SB-0318, As Passed Senate, May 19, 2011

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 318

     A bill to amend 1909 PA 279, entitled

"The home rule city act,"

by amending section 36a (MCL 117.36a), as amended by 2011 PA 7.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 36a. (1) Except as otherwise provided under this section,

if a financial emergency exists under the local government and

school district fiscal accountability act, 2011 PA 4, MCL 141.1501

to 141.1531, a city may issue financial recovery bonds in amounts

greater than the limitations established by the city charter or

this act.

     (2) Any financial recovery bonds issued under this section are

subject to the terms and conditions approved by the local emergency

financial assistance loan board created under the emergency

Senate Bill No. 318 (H-1) as amended May 18, 2011

municipal loan act, 1980 PA 243, MCL 141.931 to 141.942.

     (3) Any financial recovery bonds issued under this section are

not subject to section 5(g).

     (4) Notwithstanding subsection (1), the net indebtedness of a

city, reduced by any amounts excluded under section 4a(4), shall

not exceed 20% of the assessed value of the city.

     (5) Notwithstanding subsection (4), the net indebtedness of a

city that issues financial recovery bonds under subsection (6),

reduced by any amounts excluded under section 4a(4), shall not

exceed 12% of the assessed value of the city, adjusted for

additions as provided under section 4a(9).

     (6) If financial recovery bonds are issued under this

subsection by a city with a population of less than 10,000

according to the latest federal decennial census and located in a

county organized under 1966 PA 293, MCL 45.501 to 45.521, the city

may provide in the order authorizing the issuance of the bonds for

the deposit of revenues generated from taxes levied by the city,

including a tax levied by the city to pay a judgment or comply with

a court order, into an escrow account to be used for the purpose of

paying principal of and interest on the bonds and the

administrative costs associated with issuing the bonds, and the tax

revenues may be pledged by the city for the payment of the bonds

issued under this section. Bonds issued under this subsection shall

be limited in amount to that necessary to pay court-ordered

judgments against the city existing on the effective date of the

amendatory act that added this subsection [and administrative costs

 associated with issuing the bonds]. If the city enters into

an agreement with a third-party tax collector pursuant to which the

third-party tax collector has the duty to collect taxes that

otherwise would be collected by the city treasurer, the agreement

shall also provide for the direct payment of all tax revenues

pledged for payment of bonds issued pursuant to this section

collected by the third-party tax collector to a trustee to be

deposited into an escrow account and used for the sole purpose of

paying principal of and interest on the bonds. If the city and a

third-party tax collector enter into an agreement providing for the

direct payment of taxes to a trustee, a statutory lien and trust is

created applicable to those tax revenues received or to be received

from the third-party tax collector by the trustee. The tax revenues

paid or to be paid to a trustee for the purpose of paying the

principal of and interest on the bonds issued pursuant to this

section shall be subject to a lien and trust, which 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 issued pursuant to this section and any

other bonds subsequently issued by the city sharing a parity or

subordinate pledge of those tax revenues. The lien and trust

created under this subsection for the benefit of bondholders or

others is perfected without delivery, recording, or notice. The tax

revenues held or to be held by a trustee shall be held in trust for

the sole benefit of the holders of the bonds issued pursuant to

this section and are exempt from being levied upon, taken,

sequestered, or applied toward paying the debts or liabilities of

the city other than for payment of debt service on the bonds to

which the lien applies. As used in this subsection, "third-party

tax collector" means a party that is not the city treasurer or

other elected or appointed city official with whom the city has

entered into a contractual agreement pursuant to which the third-

party tax collector agrees to collect taxes that otherwise would be

collected by the city treasurer.

(7) (5) Financial recovery bonds issued under this section are

not subject to the revised municipal finance act, 2001 PA 34, MCL

141.2101 to 141.2821.