

6 TION OF THE NOTICE.

7 Sec. 16. Money received from the sale of bonds shall be

8 used solely for the payment of project costs. An unexpended bal-

9 ance of the proceeds of the sale of any bonds remaining after the

10 completion of the project for which issued, may be used for the

11 improvement, enlargement, or extension of the public improvement,

12 if the use is approved by the department of treasury. Any

13 remaining balance shall be paid immediately into the bond and

14 interest redemption fund ACCOUNT for the bonds, and the money

15 shall be used only for meeting bond reserve requirements or for

16 the redemption or purchase, at not more than the fair market

17 value, of outstanding bonds of the issue from which the proceeds

18 were derived. Bonds acquired by purchase shall be canceled and

19 shall not be reissued. Each ordinance shall state the period for

20 which interest is to be capitalized, and the amount of reserves

21 to be funded from the bonds. Upon receipt of the proceeds of the

22 bonds, there shall be set aside, in the bond and interest redemp-

23 tion fund ACCOUNT, the amount of interest which THAT will

24 accrue during the period at the interest rate specified in the

25 bonds and the amount required to be deposited SET ASIDE in the

26 reserve account. Money set aside shall be used solely for the

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1 payment of the capitalized interest or credited to the reserve

2 account.

3 Sec. 22. (1) In the authorizing ordinance the governing

4 body of the borrower shall pledge PROVIDE THAT the revenues of

5 the public improvement for the purposes of the following funds

6 and shall provide that such revenues as collected shall be set

7 aside in a receiving fund and transferred periodically as pro-

8 vided in such ordinance into separate and special funds as

9 follows BE ACCOUNTED FOR SEPARATELY FROM THE OTHER FUNDS AND

10 ACCOUNTS OF THE BORROWER IN THE FOLLOWING ORDER OF RECORDED

11 PRIORITY:

12 (a) Out of the revenues in the receiving fund there shall

13 be first set aside a sum sufficient to provide AFTER PROVISION

14 for the payment for the next succeeding period of all current

15 expenses of administration , AND operation , and such THE

16 current expenses for such THAT period for maintenance as may be

17 necessary to preserve the public improvement in good repair and

18 working order. This fund shall be designated "operation and

19 maintenance fund."

20 (b) Out of the remaining revenues in the receiving fund

21 there THERE shall be next set aside a sum sufficient to provide

22 for the payment of the principal of and the interest upon all

23 bonds payable therefrom FROM THOSE REVENUES, as and when the

24 same BONDS become due and payable. This fund ACCOUNT shall

25 be designated "bond and interest redemption fund." ACCOUNT".

26 In the event that the revenues of any operating year over and

27 above those necessary for the operation and maintenance fund,

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1 EXPENSES shall be insufficient to pay the principal of and

2 interest on the bonds maturing in any such operating year, then

3 an additional amount sufficient to pay such THE principal and

4 interest shall be set aside out of the revenues of the next suc-

5 ceeding operating year, after the setting aside of the operation

6 and maintenance fund PROVISION FOR THE EXPENSES OF OPERATION AND

7 MAINTENANCE. In respect to the allocation and use of moneys

8 MONEY in said THE bond and interest redemption fund ACCOUNT,

9 due recognition shall be given as to priority rights, if any,

10 between different issues or series of outstanding bonds. The

11 public corporation may provide by ordinance that a reasonable

12 excess amount shall be set aside in the bond and interest redemp-

13 tion fund ACCOUNT from time to time so as thereby to produce

14 and provide a reserve to meet any possible future deficiencies.

15 therein.

16 (c) Out of the remaining revenues in the receiving fund

17 NEXT there shall be next set aside, in the manner and priority

18 provided by the ordinance, the sum or sums necessary for such

19 THE additional funds for the public improvement as the ordinance

20 may establish ACCOUNTS AS MAY BE REQUIRED.

21 (2) Revenues remaining in the receiving fund, after satis-

22 faction of the above SUBSECTION (1), at the end of any operat-

23 ing year shall be deemed to be CONSIDERED surplus and shall be

24 disposed of by the governing body as hereinafter provided IN

25 THIS ACT.

26 Sec. 24. (1) Money in the several funds ACCOUNTS of the

27 public improvement shall be deposited with 1 or more banks,

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1 savings and loan associations, or credit unions AS designated by

2 the governing body of the borrower. Money in the bond and

3 interest redemption fund, including reserve money, shall be kept

4 on deposit with the bank, trust company, savings and loan associ-

5 ation, or credit union or with 1 of the banks, trust companies,

6 savings and loan associations, and credit unions, at which the

7 principal and interest on the bonds are currently payable. The

8 governing body of the borrower in the authorizing ordinance may

9 provide that money MONEY in the several funds ACCOUNTS of the

10 public improvement, except money in the bond and interest redemp-

11 tion fund ACCOUNT and money derived from the proceeds of sale

12 of the bonds, may be kept in 1 DEPOSIT account. at a bank, sav-

13 ings and loan association, or credit union. In that case the

14 money in the account COMBINED DEPOSIT ACCOUNTS shall be allo-

15 cated on the books and records of the borrower to the funds

16 VARIOUS ACCOUNTS in the manner provided in the authorizing

17 ordinance. The governing body of the borrower may provide that

18 the money in the several funds ACCOUNTS of the public improve-

19 ment may be kept in separate depository accounts. The money in

20 the bond and interest redemption fund ACCOUNT shall be kept in

21 a separate depository account ACCOUNTED FOR SEPARATELY.

