SB-0483, As Passed House, December 14, 2011

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 483

A bill to authorize the issuance of bonds, notes, or other

financial instruments; to create funds and accounts; to prescribe

the powers and duties of the authority, the state treasurer, and

certain other state officials and state employees; and to make

appropriations and prescribe certain conditions for the

appropriations.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the

"employment security financing act".

Sec. 2. As used in this act:

(a) "Ancillary facility" means any revolving credit agreement,

agreement establishing a line of credit, or letter of credit;

reimbursement agreement; interest rate exchange or similar

agreement; currency exchange agreement; commodity exchange

agreement; interest rate floor or cap; option, put, call, or

similar agreement to hedge payment, currency, commodity, rate,

spread, or similar exposure; investment agreement; float agreement;

forward agreement or other investment arrangement; insurance

contract; surety bond; commitment to purchase or sell securities;

purchase or sale agreement or commitment; or other contract or

agreement or other security agreement approved by the authority

under this act, including without limitation any arrangement

referred to in this act.

(b) "Authority" means the Michigan finance authority created

by Executive Reorganization Order No. 2010-2, MCL 12.194.

(d) "Bond" means a bond, note, financial instrument, or other

evidence of indebtedness or obligation issued by the authority

under this act.

(e) "Director" means director of the department of licensing

and regulatory affairs, or his or her designee.

(f) "Financing costs" means all capitalized interest;

operating and debt service reserves; costs of issuance; fees for

credit and liquidity enhancements; any item of expense directly or

indirectly payable or reimbursable by the authority and related to

the authorization, sale, or issuance of bonds, including without

limitation underwriting fees, counsel fees, fees of the attorney

general, and fees and expenses of consultants, advisors,

fiduciaries, and rating agencies; and other costs as the authority

determines to be desirable in issuing, securing, and marketing and

remarketing the bonds.

(g) "Interest rate exchange or similar agreement" means a

written contract with a counterparty to provide for an exchange of

payments based upon fixed or variable interest rates or on both

fixed and variable interest rates relating to bonds issued under

this act.

(h) "Operating expenses" means the reasonable operating

expenses of the authority under this act, including without

limitation the cost of preparation of accounting and other reports;

costs of maintaining the ratings on the bonds; bond insurance

premiums; costs of authority meetings or other required activities

of the authority under this act; counsel fees, including the fees

of the attorney general; fees and expenses incurred for

consultants, advisors, and fiduciaries relating to bonds or

activities of the authority authorized by this act; and any other

costs arising from activities authorized in section 8(2).

(i) "Outstanding" means with respect to bonds, all bonds

except those that have been paid in full at maturity or that are

not outstanding under the terms of the applicable authority

resolution, trust indenture, or trust agreement authorizing the

issuance of the bonds. With respect to ancillary facilities,

outstanding means all ancillary facilities except those that have

been paid in full or that are not outstanding under the terms of

those ancillary facilities.

(j) "Person" means an individual, corporation, limited or

general partnership, association, joint venture, limited liability

company, or a governmental entity, including this state.

(k) "State treasurer" means the state treasurer of this state

or his or her designee, if the designee is authorized to exercise

delegated signatory power for purposes of this act in a written

instrument signed by the state treasurer and maintained in a

permanent file.

Sec. 3. (1) The authority's exercise of the powers under this

act is in addition to any other powers conferred on the authority

by law, including, but not limited to, Executive Reorganization

Order No. 2010-2, MCL 12.194, and the statutory authority referred

to in that reorganization order. The authority's exercise of the

powers under this act is an essential governmental function of this

state.

(2) The authority may issue bonds in the principal amount or

amounts and with maturities as the authority determines necessary

to provide sufficient funds to achieve its authorized purposes

under this act, including, without limitation, all of the

following:

(a) Reducing or avoiding the need for the state to borrow or

obtain a federal advance to this state's unemployment trust account

within the federal unemployment trust fund.

(b) Repaying principal and interest on unpaid advances to this

state's unemployment trust account within the federal unemployment

trust fund.

benefits without advances or loans from the federal government

before January 1, 2014.

(d) Paying unemployment benefits before January 1, 2014.

(e) Paying or providing for financing costs.

(f) Providing sufficient reserves as necessary under an

indenture or under federal unemployment insurance laws, rules,

regulations, or guidance as are necessary to minimize the impact on

unemployment insurance tax rates.

