SB-0583, As Passed House, March 24, 2016

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 583

A bill to amend 1933 PA 94, entitled

"The revenue bond act of 1933,"

by amending the title and section 3 (MCL 141.103), the title as

amended by 1998 PA 196 and section 3 as amended by 2002 PA 465, and

by adding sections 7b, 21a, 22a, and 24a.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

An act to authorize public corporations, or officers of

certain public corporations, to purchase, acquire, construct,

improve, enlarge, extend, or repair public improvements within or

without their corporate limits, and to own, operate, and maintain

the same; to authorize the creation, operation, and financing of

certain delinquent tax systems; to authorize the condemnation of

property for such public improvements; to provide for the

imposition and collection of charges, fees, rentals, or rates for

the services, facilities, and commodities furnished by such public

improvements; to provide for the issuance of bonds or notes and

refunding bonds or notes payable from the revenues of public

improvements or from delinquent tax systems; to provide for a

pledge by public corporations of their full faith and credit and

the levy of taxes without limitation as to rate or amount to the

extent necessary for the payment of the bonds or notes, or for

advancing money from general funds for payment of bonds or notes;

to provide for payment, retirement, and security of such bonds; to

provide for the imposition of special assessment bonds for the

purpose of refunding outstanding revenue bonds; to prescribe the

powers and duties of the department of treasury and of the

municipal finance commission or its successor agency relative to

such bonds or notes and relative to private activity bonds issued

by a state or local governmental entity; to provide for other

matters in respect to such public improvements and bonds or notes

and to validate action taken and bonds issued; and to prescribe

penalties and provide remedies.

Sec. 3. As used in this act:

(a) "Public corporation" means a county, city, village,

township, school district, port district, or metropolitan district

of the state or a combination of these if authorized by law to act

jointly; an authority created by or under an act of the

legislature; or a municipal health facilities corporation or

subsidiary municipal health facilities corporation incorporated as

provided in the municipal health facilities corporations act, 1987

PA 230, MCL 331.1101 to 331.1507.

(b) "Public improvements" means only the following

improvements: housing facilities; garbage disposal plants; rubbish

disposal plants; incinerators; transportation systems, including

plants, works, instrumentalities, and properties used or useful in

connection with those systems; sewage disposal systems, including

sanitary sewers, combined sanitary and storm sewers, plants, works,

instrumentalities, and properties used or useful in connection with

the collection, treatment, or disposal of sewage or industrial

wastes; storm water systems, including storm sewers, plants, works,

instrumentalities, and properties used or useful in connection with

the collection, treatment, or disposal of storm water; water supply

systems, including plants, works, instrumentalities, and properties

used or useful in connection with obtaining a water supply, the

treatment of water, or the distribution of water; utility systems

for supplying light, heat, or power, including plants, works,

instrumentalities, and properties used or useful in connection with

those systems; approved cable television systems, approved cable

communication systems, or telephone systems, including plants,

works, instrumentalities, and properties used or useful in

connection with those systems; automobile parking facilities,

including within or as part of the facilities areas or buildings

that may be rented or leased to private enterprises serving the

public; yacht basins; harbors; docks; wharves; terminal facilities;

elevated highways; bridges over, tunnels under, and ferries across

bodies of water; community buildings; public wholesale markets for

farm and food products; stadiums; convention halls; auditoriums;

dormitories; hospitals and other health care facilities; buildings

devoted to public use; museums; parks; recreational facilities;

reforestation projects; aeronautical facilities; and marine

railways; or any right or interest in or equipment for these

improvements. The term "public improvement" means the whole or a

part of any of these improvements or of any combination of these

improvements or any interest or participation in these

improvements, as determined by the governing body. The definition

contained in this subdivision does not broaden or enlarge the

extent of a particular public improvement made by a public

corporation.

to issue bonds as provided in this act or a county treasurer

exercising the power to issue notes as provided in this act.

