November 30, 2006, Introduced by Rep. Hildenbrand and referred to the Committee on Local Government and Urban Policy.
A bill to amend 2001 PA 34, entitled
"Revised municipal finance act,"
by amending section 103 (MCL 141.2103) and by adding section 518.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 103. As used in this act:
(a) "Assessed value", "assessed valuation", "valuation as
assessed", and "valuation as shown by the last preceding tax
assessment roll", or similar terms, used in this act, any statute,
or charter as a basis for computing limitations upon the taxing or
borrowing power of any municipality, mean the state equalized
valuation as determined under the general property tax act, 1893 PA
206, MCL 211.1 to 211.157.
(b) "Chief administrative officer" means that term as defined
in section 2b of the uniform budgeting and accounting act, 1968 PA
2, MCL 141.422b.
(c) "Debt" means all borrowed money, loans, and other
indebtedness, including principal and interest, evidenced by bonds,
obligations, refunding obligations, notes, contracts, securities,
refunding securities, municipal securities, or certificates of
indebtedness that are lawfully issued or assumed, in whole or in
part, by a municipality, or will be evidenced by a judgment or
decree against the municipality.
(d) "Debt retirement fund" means a segregated account or group
of accounts used to account for the payment of, interest on, or
principal and interest on a municipal security.
(e) "Deficit" means a situation for any fund of a municipality
in which, at the end of a fiscal year, total expenditures,
including an accrued deficit, exceeded total revenues for the
fiscal year, including any surplus carried forward.
(f) "Department" means the department of treasury.
(g) "Fiscal year" means a 12-month period fixed by statute,
charter, or ordinance, or if not so fixed, then as determined by
the department.
(h) "Fund" means a trust fund or other permanent fund created
by a county, city, village, township, school district, intermediate
school district or community college district, or public employee
retirement system or public employee postemployment benefit system
and used to provide retirement or postemployment benefits to
beneficiaries and participants.
(i) (h)
"Governing body" means the county board of
commissioners of a county; the township board of a township; the
council, common council, or commission of a city; the council,
commission, or board of trustees of a village; the board of
education or district board of a school district; the board of an
intermediate school district; the board of trustees of a community
college district; the county drain commissioner or drainage board
of a drainage district; the board of the district library; the
legislative body of a metropolitan district; the port commission of
a port district; and, in the case of another governmental authority
or agency, that official or official body having general governing
powers over the authority or agency.
(j) (i)
"Municipal security" means a security that
when
issued
was not exempt from this act or the municipal finance act,
former
1943 PA 202, MCL
131.1 to 139.3, by the provisions of this
act
or by the provisions of the municipal finance act, former
1943
PA 202, MCL 131.1 to 139.3, or by
the provisions of the law
authorizing its issuance and that is payable from or secured by any
of the following:
(i) Ad valorem real and personal property taxes.
(ii) Special assessments.
(iii) The limited or unlimited full faith and credit pledge of
the municipality.
(iv) Other sources of revenue described in this act for debt or
securities authorized by this act.
(k) (j)
"Municipality" means a county, township,
city,
village, school district, intermediate school district, community
college district, metropolitan district, port district, drainage
district, district library, or another governmental authority or
agency in this state that has the power to issue a security.
Municipality does not include this state or any authority, agency,
fund, commission, board, or department of this state.
(l) (k)
"Outstanding security" means a security
that has been
issued, but not defeased or repaid, including a security that when
issued
was exempt from this act or the municipal finance act,
former
1943 PA 202, MCL
131.1 to 139.3, by the provisions of this
act
or by the provisions of the municipal finance act, former
1943
PA 202, MCL 131.1 to 139.3, or by
the provisions of the law
authorizing its issuance.
(m) "Public employee postemployment benefit system" means a
postemployment benefit system created and established by a county,
city, village, township, school district, intermediate school
district, or community college district.
(n) "Public employee retirement system" means a retirement
system created and established by a county, city, village,
township, school district, intermediate school district, or
community college district.
