May 8, 2014, Introduced by Reps. Durhal and Walsh and referred to the Committee on Detroit's Recovery and Michigan's Future.
A bill to create the Michigan settlement administration
authority; to provide for the operation of the authority; to create
certain funds; to authorize the resolution of certain potential
claims against the state; and to prescribe the powers and duties of
the authority and certain other state officials and state
employees.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"Michigan settlement administration authority act".
Sec. 2. The legislature finds and declares the following:
(a) As part of a municipal bankruptcy case involving a
qualified city, the city's retirement systems and certain of their
members have asserted that this state may be obligated to pay any
deficiencies in pension benefits payable to retirees, an assertion
that this state disputes.
(b) To settle a portion of a municipal bankruptcy case and if
certain conditions are satisfied, this state shall make a
contribution to reduce deficiencies in pension benefits of certain
members of certain retirement systems, in order to avoid additional
ongoing and future litigation and to partially settle the case, in
return for, among other things, full releases from any claims
against this state for alleged deficiencies in pension benefits.
(c) Partial settlement of the case and this state's
contribution in support serves important public purposes and will
be beneficial to the entire state due to 1 or more of the
following:
(i) It will enhance the retirement income for many qualified
city retirees, some of whom reside or will reside in other parts of
this state, and reduce the likelihood of their seeking public
assistance.
(ii) It will facilitate prompt resolution of certain municipal
bankruptcy cases and save taxpayers ongoing litigation costs.
(iii) It will protect this state and its taxpayers from
potential claims from parties associated with the retirement
systems of a qualified city.
(d) Establishing the authority and execution by the authority
of its powers granted under this act fulfill in all respects a
public and governmental purpose for the benefit of the people of
this state.
Sec. 3. As used in this act:
(a) "Authority" means the Michigan settlement administration
authority created under section 4.
(b) "Board" means the board of directors of the authority.
(c) "Contribution agreement" means the contribution agreement
in substantially the form included with a qualified city's plan for
adjustment.
(d) "Countercyclical budget and economic stabilization fund"
means the countercyclical budget and economic stabilization fund
created in section 351 of the management and budget act, 1984 PA
431, MCL 18.1351.
(e) "Operating expenses" means the reasonable operating
expenses of the authority, including without limitation the cost of
preparation of accounting and other reports, costs of authority
meetings or other required activities of the authority, counsel
fees, including fees of the attorney general, and fees and expenses
incurred for consultants and fiduciaries and any other costs
authorized in this act.
(f) "Person" means an individual, corporation, limited or
general partnership, association, joint venture, limited liability
company, or a governmental entity, including this state.
(g) "Plan for adjustment" means the final plan for adjustment
filed by a qualified city in a bankruptcy proceeding.
(h) "Qualified beneficiaries" means members of the retirement
systems and any beneficiaries of the retirees who are entitled to
all or part of a member's retirement benefit.
(i) "Qualified city" means a city with a plan for adjustment
and with a population of more than 600,000 that has a retirement
system for members who retire with years of service as an employee
of that city.
(j) "Retirement systems" means the police and fire retirement
system of a qualified city and the general retirement system of a
qualified city.
(k) "Settlement administration fund" or "fund" means the
settlement administration fund created in section 8.
(l) "State treasurer" means the state treasurer of this state
or his or her designee who is designated by a written instrument
signed by the state treasurer and maintained in a permanent file
and whose signature has the same force and effect as the signature
of the state treasurer for all purposes under this act.
Sec. 4. The Michigan settlement administration authority is
created as a public body corporate and politic within the
department of treasury. The authority is a state institution within
the meaning of section 9 of article II of the state constitution of
1963 and an instrumentality of this state exercising public and
essential governmental functions. The exercise by the authority of
the powers conferred by this act is an essential governmental
function of this state.
Sec. 5. The authority shall exercise its duties independently
of the state treasurer. Any administrative functions of the
authority shall be performed under the direction and supervision of
the state treasurer.
Sec. 6. (1) The authority shall exercise its duties through
its board of directors.
(2) The board shall consist of 5 members as follows:
(a) The state treasurer.
(b) The director of the department of licensing and regulatory
affairs.
(c) One member appointed by the governor with the advice and
consent of the senate, who has knowledge, skill, or experience in
the legal field of bankruptcy.
(d) One member appointed by the governor from a list of 2 or
more individuals nominated by the speaker of the house of
representatives who have knowledge, skill, or experience in the
field of bankruptcy, finance, accounting, or other relevant field.
(e) One member appointed by the governor from a list of 2 or
more individuals nominated by the senate majority leader who have
knowledge, skill, or experience in the field of bankruptcy,
finance, accounting, or other relevant field.
(3) The appointed members shall serve for a term of 1 year.
The appointed members shall serve until a successor is appointed. A
vacancy shall be filled for the balance of the unexpired term in
the same manner as the original appointment.
(4) The state treasurer or director of the department of
licensing and regulatory affairs may appoint a representative to
serve in his or her absence.
(5) Members of the board shall serve without compensation but
may receive reasonable reimbursement for necessary travel and
expenses incurred in the discharge of their duties.
(6) The state treasurer shall serve as chairperson of the
board.