Sec. 4. (1) The board of the authority shall authorize a bond

issue by resolution. The authority may issue bonds, including

refunding bonds, without obtaining the consent of any department,

division, commission, board, bureau, or agency of this state and

without any proceedings or conditions other than those specifically

required by this act. Every bond issue is a special revenue

obligation payable from and secured by a pledge of revenues or

funds available for that purpose under the Michigan employment

security act, 1936 (Ex Sess) PA 1, MCL 421.1 to 421.75, and other

assets, including without limitation the proceeds of the bonds

deposited in a reserve fund for the benefit of the owners of the

bonds, earnings on funds from bonds issued under this act, and

other available funds. The bonds are payable upon the terms and

conditions specified by the authority in the resolution under which

the authority issues the bonds or in a related trust agreement or

trust indenture.

(2) The authority may issue bonds to refund any bonds by

issuing new bonds if it considers the refunding expedient, whether

or not the bonds to be refunded have matured, and may issue bonds

partly to refund bonds then outstanding and partly for

restructuring or any of the authority's other authorized purposes.

Sec. 5. For each bond issue, the authority shall determine or

prescribe the method of determining all of the following:

(a) The date of issue.

(b) Whether the bonds shall bear no interest, appreciate as to

principal amount, bear interest at fixed or variable rates, or any

combination of these.

(d) When the bonds shall mature.

(e) Whether the authority may redeem the bonds prior to

maturity, at what price, and under what conditions.

(f) The method of payment of principal of and interest on the

bonds.

(g) The form, denomination, and place of payment of principal

of and interest on the bonds.

(h) If any officer whose signature, or the facsimile of whose

signature, appears on any bond shall cease to be that officer

before the delivery of the bond, that signature or facsimile shall

nevertheless be valid and sufficient for all purposes as if he or

she had remained in office until delivery of the bond.

(i) Any other term or condition necessary to issue the bonds.

Sec. 6. The authority may sell the bonds in the manner

determined by the authority board at public or private sale and on

either a competitive or negotiated basis. Proceeds of the bonds

shall be applied as determined by, or pursuant to, a resolution of

the authority and permitted under this act.

Sec. 7. In the discretion of the authority, any bond and any

ancillary facility may be secured by a trust agreement or trust

indenture by and between the authority and a trustee, which may be

any trust company or bank having the powers of a trust company,

whether located within or without this state. A trust agreement or

trust indenture authorized under this subsection, or an authority

resolution providing for the bond issue, may provide for creating

and maintaining reserves as the authority determines proper and may

include covenants setting forth the duties of the authority in

relation to the bonds, the ancillary facilities, the income to the

authority, and encumbered revenues. A trust agreement or trust

indenture authorized under this subsection or an authority

resolution under this act may contain provisions respecting the

custody, safeguarding, and application of all money and bonds and

may contain provisions for protecting and enforcing the rights and

remedies of the owners of the bonds and parties to ancillary

facilities as are reasonable and proper and not in violation of

law. Any bank or trust company that acts as depository of the

proceeds of bonds or of any other funds or obligations received on

behalf of the authority may furnish indemnifying bonds or pledge

obligations as the authority requires. Any trust agreement or trust

indenture authorized under this subsection or an authority

resolution may contain other provisions that the authority

considers reasonable and proper for priorities and subordination

among the owners of bonds and parties to ancillary facilities.

Sec. 8. (1) The authority may enter into, amend, or terminate,

as it determines necessary or appropriate, any ancillary facility

for any of the following purposes:

(a) To facilitate the issue, sale, resale, purchase,

repurchase, or payment of bonds, or the making or performance of

swap contracts, including without limitation bond insurance,

letters of credit, and liquidity facilities.

(b) To attempt to hedge risk or achieve a desirable effective

interest rate or cash flow.

(2) The authority may enter into, amend, or terminate any

ancillary facility as it determines necessary or appropriate to

place the obligations or investments of the authority, as

represented by the bonds or the investment of bond proceeds, in

whole or in part, on the interest rate, cash flow, or other basis

desired by the authority. The ancillary facility may include

without limitation contracts commonly known as interest rate swap

agreements and futures or contracts providing for payments based on

levels of, or changes in, interest rates. The authority may enter

into these contracts or arrangements in connection with, or

incidental to, entering into, or maintaining any agreement that

secures bonds of the authority or any investment of reserves, or

contract providing for investments of reserves, or similar

ancillary facility guaranteeing an investment rate for a period of

years.