(d) "Governing body" means for a county, the board of

commissioners; for a city, the body having legislative powers; for

a village, the body having legislative powers; for a township, the

township board; for a school district, the board of education; for

a port district, the port commission; for a metropolitan district,

the legislative body of the district; for a municipal health

facilities corporation, the board of trustees; for a nonprofit

subsidiary municipal health facilities corporation, the nonprofit

subsidiary board; and for an authority, the body in which is lodged

general governing powers. If the charter of a public corporation or

applicable law provides that a separate board has general

management over a public improvement, "governing body" means, with

respect to that public improvement, the separate board, subject to

review by the legislative body of the public corporation as the

charter or law may provide. Unless the charter or law specifically

provides otherwise, the separate board shall adopt the bond

authorizing ordinance, but shall not pledge full faith and credit.

(e) "Rates" means the charges, fees, rentals, and rates that

may be fixed and imposed for the services, facilities, and

commodities furnished by a public improvement.

(f) "Revenues" means the income derived from the rates charged

for the services, facilities, and commodities furnished by a public

improvement. Revenues include, to the extent provided in the

authorizing ordinance, earnings on investment of funds of the

public improvement and other revenues derived from or pledged to

operation of the public improvement.

(g) "Net revenues" means the revenues of a public improvement

remaining after deducting the reasonable expenses of

administration, operation, and maintenance of the public

improvement.

(h) "Project cost" or "costs" means the costs of purchasing,

acquiring, constructing, improving, enlarging, extending, or

repairing a public improvement, including any engineering,

architectural, legal, accounting, financial, and other expenses

incident to the public improvement. Project costs include interest

on the bonds, and other obligations of the borrower issued to pay

project costs, during the period of construction and until full

revenues are developed. Project costs include a reserve or addition

to a reserve for payment of principal and interest on the bonds and

the amount required for operation and maintenance until sufficient

revenues have developed.

(i) "Ordinance" means an ordinance, resolution, or other

appropriate legislative enactment of the governing body of a public

corporation.

(j) "Approved cable television system" or "approved cable

communication system" means a cable television or communication

system to which 1 of the following applies:

(i) A municipality acquires or establishes the system either

before January 1, 1987 or before a system is established in that

municipality by a private person.

(ii) A municipality acquires or establishes the system after a

system is established in that municipality by a private person and

after approval by a majority of the electors in the affected area

of that municipality voting on the question of the sale of revenue

bonds to finance the acquisition or establishment of the municipal

system.

(k) "County treasurer" means an elected county treasurer or a

county treasurer appointed under section 5 of 1923 PA 199, MCL

201.35, of a county.

(l) "Delinquent tax revenues" means the delinquent taxes,

interest, penalties and fees, and chargebacks of uncollected

delinquent taxes due or to become due to local units of government

to be collected by a county treasurer as agent for the local unit

of government in connection with a delinquent tax system and

pledged to any borrowing by a county treasurer under section 7b.

Delinquent tax revenues do not include fees, charges, and other

amounts due and payable to the county treasurer under section

87c(3) of the general property tax act, 1893 PA 206, MCL 211.87c.

(m) "Delinquent tax system" means the delinquent tax revolving

fund in any county created and designated under section 87b of the

general property tax act, 1893 PA 206, MCL 211.87b, and continued

under section 87f of the general property tax act, 1893 PA 206, MCL

211.87f.

(n) "Order" means the legislative enactment of a county

treasurer's powers under this act.

Sec. 7b. (1) A county treasurer in any county that has

continued a delinquent tax revolving fund under section 87b of the

general property tax act, 1893 PA 206, MCL 211.87b, and that has

authorized the issuance of notes under this act pursuant to section

87f of the general property tax act, 1893 PA 206, MCL 211.87f, may

by order of the county treasurer and without a vote of the electors

borrow money and issue its revenue notes on behalf of itself and

the local units of government secured by delinquent tax revenues

from the county's delinquent tax revolving fund.

