April 17, 2012, Introduced by Rep. Wayne Schmidt and referred to the Committee on Local, Intergovernmental, and Regional Affairs.
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 211.157.211.155.
(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) "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.
(i) "Health care trust fund" means a trust or fund created in
accordance with the public employee health care fund investment
act, 1999 PA 149, MCL 38.1211 to 38.1216, or other state or federal
statute, and used exclusively to provide funding for postemployment
health care benefits for public employee retirees of a county,
city, village, or township. A health care trust fund also includes
the retiree health fund vehicle administered by the municipal
employees retirement system described in the municipal employees
retirement act of 1984, 1984 PA 427, MCL 38.1501 to 38.1555, for a
county, city, village, or township that has adopted the municipal
employee retirement system to provide funding for postemployment
health care benefits for public employee retirees.
(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) "Pension fund" means a pension fund created pursuant to 1
or more of the following:
(i) The municipal employees retirement act of 1984, 1984 PA
427, MCL 38.1501 to 38.1555.
(ii) Fire fighters and police officers retirement act, 1937 PA
345, MCL 38.551 to 38.562.
(iii) Section 12a of 1851 PA 156, MCL 46.12a.
(iv) 1966 PA 293, MCL 45.501 to 45.521.
(v) A pension fund created under any other statute and used
exclusively to provide funding for postemployment pension benefits
for public employee retirees of a county, city, village, or
township in this state.
(n) (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.
(o) (m)
"Refunding security" means a municipal security issued
to refund an outstanding security.
(p) (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.
(q) (o)
"Sinking fund" means a fund for the payment of
principal only of a mandatory redemption security.
(r) (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.
(s) "Unfunded accrued liability" means the difference between
the assets and liabilities of a pension fund or a health care trust
fund as determined by an actuarial study conducted pursuant to
statement 43 or 45 of the governmental accounting standards board.
Sec. 518. (1) A county, city, village, or township may by
ordinance or resolution of its governing body, and without a vote
of its electors, issue a municipal security under this section to
pay the costs of the unfunded accrued liability 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 or to refund in
whole or in part a contract obligation issued for the same purpose.
Postemployment health care or pension benefits may be funded by the
county, city, village, or township. The funding of postemployment
health care benefits by a county, city, village, or township as
provided in this act shall not constitute a contract to pay the
postemployment health care benefits.
(2) Before a county, city, village, or township issues a
municipal security under this section, the county, city, village,
or township shall publish a notice of intent to issue the municipal
security. The notice of intent and the rights of referendum shall
meet the requirements of section 517(2).
(3) A county, city, village, or township by resolution and
with a vote of its electors may issue a municipal security pledging
its unlimited tax full faith and credit to pay the costs of an
unfunded accrued liability.
(4) The proceeds of a municipal security issued under this
section may be used to pay the costs of issuance of the municipal
security. Except for a refunding, the proceeds of a municipal
security issued under this section shall be deposited in a health
care trust fund; a trust created by the issuer which has as its
beneficiary a health care trust fund; or for a county, city,
village, or township, a restricted fund within a trust that would
only be used to retire the municipal securities issued under
subsection (1) or (3); or a pension fund. A county, city, village,
or township shall have the power to create a trust to carry out the
purposes of this subsection. The trust created under this
subsection shall invest its funds in the same manner as funds
invested by a health care trust fund. The trust created under this
subsection shall comply with all of the following:
(a) Report its financial condition according to generally
accepted accounting principles.
(b) Be tax exempt under the internal revenue code.
(5) Before a county, city, village, or township issues a
municipal security under this section, the county, city, village,
or township shall prepare and make available to the public a
comprehensive financial plan that includes all of the following:
(a) Evidence that the issuance of the municipal security
together with other funds lawfully available will be sufficient to
eliminate the unfunded accrued liability during the period the plan
is in effect.
(b) A debt service amortization schedule and a description of
actions required to satisfy the debt service amortization schedule.
(c) A certification by the person preparing the plan that the
comprehensive financial plan is complete and accurate.
(d) Documentation that the issuance of municipal securities
will result in projected present value savings regarding the
unfunded accrued liability.
(e) In the situation where the proceeds of the borrowing are
to be deposited in a health care trust fund, a plan in place from
the county, city, village, or township to mitigate the increase in
health care costs and may include a wellness program that promotes
the maintenance or improvement of healthy behaviors.
(6) Municipal securities issued under subsection (1) or (3) by
a county, city, village, or township, and currently outstanding,
shall not exceed 5% of the state equalized valuation of the
property assessed in that county, city, village, or township.
(7) Municipal securities issued under subsection (1) or (3) by
a county, city, village, or township and the interest on and income
from the municipal securities are exempt from taxation by this
state or a political subdivision of this state.
(8) A county, city, village, or township issuing municipal
securities under subsection (1) or (3) may enter into indentures or
other agreements with trustees and escrow agents for the issuance,
administration, or payment of the municipal securities.
(9) In the situation where the proceeds of the borrowing are
to be deposited in a health care trust fund, municipal securities
issued under subsection (1) or (3) by a county, city, village, or
township shall not on a cumulative basis exceed the current
unfunded accrued liabilities on postemployment health care benefits
owed to employees of the county, city, village, or township that
are reflected in the most recent actuarial study conducted pursuant
to statement 43 or 45 of the governmental accounting standards
board on behalf of the county, city, village, or township prior to
the date of the amendatory act that added this subsection.
(10) A county, city, village, or township shall not issue a
municipal security under subsection (1) or (3) unless the county,
city, village, or township has been assigned a credit rating within
the category of A or higher by at least 1 nationally recognized
rating agency.
(11) A county, city, village, or township shall not issue a
municipal security under subsection (1) or (3) unless the projected
difference between the assumed rate of return on the health care
trust fund or pension fund investments and the projected actual
interest rate paid on the municipal securities issued under
subsection (1) or (3) is not less than 100 basis points.