(3) The authority's determination that an ancillary facility,

or the amendment or termination of an ancillary facility, is

necessary or appropriate is conclusive. The authority may determine

the terms and conditions of an ancillary facility, including

without limitation provisions as to security, default, termination,

payments, remedy, and consent to service of process.

Sec. 9. A recital in a bond or ancillary facility stating that

it is issued pursuant to this act is conclusive evidence of the

validity of the bond or ancillary facility and the regularity of

the proceedings relating to the bond or ancillary facility.

Sec. 10. (1) A member of the board or an officer, appointee,

or employee of the authority is not subject to personal liability

when acting in good faith within the scope of his or her authority

under this act or on account of liability of the authority under

this act. The board may defend and indemnify a member of the board

or an officer, appointee, or employee of the authority against

liability arising out of the discharge of his or her official

duties under this act. The authority may indemnify and procure

insurance indemnifying members of the board and other officers and

employees of the authority from personal loss or accountability for

liability asserted by a person with regard to bonds or other

obligations of the authority, or from any personal liability or

accountability for the bond issue or other obligations or by reason

of any other action taken or the failure to act by the authority

under this act. The authority may purchase and maintain insurance

on behalf of any person against the liability asserted against the

person and incurred by the person in any capacity or arising out of

the status of the person as a member of the board or an officer or

employee of the authority, whether or not the authority would have

the power to indemnify the person against that liability under this

subsection.

(2) A member, officer, employee, or agent of the authority

shall not have an interest, either directly or indirectly, in any

business organization engaged in any business, contract, or

transaction with the authority or in any contract of any other

person engaged in any business with the authority, or in the

purchase, sale, lease, or transfer of any property to or from the

authority.

Sec. 11. (1) A bond issued under this act is not subject to

the revised municipal finance act, 2001 PA 34, MCL 141.2101 to

141.2821.

(2) A bond issued under this act is subject to the agency

financing reporting act, 2002 PA 470, MCL 129.171 to 129.177.

Sec. 12. In the authority's resolution authorizing bonds or in

the provisions of a trust agreement or trust indenture that the

authority authorizes, the authority may delegate for a time period

at the authority's discretion to an officer, employee, or

designated agent of the authority the power to issue, sell, and

deliver bonds within limits on those bonds established by the

authority, as to any of the following:

(a) Form.

(b) Maximum interest rate or rates.

(d) Purchase price.

(e) Denominations.

(f) Redemption dates and premiums, if any.

(g) Nature of the security.

(h) Selection of an applicable interest rate index.

(i) Other terms and conditions with respect to the bond issue

that the authority prescribes.

Sec. 13. (1) The authority shall exercise its duties under

this act independently of the state treasurer. However, the

authority shall perform its staffing, budgeting, procurement, and

related administrative functions under the direction and

supervision of the state treasurer as provided in Executive

Reorganization Order No. 2010-2, MCL 12.194.

(2) The authority shall exercise its duties under this act

through its board of directors as provided in Executive

Reorganization Order No. 2010-2, MCL 12.194.

Sec. 14. In addition to any other powers conferred upon the

authority by law, when exercising its powers under this act the

authority shall have all of the following powers:

(a) To solicit and accept gifts, grants, and loans from any

person.

(b) To invest any money of the authority at the authority's

discretion, in any obligations determined proper by the authority,

and name and use depositories for its money.

the property, assets, or activities of the authority.

(d) To sue and be sued, to have a seal, and to make, execute,

and deliver contracts, conveyances, and other instruments necessary

to the exercise of the authority's powers.

(e) To make and amend bylaws.

(f) To employ and contract with individuals necessary for the

operation of the authority.

(g) To make and execute contracts including without

limitation, trust agreements, trust indentures, bond purchase

agreements, tax regulatory agreements, continuing disclosure

agreements, ancillary facilities, and all other instruments

necessary or convenient for the exercise of its powers and

functions, and to commence any action to protect or enforce any

right conferred upon it by any law, contract, or other agreement.

(h) To engage the services of financial advisors and experts,

legal counsel, placement agents, underwriters, appraisers, and

other advisors, consultants, and fiduciaries, as is necessary to

effectuate the purposes of this act.

