December 1, 2009, Introduced by Reps. Cushingberry, Durhal, Constan, Robert Jones, Hammel, Johnson, Leland, Young, Womack and Dean and referred to the Committee on Appropriations.
A bill to amend 1981 PA 80, entitled
"Fiscal stabilization act,"
by amending sections 4 and 9 (MCL 141.1004 and 141.1009), section 4
as amended by 2002 PA 444 and section 9 as amended by 1987 PA 279.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
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.
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. 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 the
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 previously
unencumbered revenues or
taxes of the city or county 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. The money paid or to be paid to a paying agent,
trustee, escrow agent, the state treasurer, or other person for the
payment of principal of and interest on the bonds or obligations
issued pursuant to this act shall be subject to a lien that is a
statutory lien paramount and superior to all other liens and
interests of any kind for the sole purpose of paying the principal
of and interest on bonds and obligations issued pursuant to this
act. The money to be paid to and the money held by the paying
agent, trustee, escrow agent, state treasurer, or other person
under this act 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 they apply, and the holders of the
bonds or obligations issued pursuant to this act shall have a first
priority lien paramount and superior to all other liens and
interests of any kind on the money to be paid to and the money held
by the paying agent, trustee, escrow agent, state treasurer, or
other person under this act for the purpose of paying principal of
and
interest on the bonds or obligations. A
pledge pursuant to lien
created
under this act section for
the 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
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, and
that
money may be pledged by the city or county for the payment of
bonds
or obligations issued under escrow
agent, or other person to
be used for the sole purpose of paying the principal of and
interest on bonds and obligations issued pursuant to this act. If
the city or county and the state treasurer enter into such an
agreement, the state treasurer shall hold the distributable aid in
trust for the sole benefit of the holders of the bonds or
obligations
issued pursuant to this act and shall
pay the pledged
money
distributable aid in accordance with the provisions of the
agreement. The distributable aid paid or to be paid to a paying
agent, trustee, escrow agent, or other person for the purpose of
paying the principal of and interest on the bonds or obligations
issued pursuant to this act shall be subject to a lien and trust
that is a statutory lien and trust paramount and superior to all
other liens and interests of any kind, for the sole purpose of
paying the principal of and interest on bonds and obligations
issued pursuant to this act. The lien created under this section
for the benefit of bondholders or others is perfected without
delivery, recording, or notice. The distributable aid held or to be
held by the 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 they apply and the holders of the bonds or obligations issued
pursuant to this act shall have a first priority lien paramount and
superior to all other liens and interests of any kind on the
distributable aid held or to be held under this act for the purpose
of paying principal of and interest on the bonds or obligations.
(5) The state of Michigan covenants with the purchasers,
holders, owners, and their assigns, beneficiaries, executors, and
administrators of bonds or obligations secured by distributable aid
that it will not repeal, revoke, rescind, modify, or amend this
section so as to create a lien or charge on or pledge, assignment,
diversion, withholding, payment, or other use or deduction from any
distributable aid or other amounts securing bonds or obligations
pursuant to this act that is prior in time or superior in right to
the
payment required by this section. This subsection
section 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.
(6) (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, any other law
providing for distribution of state shared revenues that 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 that would
otherwise be collected from taxes imposed by the municipality.