SB-0822, As Passed Senate, March 22, 2016

SUBSTITUTE FOR

SENATE BILL NO. 822

A bill to amend 1980 PA 243, entitled

"Emergency municipal loan act,"

by amending sections 1, 2, 3, 4, and 6 (MCL 141.931, 141.932,

141.933, 141.934, and 141.936), section 1 as amended by 2012 PA 284

and sections 2, 3, 4, and 6 as amended by 2015 PA 115; and to

repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. As used in this act:

(a) "Board" means the local emergency financial assistance

loan board created under section 2.

(b) "Fiscal year" means, unless otherwise provided in this

act, the fiscal year of the municipality applying for a loan under

this act.

municipality under the city income tax act, 1964 PA 284, MCL

141.501 to 141.787, in any calendar year.

(d) "Income tax revenue growth rate" means the quotient of the

following:

(i) The numerator is the income tax collections of the

municipality for the calendar year immediately preceding the

municipality's application for a loan under this act.

(ii) The denominator is the income tax collections for the

municipality for the calendar year preceding the calendar year used

in determining the numerator.

(e) "Municipality" means a county, city, village, or township,

or school district in this state. ~~For the period beginning on~~

~~October 1, 2011 and ending on September 30, 2018, municipality also~~

~~includes a school district in this state.~~

(f) "Local tax base growth rate" for a municipality means the

state equalized valuation of the real and personal property of the

municipality for the most recent year for which data is available

divided by the state equalized valuation of real and personal

property of the municipality for the fifth year preceding the most

recent year for which data is available.

(g) "Statewide tax base growth rate" means the total state

equalized valuation for real and personal property for the most

recent year for which data is available divided by the total state

equalized valuation for the fifth year preceding the most recent

year for which data is available.

(h) "State equalized valuation of real and personal property

of the municipality" means the valuation determined under 1911 PA

44, MCL 209.1 to 209.8, of real and personal property within the

municipality plus an amount equal to the state equalized valuation

equivalent of certain revenues of the municipality as determined

under this subdivision. The state equalized valuation equivalent

shall be calculated by dividing the sum of the following amounts by

the municipality's millage rate for the fiscal year:

(i) The amount levied by the municipality for its own use

during the municipality's fiscal year from the specific tax levied

under 1974 PA 198, MCL 207.551 to 207.572.

(ii) The amount levied by the municipality for its own use

during the municipality's fiscal year from the specific tax levied

under the commercial redevelopment act, 1978 PA 255, MCL 207.651 to

207.668.

Sec. 2. (1) There is created a local emergency financial

assistance loan board within the department of treasury. This board

~~shall consist~~ consists of the state treasurer, the director of the

department of licensing and regulatory affairs, and the director of

the department of technology, management, and budget. Except for

budgeting, procurement, and related functions of the board that

shall be performed under the direction and supervision of the state

treasurer, the board shall exercise its prescribed statutory

powers, duties, and functions independently of the department of

treasury.

(2) The board has the powers necessary to carry out and

effectuate the purposes and provisions of this act, and powers

vested in the board under other laws of this state, including, but

not limited to, all of the following powers:

(a) To act by an order issued in the name of the board and

signed by the members of the board. The signature of the designee

of a member, when the designee is acting for his or her principal,

has the same force and effect as the signature of the member.

(b) To authorize and make loans; to renegotiate the terms of

outstanding loans; and to make, execute, and deliver contracts and

other instruments necessary or convenient to the exercise of its

powers.

respect to fiscal questions arising from and relating to its

proposed or outstanding loans.

(d) To promulgate rules under the administrative procedures

act of 1969, 1969 PA 306, MCL 24.201 to 24.328, that it considers

necessary.

(e) To examine the books and records of a municipality

applying for or receiving a loan under this act for the purpose of

ascertaining if the municipality is complying, in relation to a

loan under this act, with the requirements of the board, the laws

of this state, and the charter, ordinances, and resolutions of the

municipality. Additionally, for effectuating this purpose, the

board may require sworn statements from any officer or employee of

the municipality and may require the municipality to furnish a

statement of its financial condition. The board has full power, in

furtherance of its investigations, to examine witnesses on oath, to

compel the attendance of witnesses, to compel the giving of

testimony, and to compel the production of books, papers, and

records. Witnesses may be summoned by the board by its process upon

the payment of the same fees as are allowed to witnesses attending

in the circuit court for the county in which a hearing is held. A

person duly subpoenaed under this section who fails to attend or

testify at the place named in the subpoena served for that purpose

is guilty of a misdemeanor.