22 (2) Subject to the limitations and conditions provided in

23 the authorizing ordinance, money in the several funds ACCOUNTS

24 of the public improvement may be invested in 1 or more of the

25 following: ACCORDANCE WITH THE PUBLIC CORPORATION'S INVESTMENT

26 POLICY ADOPTED BY THE LEGISLATIVE BODY OR GOVERNING BODY OF THE

27 PUBLIC CORPORATION UNDER 1943 PA 20, MCL 129.91 TO 129.96.

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1 (a) United States government obligations.

2 (b) Obligations the principal and interest on which is fully

3 guaranteed by the United States.

4 (c) Repurchase agreements that are secured by United States

5 government obligations or obligations fully guaranteed by the

6 United States and that are held by an independent third party.

7 (d) Certificates of deposit or other accounts of, or bankers

8 acceptances of, 1 or more of the following:

9 (i) Banks that are members of the federal deposit insurance

10 corporation.

11 (ii) Savings and loan associations that are members of the

12 federal savings and loan insurance corporation.

13 (iii) Credit unions whose accounts are insured by the

14 national credit union share insurance fund.

15 (e) Commercial paper that is rated in the highest category

16 by a nationally recognized rating agency.

17 (f) Obligations of a state of the United States or of a

18 political subdivision of a state of the United States that are

19 rated in 1 of the 3 highest categories by a nationally recognized

20 rating agency.

21 (g) A collective investment fund that invests solely in 1 or

22 more of the securities authorized for investment by this

23 subsection.

24 (3) Investment of money in the bond and interest redemption

25 fund being accumulated for payment of the next maturing principal

26 or interest on the bonds is limited to 1 or more of the

27 following:

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1 (a) United States government obligations, or obligations the

2 principal and interest of which are fully guaranteed by the

3 United States, that mature not later than 10 days after the date

4 for payment of the maturing principal or interest for which the

5 money is being accumulated.

6 (b) Repurchase agreements that are to settle on or before

7 the date set for payment and that are secured by United States

8 government obligations or obligations fully guaranteed by the

9 United States and that are held by an independent third party.

10 (4) The securities representing an investment under this

11 section shall be kept on deposit with the bank, trust company,

12 savings and loan association, or credit union having the deposit

13 of the funds from which the purchase was made. The date of pay-

14 ment of the next maturing principal or interest on bonds that are

15 additionally secured pursuant to section 7a(1)(a) for purposes of

16 investing the money in the bond and interest redemption fund

17 shall be the date principal or interest is scheduled to be paid

18 on those bonds as stated on the face of the bonds notwithstanding

19 a provision of the bonds that may call for payment prior to

20 maturity. Investment earnings shall be credited to the fund to

21 which the investment belongs unless otherwise provided in the

22 authorizing ordinance.

23 Sec. 26. Any moneys MONEY remaining in the receiving

24 fund ACCOUNTS OF THE PUBLIC IMPROVEMENT at the end of any oper-

25 ating year, which under the provisions of section 22 shall be

26 deemed to be CONSIDERED surplus, may be transferred to other

27 funds ACCOUNTS of the public improvement or may be used for

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1 such THE purpose or purposes as the governing body may

2 determine to be for the best interests of the borrower, unless

3 some other disposition shall have been made therefor in the

4 ordinance authorizing the issuance of bonds hereunder UNDER

5 THIS ACT. In the event that moneys in the receiving fund are

6 MONEY OF THE PUBLIC IMPROVEMENT IS insufficient to provide for

7 the current requirements EXPENSES of the operation and mainte-

8 nance fund ACCOUNT or the bond and interest redemption fund

9 ACCOUNT, any moneys and/or MONEY OR securities in other funds

10 ACCOUNTS of the public improvement shall be transferred first to

11 the operation and maintenance fund ACCOUNT and second to the

12 bond and interest redemption fund ACCOUNT to the extent of any

13 deficits therein IN THOSE ACCOUNTS.

14 Sec. 27. (1) Unless an exception from prior approval is

15 available pursuant to subsection (3), before a public corporation

16 issues bonds under this act, it shall make a sworn application to

17 the department of treasury, on forms to be furnished by the

18 department of treasury, for permission to issue the bonds and

19 shall attach to the application a certified copy of the ordinance

20 or ordinances authorizing the issuance of the bonds and, except

21 in case of refunding bonds, a certified copy of the estimate of

22 the cost of the project for which the bonds are to be issued.