(7) A majority of the appointed and serving members of the
board shall constitute a quorum of the board for the transaction of
business. A member may participate in a meeting by the use of
amplified telephonic or video conferencing equipment. A member
participating by the use of video conferencing equipment shall be
considered to be present for purposes of a quorum and for purposes
of voting. Actions of the board shall be approved by a majority
vote of the members present at a meeting.
(8) In fulfilling its duties under this act, the authority may
seek legal counsel from the state attorney general or financial
expertise from the state treasurer. If it is unable to obtain
necessary assistance from the state attorney general or state
treasurer, then the authority may contract for the services of
legal counsel, financial expert, or other expert advice.
(9) The members of the board and any agent of the authority
are subject to 1968 PA 317, MCL 15.321 to 15.330, and 1968 PA 318,
MCL 15.301 to 15.310.
(10) A member of the board or agent of the authority shall
discharge the duties of his or her position in a nonpartisan
manner, with good faith, and with that degree of diligence, care,
and skill that an ordinarily prudent person would exercise under
similar circumstances in a like position. In discharging the
duties, a member of the board or agent of the authority, when
acting in good faith, may rely upon the opinion of legal counsel or
other expert advice.
Sec. 7. The authority shall have all of the following powers:
(a) To make and amend bylaws.
(b) 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.
(c) To make and execute contracts including without limitation
the contribution agreement, trust agreements, and escrow
agreements, and all other instruments necessary or convenient for
the exercise of its powers and functions, and commence any action
to protect or enforce any right conferred upon it by any law,
contract, or other agreement.
(d) To engage the services of legal counsel or other advisors,
consultants, and fiduciaries as necessary to effectuate the
purposes of this act.
(e) To pay its operating expenses.
Sec. 8. (1) The settlement administration fund is created
within the state treasury.
(2) The state treasurer may receive money or other assets from
any source for deposit into the fund. The state treasurer shall
direct the investment of the fund. The state treasurer shall credit
to the fund interest and earnings from fund investments.
(3) Money in the fund at the close of the fiscal year shall
remain in the fund and shall not lapse to the general fund.
(4) The authority shall expend money from the fund only as
provided in this act.
Sec. 9. (1) The authority shall either disburse the money in
the fund to the retirement systems or return the money to the
countercyclical budget and economic stabilization fund as set forth
in this section.
(2) The authority shall cause $194,800,000.00 to be paid to
the retirement systems for the benefit of qualified beneficiaries
if and only if the authority determines in writing that both of the
following conditions have been satisfied:
(a) The bankruptcy court has entered an order approving a plan
for adjustment for a qualified city.
(b) The terms and conditions of the contribution agreement
have been satisfied.
(3) If the authority determines in writing that at least 1 of
the conditions in subsection (2) has not been satisfied, then the
money in the fund shall be returned to the countercyclical budget
and economic stabilization fund.
(4) If the authority has failed to make a finding in writing
under subsection (2) or (3) by May 1 immediately following the
approval of the plan for adjustment, then the money in the fund
shall be returned to the countercyclical budget and economic
stabilization fund.
Sec. 10. (1) If the authority causes $194,800,000.00 to be
paid to the retirement systems for the benefit of qualified
beneficiaries, then the state treasurer shall determine whether
there is substantial compliance with the conditions and
requirements of the settlement of pension claims set forth in the
contribution agreement, the plan for adjustment, and any order of
the bankruptcy court.
(2) The money received by the retirement systems shall be
utilized to enhance the retirement benefits of certain qualified
beneficiaries.
(3) The state treasurer shall submit a report to the governor
and both houses of the legislature on whether there is substantial
compliance with the conditions and requirements of the settlement
of pension claims as provided in the contribution agreement. The
state treasurer shall submit the report annually beginning
September 1 immediately following the payment of the money to the
retirement systems and ending 20 years thereafter.
Sec. 11. It is determined that the creation of the authority,
the appropriation made to the authority, and the carrying out of
the authority's authorized purposes are in all respects a public
and governmental purpose 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.
Sec. 12. The obligation to make this state's contribution
described in the contribution agreement is not a general obligation
or indebtedness of this state or the authority and is subject to
the satisfaction of the conditions described in the contribution
agreement, the plan for adjustment, and the order of a bankruptcy
court.
Sec. 13. (1) This state, a state official or state-related
entity, as defined in the plan for adjustment, the state treasurer,
the authority, a board member, an agent of the authority, and any
other legal, financial, or other expert providing advice to the
authority does not have any liability or obligation arising from or
related to the contributions or funding of the retirement systems,
except for the authority's disbursement or return of funds as
provided in section 9.
(2) This state, a state official or state-related entity, as
defined in the plan for adjustment, the state treasurer, the
authority, a board member, an agent of the authority, and any other
legal, financial, or other expert providing advice to the authority
does not have any liability for the representations, warranties,
covenants, determinations, agreements, or other obligations of this
state or the authority, or under any of the certificates, notices,
or agreements delivered pursuant to the contribution agreement, the
plan for adjustment, or the order of a bankruptcy court confirming
the plan for adjustment.
Sec. 14. Any action or proceeding related to the duties and
obligations or otherwise arising under this act or with respect to
the contribution agreement or the plan for adjustment shall be
brought in the bankruptcy court that approved the plan for
adjustment. However, if the bankruptcy court determines it does not
have jurisdiction, an action or proceeding described in this
section shall be brought in the court of claims, which court shall
have exclusive jurisdiction.