(f) To serve notice upon a municipality of an order relating

to the municipality issued by the board. A municipality has prima

facie notice of and is bound by an order of the board if notice has

been served upon it by registered mail addressed to any officer of

the municipality upon whom legal process may be served.

(g) To enforce compliance with its orders; with the terms of

outstanding loans; with any provision of this act; or, in relation

to a loan under this act, with any law of this state or with the

charter, ordinances, or resolutions of a municipality that received

a loan under this act. As 1 method to enforce compliance, the board

may institute appropriate proceedings in the courts of this state,

including proceedings for writs of mandamus and injunctions.

(h) To subject a loan to the terms and conditions the board

considers necessary to ensure compliance with the uniform budgeting

and accounting act, 1968 PA 2, MCL 141.421 to 141.440a, and to

ensure timely repayment of the loan, including, but not limited to,

requiring the direct assignment for repayment of a loan of any

state money appropriated to the municipality or, for a municipality

that is a school district, other revenue or money that may be

pledged by a school district under section 1211 of the revised

school code, 1976 PA 451, MCL 380.1211, or other law. For a loan

entered into after ~~the effective date of the amendatory act that~~

~~added this sentence,~~ July 7, 2015, if a municipality does not make

any scheduled repayment on a loan, the department of treasury shall

require the direct assignment for repayment of the loan, in the

amount equal to the minimum of the interest due on the loan and up

to 5% of the loan, from any state money appropriated to the

municipality or, for a municipality that is a school district,

other revenue or money that may be pledged by a school district

under section 1211 of the revised school code, 1976 PA 451, MCL

380.1211, or other law.

(i) To provide loan terms specifying conditions and events of

default and remedies available upon default by a municipality.

(j) To impose loan terms upon the disbursement of a loan

authorized to be made under section 3(2)(b) or (3).

(3) The board shall review each application for a loan from a

municipality to determine if the municipality satisfies the

requirements of this act. Except for loans authorized under section

3(2) or (3), upon determining those applications that satisfy the

application eligibility requirements of section 4, ~~and, for~~

~~subsequent annual loans, section 8,~~ the board may authorize an

annual loan to 1 or more of those eligible applicants upon

declaring that a local fiscal emergency exists in the municipality.

For loans authorized under section 3(2) or (3), the board may

authorize a loan upon determining that the municipality has

satisfied the requirements of this act applicable to loans under

section 3(2) or (3).

(4) All actions of the board shall be approved by all members

of the board. All meetings of the board shall be conducted at a

public meeting held in compliance with the open meetings act, 1976

PA 267, MCL 15.261 to 15.275.

(5) Subject to the requirements of this act, the board has the

sole authority to determine all of the following:

(a) The amount of a loan.

(b) The rate or rates of interest on a loan.

limited to, requiring that the proceeds of a loan be used for

specified purposes.

(6) The department of treasury shall provide staff services to

the board to carry out this act.

(7) A municipality may do 1 or more of the following:

(a) Borrow money under this act, and issue evidences of

indebtedness for repayment of obligations, including, but not

limited to, money advanced or previously advanced to a school

district or approved or previously approved for advancement to a

school district under section 15(2) of the state school aid act of

1979, 1979 PA 94, MCL 388.1615, or money borrowed by the school

district under section 1225 of the revised school code, 1976 PA

451, MCL 380.1225.

(b) Enter into a loan agreement with the board.

(d) Assign and convey any revenues allocated to it for

repayment of the loan.

(e) Take any other action necessary to receive, secure, or

repay a loan under this act.