(i) To pay its operating expenses and financing costs.

(j) To pledge revenues or other assets as security for the

payment of the principal of and interest on any bonds and for its

obligations under any ancillary facility.

(k) To procure insurance, letters of credit, or other credit

enhancement with respect to any bonds for the payment of tenders of

bonds, or for the payment upon maturity of short-term bonds.

(l) To enter into any ancillary facility with any person under

the terms and conditions at the authority's discretion and to

provide insurance, letters of credit, or other credit enhancement

with respect to any ancillary facility.

(m) To modify, amend, replace an existing, or enter into a

new, ancillary facility.

(n) To tender for, redeem, or defease bonds.

(o) To do any and all things necessary or convenient to carry

out its purposes and exercise the powers expressly given and

granted in this act.

Sec. 15. A bond or ancillary facility issued under this act is

not a debt or liability of this state or any agency or

instrumentality of this state, other than the authority as set

forth in this act, either legal, moral, or otherwise. It does not

create or constitute any indebtedness, liability, or obligation of

this state or constitute a pledge of the faith and credit of this

state. Nothing in this act shall be construed to authorize the

authority to incur any indebtedness or liability on behalf of this

state. Each bond or ancillary facility shall contain on its face or

other prominent place on the bond or ancillary facility in bold

typeface a statement to that effect.

Sec. 16. (1) The property of the authority and its income and

operations under this act are exempt from taxation by this state

and any political subdivision of this state.

(2) If the authority intends the interest on bonds it issues

to be exempt from federal income tax, the authority shall prescribe

restrictions on the use of the proceeds of those bonds and related

matters as necessary to assure the exemption. The recipients of

proceeds of those bonds are bound to the extent the restrictions

are made to apply to them. The authority and the director may

severally execute agreements as to bonds the authority issues,

including without limitation intergovernmental agreements or other

agreements providing for collecting and remitting funds.

Sec. 17. (1) This state hereby pledges and agrees with the

authority, and the owners of the bonds and parties to ancillary

facilities, that until all bonds and ancillary facilities, together

with the interest on the bonds and ancillary facilities and all

costs and expenses in connection with any action or proceedings by

or on behalf of owners of bonds or parties to ancillary facilities,

are fully paid and discharged, that this state will not do any of

the following:

(a) Limit or alter the rights of the authority to fulfill the

terms of its agreements with owners of the bonds or parties to

ancillary facilities.

(b) Impair in any way the rights and remedies of owners of the

bonds or benefited parties or the security for the bonds or

ancillary facilities.

required by any contract with the owners of the bonds or parties to

ancillary facilities when applying the then applicable contribution

rates to the then applicable wage base.

(d) Reduce the obligation assessments imposed under section

26a of the Michigan employment security act, 1936 (Ex Sess) PA 1,

MCL 421.26a, to a level below that required by any outstanding bond

or ancillary facility.

(2) The authority is authorized and directed to include the

pledge and agreement made under this section in any contract with

the owners of the bonds and parties to ancillary facilities.

Sec. 18. Notwithstanding any restriction contained in any

other law, rule, regulation, or order to the contrary, this state

and all political subdivisions of this state; their officers,

boards, commissioners, departments or other agencies; governmental

pension funds; all banks, trust companies, savings banks and

institutions, building and loan associations, savings and loan

associations, investment companies and other persons carrying on a

banking or investment business; and all executors, administrators,

guardians, trustees, and other fiduciaries; and all other persons

whatsoever who now are or may hereafter be authorized to invest in

bonds or other obligations of the state, may properly and legally

invest any sinking funds, money, or other funds, including capital,

belonging to them or within their control, in any bond. Bonds that

the authority issues under this act are hereby made bonds that may

properly and legally be deposited with, and received by, any state

municipal officer or agency of this state, for any purpose for

which the deposit of bonds or other obligations of this state is

now, or may be, authorized by law.

Sec. 19. This act and all powers granted in it shall be

liberally construed to effectuate its intent and purposes, without

implied limitations on the powers of the authority or the state

treasurer. This act is full, complete, and additional authority for

all things that are contemplated in this act to be done. All rights

and powers granted in this act are cumulative with those derived

from other sources and shall not be construed to limit those rights

and powers except as expressly stated in this act. Insofar as the

provisions of this act are inconsistent with the provisions of any

other act, general or special, the provisions of this act control.