(o) (l) "Qualified status" means a municipality
that has
filed a qualifying statement under section 303 and has been
determined by the department to be qualified to issue municipal
securities without further approval by the department.
(p) (m)
"Refunding security" means a municipal
security
issued to refund an outstanding security.
(q) (n)
"Security" means an evidence of debt such
as a bond,
note, contract, obligation, refunding obligation, certificate of
indebtedness, or other similar instrument issued by a municipality,
which pledges payment of the debt by the municipality from an
identified source of revenue.
(r) (o)
"Sinking fund" means a fund for the
payment of
principal only of a mandatory redemption security.
(s) (p)
"Taxable value" means the taxable value of
the
property as determined under section 27a of the general property
tax act, 1893 PA 206, MCL 211.27a.
(t) "Unfunded actuarial liability" means the amount by which a
fund is short of the amount that will be necessary, computed in
accordance with the standards of practice promulgated by the
actuarial standards board of the American academy of actuaries,
without further payments into the fund, to pay retirement or other
postemployment benefits to beneficiaries and participants of a
public employee retirement system or a public employee
postemployment benefit system.
Sec. 518. (1) A county, city, village, township, school
district, intermediate school district, or community college
district may by resolution of its governing body, and without a
vote of its electors, issue a municipal security under this section
secured by the full faith and credit of such county, city, village,
township, school district, intermediate school district, or
community college district to pay the costs of the unfunded
actuarial liability of a public employee retirement system pension
plan of the county, city, village, township, school district,
intermediate school district, or community college district or the
unfunded actuarial liability of other actuarially based
postemployment benefits such as health benefits, including, but not
limited to, medical, dental, vision, and other health-related
benefits of a public employee retirement system or public employee
postemployment benefit system of the county, city, village,
township, school district, intermediate school district, or
community college district under agreements with the county, city,
village, township, school district, intermediate school district,
or community college district; provided that the amount of taxes
necessary to pay the principal and interest on that municipal
security, together with the taxes levied for the same year, shall
not exceed the limit authorized by law. Postemployment benefits may
be funded by the county, city, village, township, school district,
intermediate school district, or community college district,
notwithstanding the fact that the county, city, village, township,
school district, intermediate school district, or community college
district has no legal obligation to pay the benefits or has the
right to alter or eliminate the payment of those benefits. The
funding of postemployment benefits by a county, city, village,
township, school district, intermediate school district, or
community college district as provided in this act shall not
constitute a contract to pay the postemployment benefits.
(2) Before a county, city, village, township, school district,
intermediate school district, or community college district issues
a municipal security under subsection (1), the county, city,
village, township, school district, intermediate school district,
or community college district shall publish a notice of intent to
issue the municipal security. The notice of intent shall be
directed to the electors of the county, city, village, township,
school district, intermediate school district, or community college
district, shall be published in a newspaper that has general
circulation in the county, city, village, township, school
district, intermediate school district, or community college
district, and shall state the maximum amount of municipal
securities to be issued; the purpose of the municipal securities;
the source of payment; the right of referendum on the issuance of
the municipal securities; and any other information the county,
city, village, township, school district, intermediate school
district, or community college district determines necessary to
adequately inform the electors of the nature of the issue. The
notice of intent shall not be less than 1/4 page in size in the
newspaper. If, within 45 days of the publication of the notice of
intent, a petition, signed by not less than 10% or 15,000 of the
registered electors, whichever is less, residing within the county,
city, village, township, school district, intermediate school
district, or community college district, is filed with the
governing body of the county, city, village, township, school
district, intermediate school district, or community college
district, requesting a referendum on the question of the issuance
of the municipal securities, then the county, city, village,
township, school district, intermediate school district, or
community college district shall not issue the municipal securities
until authorized by the vote of a majority of the electors of the
county, city, village, township, school district, intermediate
school district, or community college district qualified to vote
and voting on the question at a general or special election. A
special election called for this purpose shall not be included in a
statutory or charter limitation as to the number of special
elections to be called within a period of time. Signatures on the
petition shall be verified by a person under oath as the actual
signatures of the persons whose names are signed to the petition,
and the governing body of the county, city, village, township,
school district, intermediate school district, or community college
district shall have the same power to reject signatures and
petitions as city clerks under section 25 of the home rule city
act, 1909 PA 279, MCL 117.25. The number of registered electors in
the county, city, village, township, school district, intermediate
school district, or community college district shall be determined
by the governing body of the county, city, village, township,
school district, intermediate school district, or community college
district.