Sec. 3. (1) ~~For state fiscal years ending before October 1,~~

~~2011, the~~ The board may authorize loans under this act to

municipalities that total up to ~~$5,000,000.00 in a state fiscal~~

~~year. For state fiscal years beginning after September 30, 2018,~~

~~the board may authorize loans under this act to municipalities that~~

~~total up to $10,000,000.00 in a state fiscal year, but a loan to a~~

~~single municipality shall not exceed $4,000,000.00 in a state~~

~~fiscal year. For the period beginning on October 1, 2011 and ending~~

~~on September 30, 2018, the board may do all of the following:~~

~~(a) Authorize loans to municipalities other than school~~

~~districts that total up to $48,000,000.00 during the period. Loans~~

~~to a single municipality under this subdivision shall not total~~

~~more than $20,000,000.00.~~

~~(b) Authorize loans to municipalities that are school~~

~~districts that total up to $70,000,000.00 during the period. Loans~~

~~to a single school district under this subdivision shall not total~~

~~more than $20,000,000.00. The board shall not authorize a loan to a~~

~~school district organized as a school district of the first class~~

~~under part 6 of the revised school code, 1976 PA 451, MCL 380.401~~

~~to 380.485.~~$148,000,000.00. The board also may authorize a loan of

up to $300,000,000.00 to a school district that is or becomes a

qualifying school district as described in section 12b of the

revised school code, 1976 PA 451, MCL 380.12b.

(2) The board may authorize loans under this act to a county

within the following limitations:

(a) In the 1998-99 state fiscal year, the board may authorize

loans under this act to a county with a population greater than

1,500,000.

(b) For a state fiscal year in which the block grant

appropriated to a county with a population of more than 1,500,000

that is organized under 1966 PA 293, MCL 45.501 to 45.521, and that

is a county juvenile agency is less than the amount required to be

distributed to that county in that year under the social welfare

act, 1939 PA 280, MCL 400.1 to 400.119b, the board may authorize a

loan to that county in an amount not greater than the difference

between the amount of the block grant and the amount required to be

distributed to that county for that fiscal year under the social

welfare act, 1939 PA 280, MCL 400.1 to 400.119b. The board is not

required to authorize loans under this subdivision to a county for

more than 1 state fiscal year.

(3) If in a state fiscal year the block grant appropriated to

a county other than a county described in subsection (2) that is a

county juvenile agency is less than the amount required to be

distributed to that county in that year under the social welfare

act, 1939 PA 280, MCL 400.1 to 400.119b, the board may authorize a

loan to that county in an amount not greater than the difference

between the amount of the block grant and the amount required to be

distributed to that county under the social welfare act, 1939 PA

280, MCL 400.1 to 400.119b, in that state fiscal year.

(4) Sections 6(2) , and 7 ~~, and 8~~ and the conditions listed in

section 4(1) do not apply to a loan authorized under subsection (2)

or (3).

(5) The proceeds of a loan made under subsection (2) or (3)

shall be maintained in a separate account and shall not be

commingled with the county's general fund or any other special fund

or account.

(6) The state treasurer or his or her designee shall monitor

the expenditure of the proceeds of any loan made under subsection

(2) or (3).

(7) The proceeds of a loan made under subsection (2) or (3)

are subject to the county juvenile agency act, 1998 PA 518, MCL

45.621 to 45.631.

(8) Except as otherwise provided in this subsection, revenue

for loans made under this act shall be provided from the surplus

funds of this state under authorization granted under section 1 of

1855 PA 105, MCL 21.141, or from the repayment proceeds of other

loans issued under this act or sold or transferred under section

6a. Alternatively, for a school district, revenue for a loan made

under this act may be provided from money advanced to the school

district by this state from money appropriated from the state

school aid fund established under section 11 of article IX of the

state constitution of 1963 and payable to the school district under

the state school aid act of 1979, 1979 PA 94, MCL 388.1601 to

388.1896.

(9) After September 30, 2012, the board may restructure

payments, but not the outstanding principal balance or interest, on

a loan to a municipality under subsection (1) if all of the

following apply:

(a) The municipality is in compliance with the terms of the

loan and any other requirements applicable to the municipality

under this act.