Sec. 20. Subject to any agreements with bondholders, the

authority may use any funds available to purchase bonds of the

authority at a price determined by the authority.

Sec. 21. (1) Notwithstanding any existing provision of law and

in addition to any other appropriations provided by law,

$1,000,000.00 is appropriated from the general fund to the

authority for the fiscal year ending September 30, 2012 for all of

the following purposes:

(a) Payment of operating expenses of the authority.

(b) Funding any reserve requirements.

(2) Money appropriated under this section that is not expended

before the end of the state fiscal year ending September 30, 2012

shall not revert to the general fund, and the authority may retain

and use it for the purposes authorized by subsection (1).

Sec. 22. Except as otherwise provided in this section, any

legal action against the authority shall be brought in the Michigan

court of appeals, which has exclusive jurisdiction. However, any

legal actions against the authority seeking money damages shall be

brought in the court of claims for this state, which has exclusive

original jurisdiction with respect to actions against the authority

seeking money damages.

Sec. 23. (1) This act governs the creation, perfection,

priority, and enforcement of any pledge of revenues or other

security made by the authority under this act. Each pledge of the

authority is valid and binding as of the time the pledge is made.

The encumbered revenues, reserves or earnings pledged, or earnings

on the investment of the encumbered revenues, reserves, or earnings

pledged are immediately subject to the lien created under the

pledge without any physical delivery or further act. The lien is

valid and binding against all parties having claims of any kind in

tort, contract, or otherwise against the authority, whether or not

the parties have notice of the lien or pledge or whether the pledge

or lien has been recorded. The resolution or other instrument by

which a pledge is created is not required to be recorded.

(2) This act also governs the negotiability of bonds issued

under this act. Any bonds issued under this act are fully

negotiable within the meaning and for all purposes of the uniform

commercial code, 1962 PA 174, MCL 440.1101 to 440.11102. By

accepting the bond or obligation, each owner of a bond or other

obligation of the authority shall be conclusively considered to

have agreed that the bond is and shall be fully negotiable within

the meaning and for all purposes of the uniform commercial code,

1962 PA 174, MCL 440.1101 to 440.11102.

Sec. 24. Bonds issued under this act are limited to the

principal amount necessary to satisfy this state's obligations to

the federal government for advances or loans from the federal

account of the unemployment trust fund, to pay unemployment

benefits before January 1, 2014, and to pay financing costs,

reserves, coverage required for financing, and reimbursement for

advances made by this state to pay a portion of its obligations on

or before December 31, 2013. This limitation does not apply to or

preclude issuing bonds to refinance or refund bonds issued under

this act on or before December 31, 2013.

Enacting section 1. The legislature finds and declares all of

the following:

(a) It is an essential governmental function to maintain funds

in an amount sufficient to pay unemployment benefits when due.

(b) At the time of the enactment of this act, unemployment

benefits payments are made from Michigan's account in the

unemployment trust fund of the United States treasury and are

funded by employer contributions.

the federal government through loans from the federal unemployment

trust fund is the only option available to obtain sufficient funds

to pay benefits when the balance in Michigan's account in the

unemployment trust fund of the United States treasury is

insufficient to make necessary payments.

(d) Alternative methods of replenishing this state's account

in the unemployment trust fund of the United States treasury may

reduce the costs of providing unemployment benefits and employers'

cost of doing business in the state.

(e) It is in this state's best interests to authorize the

issuance of bonds when appropriate for the purpose of continuing

the unemployment insurance program at the lowest possible cost to

this state and employers in this state and to avoid reductions in

the employer unemployment tax credit.

(f) Execution by the authority of its powers granted under

this act fulfill in all respects an essential governmental function

and public purpose for the benefit of and in furtherance of the

public health and welfare of the people of this state.

Enacting section 2. The legislature determines that the

creation of the authority by Executive Reorganization Order No.

2010-2, MCL 12.194, and the carrying out of its authorized purposes

under this act are in all respects public and governmental purposes

for the benefit of the people of this state and for the improvement

of their health, safety, welfare, comfort, and security, and that

these purposes are public purposes and that the authority will be

performing an essential governmental function in the exercise of

the powers conferred upon it by this act.