(2) In the order authorizing the borrowing and issuance of

notes, the delinquent tax revenues from which the borrowing is to

be repaid shall be pledged as security for the payment of the

principal and interest on the notes. Money and other property held

in the delinquent tax revolving fund, including collections on the

delinquent tax revenues, shall be kept separate from and shall not

be commingled with any other money in the custody of the county

treasurer. The segregated fund or account shall be established as a

part of the delinquent tax revolving fund and shall be accounted

for separately on the books of the county treasurer.

(3) The proceeds of the notes shall be placed in and used as

the whole or part of the delinquent tax revolving fund established

under section 87b of the general property tax act, 1893 PA 206, MCL

211.87b, after the expenses of borrowing have been deducted.

(4) The notes issued pursuant to this section shall comply

with all of the following:

(a) Be in an aggregate principal amount not exceeding the

aggregate amount of all of the following:

(i) The delinquent tax revenues pledged, exclusive of

interest.

(ii) At the option of the county treasurer, and to the extent

authorized under section 87f of the general property tax act, 1893

PA 206, MCL 211.87f, a note reserve fund in an amount not to exceed

15% of each borrowing.

(iii) The cost of issuance.

(b) Bear interest not exceeding 14.5% per annum.

exceeding 6 years after their date of issue, as the county

treasurer by order determines.

(d) May be issued at an original issue discount not to exceed

2% of the face value of the note issued.

(e) The order authorizing issuance of the notes may provide

that all or part of the notes shall be subject to prepayment and,

if subject to prepayment, shall provide the amount of call premium

payable, if any, the number of days' notice of prepayment that

shall be given, and whether the notice shall be written or

published, or both. Otherwise, the notes shall not be subject to

prepayment.

(f) The sale and award of notes shall be conducted and made by

the county treasurer at a public or private sale. If a public sale

is held, the notes shall be advertised for sale once not less than

5 days before sale in a publication printed in the English language

and circulated in this state that carries as a part of its regular

service notices of the sales of municipal bonds and that has been

designated in the resolution as a publication complying with these

qualifications. The notice of sale shall be in the form designated

by the county treasurer. The notes may be sold subject to the

option of the county treasurer, and the county treasurer may

withhold a part of the issue from delivery if, in his or her

opinion, sufficient funds are available before delivery of the

notes to make full delivery unnecessary to the purposes of the

borrowing.

(5) If the county board of commissioners provides by

resolution, the notes may also be limited tax full-faith and credit

obligations of the county subject to the state constitution of 1963

as to the levying of any taxes not authorized by the voters or by

law unless the county has held an election pursuant to section 87d

of the general property tax act, 1893 PA 206, MCL 211.87d, if the

county's voters have approved the proposition found in section

87d(1) of the general property tax act, 1893 PA 206, MCL 211.87d,

permitting the county to pledge the county's unlimited taxing power

for the purpose of providing money for the delinquent tax revolving

fund. If the proceeds of the taxes pledged are not sufficient to

pay the principal and interest of the notes when due, the county

shall impose a general ad valorem tax without limitation as to rate

or amount on all taxable property in the county to pay the

principal and interest and may reimburse itself from delinquent

taxes collected.

(6) If the county board of commissioners provides by

resolution, the notes may be secured additionally by a pledge of

the county's general fund and are subject to all the following:

(a) The notes shall be designated general obligation limited

tax notes.