(b) The municipality is in compliance with any requirements

relating to a deficit elimination plan under state law.

neutral evaluation process, settlement agreement, consent

agreement, or order of an emergency manager under the local

financial stability and choice act, 2012 PA 436, MCL 141.1541 to

141.1575, or a successor statute.

(d) For a municipality that is a school district, the school

district is in compliance with all requirements for receipt of the

foundation allowance and any other requirements applicable to the

school district under the state school aid act of 1979, 1979 PA 94,

MCL 388.1601 to 388.1896.

(e) For a municipality other than a school district, the

municipality is in compliance with ~~all conditions for economic~~

~~vitality incentive program money or~~ statutory revenue sharing or

other requirements applicable to the municipality under the Glenn

Steil state revenue sharing act of 1971, 1971 PA 140, MCL 141.901

to 141.921.

(f) The restructuring of payments complies with applicable

law.

(g) The loan has not been sold or transferred under section

6a.

(10) As used in this section, "county juvenile agency" means

that term as defined in section 2 of the county juvenile agency

act, 1998 PA 518, MCL 45.622.

Sec. 4. (1) If the governing body of a municipality desires to

request a loan, it shall provide by resolution for the submission

of an application to the board for a loan made under this act. The

municipality shall certify and substantiate all of the following

information and conditions to be eligible for consideration for a

loan authorization by the board:

(a) A deficit for the municipality's general fund is projected

for the current fiscal year.

(b) That 1 or both of the following have occurred within the

18 months immediately preceding the loan request:

(i) The municipality has issued tax anticipation notes or

revenue sharing notes under the revised municipal finance act, 2001

PA 34, MCL 141.2101 to 141.2821, or for a school district, issued

notes under section 1225 or 1356 of the revised school code, 1976

PA 451, MCL 380.1225 and 380.1356.

(ii) The department of treasury has acted upon a request by

the municipality to issue tax anticipation notes or revenue sharing

notes under the revised municipal finance act, 2001 PA 34, MCL

141.2101 to 141.2821.

conditions:

(i) Its income tax revenue growth rate is .90 or less, or the

municipality has 2 or more emergency loans outstanding at the time

its application is submitted and its income tax revenue growth rate

is 1.3 or less.

(ii) Its local tax base growth rate is 75% or less of the

statewide tax base growth rate.

(iii) The state equalized valuation of real and personal

property within the municipality at the time the loan application

is made is less than the state equalized valuation of real and

personal property within the municipality in the immediately

preceding year.

(iv) The municipality is levying the maximum number of mills

it is authorized to levy as approved by the voters and has either

of the following:

(A) One or more delinquent special assessments.

(B) Outstanding bonds, notes, or other evidences of

indebtedness that were issued in anticipation of a contract

obligation with, or an assessment obligation against, another

municipality that has 1 or more delinquent special assessments that

were levied to satisfy, in whole or in part, the contract or

assessment obligation.

(v) For a school district, the department of treasury

determines that 1 or more of the following apply:

(A) The school district's membership under section 6 of the

state school aid act of 1979, 1979 PA 94, MCL 388.1606, at the time

the loan application is made has declined over the preceding 3-

state-fiscal-year period by a total of 15% or more.

(B) The loan will assist the school district in resolving a

financial emergency or fiscal stress within the school district.

(vi) The municipality is in receivership, is in the neutral

evaluation process, or is subject to a consent agreement under the

local financial stability and choice act, 2012 PA 436, MCL 141.1541

to 141.1575, or a successor statute, and loan authorization by the

board is necessary to implement a financial and operating plan, a

consent agreement, a settlement agreement, or a continuing

operations plan or recovery plan for the municipality under the

local financial stability and choice act, 2012 PA 436, MCL 141.1541

to 141.1575, or a successor statute.

(d) The municipality submits a 5-year plan, that has been

approved by the governing body of the municipality, and that will

balance future expenditures with anticipated revenues.

(2) If the board determines it necessary, the board may

inspect, copy, or audit the books and records of a municipality.

(3) Subsection (1) does not apply to a loan authorized under

section 3(2) or (3).

