CLEAN MICHIGAN INITIATIVE LOANS S.B. 719:
SUMMARY AS ENACTED
Senate Bill 719 (as enacted) PUBLIC ACT 115 of 2014
Sponsor: Senator Darwin L. Booher
Senate Committee: Natural Resources, Environment and Great Lakes
House Committee: Natural Resources
CONTENT
The bill amended Part 196 (Clean Michigan Initiative Implementation) of the Natural Resources and Environmental Protection Act (NREPA) to allow the terms of an outstanding loan from the Clean Michigan Initiative Bond Fund to be renegotiated upon a demonstration of financial hardship by the loan recipient.
The bill took effect on April 11, 2014.
The Clean Michigan Initiative (CMI) Act requires the State to borrow up to $675.0 million and issue general obligation bonds to finance environmental and natural resources protection programs that would clean up and redevelop contaminated sites, protect and improve water quality, prevent pollution, abate lead contamination, reclaim and revitalize community waterfronts, enhance recreational opportunities, and clean up contaminated sediments in lakes, rivers, and streams. The proceeds of the sale of the bonds, any premium and accrued interest received on the delivery of the bonds, and any interest earned on the proceeds must be credited to the CMI Bond Fund for these purposes.
The Fund was created within the State Treasury under Part 196 of NREPA, which also provides for the allocation of the Fund money, including up to $335.0 million for use by the Department of Environmental Quality (DEQ) for response activities at facilities. Of that amount, $75.0 million must be used to provide grants and loans to local units of government and brownfield redevelopment authorities for response activities at known or suspected facilities with redevelopment potential. Of the $75.0 million, a maximum of $25.0 million must be used to provide loans for specified "eligible activities" pursuant to the CMI Revolving Loan Program. To receive loan funds, approved applicants must enter into a loan agreement with the DEQ. A loan made with Fund money must include the following terms:
-- The interest rate must be not more than 50% of the prime rate as determined by the administering State department as of the loan's approval date.
-- Recipients must repay loans in equal annual installments of principal and interest beginning within five years after execution of a loan agreement and concluding within 15 years after execution.
-- A recipient must enter into a loan agreement with the administering State department.
-- Upon default or the request of the recipient as a method to repay the loan, the Department of Treasury must withhold State payments from the recipient in amounts consistent with the repayment schedule in the agreement, depositing the withheld funds into the CMI Bond Fund, until the loan is repaid.
Under the bill, upon a loan recipient's request and a showing of financial hardship related to the project that was financed in whole or in part by the loan, the administering department
may renegotiate the terms of any outstanding loan, including the length, interest rate, and repayment terms. The administering department, however, may not reduce or eliminate the amount of the outstanding loan principal.
The DEQ must report to the Legislature the number of loans refinanced under the bill, the local unit of government or authority responsible for each loan refinanced, and the change in the terms of the loan, as appropriate. This information may be included in the report prepared by the DEQ under Section 16 of the Brownfield Redevelopment Financing Act. (Under that section, each brownfield redevelopment authority must submit to its governing body, the DEQ, and the Michigan Strategic Fund (MSF) an annual financial report on the status of its activities for each calendar year. The DEQ and the MSF must collect the reports, compile a combined report, and submit to the Legislature an annual report based on the compiled information.)
MCL 324.19612 Legislative Analyst: Julie Cassidy
FISCAL IMPACT
The bill will have a neutral fiscal impact on State government and a positive fiscal impact on local units of government. Under the bill, municipalities and brownfield redevelopment authorities experiencing financial hardship related to a Clean Michigan Initiative (CMI) project loan are allowed to renegotiate terms of the loan. This will generally have a positive fiscal impact on municipalities and authorities that qualify, as interest rates, terms, and loan length may be favorably renegotiated. The DEQ receives CMI loan repayments, which allows additional projects to be funded. To the extent that municipalities and authorities renegotiate loan terms under the bill, future CMI loan repayments may be reduced. Reduced repayments will not have an administrative or operational impact on the DEQ, nor will they affect the Department of Treasury's ability to repay the original CMI bonds. The impact of reduced repayments will be a reduction in the amount of future CMI loans the DEQ can issue. The DEQ indicated that it expected such a reduction to have a minimal impact on the CMI loan program.
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.