(b) The notes shall be the full faith and credit obligations

of the county issuing them. If the proceeds of the taxes and

interest and, when pledged, county property tax administration

fees, or note reserve fund are not sufficient to pay the principal

and interest, when due, the county shall pay the principal and

interest from its general funds or any additional tax which may be

levied within its constitutional and statutory debt limits, and the

county may subsequently reimburse itself from delinquent taxes

collected. The county's obligation to pay from its general funds

shall be its first budget obligation and shall be provided for in

the borrowing resolution in the following language:

"This note issue, in addition, shall be a general obligation

of the county of _________, secured by its full faith and credit,

which shall include this county's limited tax obligation, within

applicable constitutional and statutory limits, and its general

funds. The county budget shall provide that if the pledged

delinquent taxes and any other pledged amounts are not collected in

sufficient amounts to meet the payments of principal and interest

due on these notes, the county, before paying any other budgeted

amounts, will promptly advance from its general funds sufficient

money to pay that principal and interest.".

(7) Notwithstanding any other provisions of this section, all

the following apply:

(a) Interest on the notes may be payable at any time provided

in the order, and may be set, reset, or calculated as provided in

the order.

(b) Notes issued under this section may have 1 or more of the

following attributes:

(i) Made the subject of a put or agreement to repurchase by

the county treasurer.

(ii) Secured by a letter of credit issued by a bank under an

agreement entered into by the county treasurer or by any other

collateral that the county treasurer's order may authorize.

(iii) Callable as set forth in the order.

(iv) Reissued by the county treasurer once reacquired by the

county treasurer under any put or repurchase agreement.

following:

(i) Authorize the issuance of renewal notes.

(ii) Refund or refund in advance notes by the issuance of new

notes, whether the notes to be refunded have or have not matured.

(iii) Issue notes partly to refund notes and partly for any

other purposes authorized by this act.

(iv) Buy and sell any notes issued under this section.

(d) Renewal, refunding, or advance refunding notes shall

comply with all of the following:

(i) Shall be sold and the proceeds applied to the purchase

redemption or payment of the notes to be renewed or refunded.

(ii) Shall not be subject to the revised municipal finance

act, 2001 PA 34, MCL 141.2101 to 141.2821.

(iii) May be sold or resold at a public or private sale.

(iv) May pledge the delinquent taxes pledged in the issue to

be refunded in advance after the original issue is defeased by the

advance refunding issue.

(e) Notes may be issued and secured by a second lien on

delinquent tax revenues, interest, and property tax administration

fees already the subject of a first lien because of the issuance of

a prior note issue.

(f) Any notes issued may be secured in whole or in part under

a trust or escrow agreement, which agreement may also govern the

issuance of renewal notes, refunding notes, and advance refunding

notes. The agreement may authorize the trustee or escrow agent to

make investments of any type authorized in the agreement.

(8) The notes issued under this section and interest on the

notes shall be payable in lawful money of the United States of

America and shall be exempt from all taxation by this state or a

taxing authority in this state.

(9) The notes issued under this section may be made payable at

a bank or trust company, or may be made registrable as to principal

or as to principal and interest under the terms and conditions

specified in the authorizing resolution or by the county treasurer

when awarding the notes.

(10) To the extent authorized under section 87f of the general

property tax act, 1893 PA 206, MCL 211.87f, a county treasurer

shall have all the powers granted by this act to a public

corporation and shall exercise those powers by order. A copy of

that order shall be maintained in the records of the county

treasurer, and a second copy shall be filed with the county clerk

on December 31 each year for all such orders issued that year.

(11) Notwithstanding 1966 PA 293, MCL 45.501 to 45.521, a

county operating under a home rule charter shall not be restricted

by the provisions of the home rule charter in connection with the

powers granted to the county treasurer to issue notes by this

section. The treasurer of a county described in this subsection,

notwithstanding any charter provisions to the contrary, shall have

all of the powers granted to county treasurers by this section.

(12) If the treasurer so authorizes in the order authorizing

the notes, any notes issued may be secured in whole or in part

under a trust or escrow agreement. That agreement may authorize the

trustee or escrow agent to make investments of any type authorized

in the agreement.

(13) Notes issued under this act are exempt from the revised

municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821.

Sec. 21a. (1) Delinquent tax revenues shall be fixed before

the issuance of the notes and shall be sufficient to provide for

all of the following:

(a) The payment of the interest on and the principal of notes

payable from the delinquent tax revenues when the notes become due

and payable.