Sec. 6. (1) A loan made under this act shall bear an annual

rate or rates of interest, if any, as established by the board

under section 2(5). The board may establish interest for a loan

under this act either at a rate or rates that are fixed for the

term of the loan or, if the formula is approved by the board at the

time the loan is made or renegotiated as authorized in section 2,

at a rate calculated upon a formula that varies the rate annually.

The board may provide that the interest rate or rates for a loan

under this act may adjust to an interest rate or rates determined

at the time of the sale or transfer by the state treasurer to be

sufficient to facilitate the sale of the loans under section 6a.

Except for loans sold or transferred under section 6a, if the

interest rate for a loan under this act is a single fixed rate, the

annual rate of interest for the term of a loan shall not be less

than the municipal 10-year rate as determined by the state

treasurer. The board may consider a higher interest rate based on

both the market interest rates and the risk of the municipality

requesting the loan. Except for loans sold or transferred under

section 6a, if the interest rate for a loan under this section is

not a single fixed rate, ~~all~~ both of the following apply to the

loan:

(a) The annual rate of interest for the loan shall not be less

than 2.5%, but the board may consider a higher interest rate based

on both the market interest rates and the risk of the municipality

requesting the loan.

(b) If the loan includes an interest-only repayment period,

the interest-only repayment period shall not be more than 60

months.

(2) Interest payments are due and payable as determined by the

board or the state treasurer under section 6a. Repayment of all of

the principal shall be made not more than 30 years from the date of

issuance determined by the board or state treasurer under section

6a, except as provided in subsection (5). This subsection, ~~sections~~

section 7, ~~and 8,~~ and the conditions listed in section 4(1) do not

apply to a loan authorized under section 3(2) or (3).

(3) The loan agreement between the board and a county for a

loan authorized under section 3(2) or (3) shall establish the

schedule for payment of the principal of and interest on the loan,

the nature of the obligation of the county to repay a loan made

under this act, and any security for that loan. Payments of

principal and interest for a loan authorized by section 3(2) shall

be limited to revenues allocated to the county under the health and

safety fund act, 1987 PA 264, MCL 141.471 to 141.479, minus those

revenues authorized by the board in the loan agreement for use in

the payment of other county obligations.

(4) Unless other state appropriations to a municipality are

pledged or assigned in an amount sufficient for the municipality to

make a required principal or interest payment, if the

municipality's payment of required principal or interest is

delinquent, the state treasurer may withhold the amount of all

delinquent payments that are due on a loan issued under this act

from state payments to the municipality under the Glenn Steil state

revenue sharing act of 1971, 1971 PA 140, MCL 141.901 to 141.921,

or from the municipality's portion of the revenue generated by the

local community stabilization share tax levied under the use tax

act, 1937 PA 94, MCL 205.91 to 205.111, and payable by the

department of treasury to the local community stabilization

authority created under the local community stabilization authority

act, 2014 PA 86, MCL 123.1341 to 123.1362, for distribution to the

municipality or other governmental entities, or both.

(5) Except for loans sold or transferred under section 6a or

as otherwise determined by the board, notwithstanding the payment

schedules and methods established by this section or by the terms

of a loan agreement, a municipality may initiate repayment of all

or part of a loan made under this act at an earlier date or may

make repayment in fewer installment payments, or both. The board

shall not condition either eligibility for consideration for a loan

or the grant of a loan under this act on repayment schedules and

terms other than those required by subsections (1), (2), (3), and

(4). In addition, failure of a municipality to make repayments

under terms or a schedule it has instituted under this subsection

does not disqualify the municipality from eligibility for

consideration for loans in subsequent fiscal years.

(6) A loan issued under this act shall be a general obligation

of the municipality except that a loan issued under section 3(2)

shall not be a general obligation of the municipality and shall be

repaid solely from specific revenues pledged for repayment of the

loan.

Enacting section 1. Sections 5 and 8 of the emergency

municipal loan act, 1980 PA 243, MCL 141.935 and 141.938, are

repealed.

Enacting section 2. This amendatory act takes effect 90 days

after the date it is enacted into law.

Enacting section 3. This amendatory act does not take effect

unless all of the following bills of the 98th Legislature are

enacted into law:

(a) Senate Bill No. 710.

(b) Senate Bill No. 821.