23 The department of treasury may request the applicant to furnish

24 the information the department of treasury considers desirable in

25 order to pass upon the application. Unless an exception from

26 prior approval is available pursuant to subsection (3), a bond

27 shall not be issued under this act until the borrower has first

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1 secured the approval of the department of treasury for that

2 issuance. In determining whether a proposed issue of bonds shall

3 be approved, the department of treasury shall take all of the

4 following into consideration: A PUBLIC CORPORATION MAY ISSUE

5 BONDS UNDER THIS ACT, ONLY IF THAT PUBLIC CORPORATION IS A MUNIC-

6 IPALITY QUALIFIED OR APPROVED TO ISSUE OBLIGATIONS UNDER THE

7 REVISED MUNICIPAL FINANCE ACT, 2001 PA 34, MCL 141.2101 TO

8 141.2821.

9 (a) Whether the bonds conform to the provisions of this

10 act.

11 (b) Whether the probable revenues pledged to the payment of

12 the bonds will be sufficient to pay the principal of and interest

13 on the bonds when due.

14 (c) Whether the amount of the proposed issue is sufficient

15 or excessive for the purpose for which the bonds are to be

16 issued.

17 (2) The provisions of chapter II of the municipal finance

18 act, Act No. 202 of the Public Acts of 1943, being sections 132.1

19 to 132.3 of the Michigan Compiled Laws, relating to the depart-

20 ment of treasury, its powers and duties, and its orders, shall

21 govern insofar as those provisions may be applicable, in respect

22 to the various matters covered by this section.

23 (3) The requirement of subsection (1) for obtaining the

24 prior approval of the department of treasury before issuing bonds

25 under this act, except for bonds issued in whole or in part for

26 refunding purposes under section 20 or an obligation of a public

27 corporation to a provider of additional security under section

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1 7a(1)(a) which secures a bond which may be tendered before

2 maturity at the option of the holder, shall be subject to sec-

3 tions 10 and 11 of chapter III of the municipal finance act, Act

4 No. 202 of the Public Acts of 1943, being sections 133.10 and

5 133.11 of the Michigan Compiled Laws. The department of treasury

6 has the same authority as provided by section 11 of chapter III

7 of Act No. 202 of the Public Acts of 1943 to issue an order pro-

8 viding or denying an exception from the prior approval required

9 by subsection (1) for bonds authorized by this act.

10 Sec. 28. No order of the municipal finance commission or

11 its successor agency permitting QUALIFICATION OR APPROVAL TO

12 ISSUE OBLIGATIONS UNDER THE REVISED MUNICIPAL FINANCE ACT, 2001

13 PA 34, MCL 141.2101 TO 141.2821, THAT PERMITS the issuance of

14 bonds under this act shall NOT be deemed CONSIDERED an approval

15 of the legality thereof OF ISSUING BONDS UNDER THIS ACT. The

16 issuance of the commission's or its successor agency's order

17 granting permission to issue any bonds shall imply that the com-

18 mission or its successor agency has made such determination of

19 facts or circumstances, has given such approvals, and has reached

20 such opinions as are a necessary prerequisite to the issuance of

21 such order.

22 Sec. 30. Any borrower issuing revenue bonds under this act

23 shall install, maintain, and keep proper books of record and

24 account, separate entirely from other records and accounts of

25 such borrower, in which full and correct entries shall be made of

26 all dealings or transactions of or in relation to the properties,

27 business, and affairs of the public improvement. The governing

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1 body of such A borrower, not later than 6 months after the

2 close of any operating year, shall cause to be prepared, on forms

3 furnished by the department of treasury, a statement in reason-

4 able detail, sworn to by its chief accounting officer, showing

5 the cash income and disbursements of the public improvement

6 during such THE operating year, and the assets and liabilities

7 of the same at the close of such THAT OPERATING year. Such

8 THAT statement, at all reasonable times during usual business

9 hours, shall be open to examination and inspection by any taxpay-

10 er, user of the services furnished by the public improvement, or

11 any holder or owner of bonds issued under this act, or anyone

12 acting for or on behalf of such A taxpayer, user of the serv-

13 ices of the public improvement, or bondholder. , and a certified

14 copy thereof shall be filed with the department of treasury not

15 later than 6 months after the close of such operating year. The

16 governing body, or any officer or member of the governing body,

17 charged with the duty of compiling and furnishing the statement

18 herein required who refuses or neglects to furnish the same to

19 the department of treasury within the time required, is guilty of

20 a misdemeanor, and the department of treasury may compel compli-

21 ance with this section by proceedings in mandamus. If the books

22 of record and account pertaining to the public improvement are

23 audited annually by a certified public accountant, the audit

24 report of the annual audit, for the purposes of this section and

25 at the option of the governing body of the borrower, may be used

26 in place of the statement to be prepared on forms furnished by

27 the department of treasury and all of the provisions of this

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1 section pertaining to the statement shall apply to the annual

2 audit report.

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