(b) The creation of any reserve for the notes as required in

the order authorizing the issuance of those notes.

(2) The county treasurer shall covenant and agree in the order

authorizing the issuance of the notes and on the face of each note

to collect at all times the amounts pledged to repay the notes

which shall be sufficient to provide for the amounts described in

subsection (1). The amounts pledged that are fixed and established

pursuant to the order shall not be subject to revision or change.

(3) Notes issued and sold under this section shall be secured

by a statutory lien on the delinquent taxes and, to the extent held

in the delinquent tax revolving fund, on all other property and

assets and any revenues derived from the delinquent taxes and other

property or assets. The lien shall automatically attach without

further action or authorization by the county treasurer. The lien

on the delinquent taxes and all other property and assets and any

revenues derived from the delinquent taxes and other property or

assets that are held in the delinquent tax revolving fund shall be

valid and binding from the time the notes are executed and

delivered. The lien shall automatically attach and be effective,

binding, and enforceable against the county, the county treasurer,

its successors, transferees, and creditors, and all others

asserting rights in the secured property, irrespective of whether

those parties have notice of the lien and without the need for any

physical delivery, recordation, filing, or further act. In

addition, the amounts collected which are subject to the lien shall

be held in trust for the owners of the notes authorized by this

section. Any property eligible to be conveyed and properly conveyed

to a land bank fast track authority as tax reverted property, as

defined by section 3(q) of the land bank fast track act, 2003 PA

258, MCL 124.753, or to this state or a person, city, village,

township, or county pursuant to section 78m or 78r of the general

property tax act, 1893 PA 206, MCL 211.78m and 211.78r, shall be

released from any lien created under this section.

Sec. 22a. (1) In the authorizing order, the county treasurer

shall also provide that the delinquent tax revenues of the

delinquent tax system are all subject to a statutory lien and shall

be kept separate from and shall not be commingled with any other

money in the custody of the county treasurer. The delinquent tax

revenues of the delinquent tax system shall be used to provide for

the payment of the principal of and the interest upon all notes

payable from those revenues, as and when the notes become due and

payable. This account shall be designated note and interest

redemption account and shall be subject to the statutory lien. In

respect to the allocation and use of money in the note and interest

redemption account, due recognition shall be given as to priority

rights, if any, between different issues or series of outstanding

notes. If authorized under a resolution adopted by the board of

commissioners and, in a charter or unified county, the chief

executive officer of the county in the manner authorized under the

charter or by law, the county treasurer may provide by order that a

reasonable excess amount shall be set aside in the note and

interest redemption account from time to time so as to produce and

provide a reserve to meet any possible future deficiencies, which

reserve shall also be subject to the statutory lien.

(2) Revenues remaining, after satisfaction of subsection (1),

at the end of any operating year shall be part of the surplus in

the delinquent tax revolving fund which may be transferred to the

county general fund as provided in section 87b(7) of the general

property tax act, 1893 PA 206, MCL 211.87b.

Sec. 24a. Money in the several accounts of the delinquent tax

system shall be deposited as designated by the county board of

commissioners of the county. Money in the several accounts of the

delinquent tax system, except money in the note and interest

redemption account and money derived from the proceeds of sale of

the notes each of which shall be kept in a separate deposit

account, may be kept in 1 deposit account, provided, however, that

only delinquent tax revenues of the delinquent tax systems shall be

held in or credited to that deposit account and those funds and

other property shall not be commingled with any other money of or

in the custody of the county treasurer. In that case, the money in

the combined deposit accounts shall be allocated on the books and

records of the county treasurer to the various accounts in the

manner provided in the authorizing order. The county treasurer of

the county may provide that the money in the several accounts of

the delinquent tax system be kept in separate depository accounts.

The money in the note and interest redemption account shall be

accounted for separately.