(3) Before a county, city, village, township, school district,
intermediate school district, or community college district issues
municipal securities under subsection (1), the county, city,
village, township, school district, intermediate school district,
or community college district shall have prepared a comprehensive
plan of finance indicating its ability to manage its unfunded
actuarial liability. The comprehensive plan of finance shall
include all of the following:
(a) Documentation that contributed funds from proceeds of
issued municipal securities and annual required contributions will
be adequate to meet the level of benefits provided.
(b) An amortization of unfunded liabilities and a description
of actions to accomplish the amortization.
(c) A description and explanation of any and all actuarial
assumptions.
(d) A schedule illustrating the amortization of any unfunded
liabilities.
(e) A comparative review illustrating the level of funds
available to the plan from rates, investment income, and other
sources realized over the period covered by the plan with the
assumptions used.
(f) A statement certified by an actuary within 36 months prior
to the issuance date of the municipal securities that the plan is
complete and accurate.
(g) Demonstration that the issuance of the municipal
securities will result in a projected present value savings based
on the amortization schedule discounted at the true interest cost
of the total amount borrowed when compared to the actuarial
assumption related to the rate of return on plan assets.
(4) Municipal securities issued under subsection (1) by a
county, city, village, township, school district, intermediate
school district, or community college district are not subject to
section 503 of this act.
(5) Municipal securities issued under subsection (1) by a
county, city, village, township, school district, intermediate
school district, or community college district shall have a maximum
term of 30 years as determined by the county, city, village,
township, school district, intermediate school district, or
community college district.
(6) Municipal securities issued under subsection (1) by a
county, city, village, township, school district, intermediate
school district, or community college district shall have been
assigned an investment grade by at least 1 nationally recognized
rating agency.
(7) Municipal securities issued under subsection (1) by a
county, city, village, township, school district, intermediate
school district, or community college district, and currently
outstanding, shall not exceed 5% of the state equalized valuation
of the property assessed in that county, city, village, township,
school district, intermediate school district, or community college
district.
(8) Notwithstanding any other provisions of this act, up to
50% of the principal amount of any municipal security issued under
subsection (1) by a county, city, village, township, school
district, intermediate school district, or community college
district may be sold at a discount exceeding 10%.
(9) A municipal security issued under subsection (1) by a
county, city, village, township, school district, intermediate
school district, or community college district may mature annually
or be subject to mandatory redemption requirements, with the first
annual maturity or mandatory redemption requirement to fall due 5
years or less from the date of issuance and some principal amount
shall mature or be subject to mandatory redemption in each
subsequent year of the term of the municipal security.
(10) Municipal securities issued under subsection (1) by a
county, city, village, township, school district, intermediate
school district, or community college district shall not on a
cumulative basis exceed 75% of current unfunded actuarial
liabilities of such county, city, village, township, school
district, intermediate school district, or community college
district.
(11) A county, city, village, township, school district,
intermediate school district, or community college district issuing
municipal securities under subsection (1) may enter into indentures
or other agreements with trustees and escrow agents for the
issuance, administration, or payment of the municipal securities.
(12) Proceeds of municipal securities issued under subsection
(1) by a county, city, village, township, school district,
intermediate school district, or community college district shall
be deposited in a fund under the terms and conditions established
by the county, city, village, township, school district,
intermediate school district, or community college district and
shall be disbursed as directed by the county, city, village,
township, school district, intermediate school district, or
community college district. The money in the fund shall be invested
as directed by the county, city, village, township, school
district, intermediate school district, or community college
district in investments allowed under the public employee
retirement system investment act, 1965 PA 314, MCL 38.1132 to
38.1140m.